Agriculture - A New Frontier
Date: Wednesday , March 03, 2010
As I stand in the middle of a farmland somewhere in Baramati with a farmer who owns more than 40 acres of land there and see him smiling as his fortunes are changing, I wonder how much aware we are about this quiet revolution happening in agriculture in India. It is interesting to see that his land is today valued at close to one crore (10 million) rupees, his annual income per acre is more than fifty thousand rupees, his yield has increased by 2-3 times because of better seeds and drip irrigation, and his quality of life is much better than that of those in the so called plush urban dwellings. I have a strong inclination and urge to become a farmer as I stand there under the cool breeze and bright sun. Well, I cannot become a farmer now so I have decided to put more attention to agriculture investing and help the farming ecosystem in India in order that all farmers in India can smile like the one I met in Baramati.
Agriculture can be very distinctly divided into pre and post harvest spaces. The pre-harvest space includes inputs like seed, fertilizer, and pesticide from companies and the post harvest space includes procurement, processing, and marketing of agricultural produce. Both these spaces, especially the pre-harvest one is seeing a lot of activity principally in the seed and drip irrigation spaces. The post harvest space is still evolving but has the highest potential to grow as the warehousing, agriculture-logistics, and food-processing activities pick up. Also players like National Spot Exchange are creating platforms that will enable farmers get better price for agriculture commodities.
Agriculture in India is a more than 100 billion dollar market, which can easily double since our average yields are less than half of global averages. India has the highest arable land area next to the US, and therefore has a huge potential to become a global farm basket. Also with better irrigation and seeds, you can rotate crops multiple times in a year rather than 1-2 times, which can again increase the farm output of India.
But the fact is that agriculture in India is growing at a dismal annual average of 1-2 percent. There is lot of government involvement in agriculture, which hinders the growth of this sector. The farmers in India are among the least educated about different crop technologies and have limited access to capital. The farmer today gets only a minuscule share of the price of the farm produce. The subterranean water table in India is going down every year; 80 percent of the lands in Punjab and Rajasthan are already in a critical condition.
All these problems are also interesting opportunities if you sit down and think. Jain Irrigation captured it in drip irrigation, Monsanto in BT cotton, and players like KS Oils in mustard-based oil. As a budding entrepreneur, this may be a space that could yield you more money and more satisfaction in the long run.
Other areas that are interesting and may see lot more activity are e-commerce, cleantech, and healthcare. Education and healthcare are also interesting but are somehow more asset-based and may require lot more capital to scale. For first time entrepreneurs who lack access to sufficient capital, it is advisable to avoid such capital-intensive businesses.
As an early stage venture fund, we are open to meeting, mentoring, and investing behind entrepreneurs who are passionate and driven.
The author is Manoj Gupta, Vice President, Nexus Venture Partners. He can be reached at email@example.com