Confederation of Indian Industry (CII) and Bain & Company jointly prepared a report titled ‘Innovation in India’s Rural Economy: disruptive business models are stimulating inclusive growth in agriculture and rural finance’ which revealed that agriculture sector grew by 11% Compound Annual Growth Rate (CAGR) during 2015-20 & the growth of the agriculture sector with highest disruption in terms of smartphone and internet penetration.
i.The agriculture sector has grown by a CAGR of 11 percent during 2015 -20 with the support of government and other private sectors initiatives towards physical and digital infrastructure.
- The rural economy contributed nearly half the nation’s overall GDP in 2019–2020 and employs 350 million people (68 percent of the total workforce).
- Agriculture contributes approximately 37 percent of total rural GDP in 2019–20.
ii.The private equity investment in agri-tech space reached more than 50 percent per annum between 2017 and 2020 that reaches an aggregate of upto Rs. 6600 Crores.
iii.Over the last 5 years, the rural ecosystem has grown over 10 percent per annum and have also shown 30 percent increased growth of rural smartphone and internet penetration.
Growth in digital platform:
i.The number of children with access to smartphones increased by 42 percent between 2018 and 2020 due to COVID-19 pandemic outbreak and online classes.
ii.Unified Payment Interface (UPI) – Digital payments penetration is increasing, driven by government interventions like the Payment Infrastructure Development Fund, Digital-first banking models and lowering of operational costs.
- According to the report, 30 percent of the rural ecosystem is adopting digital payment and digital commerce solutions to avail agri-financial services.
iii.The Indian government is also paving way for more digital and UPI payments post-demonetisation, along with digital payment players like Paytm and PhonePe.
Some examples of digital platform for farmers:
i.Ninjacart, a supply-chain platform, built an online marketplace to connect farmers to retailers without any intermediaries.
- It provides pricing, demand visibility, and payment assurance to drive engagement and support farmers.
ii.Indigo Ag is a platform that delivers services across the agriculture value chain, including agronomy advisory, quality testing to increase yields, and a marketplace to connect buyers and sellers.
iii.Aadhaar identity number accelerates digital payments and innovations in banking, which improves citizens’ access to cash and credit.
- As of March 2021, about 1.3 billion Indian residents have been issued an Aadhaar identity number.
Growth in microfinance sector:
i.The rural microfinance sector showed a growth in gross loan portfolio of about Rs 1,22,500 crore in December 2019 to Rs 1,46,700 crore in March 2021.
ii.Agri credit has also shown a growth at 10 percent CAGR in the last 5 years, reaching nearly Rs 14 lakh crore in 2019–2020 with Tamil Nadu, Andhra Pradesh, and Uttar Pradesh having around 35 percent of agri-credit business.
i.Farmer producer organisations (FPOs) have become critical access points to farmers, and can generate awareness and support new initiatives.
- Government policies, such as the Model Contract Farming Act, 2018, and initiatives led by private and nonprofit entities have boosted the formation and development of FPOs.
ii.Access to credit options for farmers are increasing as more rural and agriculture focused players, like Jai Kisan and Samunnati, connect farmers to financing partners.
- Additionally, government schemes like the Agriculture Infrastructure Fund and Pradhan Mantri MUDRA Yojana (PMMY) are offering low-interest loans to farmers.
Overview of India’s rural population:
i.Among two-thirds of India’s population in 2019–20, about 60 percent concentrated in 6 states. Uttar Pradesh has the highest rural population (~18 crore), followed by Bihar (~11 crore), Maharashtra, West Bengal, Madhya Pradesh and Rajasthan.
ii.Since 2017, the rural workforce has been increasing at a rate of 8 percent to 12 percent per annum in states like Rajasthan, Uttar Pradesh, and Bihar.
Contribution towards India’s Gross Domestic Product (GDP):