As finance minister Nirmala Sitharaman readies to present the interim Budget on February 1, Indian agritech startups have big hopes from the upcoming Union Budget
Waycool MD Karthik Jayaraman called for exempting long-term capital gains on private equity investments in the agriculture sector to promote innovation and build infrastructure
Agritech players believe there is a need for developing digital public infrastructure tailored for the sector to mitigate the effect of climate change
The countdown for Union Budget 2024-25 has begun. As finance minister Nirmala Sitharaman gears up to present the interim Budget on February 1, before the country heads for general elections in April-May this year, the agritech startups in the country have big hopes from the upcoming Budget.
But before we delve into the expectations of the agritech ecosystem, let’s take a look at the opportunity in this market. The Indian agricultural sector accounts for nearly 16% of the country’s gross domestic product (GDP) and employs nearly 44% of the national workforce. However, the sector is plagued by the use of age-old practices and obsolete technology.
This is the market that the Indian agritech startups are trying to disrupt by leveraging technology. From providing weather-based crop advisory to soil analysis and from promoting IoT-enabled practices to AI-driven technology, the startups are eyeing a pie of the market which is expected to grow to a size of $24 Bn by 2025.
The Economic Survey 2022-23 pegged the number of agritech startups in the country at over 1,000. AgroStar, Fasal, CropIn, Dehaat, Ergos, KisanKonnect, Ninjacart, Waycool, FarMart, and Gramophone are among the startups looking to transform the agricultural landscape of the country.
As such, the stakeholders of this fast-growing sector have a long list of demands from the government. However, since the Budget is expected to be a vote on account owing to the upcoming Lok Sabha elections, it remains to be seen if the Centre goes for new major announcements.
Interest Subvention & Support For Infra Development
As per reports, the finance ministry is expected to increase the agricultural credit target to INR 22-25 Lakh Cr for FY25 from INR 20 Lakh Cr in the ongoing fiscal to improve access to institutional credit for farmers.
Ninjacart cofounder and CEO Kartheeswaran KK called this a pivotal step towards empowering farmers. However, he also sought interest subvention of 2% for short-term agricultural loans to promote financial inclusion, drive sustainable growth, and encourage innovation in the field of agritech.
Improved credit access will allow farmers to deploy the offerings of agritech startups to increase their crop yield, get better prices, among others.
In last year’s Budget, the Centre provided a gift to agritech startups by announcing an agriculture-focused accelerator fund to encourage such startups in the rural parts of the country. However, the government didn’t declare any tax incentives for agritech players, which the industry is hoping will be announced in this year’s Budget.
Karthik Jayaraman, MD of Waycool, pointed out that while 2023 laid a promising foundation, some challenges persist and need nuanced solutions.
“A key need is to incentivise investments in the sector to build durable, large-scale organisations in the food and agri space. This can be achieved by exempting long-term capital gains on private equity investments in the sector, which will promote innovation in the space,” Jayaraman said.
Promoting AI & Other Technologies
At a time when the world is witnessing a generative AI boom, the Indian agritech players are also seeking measures to promote the use of various emerging technologies in the sector.
Industry players told Inc42 they expect the Budget to focus on deeper integration of technology in agriculture to enhance productivity and sustainability.
Over the years, India has created digital public infrastructure (DPI), also called India Stack, of which UPI is the biggest and most popular foundational block, with an aim to increase digitisation and promote ease of living. Agritech players believe there is a need for similar DPI for agriculture to mitigate the effect of climate change.
“India’s significant progress in DPI across various fields needs to extend to agriculture…A national grid of sensors that can track atmospheric and soil conditions and capture precise data on the same will be an asset that can be leveraged by multiple stakeholders for yield prediction, disease onset prediction, AI-based irrigation management, and several such applications,” said Waycool’s Jayaraman.
Talking about AI, it has the ability to transform agriculture in the coming years by shifting from task-specific learning to generalised capabilities.
As such, the lack of tax incentives for promoting internet of things (IoT) and AI in agriculture in last year’s Budget was a missed opportunity, according to Sandiip Bhammer, founder and co-managing partner of climate change focussed venture capital fund Green Frontier Capital.
“This year, reforms should include tax benefits or subsidies for adopting these technologies in the agricultural sector. Also, establishing a clear regulatory framework to encourage innovation, while ensuring data privacy and security, is crucial. Additionally, investment in research and development and collaborations between tech companies and agricultural experts can drive the transformation of this sector,” Bhammer added.
CropIn founder and CEO Krishna Kumar too highlighted the need to promote AI, saying the upcoming year would see a surge in AI innovations. This would usher in a new era of digitisation, data utilisation, and use of AI tools in farming which would empower individuals to use technology to predict yields, address water shortages proactively, and anticipate weather patterns, he added.
Fighting Climate Change & Improving Yields
Arguably, no other sector is as impacted by climate change as agriculture. The impact of climate change often leads to stagnation or decline in productivity and also hits standing crops. The sustainability of the agricultural and food supply chain hinges on acknowledging and mitigating climate risks.
While the government has taken steps to address this challenge, omnichannel farm-to-fork startup KisanKonnect’s founder and CEO Vivek Nirmal called for higher fund allocation for National Innovations in Climate Resilient Agriculture (NICRA) in this year’s Budget, with a special focus on vegetables.
NICRA is a network project of the Indian Council of Agricultural Research (ICAR) which aims to enhance the resilience of Indian agriculture to climate change and climate vulnerability through strategic research and technology demonstration.
According to Nirmal, vegetable farmers, who are predominantly smallholder farmers, are particularly vulnerable to the impact of climate change due to their short crop cycles and they need to be extensively covered under the project.
NICRA is currently underway at a smaller scale, primarily focusing on cereals and pulses. Nirmal’s comments are significant as KisanKonnect sources fruits and vegetables from over 500 farms in the country.
He also sought higher focus and funds for research centres as they can swiftly develop and offer practical methods for enhancing the yield for fresh fruits and vegetables, helping farmers as well as agritech startups.
Meanwhile, Prasanna Rao, MD and cofounder of agritech startup Arya.ag, also expects the finance minister to announce measures to support climate-resilient practices in agriculture in line with the country’s net zero emissions target.
Rao added that a framework for the measurement and assessment of carbon credits in agriculture is the need of the hour.