Deloitte study. ‘Technology is key to develop farm sector, meet food demand’

With the food spend of an average Indian household expected to increase to 35.4 per cent by 2025, technology will be the key enabler to meet the demand and ensure affordability, according to a study by Deloitte.

The study — Future of Food: Innovation in managing demand and supply disruptions — says technology-led disruption is improving the entire agri and food value chain, using minimum inputs and maximising output.

Market potential

“Blockchain technology, machine learning and artificial intelligence, besides a multiplicity of different technologies are coming into play in the food sector,” said Anand Ramanathan, Partner, Deloitte Touche Tohmatsu India LLP.

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The entire agri-tech market is led by 1,000-plus start-ups in India, with the market size estimated at ₹1,400 crore last year. It has a potential of ₹1,68,700 crore, Ramanathan said, explaining the features of the study.

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According to the study, the Indian government is supportive of technology adoption and has invested in 300-plus start-ups. Ramanathan said investments in agri-tech start-ups during 2019-20 totalled ₹3,150 crore.

Many multinationals have invested in these start-ups, mainly in view of the data they are generating, he said.

Technology is seen as key to meeting India’s future demand as the share of middle-income households increases to 80 per cent from the present 50 per cent and drives drive 75 per cent of consumer spending, the study said.

Increasing prosperity

“Rising population and increasing prosperity are expected to increase food demand in India significantly. In terms of food spending by 2025, meat and poultry are estimated to account for 30.7 per cent, bread, rice, and cereals 23.8 per cent, and fruits 16 per cent,” it said.

The rise in prosperity is leading to a change in the food pyramid, resulting in demand-supply mismatch. “India is facing a deficiency in pulses at a time when there is demand for smart proteins. Also, less land is available for pasture. This is where technology can play a crucial role with regard to market linkages and supply chain,” Ramanathan said.

This is one of the reasons why the poultry and dairy segment will see rapid development over the next couple of decades, the study said.

One of the significant changes in the food pyramid is that there is a revival of ethnic cuisine despite political divisions. “There is a need to augment pulses and millets production. The urban consumer needs more fresh food and this has resulted in direct procurement from growers,” he said.

Role of Covid

There is a demand for technology to cut costs, reduce wastes and innovation in the supply chain, Ramanathan said.

Asked if Covid played a role in the change of food habits, he said the pandemic has seen people re-examining the way they eat. “During the pandemic, they began to cook at home and reviewed their cooking, innovated and focussed a lot on health,” the Deloitte partner said.

Even before the pandemic set in, the entry of organised players in the food sector, particularly in cereals, spices, and dairy, resulted in increased investments.

“Government policies, especially in the frozen food sector, have helped particularly in the ready-to-cook and ready-to-eat segments,” he said.

Emerging as an alternative

Referring to India emerging as a key cereals exporter in the Indian Ocean rim (IOR) during the pandemic, Ramanathan said India will continue to be a big producer of grains and cereals.

“This will also result in more processing units coming up in the IOR, particularly since the disruptions to the supply chain during Covid have necessitated derisking. This has helped India develop as a good alternative source,” he said.

There is more focus on research and development, and agri-technology, including transfer of technology, has played an important role in this. “Technology is also important since prices of raw materials make up 50-60 per cent of production cost and firms look for various ways to reduce the input costs,” Ramanathan said.

As part of improving supply and reducing costs, companies have begun working with farmer producer organisations, which are working collectively to bring efficiency.

Mindful factors

The change in the food pyramid has resulted in people becoming mindful of their dietary trends, with the consumption of proteins increasing and the share of grains decreasing. People are also health-conscious, choosing nutri-cereals over rice and wheat, and mindful about how their food is sourced.

They also seek food that appeals to their local tastes, preferring to buy packaged staples and ready-to-cook or ready-to-eat food.

On the impact of farm mechanisation, the study said the number of agricultural workers had declined from 63.6 crore in 2010-11 to 58.2 crore in 2019-20, though the average wages have increased. “With companies launching subscription and pay-per-use models to make mechanisation affordable for small farmers as well, the focus is on improving access to machinery and equipment,” the study said.

5 key themes

The Deloitte study said five key themes have emerged for technology adoption across the agri-business sector. Foremost among them is market linkages — improving the supply chain with disintermediation to improve market linkages and supply-chain efficiency.

Organisations are also looking at productivity-enhancing tools and devices for optimum use of agri inputs, water, and other resources, while farming-as-a-service is crucial in providing mechanisation on a subscription or pay-per-use model.

Digitisation of agriculture enables transparency and traceability of food across the entire value chain, as also credit access for under-served farmers.

Ramanathan said the Centre should treat irrigation as infrastructure investment.

Along with the agriculture sector, the food processing industry and sustainable packaging units will also develop. The study said the Indian food and agriculture industry is on the brink of transformation and would require all value-chain members to act in tandem and secure the future of food in India.

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