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Indian agritech sector to grow to US$ 30-35 billion by 2025

IBEF, Knowledge Centre

Jul 27, 2021 14:01

India is an agrarian economy, with ~54.6% people directly dependant on agriculture as their primary source of livelihood. According to advance estimates by the government in the Economic Survey 2020-21, GDP contribution by the agriculture sector is likely to be 19.9% in 2020-21, increasing from 17.8% in 2019-20. Further, the farming community's exceptional endurance amid COVID-19 resulted in agriculture being the only sector to post growth (3.4%) at constant prices in 2020-21, while the entire economy contracted by 7.2%. Currently, the sector is valued at US$ 370 billion and is likely to witness exponential transformation in the future because of supportive government policies and technological advancements.

Agritech in India
Rising tech awareness among farmers, driven by high internet penetration and mobile connectivity, is expected to drive the sector. The government is also playing an active role in sector development by creating incubators, awarding grants and focusing on public-private partnerships. The favourable impact of these initiatives is expected to peg the market valuation at US$ 30-35 billion by 2025, according to Bain & Company’s “Indian Agriculture: Ripe for Disruption” report. The report further cited that India’s agricultural value chain is anticipated to witness more growth (by value) across the entire ecosystem in the next two decades. This will radically alter the way India and the rest of the world produce and consume agricultural goods.

Driven by these strong tailwinds, PE and VC investments are also accelerating in this space. India is the world's third-largest recipient of agritech funding after the US and Germany and has the third-largest number of agritech start-ups after the US and the UK. In 2020, India received investments worth US$ 329 million from PE/VC firms and registered a staggering CAGR of ~53% from 2017 (US$ 91 million) to 2020 (US$ 329 million).

Indian agritech start-ups have significantly attracted investors from across the globe. Following is the list of prominent agritech start-ups that have received significant funding:

By expanding the total agricultural output, institutional and technological reforms, efficient post-harvest management, etc., the government is planning to double famer incomes by 2022. E-NAM (National Agriculture Market)—an online trading platform—was launched in 2016 for agricultural commodities; the platform unified all Agricultural Produce Market Committees (APMCs) mandis to form an integrated national online marketplace for agricultural commodities.

In September 2020, the Indian Parliament passed three agriculture-focused reforms bills to provide income stability to farmers.

  • The first bill is intended towards expansion of sales channels (other than the conventional APMC) and promotion of interstate and intra-state movement, wherein farmers can sell their produce & agricultural goods to anyone and at any place.
  • The second bill focuses on crop price assurance, wherein the market risk is transferred from the farmer to the sponsor.
  • The third bill was introduced as an amendment to the Essential Commodities Act (ECA) 1955, which deregulated bulk commodity storage.

All these initiatives are intended towards increasing farmer net income, encouraging private investments in the sector, enabling free movement of agricultural produce and boosting technological advancements. After implementation of these three laws, new opportunities are likely to be created for various agricultural businesses in the Indian market.

The Road Ahead…   
The Indian agritech sector presents a vibrant, untapped potential for expansion. The sector has reached to that inflection point where it is gaining significant attention from global investors. As agriculture is termed to be the backbone of the Indian economy, agritechs are playing a crucial role by helping farmers digitise the whole supply chain and adapt to using new technologies such as artificial intelligence, the Internet of Things, Big Data analytics and advanced engineering techniques.

Technology advancements, regulatory changes and rising investments are causing significant disruptions in the Indian agriculture sector. Agritechs are foreseen to be well prepared to face industry challenges and seize opportunities in the future. Additionally, the agricultural sector will be creating significant value in the market and now, is the ideal time for businesses to invest and develop capabilities in order to take advantage of the many opportunities.