Private equity investments in agri-tech start ups have skyrocketed in four years (2017-2020) managing to attract ₹6,600 crore, and growing annually at over 50 per cent, according to a study. It also said that the rural microfinance sector has grown significantly in the past 18 months from about ₹1.22 lakh crore in December 2019 to ₹1.46 lakh crore in March 2021.

“Investors have focused on opportunities that address systemic issues, building sustainable systems, and ensuring inclusive growth. Similarly, finance technology has recently attracted investors. Significant domestic and international investments are being pumped into the sector to improve efficiency and access to credit, according to the a study titled ‘Innovation in India’s Rural Economy: Disruptive Business Models are Stimulating Inclusive Growth in Agriculture and Rural Finance’ published jointly by Bain & Company and Confederation of Indian Industry (CII).

Solutions for crop health, yield

Investors have focused on opportunities that address systemic issues, building sustainable systems and ensuring inclusive growth. Several global tech giants see this space as a new growth opportunity and are investing in innovative solutions for crop health monitoring and yield estimation, it said.

“Disruption in India’s food and agriculture will evolve from traditional agriculture to new farming models, advanced agri-tech services, and new food products,” said Parijat Jain, partner and leader of Bain’s agri-business practice in India.

Agriculture is the largest sub-sector in the rural economy, contributing approximately 37 per cent of total rural GDP in 2019–20, the study said. The farm sector contributes ₹35 lakh crore to the national GDP in 2019–2020. Proteins, fats, fruits, and vegetables make up 60 per cent of agriculture’s production value. Rice and wheat cover approximately 40 per cent of the country’s total farm land and account for a quarter of the total production value.

New business models

As newer generations of farmers and farmer producer organisations (FPOs) become digitally savvy, new business models are emerging across the agriculture value chain, from inputs and harvesting to processing and distribution, it said.

Citing the example of Ninjacart, a supply-chain platform, which built an online marketplace to connect farmers to retailers without any intermediaries, it said such platform provides pricing, demand visibility, and payment assurance to drive engagement and support farmers.

Growth of agri-credit

As traditional agriculture transitions to agri-business, the need for faster and better access to cash and credit is increasing, the CII study said. “While cash is still the dominant method of payment in rural India, Unified Payments Interface (UPI) transactions doubled in the past year,” it said.

There has been a significant increase in access to credit in the rural ecosystem, too. Agri credit has grown at 10 per cent in the last five years, from ₹8 lakh crore in FY15 to ₹14 lakh crore in FY20.

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