Entrepreneurship in Agriculture: Options Galore!

Agriculture plays a vital role in India’s economy. Over 58 percent of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, is one of the largest contributors to the country’s GDP. As per estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors, including livestock, forestry and fishery, was 16.1 percent of the Gross Value Added (GVA) during 2014–15 at 2011–12 prices.

The country is the largest producer, consumer and exporter of spices and spice products. It ranks third in farm and agriculture outputs. Agricultural export constitutes 10 percent of the country’s exports and is the fourth-largest exported principal commodity. The agro industry in India is divided into several sub-segments such as canned, dairy, processed, frozen food to fisheries, meat, poultry, and foodgrains.

Over the past few years, multiple factors have worked together to facilitate growth in the agriculture sector in India. These include growth in household income and consumption, expansion in the food processing sector and increase in agricultural exports. Rising private participation in Indian agriculture, growing organic farming and using information technology are some of the key trends in the agriculture industry.

Agribusiness: An Introduction

In India, there are healthy signs of transformation in agriculture and allied activities. Visible improvement has come about by adoption of management practices through on-farm and off-farm operations in this sector. Agribusiness has evolved out of the new input-output matrix.

The term ‘agribusiness’ was first used by John H Davis of Harvard University, in 1955. In 1980s, it was given three connotations:

• Synonymous with term agriculture;
• Synonymous with agricultural economics; and,
• A modified concept of agriculture, excluding farming, or off-farm aspects of agriculture.

At present, agribusiness is defined as all business enterprises or sells to farmers/traders/consumers. The transaction may involve either an input or a produce or service and encompasses items such as:

• Productive Resources: feed, seed, fertiliser, equipment, energy, pesticides, machinery, etc;
• Agricultural Commodities: raw and processed commodities of food and fibre;
• Facilitative Services: credit, insurance, marketing, storage, processing, transportation, packing, distribution, consultancy, soil testing etc.

In the developed countries, agribusiness is defined as the total output arising from farm production and product processing at both pre and post-farm gate levels. In developing countries like India, the agribusiness sector encompasses four distinct sub-sectors, viz, agricultural inputs, agricultural production, agro-processing, and marketing and trade. All these add value or utility to the goods. Agribusiness is emerging as a specialised branch of knowledge in the field of management sciences. Agribusiness has opened new vistas for growth and development of the rural economy in general and of the agrarian economy in particular.

Scope and Opportunities

The scope and opportunities in agribusiness have substantially increased due to globalisation of trade and agriculture and the policy reforms at national level, leading to an unprecedented level of corporate interest in this sector. The policies of globalisation have taken Indian agriculture to the global stage, opening up opportunities as well as numerous challenges. The current structural changes in the economy have resulted in major shifts in the Indian agricultural scenario. Today the fast growing Indian rural market, which has become indispensable for making corporate growth strategy in the country.

The progressive growth of Indian economy is most likely to be controlled by the agribusiness sector. Agribusiness has opened up vast opportunities for value addition, packaging, retailing, and exports of agricultural products with high application of technology and management. In the last few years, there have been a radical shift in the nature of agribusiness, and as a result the demand for competent and dynamic professionals has grown manifold.

Agripreneurs: Adding Value

Currently, the structural changes in the economy have resulted in major shifts in the Indian agricultural scenario. As young and charged-up entrepreneurs are joining the fray, agricultural commodities are being turned into value-added products. With the same available resources, young entrepreneurs are modifying their business-models and exploiting market opportunities to improve their lifestyles. This is not only helping the entrepreneurs but also encouraging farmers to shift to a better world. Agriprenuers have come to realise the importance of quality changes and value addition in agriculture. Risk and uncertainty being inevitable parameters of modern business, serving farmers and saving farming has become the need of the hour.

Entrepreneurship in agriculture is not only an opportunity but also a necessity for improving the production and profitability. However, the rate of success is low in India, because of the following reasons:

• For most of the farmers in India, agriculture is mainly a means of survival. In the absence of adequate knowledge, resources, technology and connectivity with the market, it is difficult for the small holders to turn their agriculture into an enterprise;

• The self-employed technicians need regular back-up services in the form of technical and business information, contact with the marketing agencies, suppliers of critical inputs and equipment and research stations who are involved in the development of modern technologies;

• There are several legal restrictions and obstacles, which come in the progress of agribusiness. Private traders engaged in such business tend to ignore these rules and disturb the fair trade environment;

• With low profitability and outdated technologies, farmer members lose interest in their own enterprises as well as in that of their leaders.

Great Potential for Startups

With increasing mobile penetration and Internet access in rural areas, startups are slowly strengthening their foothold in the agriculture sector too. With a focus on solving issues concerning farmers, startups such as Fresh World, Farmily, Awaaz De, Anulekh Agrotech and Sahaja Organics are disseminating farm information through mobile phones, thereby reducing the gaps in agri retail supply chain, providing farmers with direct market access, besides weather, water and soil management services.

The proliferation of food produce delivery startups such as Nature’s Basket and Food Bazaar while highlighting the benefits of farm fresh produce to customers have also helped farmer. However, many of these still bulk source their produce from farmers through middlemen.

Entrepreneurs can also explore many options

in the foodgrain cultivation and marketing segments. They can add value with proper management and marketing initiatives. The processed food market opens a great potential for entrepreneurs be it fast food, packaged food or organic food. Fresh fruits and vegetables have a good demand abroad. A good network of food processing units can help potential exporters build a good business.

The importance of organic farming is growing at a fast pace, especially with urban people preferring only organic products. Entrepreneurs can focus on business opportunities in this sector. There are many small-time farmers who have adopted organic farming but the demand is still unmet, offering many opportunities for those who can promote organic farming on a large scale.

Biotechnology has huge potential, and entrepreneurs can look at a plethora of options with the application of biotechnology in agriculture, horticulture, sericulture, poultry, dairy and production of fruits and vegetables.

Now, the agri based startup firms are catching the fancy of venture capitalists. Venture capital funding in agri startup firms is picking up in India and is expected to increase in the coming years. This increase in venture capital funding is due to the lack of institutional funding through banks and Non-Banking Financial Company (NBFC). Apparently, this lack of institutional funding has prompted the entrepreneurs of these startups to go for venture capital even at a high cost.

To Conclude

While offering lot of business opportunities, the number of agri based startups is much lower when compared to the number of startups in the technology and e-commerce sector. The main reason for this huge disparity in the numbers is because there are several problems in the entire value chain of agriculture.

Creating a few million entrepreneurs will create millions of jobs as well as provide livelihood opportunities for the poor in remote corners of the country. Therefore, there is a need for efficient support organisations to monitor the activities of startups. Prediction of the future demand, introduction of modern technologies, cost control, and business expansion are the important areas, where entrepreneurs need regular support. Suitable legal support may also be required to protect the traders engaged in unfair trade practices.

It is better to promote agro-based enterprises in rural areas, as the local people have the required skills and most of the businesses help the entrepreneurs to ensure food security. The output of such business have ready demand even in rural areas and hence the market opportunities are better. With a strong agro-based programme, non-farm activities can also be initiated when the entrepreneurs are more experienced and capable of taking risk and managing the programme better. Promotion of direct marketing by establishing close interaction between producers and consumers will further enhance the benefits, while encouraging a large number of unemployed rural youth to turn into micro-entrepreneurs and traders.


References:

http://www.worldagribusiness.com/ArticleNovScenario.html
http://www.zenithresearch.org.in/images/stories/pdf/2011/June/5%20ATUL%20BANSAL%20.pdf
http://ageconsearch.umn.edu/bitstream/47436/2/1-Presidentialaddress.pdf
http://articles.economictimes.indiatimes.com/2008-10-06/news/28437665_1_young-entrepreneurs-technology-retail-outlets
http://www.indianweb2.com/2015/09/15/vc-funding-in-agri-tech-startup-ramping-up-in-india-544/
http://www.hindustantimes.com/business-news/india-inc-hails-pm-modi-s-thrust-on-agri-production-startups/article1-1380496.aspx
http://knowstartup.com/2015/07/agri-startups-sector/
http://www.ibef.org/industry/agriculture-india.aspx