Investment in agri-tech startups increased significantly during 2017-20: Report

NEW DELHI: Private equity investments in agri-tech space have skyrocketed in last 4 years, growing at more than 50 per cent per annum to aggregate approximately Rs 6,600 crore, a report by Bain & Company showed.
Titled 'Innovation in India’s rural economy: Disruptive business models are stimulating inclusive growth in agriculture and rural finance', the report has been prepared by Bain & Company and the Confederation of Indian Industry (CII).
It said that rural economy contributed nearly half of India’s overall gross domestic gross domestic product (GDP) in 2019–2020.
"Two-thirds of the population participated in rural economy in the past two years, and agriculture—the largest sub-sector within rural economy, had the highest share of output, contributing approximately 37 per cent of the total rural GDP," the report noted.
Agriculture sector has been growing steadily at a compound annual growth rate (CAGR) of 11 per cent since 2015, supported by government and private sector initiatives towards improvements in its physical and digital infrastructure.
It has also witnessed highest disruption in terms of smartphone and internet penetration. This ecosystem is now at an inflection point, and companies that address inefficiencies across the value chain will have explosive growth potential, the report said.
Parijat Jain, partner and leader of Bain’s Agribusiness practice in India said: “Disruption in India’s food and agriculture will evolve from traditional agriculture to new farming models, advanced agri-tech services, and new food products. In the last six years, several start-ups have emerged to reduce systemic inefficiencies among inputs and marketplaces, precision farming, processing and storage.”
The report further explained that over the past decade, India’s rural ecosystem has evolved significantly with multiple enablers priming this space for future growth. These trends have created an environment ripe for innovation—allowing start-ups and traditional players to introduce disruptive business models that address inefficiencies particularly in India’s agriculture and finance sectors.
UPI transactions double
According to Bain-CII estimates, about 30% of the rural ecosystem is adopting digital payment and digital commerce solutions to avail easier access to agri-financial services.
United Payments Interface (UPI) transactions have doubled in the past year, processing eight times more transaction value than credit cards.
The report said that even while cash remains the dominant method of payment for rural financing, accounting for roughly 90 per cent of all payments, digital payments penetration is increasing, driven by government interventions like the Payment Infrastructure Development Fund.
Digital-first banking models and lowering of operational costs (which enabled lenders to service lower-value loans) also helped lending organisations scale into the sector, it added.
Growth in rural microfinance sector
In the past 18 months, rural microfinance sector has grown significantly. From a gross loan portfolio of about Rs 1,22,500 crore in December 2019, it has risen to Rs 1,46,700 crore in March 2021.
"There has been a significant increase in access to credit in the rural ecosystem too. Agri credit has grown at 10 per cent CAGR in the last five years, reaching nearly Rs 14 lakh crore in 2019–20," the report said.
About 35 per cent of agri-credit business comes from Tamil Nadu, Andhra Pradesh, and Uttar Pradesh, it added.