The average farm size in India is 1.1 hectares. But don’t allow that number to paint a grim picture about the state of agriculture and farmers in India. The country ranks first in the production of cotton, milk and pulses globally, and second in the production of wheat, rice, sugarcane, fruits and vegetables.
India’s low average land holding obscures the fact that 20.4 million farmers are classified as having land holdings that are semi-medium, medium and large. According to the Agriculture Census 2015-16, these land holdings represent 57.20% of the 157.8 million hectares of total land under cultivation. These 20.4 million farmers, who control more than half of India’s cultivable land, have a more commercial orientation, selling their surplus produce into domestic and export value chains.
The Agriculture Census data shows that Indian farmers are not necessarily the monolithic, homogeneously poor community of persistent popular imagination. Instead, there are pockets of profitability, associated with the size of landholdings, participation in certain value chains (e.g. aquaculture), and proximity to centres of consumption (e.g. peri-urban horticulture). Agriculture is modernising like any other sector in India.
Growing investor interest
The agritech sector in India has witnessed a surge of startup activity over the past seven years. While a few brave agritech startups were founded prior to the year ended March 2014, the rise of smartphones and mobile internet have catalysed the growth of the sector. Rural smartphone penetration has provided the digital backbone to scale both business-to-farmer (B2F) and business-to-business-to-farmer (B2B2F) models, which help farmers to improve their yields, lower their operating costs, and ensure their produce get the right market value. In this time, a supportive agritech ecosystem has evolved, with a number of accelerators, strategic corporate involvement, and VCs operating at every stage.
The increasing focus on agritech by generalist VCs and impact venture funds has been one of the biggest changes in the last five years. The year 2015 saw a saturation of funding and competing business models in the urban business-to-consumer (B2C) segment like e-grocery and food delivery (for example, that year, e-grocer Grofers got funded by investors Tiger Global, Sequoia, SoftBank – you name it). This led generalists to refocus on business-to-business (B2B) opportunities linked to small and medium enterprises (SMEs), and agritech was one of the beneficiaries.
Agritech and its relative opportunities
Farmer platforms: With rural smartphone penetration rising, farmers are no longer isolated in their villages and can connect with the pan-India agricultural ecosystem. Farmer platform startups are enabling those connections, building digital marketplaces where farmers can buy inputs, access credit/insurance, or rent farm machinery. Most platforms also provide their farmers with advisory services, with some facilitating market linkages to help their farmers realise higher prices. AgroStar, Aquaconnect, Clover, DeHaat, EM3, and Gramophone are some of the startups which operate in this space.