Innovative business models are encouraging India’s agricultural growth: Bain & Co.

Innovative and disruptive business models are stimulating inclusive growth in agriculture and rural finance, said a report by Bain and Company and CII. The report, titled Innovations in Rural Economy, said India’s rural economy contributes to nearly half of the nation’s GDP and is growing steadily, supported by government and private sector improvements to the physical and digital infrastructure.

Given that agriculture is the largest contributor to the rural economy, accounting for nearly 37 percent of the total rural gross domestic product in 2019-20. Between 2017 and 2020, agritech startups attracted Rs 6,600 crore of private equity investment for areas such as building sustainable systems, finance technology, and ensuring inclusive growth.

The report further emphasizes that the rural microfinance sector has grown significantly in the past 18 months, up from a gross loan portfolio of Rs 1,22,500 crore in December 2019 to Rs 1,46,700 crore in March 2021.

Agricredit has increased at around 10 percent CAGR in the last five years, reaching Rs 14 lakh crore in 2019-2020. About 35 percent of agricredit business comes from three states—Tamil Nadu, Andhra Pradesh, and Uttar Pradesh.

Several global tech giants like IBM and Microsoft view this space as a new growth opportunity and are investing in innovative solutions for crop health monitoring and yield estimation.

Talking about rural microfinancing, the report said that as borrowers and lenders have both matured, rural mass lending has increased. In FY21, total originations were valued at around Rs 76,000 crore with rural two-wheeler loans accounting for roughly 50 percent. Small-ticket personal loans and consumer durables loans each had a rural share of approximately 30 percent.

Besides according to the report, government schemes such as the Agriculture Infrastructure Fund are attracting credit to build community farming assets and post-harvest agriculture infrastructure. To promote non-farm activities, also schemes have been launched to fund manufacturing, trading and service sectors, and activities that are allied to agriculture.

The rural smartphone and internet penetration has increased by 30 percent annually over the last five years, with a significant reduction in data prices that are driving the rise in smartphone usage. Also, Covid-19 has accelerated smartphone exposure and proficiency.

Leave a Reply

Your email address will not be published.