Editor’s note: Raghavan Sampathkumar is founder and principal of boutique research and consultancy firm SMARTAgBiz, based in Singapore. He has experience across different subsectors of food & agribusiness in Asia-Pacific countries. In previous roles he has worked for Canadian Pulse Growers Association and Promar Consulting in Japan.
In a recent speech to the graduating students of Indian Institute of Science, NR Narayana Murthy, founder of Infosys – the poster child of India’s Information Technology sector – pointed out that over the last 60 years, India has not produced any ground-breaking scientific inventions that could change the world. Perhaps, his statement is debatable in the context of India’s recent achievements and impeccable growth in areas such as astrophysics, telecommunications and IT. But his analysis is unfortunately true for the country’s biggest and oldest sector — agriculture.
The country seems to continue to bask in the glory of ‘Green Revolution’ being oblivious of the imminent need to make progress. (This was succinctly narrated in a story in The Economist entitled “Farming in India: In a time warp”.) One of the main reasons for such lackluster attitudes could possibly be the entrenched “politicization” of policies and the firm grip of the government. This is primarily limiting the ability and prospects of involvement by the private sector.
But there is promise for a better future in the relentless optimism of a growing class of passionate and young entrepreneurs in the country.
Technological innovation in agriculture globally has become one of the hottest and most debated topics recently. The sector, particularly in the West, is witnessing a huge influx of new entrants and innovative technologies attempting to take agribusiness to the next level. Understandably, much of the buzz is occurring in developed Western countries, which have industrial-scale agribusiness with larger average land-holdings than their Asian counterparts.
Join Us! Sign up for our next fund here.
In this context, this column is an attempt to look at current and future scenarios; whether India is ready for an “AgTech” revolution; how technology can improve the ailing sector; some examples of technological interventions, opportunities and roadblocks for the techpreneurs; critical factors for success; macroeconomic trends and key industry drivers; and also importantly, policy implications for nurturing innovations. Though this is primarily related to India, the implications and conclusions may well be applied to many other countries that share a similar agrarian and socio-economic demographic profile in the region.
India’s agri-food sector — a brief overview
Agriculture still supports nearly two-thirds of the population directly or indirectly but contributes a little over a sixth of the nation’s GDP. Its share is expected to fall as the country develops further. Barring few spurts in growth due to some targeted interventions in the last 63 years since its independence, the sector has still not arrived where it needs to. Average yields for most of the country’s key crops like rice are at least half of the global average. Food losses, mainly pre-harvest, still amount to as high as 40 percent for some crops like vegetables and more than half of its cultivable area remains unirrigated. Competition from non-agricultural uses is also exacerbating a decline in cultivable acres.
Smaller and fragmented land holdings and primitive agricultural techniques are still prevalent. The sector is still labor-intensive in most parts of the country, with islands of success in farm mechanization. Low levels of literacy and a lack of access to critical information and knowledge are quite common. Internet penetration is limited in rural areas although mobiles have become almost ubiquitous. The industry is still struggling to achieve financial inclusiveness particularly for the resource-poor farmers. The policy & regulatory environment is rather skewed in favor of a few “votebank” crops and is mostly archaic and outdated. Involvement of private players in the food chain is limited to certain activities such as trading since the sector is highly politically-sensitive and hence always kept under the tight grip of the government. Add the lacking differences in adopting policies by the individual states, lack of a conducive eco-system to promote and nurture entrepreneurship, a deeply entrenched and cumbersome bureaucracy and red-tape, and the list of problems grows lengthy.
In contrast, from a macroeconomist’s perspective, the country is going to be the most populous globally with more than 1.3 billion people by the turn of the next decade. It will also probably be the youngest with a median age of under 30 years. It’s a lucrative market for anything and everything. More than two-thirds of the country’s population is going to be living in urban areas where food consumption habits are converging and matching with their developed market counterparts. Not to forget the rise in per capita average income from the current $1,274, which has grown at an enviable rate of 10.4 percent since 2007. The trend is likely to continue as the country is set to become the third largest economy that will have nearly tripled from its current value of $2.3 trillion.
The implications of this enormous demographic and socio-economic transformation are absolutely mind-blowing. Particularly, for the food industry, it is going to be very interesting yet challenging to cater to the diverse and complex needs of the new generation. These are the people who are ruthlessly demanding more, better and faster in everything they consume.
The AgTech scene: World vs India
Even before discussing the application of technologies in farming, we must remind ourselves that in the West, the agriculture sector has undergone progressive growth and many decades of reform contributing to land consolidation, growing economies of scale, enhanced market orientation, efficient supply chains and more.
All these eventually mean that a farmer is more in control of his productivity and profitability and is therefore able to invest in improving his business.
By contrast, Indian farmers face a range of risks in the production from the availability of water to quality of inputs and technologies to finally marketing their produce since the primary production sector still remains largely disconnected from the markets. Price signals usually do not reach the growers in time to respond appropriately. Ironically, they are claimed to be “risk-averse” and unwilling to invest in technologies or machines to improve efficiency of their farming operations.
To put simply, from a techpreneur’s point of view, Indian agriculture is still probably in the “Paleolithic period”, falling way behind its Western counterparts in terms of achieving efficiency through use of technological interventions.
However, each of the above issues that currently affect agriculture in India are providing opportunities for the passionate and skilled entrepreneurs to innovate and create solutions. These can be as simple as mobile-based social networking platforms that can open up direct marketing options for the farmers to highly tech-driven precision agriculture.
Examples of technological innovations in Indian agriculture
India’ agriculture has just woken up to the idea of leveraging technological interventions to maximize efficiency and the following broad categories emerge from a stocktake of the existing interventions.
These are some of the examples and there are many more at different stages such as concept development, piloting, field testing and commercialization. Many of these initiatives are supported by several venture capital firms, incubators and accelerators. These include: Omnivore Partners, ABI-ICRISAT, CIIE at IIM Ahmedabad, Infuse Ventures, Aspada Ventures, Rural Agri Ventures, VodaFone, the World Bank and industry associations like GSMA (mAgri initiative).
Watch out for part two which will focus on the various challenges for tech-driven agriculture in India and insights into making innovation successful in the country.
Raghavan Sampathkumar is an agribusiness professional with over 10 years of experience across the agricultural value chain. All opinions expressed are his own. He can be contacted at [email protected].
Have any news, tips or want to write a guest article? Email [email protected]