The need for the sector to transition from the traditional industrial model into a modern, digital and sustainable one is more urgent than ever.
This article is part of the series — Colaba Edit.
India’s GDP grew at about 8 percent over the past few years on the back of rapid economic modernisation. Even so, farming remains crucial to the country’s poverty alleviation and food security efforts. About 41 percent of the Indian workforce is employed in agriculture, but the sector contributes a mere 15 percent to the national GDP. Farmers continue to face major challenges, including a lack of information on farm inputs and the absence of market linkages. The farm-to-fork value chain is excessively long and contains multiple stakeholders, resulting in low-value realisation for farmers. On the downstream, lack of infrastructure and the mandi (agri-commodities market) system result in farmers being denied a fair price for their produce and a large volume of post-harvest loss.
Agricultural development also has environmental consequences. India emits 2,299 million tonnes of carbon dioxide (CO2), with nearly a fifth from agriculture and livestock. A majority of agricultural greenhouse gas emissions (GHG) occur at the primary production stage by producing and using agricultural inputs (such as water, fertilisers and pesticides), farm machinery, soil disturbance, residue management, and irrigation.
The agriculture sector is also severely impacted by climate change through frequent droughts, heatwaves and erratic rainfall. Possible changes in temperature, precipitation and CO2 concentration significantly impact crop growth. India will likely experience more seasonal variation in temperature with more warming in the winters than summers. Between 1891 and 2009, India has seen 23 large scale droughts, with increasing frequency. Such extreme weather events pose risks of potential crop failure, an additional burden given that India’s ecological and sociological systems already face pressures from rapid population, and economic and industrialisation development.
There is no want of policy reforms by the government to reshape the industry. The government recently passed three agricultural bills that seemingly attempt to target farmers’ welfare. Of the three laws, the most significant change is in the form of the Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Ordinance 2020, which seeks to end the monopoly of state-run or state-authorised mandis on buying produce from farmers and selling it on downstream. It also removes barriers for the interstate trading of agricultural produce by ending the requirement for buyers to be registered locally.
The bills provoked the ire of a faction of farmers, with thousands marching towards the nation’s capital, in defiance of water cannons, batons and tear gas, to protest against the new laws. While the Indian Supreme Court has halted the implementation of these reforms, for now, many would agree that the agricultural laws — some of which date from the 1950s and 1960s, an era of scarcity and state socialism — need to be modernised.
It is pertinent to put the protest into the context of India’s existing agricultural policies. Most of the protesters are farmers in the country’s grain belt, and who have pumped unlimited groundwater using government-supplied electricity, seed and fertiliser subsidies. These farmers produce the bulk of rice and wheat that the government spends US$25 billion a year procuring at a guaranteed price in the name of “food security.” Such policies are unsustainable. Among others, it promotes antiquated farming techniques associated with poor management of fertilisers, water and pesticides that put a strain on natural resources and create a carbon footprint.
Amid the din of debates and dissent surrounding the agricultural reform, the climate agenda remains sorely absent at the policy level. To realise India’s vision of a digital green economy, of epochal importance is the inclusion of not just farmer resilience — from the impact of excess rain, heat, pests, hail, flood, drought and seawater inundation — and the amelioration of stress on environmental sustainability that traditional agricultural practices exert. Many agriculture technologies (agritech) have become the lever through which the climate agenda can be achieved.
Various agritech companies have emerged to help the farmers capture the best value for their produce. Several firms are working on remodelling the whole supply chain through efficient distribution systems and are trying to reduce the number of intermediaries involved in the value chain to increase the farmer’s profit. Other firms are using technologies like satellites and drones to geotag farms, crop health and estimate output. Some companies have also set up online trading platforms to directly connect farmers and consumers instead of going via the state-run mandi system. Digital platforms for farmers, like Patna-based DeHaat, can put competitive pressure on the middlemen and help farmers access the market directly. This has been particularly crucial as traditional marketing channels were disrupted by COVID-19 (for instance, zealous police officers stopped food trucks at the height of the countrywide lockdown, causing supplies from farms to urban areas to be disrupted). Such firms have helped farmers capture greater value in the chain, thereby strengthening their climate resilience.
Indian firms are also making advances in sub-industries like freshwater aquaculture. For instance, Aquaconnect, a Chennai-based agritech startup, uses machine learning and artificial intelligence to analyse feed and growth patterns to provide insights to farmers as well as appropriate advice on disease management. Aquaconnect is able to help farmers cut GHG emissions from resource use (inputs, seeds and water), water degradation and pollution by optimising feed usage and enhancing the biomass conversion of shrimps.
Farmers also lack access to credit and crop insurance, despite climate vulnerability, due to a lack of reliable data. Startups like SatSure and Mantle Labs leverage data on soil health and weather patterns to accurately determine the risk profile of a farm. Real-time data from satellites and drones can also help in capturing the extent of damage in case of crop loss. Accessible and affordable credit and crop insurance is crucial for smallholder farmers to increase their resilience to the effects of climate change.
These examples show that agriculture is part of the problem and solution to climate change and sustainability, and agritech innovations are key to usher India into a digital green economy. Agritech startups also carve out a new economic equilibrium for farmers, ensuring that they are better prepared financially to confront the impacts of climate change. The challenge is in the time and effort it takes to get these technologies to the hinterland.
The good news is that investment interests in the sector have been rising, with US$1.9 billion cumulative capital flows up to 2019. Greater collaborative support is required from the government, incubators and accelerators to create an enabling ecosystem to scale agritech solutions further.
From a policy standpoint, there needs to be greater support for agritech. While many state governments have policies for startups, there is no specific policy for agritech firms, not least because of the scant recognition of the agriculture and climate change connection. The governments must provide farmers with access to startups’ infrastructure, such as through the Krishi Vigyan Kendras, to engage with these innovations.
Despite the heated debate on the three new farm laws, they are only baby steps. The need for the sector to transition from the traditional industrial model into a modern, digital and sustainable one is more urgent than ever. The best way to do this is to arm smallholder farmers with the new technology and markets to achieve twin benefits — a profitable farmer and an environmentally sustainable agro-economy.
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Kean is an Investment Specialist at the Asian Development Bank. He leads venture investments in the agriculture healthcare financial and clean technology sectors.
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