India’s agri-tech space has witnessed a remarkable surge in private equity investments, growing at a rate of over 50% annually to reach an impressive aggregate of approximately ₹6,600 crore until 2020. A joint report by Bain & Company and Confederation of Indian Industry (CII), titled ‘Innovation in India’s Rural Economy: Disruptive Business Models are Stimulating Inclusive Growth in Agriculture and Rural Finance,’ highlights the significant role of the rural economy in the nation’s overall GDP, with agriculture leading as the largest sub-sector.
The report underscores that close to two-thirds of India’s population actively participated in the rural economy over the past two years, with agriculture contributing around 37% to the total rural GDP in 2019-2020. The agricultural sector has been on a steady growth trajectory, boasting an impressive compound annual growth rate (CAGR) of 11% since 2015, supported by governmental and private sector initiatives to enhance physical and digital infrastructure. Moreover, the sector has experienced substantial disruptions with the widespread penetration of smartphones and the Internet.
The report identifies an inflexion point in the agri-tech ecosystem, presenting an opportune moment for companies that can potentially address inefficiencies across the agricultural value chain to experience explosive growth potentially. Encouragingly, domestic and international investments are pouring into the sector to enhance efficiency and access to credit. Notably, private equity investments in agri-tech have soared over the last four years, growing at a staggering rate of more than 50% per annum.
These investments have been strategically focused on addressing systemic issues and establishing sustainable systems that promote inclusive growth. Global tech giants are recognizing this space’s immense potential and investing in innovative solutions, particularly in crop health monitoring and yield estimation.
According to Parijat Jain, partner and leader of Bain’s Agribusiness practice in India, the disruption in India’s food and agriculture sector will extend beyond traditional agriculture to encompass new farming models, advanced agri-tech services, and novel food products. The past six years have witnessed the emergence of numerous start-ups dedicated to reducing systemic inefficiencies in inputs and marketplaces and advancing precision farming, processing, and storage capabilities.
Additionally, the report highlights the significant rise in Unified Payments Interface (UPI) transactions, which have doubled in the past year, driven by the pandemic. UPI transactions currently process eight times more transaction value than credit cards, largely facilitated by widespread smartphone access, affordable data costs, and Aadhaar-based digital identity verification, enabling services like Know Your Customer (KYC) and e-sign.
The agri-tech sector’s rapid expansion and the surge in private equity investments demonstrate the immense growth potential of innovative solutions that contribute to India’s rural economy’s sustainable and inclusive development.
