Emerging innovation for sustainable farming

Hemendra Mathur, Venture Partner, Bharat Innovation Fund

Climate risks are more pronounced in the form of high temperatures, flash floods, delayed / erratic monsoon, shifting cropping patterns, depletion of the water table, nutrient deficiency in the soil adversely impacting productivity and farm incomes. To mitigate these risks, Indian agriculture needs to adapt innovations to become sustainable and profitable for farmers. There have been several efforts by the central government as well as some state governments to take agriinnovations to farmers.

There are about 150 million farmers in India with the majority of them (more than 85 per cent) owning less than two hectares of farmland. A farmer with an average land holding of about one hectare earns a gross income of about Rs 120,000 to meet his personal, family and occupational needs. Farmers are often left with a little surplus for productive investment into new-age solutions.

As demonstrated by about 1000 plus agritech startups, innovations can go a long way in improving farm economics with improved yield, reduced cost of inputs and empowering farmers to de-risk against commodity price fluctuations, monsoon failures etc. The growing breed of agrientrepreneurs is working towards improving farmer access to markets, quality inputs, institutional credit, and insurance. Consumers also benefit in the process with improved access to safe, nutritious and affordable food. Industry and government gain with access to reliable, timely and accurate data for decision making and policy design for farmer welfare.

The agri-tech sector took its root in the last decade. However it gained momentum in the last three years, driven by entry of high-quality entrepreneurs and increasing investor interest. There are estimated more than 1000 post-poc (Proof-of-concept) agri-tech startups in the agricultural sector, most of them with a vintage of less than five years.

Indian agri-tech startups are trying to solve multi-dimensional problems prevalent in Indian agriculture including low productivity, suboptimal efficiency in supply chain, and lack of access to markets, institutional credit, crop insurance, quality inputs and market linkages.

Investment scenario

Investors have pumped in close to $1.5 billion in upstream agri-tech deals over the last decade and the momentum has started to pick up with over $1 billion invested in the last 36 months. In all probability, agri-tech will continue to attract venture capital in the range of $500 million to $1 billion on an annual basis in the foreseeable future.

Sector-agnostic investors are rapidly growing their participation, signifying the sector's attractiveness. There are many generalist funds entering the space including Arkam Ventures, Sequoia, Mirae Asset, Lightspeed Ventures, Elevation Capital, Avaana Capital, Prosus Ventures, ABC World Asia. The sector is also witnessing a new type of corporate strategic investments from e-commerce giants such as Walmart and Alibaba, which see food and grocery as a critical part of their business. The seed investments from incubators, angels and microvcs are also picking up.

Though corporate venture capital flows from traditional Indian agri-business have not picked up, many corporates such as UPL (Nurture.farm) and ITC have invested in building their digital platforms. Innoterra has developed a full-stack platform for fruits, vegetables, staples and milk connecting thousands of farmers to consumers.

Policy perspective

There have been several efforts by the central government as well as some state governments to take these innovations to farmers. In addition, there is an effort made by some of the Foundations and not-for-profit enterprises to support technologies that positively impact smallholder farmers. All these efforts are a welcome sign; however, a coordinated and synergistic approach can go a long way to amplify the positive impact on farm economics. It is time the government drives the innovation agenda parallel to other agri reforms to make an impact of reforms more productive.