Opinion

Budget gives much needed boost to Agri start-ups

Subhadeep Sanyal | Updated on February 01, 2021

In a sweeping and honest budget focused on accepting a relatively large fiscal deficit, improving infrastructure, stressed asset management, creation of India’s first DFI and increased healthcare spending, the agriculture sector highlights were relatively muted.

In my opinion, this was the most practical budget for the agriculture sector. It has a clear focus on infrastructure creation; enhancing credit flows to non-traditional niches within the sector; creation of an agri cess to boost budgets; while ensuring strong performance in direct procurement of commodities by the government were the highlights in the budget.

 

An increased outlay on agri infrastructure creation for post-harvest needs like storage (Arya Collateral) and logistics, and infrastructure upgradation of 1,000 APMC Mandis via the Agri Infra Fund will result in farmers and other stakeholders in the supply chain to access markets more efficiently.

Agri start-ups benefit

Food and commodity quality compliance will also see a fillip, buoyed by consumer demand, as the industry’s ability to supply quality and traceability produce increases – early signs are visible in the work done by start-ups like AgNext Technologies. This is buoyed by the larger macro infrastructural spends intended to be done on roads, railways and ports, which will help agri supply chains to be more efficient in the coming years. Start-ups like Bijak and Agri10x would be beneficiaries as they primarily help buyers and sellers of agri commodities connect and trade with each other.

The focus on eastern and north-eastern regions was much needed, as the agricultural development in there can be jump started. We have seen this through one of our portfolio companies DeHaat, which is a 360-degree farmer services platform operating in Bihar, UP, Jharkhand, WB, and Odisha with an active farmer base of 4,00,000 smallholder farmers being connected to buyers, providing high quality inputs and advisory as well.

Allied areas of agriculture like fisheries, and dairy and animal husbandry, got their much-needed light of the day with more credit flows - which can potentially reach these producers. Also, the continued focus on micro-irrigation with doubling the outlay, and Operations Greens being expanded to 22 commodities give ample indication of new value addition pockets which are growing faster than traditional center of plate commodities. Aquaconnect, Reshamandi, Clover and Stellapps are some start-ups working in the aquaculture, sericulture, vegetable and dairy value chains respectively.

On the financial announcements, the cap for FDI in insurance increasing should help expand the market and start-ups like Gramcover to be able to bring more customised insurance options for farmers and rural markets.

 

Some areas which probably needed more focus was an analysis of GST reduction in places like agri warehousing, investment in research, education and upskilling for the agri sector. Rural consumption stimulus was also probably not a headline, which may impact spending for farmers.

The reason for peppering each focus area above with names of agri-tech start-ups is that these are representative of many more. Such start-ups work in the areas which were the highlights of this years budget. They are also the bridge between farmers and their much-needed technology upgradation and are well versed with scaling rapidly.

From less than 50 such start-ups in 2013 and about 450 in 2019, there are now around 1,000 plus agri-tech start-ups in India which are trying to solve for the massive billion-dollar inefficiencies which plague the sector, most of all which positively impact the smallholder farmer. This is also reflected in the investment landscape where capital inflows into the sector between 2010 and 2019 stood at $1.9 billion, out of which $1.7 billion came between 2014 and 2019.

One hopes that the continued stimulus around start-ups via the Start-up India and Stand Up India schemes, tax holidays for start-ups and creating One Person Companies with lesser compliance requirements. It will lead to more talents starting ventures and agritech will get its fair share of these.

For a long-term investor in the space, we think this budget will go a long way in cementing the agritech start-up landscape and attract more investment in the sector.

(The writer is a Partner at Omnivore, a venture capital firm focussed on the agriculture sector.)

Published on February 01, 2021

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