NEW DELHI–30 June 2021–The Indian agricultural sector is at the cusp of a disruption based on technology, regulation, investment and stakeholder behavioural changes across consumers to farmers. The idea of doubling farmer incomes in the next few years is likely to become a reality. Agritech and agriecosystem sectors have received significant interest from the investor community, making India the third-largest nation in terms of agritech funding and the number of agritech start-ups. Estimates indicate that approximately $30–$35 billion of the value pool will be created in agri-logistics, offtake, and agri-input delivery by 2025. These are among the findings of Bain & Company’s "Indian Agriculture: Ripe for Disruption”, the report, released today.

Agriculture’s contribution to the country’s gross value added (GVA) is about 20%, however it continues to be dominated by small and marginal land holdings. Additionally, close to 55% of the Indian population still depends on agriculture for their livelihood. The report outlines an approach to reinvent Indian agriculture that is adapted for the changing times—organisations can maximise their current business potential by becoming cheaper, better, faster, broader and greener.

Commenting on the report, Prashant Sarin, partner and leader of the Advanced Manufacturing & Services, Energy & Natural Resources practices in Bain & Company, India said, “We are at a key moment when we can leapfrog from the traditional methods to a new, technology-friendly way of growing, processing, and selling food. The traditional form of agriculture will be disrupted and overhauled over time, and $30-35B value will be created in new value pools across the agricultural value chain, over the next few years.”

The report highlights three bills passed in September 2020, by the Indian parliament on agriculture-focused reforms. All these are intended to encourage investment in direct farmer purchase by corporates, free movement of food items from production to consumption centres, and private investment in storage. A host of new business opportunities can be uncovered when these reforms come into operation. The APMC reforms will enable corporates to buy directly from the farmer while the ECA reform incentivises investment in storage and transportation infrastructure, resulting in supply chain efficiencies. Firms can save 5% to 10% or more on procurement costs of food items through a concerted national strategy.

Parijat Jain, partner and leader of Bain’s Agribusiness practice in India, said, “Indian agriculture is at an inflection point. The $370 billion sector will undergo a complete transformation in the coming years on the back of significant technology interventions, regulatory support and behavioral changes across consumers and farmers. Digital disruption across the agricultural and agritech value chain is enabling ‘uberisation’ of services, converting capital investment assets to payper-use models and creating online communities along with online input & output marketplaces.”

Technology is driving innovations in a variety of ways across the agricultural value chain. For example, insurance, credit rating, and loans are contributing to increased funding for this sector. In farming activities, weather prediction and smart crop management are leading to higher output while sensors and the Internet of Things are enabling better tracking and visibility of farming activities. According to Bain & Company, at the macro level there are three potential plays for companies in the agritech ecosystem. The first involves setting up an integrated and future-ready agritech platform by bringing together all the offerings across the value chain. The second is to set up a CoE and incubation wing for new business models and agritech start-ups through strategic investments and partnerships. The third is to digitally reinvent current businesses by identifying priority use cases that would complement the current businesses and capabilities. When implemented, these technological changes, capabilities and investments can fundamentally change productivity and landscape of the sector.

Between 2017 and 2020, India received about $1 billion in agritech funding. The top deals in agriculture were investments into companies like Ninjacart, AgroStar, Mahyco Grow, Husk, WayCool Foods and Products, Jumbotail, Vahdam, and DeHaat (Green AgRevolution). Based on the discernable changes in the sector, investments in agritech over the next four to five years are poised to increase significantly.

“Companies need to be ready to address the challenges in this journey of change while exploiting the opportunity it represents over the coming years. We will see significant value being created in the sector, and this is the best time for companies to invest and build their digital capabilities to exploit the opportunities that lie ahead,” said Shalabh Singawne, an associate partner and member of the Energy & Natural Resources, and Advanced Manufacturing & Services practices in Bain & Company, India.

The backbone of an agritech platform should be built around the strategic bedrock that could comprise multiple themes, such as a digital marketplace, supply chain management, or smart services across the agricultural value chain. Bain believes that the life cycle of building an integrated platform will require sustained investment across multiple phases. A holistic digital platform would therefore include e-trading and an online marketplace; seamless supply chains; and smart farming and data-backed advice on risks and mitigation steps, such as short-term weather and long-term soil condition predictions.

In summary, the future of agriculture is very important to India’s development, its policy planners, and other stakeholders. Reforming Indian agriculture is also critical from an environment, sustainability, and climate change perspective. Agricultural marketing reforms started in 2003, but the pace of transformation across the value chain only gathered steam in the past few years. We have only touched the tip of the iceberg. Companies and farmers are vital components in this value chain—one complements the other. We will be able to lift millions of farmers from subsistence farming and poverty, allowing them to become wealth creators. Increasingly, many young entrepreneurs are entering the agriculture start-up space. Adopting technology-friendly practices across the agricultural value chain is critical to transforming this critical sector of India’s economy.

To receive a copy of the report or arrange an interview with its authors;

Indian media contact: Aparna Malaviya at aparna.malaviya@bain.com or +91 9820273038

International media contact: Nicholas Worley at nicholas.worley@bain.com or +852 2978 8830