Digital disruption in Indian agriculture

By Girija Shankar

While digital forces are reshaping industries ranging from retail to telecom to entertainment, the value chain in agriculture has remained rather untouched.

Over the last few decades, India has made great strides in services and manufacturing – yet, agriculture remains one of our biggest value creators. Not only does agriculture contribute to 17% of India’s GDP, it provides a livelihood for 50% of our population and constitutes about 400B US$ of economic value. Yet the agri economy remains under stress. While digital forces are reshaping industries ranging from retail to telecom to entertainment, the value chain in agriculture has remained rather untouched.

Despite being among the top global producer of pulses, rice, milk, jute etc., our agri value chain is widely acknowledged to be among the most broken and inefficient globally. For example – the rice yields in India are 40% of US levels and lower than many other emerging nations; worse, the Gross Value Addition (GVA) growth per agriculture worker is less than half of global averages. There are three primary issues here –

One, the level of farm mechanisation is about 35% to 40% in India while most developed countries have over 90% mechanisation. Second, farmer value realisation is between 20 % to 30% versus the global benchmark of 50% to 60%. Third, food processing is still less than 15% in India compared to global averages of 30% to 40%.
Each of these underlying factors are about to change and as it happens, it could create a strong impetus to India’s overall economy. A combination of factors is at work: Rise of the Indian Consumer; Emergence of AgriTech; Data Revolution in Rural India and lastly Govt of India Vision to Double Farm Income by 2022!

Rising Indian Consumer
Clearly, this is one of the mega trends of the 21st century India and a trend that’s likely to continue as our demographic dividend pays off with a young and productive workforce until 2050. With the emergence of nuclear families, online groceries, acceptability of processed food and coming of age of food tech – Each of these will play a role in removing the middleman and increasing the share of processed food in our diet. For example, by end of 2016, India already had about 400 food delivery apps and over 100 grocery start-ups. While many of those have shut shop since, we do have several winners emerging, some of whom are currently the darlings of PE investors. Even within the FMCG space, there is a considerable innovation in food, particularly health food resulting in the emergence of new brands.

Emergence of Agritech
Agri-tech is clearly the next big thing in digital. As per NASSCOM, the global agri-tech investment in 2016 was 3.2B US$ and in the same period India got about 320M US$ funding for 50+ start-ups. India is among the top 5 countries globally in term of agritech deals. There are agritech start-ups across the entire farm to fork value chain – agri inputs, remote sensing, agri advisory, market linkage, farming as a service and IoT enabled technologies.

For example, today you can buy seeds and fertilisers online, rent farm implements, get weather and disease forecasts, receive mobile based agri advisory, check prices at local and remote mandis and sell your produce online. All of this is happening and more, albeit the adoption is yet to reach critical mass in most cases.

In terms of remote sensing, the cost of satellite imagery has plummeted – this is going to create a whole new set of use cases – for example, one could combine remote sensing with image analytics to identify farm diseases and advise the farmer to take necessary steps. Accurate weather advisory coupled with pest models can provide yield forecasts and early warning signals for diseases.

Even the area of crop insurance will get disrupted through remote sensing as the need for manual inputs like crop cutting experiments will give rise to remote assessment of farm yields.

Data Revolution in Rural India
Did you know, 58% of internet users in rural India regularly access video content versus 70% of urban Indian. Last year, YouTube stated its ambition to double the user base to 800M in the next 2 to 3 years. Of this 50% are expected to come from rural India. While currently, the mobile internet penetration is quite small at 18% but it’s growing at over 15%.

Assuming the mobile phone is the primary vehicle for any digital disruption, this breaking of the final barrier to mobile adoption is a wonderful thing for India’s rural economy. The entire agri value chain is now wide open for innovative tech driven business models.

Govt of India Initiatives
The average increase in agri produce price was only 6.8% between 2011 and 2016, while doubling farmer income by 2022 over 2015 baseline requires an annual growth rate of 10.4%. Therefore, for achieving this vision considerable effort and non-ordinary steps by both Central and State Governments need to be put in place.

Fortunately, the Govt of India is quite active and is working on multiple initiatives to drive farmer income. The most important being the effort to dismantle the current agricultural produce market committee (APMC) regime and hold of middlemen through policy and technology. Some examples include, easing APMC to allow direct sale by producers to processing industries / bulk buyers, taking fruits and vegetables out of APMC act, allowing private mandis and easing trading licensing norms.

However, the real game changer would be the launch of eNAM (e-National Agriculture Mandi) which will enable 7000+ mandis to be connected and create a common, uniform and digital marketplace for agri produce.

It is evident that the agri economy is up for disruption driven by these structural shifts. Right policy action, emergence of new technologies and entry of risk-taking entrepreneurs will enable new ways of working, integrate supply chains and remove systemic leakages. And all of this will have a salubrious effect on the person who’s at center of it – the Farmer. Having said that, if we want to save the future of our farmers and permanently secure the future of Indian agriculture, major policy interventions have to be made at the earliest.

DISCLAIMER: The views expressed are solely of the author’s own. The Author is is Partner- Global Business Services at IBM India/South Asia.


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