India’s rural ecosystem is evolving from ‘traditional agriculture to new farming models, advanced agri-tech services, and new food products.’ The country has witnessed significant investments into the sector, to the tune of approximately Rs 6600 crore during 2017- 2020, a growth of more than 50 per cent per annum. According to a report by Bain & Company and Confederation of Indian Industry (CII) titled, ‘Innovation in India’s Rural Economy: Disruptive Business Models are Stimulating Inclusive Growth in Agriculture and Rural Finance’, significant domestic and international investments are being pumped into the sector to improve efficiency and access to credit. Several global tech giants are seeing this space as a new growth opportunity and are investing in innovative solutions for crop health monitoring and yield estimation.

Parijat Jain, Partner & Leader of Bain’s Agri-business practice in India, said, “In the last six years, several start-ups have emerged to reduce systemic inefficiencies among inputs and marketplaces, precision farming, processing and storage.”

The Indian agriculture sector has been growing steadily at a CAGR of 11 per cent since 2015, and it contributes to approximately 37 per cent of the total rural GDP.

More digital payments

According to Bain-CII estimates, about 30 per cent of the rural ecosystem is adopting digital payment and digital commerce solutions to avail easier access to agri-financial services. In that, Unified Payments Interface (UPI) transactions doubled in the past year, to surpass eight times more transaction value than credit cards. The factors credited to this swift uptick include access to smartphones, lower cost of data, and Aadhaar building a digital identity that enabled services like Know Your Customer (KYC) and e-sign.

Even as digital payments are increasing, cash still remains the dominant method of payment for rural financing, accounting for around 90 per cent of all payments.

The report also maintained that the rural microfinance sector has grown significantly in the past 18 months, rising from a gross loan portfolio of about Rs 122.5K crore in December 2019 to Rs 146.7K crore in March 2021. Agri credit has grown at 10 per cent CAGR in the last five years, reaching nearly Rs 14 lakh crore in 2019-2020 and about 35 per cent of this comes from states of Tamil Nadu, Andhra Pradesh and Uttar Pradesh.