The fintech agri ecosystem is likely to add $100 billion (about ₹8-lakh crore) to the country’s GDP, currently valued at about $3.5 trillion in next five years on the back of booming investment in agriculture sector.
Addressing the businessline’s annual Agriculture and Commodity Summit 2024 in New Delhi, NABARD’s chief general manager Manikumar S said $100 billion is likely to be added to GDP in next five years at three levels – digital lending, precision agriculture and digital marketplace (both B2B and B2C).
But, Anil Kumar SG, founder CEO of Sammunati, said it is possible to add that value in next three years if the potential is unlocked. Citing the instance of agri infra fund (AIF), where there is a glass ceiling that says lending cannot happen beyond 9 per cent in a year, he said things would have to be done differently from what is going on.
Highlighting that big opportunity is knocking the doors of agri fintech companies, Manikumar said they need to tap it as currently they share less than one per cent in short-term farm credit.
“Out of ₹22-lakh crore of farm credit disbursed in 2022-23, as much as ₹14-lakh crore was short-term crop loan (one year or less duration). The share of fintech in the short term credit was about ₹13,000 crore. This shows there is a space for agri fintech in this segment and it is doable to scale up,” he said.
In last three years, the share of farm credit in overall credit has doubled to 14 per cent. But the credit penetration is skewed in favour of large farmers, Manikumar said, adding it is as high as 54 per cent who have access to institutional credit. On the other hand, one-third of small and marginal farmers (86 per cent) have access to institutional credit, he said and added “this is a cause of worry.”
He said the gross transaction value (GTV) is likely to jump 8-fold in next five years to $34 billion from $4 billion in 2022 in agtech, where there are four-five sub-segments. The food crop component in the agtech will see a surge to $25 billion from $3 billion in next four years. The food tech within agtech is expected to grow to $341 million from $209 million.
In the online trading and auction platforms, there may be a transaction of $8 billion worth of agri commodities by 2027, he said. The warehousing sector may manage $10 billion worth agri produce and as much as $5 billion of these farm produce will go through some kind of quality assessment, he added.
Because of this huge investment possibilities the agri fintech may get an opportunity to finance about $3 billion (about ₹25,000 crore).
Funding winter
He said that funding in start-ups (including agtech) in India has declined to $7.5 billion in 2023 (up to December 15) from $25 billion in 2022. The agrifintech start-ups have seen the funding dipping to $11 million from $16 million. However, there was a recovery noticed in the last quarter of 2023 (October-December) as renewed investor interest have been noticed.
He also said that while the share of women-led start ups in fintech sector is 33 per cent, within this in the agri segment, the share is 43 per cent and it is even higher at 48 per cent in non-tier-I cities and towns in West Bengal, Chhattisgarh, Punjab, Uttar Pradesh, Tamil Nadu and Telangana.
“Going forward, 2024 may see continued investor interest. Precision agtech, mostly in developing smart agriculture, smart warehousing, agri biotech and those start ups having presence in all segments covering inputs to marketing support are seen to grow this year with more funding from investors, Manikumar said.
R Rajiv Srivastva, deputy general manager of SBI, said that SBI would continue to partner agri fintechs and would also open more special start-ups branches across the country after opening three such branches recently. Those will cater to agri fintechs, too.
The summit was sponsored by State Bank of India and co-powered by NABARD in association with National Commodity & Derivatives Exchange Ltd (NCDEX) and INDOFIL Industries Ltd. Dhanuka Agritech Ltd and Kribhco Agri Business are associate partners. The National Stock Exchange and Vaikunth Mehta National Institute of Co operative Management were the regional sponsors.
The session was moderated by KR Srivats, Associate Editor, business line.