Kurukshetra January 2024

Startups Redefining Rural India

Chapter 1- Redefining Rural Landscapes

• India is the 3^rd largest startup ecosystem in the world, with more than 1 lakh registered startups (DPIIT- Startup India).
• The startup ecosystem has seen unprecedented growth since 2014, when the government launched schemes like Startup India, Atal Innovation Mission (AIM), MeitY Startup Hub (MSH), BIRAC, and DST-supported schemes etc.
• Some schemes especially to encourage rural entrepreneurship are listed below:

Role of Digitization

• Internet penetration and data accessibility have a huge role to play in developing startup ecosystems.
• India has one of the cheapest data rates in the world (USD 0.17 for 1 GB).
• By 2025, India will have 90 crore active internet users, and 56% of the new internet users will be from rural areas.
• The digitisation of rural areas has been taken a pace with government schemes like BharatNet, Common Service Centers (CSCs), Digital India Campaign, Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGdisha), and Digital Finance for Rural India, along with a vibrant private telecom sector.
• Rural India presents a massive opportunity for startups, especially in sectors like agritech, food processing, edtech, skill development, e-commerce, health-tech, renewable energy, handicrafts and traditional arts, and fintech.

Types of Rural Startups

Challenges for Rural Startups

• Connectivity with Suppliers in Urban Areas- Limited infrastructure, including transportation and communication networks, can hinder the efficient flow of goods and services.
• Access to Financing: Financial institutions may be hesitant to invest in ventures located in remote areas, citing higher perceived risks and a lack of traditional collateral.
• Lack of Support System and Ecosystem in Rural India for Startups
• Difficulty in Finding Early Adopters in Rural Areas
• Limited Funding Mechanism in Rural Areas

Therefore, fostering an environment that supports and nurtures the growth of startups, particularly in rural areas, becomes imperative for realizing the USD 10 Trillion milestone by the year 2030.

Chapter 2- Reform Perform & Transform through Agri-Startups

• In 2021, India experienced the development of 46 unicorns (denoting new companies valued at $1 billion or more), positioning India as the third-largest unicorn hub globally, with a total of 90 unicorns, behind only the USA and China.

Potentialities of Agri-Startups

• Around 55% of Indian population relies directly on agriculture (Census 2011), contributing around 18% to the GDP.
• Investing in agriculture is among the most secure and profitable business avenues.
• Agricultural practices have been successfully transformed through a diverse array of technologies, including hybrid seeds, precision farming, artificial intelligence, geo-tagging and satellite monitoring, big data analytics, mobile apps, and farm management software.
• It can be applied at every stage of the agricultural process to enhance productivity and increase farm incomes.
• Through various policies and interventions, the Government aims to empower startups, fostering innovation, design, and the rapid expansion of the startup movement.

Government's Proactive Policies to Empower Startups-

Enablers such as Incubators and Accelerators play a crucial role as key partners within the broader startup ecosystem, supporting and expediting the successful development of businesses.

1. a-IDEA: It is an agriculture-focused Technology Business Incubator (TBI) of the National Academy of Agricultural Research Management, Hyderabad (ICAR-NAARM), founded in 2014 and funded by the Government of India's Department of Science and Technology (DST). It strives to assist agri-preneurs in ideating, incubating, and accelerating their unique early-stage enterprises that are scalable to become competitive food and agribusiness ventures.
2. AGRIUDAAN: It is India's first Food & Agribusiness accelerator, launched by NAARM, a-IDEA, and CIIE- IIM(A) in 2015. Focus areas include sustainable inputs, precision/smart agriculture, innovative food technology, and supply chain technology.
3. Centre for Innovation, Incubation and Entrepreneurship (CIE):  It enables and activates startup ecosystems in several Indian locations. Its mission is to help and foster early-stage entrepreneurs by growing the startup ecosystem through partnerships, mentorship, funding, and collaborations.
4. International Crops Research Institute for the Semi-Arid Tropics (ICRISAT)- It fosters technology development and commercialization through public-private partnerships.

Agri-tech Startups Categories

These are categorized into different types such as

1. Establishing connection to output markets
2. Facilitating input supply
3. Enabling mechanisation and irrigation
4. Providing financial solutions such as credit and insurance
5. Aiding in quality maintenance through monitoring and traceability
6. Managing postharvest processes
7. Offering logistic services such as warehousing and cold chains
8. Supporting activities related to animal husbandry

Conclusion

1. The Indian Government has initiated the Startup India programme, aiming to consolidate and unite a majority of startups on a single platform.
2. Agri-tech startups are actively integrating technology into market linkages. The major sub-sectors witnessing the rise of agri-tech startups include Big Data Analytics, Supply Chain/Market-linked Model, FaaS (Farm as a Service), loT Enabled solution.
3. A comprehensive network of relevant institutions is vital for the transformation of agri-startup intentions into profitable enterprises.

Chapter 3- Redefining Food Processing Sector through Startups

• Food Processing sector is extremely vital for an agrarian country like India.
• It acts as an effective link between agriculture and industries and also helps in reducing wastages of perishable agricultural produce, ensuring value addition, and diversifying and commercializing agriculture, thereby generating incremental employment and income for farmers.

Importance of Food Processing Sector

• It is one of the most important sectors of the Indian economy, both in terms of its contribution to economic output and also in terms of overall economic growth.
• From 2012-13 to 2020-21, the Gross Value added by food processing industries at 2011-12 constant price grew from Rs. 1.30 lakh crore to Rs. 2.37 lakh crore.
• It is one of the fastest growing sectors in the country, having grown at 10.3% during 2015-16 to 2020-21, vis-a-vis the growth rate of 5.1% in the overall manufacturing sector.
• This sector is also one of the sectors where consumer dynamism is highly palpable and easy to comprehend.

Startups: Sunrise and Inclusive Growth

• A study by NABARD Consultancy Service Pvt. Ltd. Estimated in 2022 the percentage of harvest and post-harvest loss of perishable food as shown in Table 1.
• In this context, food processing startups need to be facilitated through specialised interventions that can ensure the presence of new research and development, technology, innovative processes, and products, and thereby enlarging the scope of an improved supply chain, value chain, and demand system in the food sector of the country.
• Out of more than 3.13 crore registered micro, small, and medium enterprises in the country, as many as 19 lakh are in the food processing sector, of which 33% are owned by women entrepreneurs.
• There is a concentration in the southern States of Andhra Pradesh (14%), Tamil Nadu (12%) and Telangana (10%), which together constitute 36% of all registered food processing factories in the country.
• Since its launch in 2020, Self-Reliant Fund for MSMEs has provided equity support to growth-oriented MSMEs, including startups.
• Out of the 373 MSMEs, which have benefitted from equity infusion under SRI Fund in the past two years, 15 are from the food processing.

A number of initiatives are being taken by the Government of India to address the challenges faced by the food processing sector, including-

• ‘Make in India’, which recognises this sector as a priority sector.
• On principle of reaping benefits from economies of scale, a cluster approach or a plug-and-play model on which mega food parks are based would work well for this sector.
• Pradhan Mantri Kisan Sampada Yojana, Prime Minister Formalisation of Micro Processing Enterprises, Production Linked Incentive, etc.
• Production Linked Incentive scheme, Agri-Infra Fund, etc for startups in the food processing sector to flourish, backward linkages with agriculture, fisheries, dairying, animal husbandry, etc.
• Involvement of technology in the food processing sector, especially since the advent of the Covid pandemic in 2020, has been increasing.
• The need for investment rises, and, therefore, foreign direct investment (FDI) is attracted. In the last nine years, the food processing sector in the country has attracted Rs. 50,000 crore of FDI.

Promoting Startups

Government has been promoting and facilitating startups in the country through various initiatives some of them are-

• A Rs. 10,000 crore Fund of Funds has been established, which aims at making capital available for startups at the early stage, seed stage, and growth stage.
• There is a separate Credit Guarantee Scheme for loans taken by startups.
• Central Ministries and Departments have been advised to relax the conditions of prior turnover and experience when procuring from startups.
• Startups are eligible for fast-tracked patent application examination and disposal.
• The Startup India Online Hub connects all stakeholders on the same platform, viz., startups, investors, funds, mentors, academic institutions, incubators, corporations, Government bodies, etc.
• For startups, there is a 100% deduction allowed for their profits and gains for three consecutive years out of ten years.
• The Budget also announced the establishment of an Agriculture Accelerator Fund to encourage agri-startups, especially those by young entrepreneurs in rural areas.
• Fund aims to bring innovative and affordable solutions for challenges faced by farmers and to bring in modern technologies to transform agricultural practices, increase productivity, and enhance profitability.

Linking Startups to Global Markets

• The Central and State Governments promote export-oriented enterprises.
• Agricultural and Processed Food Products Export Development Authority (APEDA), set up under the APEDA Act, 1985, is mandated, inter alia, to aid in the registration of exporters of scheduled products, provide financial assistance to them, fix standards and specifications for the scheduled products, carry out inspection, improve packaging and marketing of scheduled products, etc.
• Between 2014 and 2023, the share of processed foods in India’s exports has risen from 13% to 23%, with APEDA having linked importers with exporting startups.
• Recent high-level meetings held with countries like Brazil, called for facilitating greater exchange of goods and ideas. This is also an affirmative step towards ensuring world food security.

Startups in the food processing ecosystem are found at various stages of the value chain and together have the potential and dynamism to complete the value chain and lead to transformational changes in the economy.

The support required by them at different stages is obviously different. If the recent growth in this sector is to be taken as an indicator, then the contribution of this sector to the economy in the immediate future can be expected to be even more rapid.

Chapter 4- Startups Towards Rural Water Security

• Water and sanitation problems in the country have no single solution owing to the diversity in geography, demography, culture, and climatic conditions.
• In lines with the Sustainable Development Goals (SDG), goal for Water, Sanitation and Hygiene (WASH) ecosystem is to ensure access to clean water and safe sanitation facilities for every person.
• Startups, with their unique advantage and position in the ecosystem, help to achieve the goal of inclusiveness through their novel ideas and products.

Elements of Rural Water Security

• To ensure water security, it is important to bridge the gaps in water demand management, water treatment and and water quality, groundwater management, and effective water governance.
• The first step to improving demand management is ‘to measure.” Startups are successful in developing meters at an economical rate using low-cost sensors.
• The installation of water-saving devices also contributes to the effective demand management.
• Water quality and the high cost of treatment have always been concerns in rural water security.
• Various departments under the Government of India and State Governments are encouraging startups to invent novel devices and test kits for water quality testing and affordable treatment mechanisms.
• Borewells are reliable water sources in many parts of rural India, both for drinking and agriculture. However, its sustainable use is a challenge due to the lack of accurate data on groundwater levels.

Role of Startups

• Many startups have come up with useful tools and ideas to tackle these issues such as Excessive water consumption associated with subsidized or free supply of electricity. Handheld device, GIS-based dashboards, and data-based advisories are a few examples.
• Improved water governance is essential to streamlining the integrated approach of resource allocation and management.
• Startups have been successful in such situations with tools to save agriculture water and facilitate the scheduling of water supply based on real-time data, which is otherwise cumbersome with manual calculations.

Startup India’s Innovation Challenges

• Startup India initiative has been working with various departments and agencies to promote startups working in the WASH sector.
• DPIIT and the National Jal Jeevan Mission, Department of Drinking Water and Sanitation, had conducted an innovation challenge to develop portable water testing devices.
• Swachh Bharat Grand Challenge was introduced in the fields of waste management, water management, air quality management, and sanitation.

Many interesting solutions to address the pertinent issues in the WASH sector. Some of them are:

• Intelligent Public Toilets (IP Toilets) with self-cleaning facilities, floor hygiene concept, and an loT-enabled control board for monitoring usage.
• Created an anaerobic granulated sludge of more than 650 numbers of various bacteria that is used to treat waste water that can directly be used for irrigation purposes.
• E-Waste Exchange for disposal of electronic waste complying with government regulations.
• Odourless, waterless, and chemical-free urinal systems that provides a unique air-lock system that does not allow urine to come into contact with air or oxygen.
• Organic hydrogel, made from biodegradable waste, which could retain moisture, nourish the soil, and even boost crop growth naturally.

AIM-ICDK Water Innovation Challenge

• NITI Aayog’s Atal Innovation Mission (AIM) and Innovation Centre Denmark (ICDK) has introduced an open innovation challenge in water sector to identify and nurture innovative startup ideas.
• The programme helped innovators to build their skills and apply their technical disciplines, innovation capacity, and catalyse water solutions.

National Startup Awards for Rural Drinking Water

• National Startup Awards (NSA), in 2020, seek to recognise and reward outstanding startups and ecosystem enablers under various categories.
• One of the winners in this category, WEGOT aqua, provided an loT-based water management solution that enables real-time, data-driven, and automated decision-making to reduce the water demand, and thereby increase the efficiency of water infrastructure in buildings.
• The sensor also detects, and notifies leakages, broken pipes, abnormal use in real-time via mobile app and web dashboards. Once reported, the user can shut the leaks remotely, thus saving water from getting wasted in leakages.

Some of the startups working in the water management sector are-

1. Boon (formerly known as Swajal)- This water-tech startup is striving to make water accessible and affordable, ensuring a reliable supply of safe drinking water. loT-based remote monitoring capabilities built into the cloud platforms make repairs and upgrades seamless.
2. Vassar Labs
3. Waterlab India - Bhujal App and loT
4. Genrobotics and the Bandicoot
5. Kheyti

The Government of India and State Governments are keen in providing supportive environment for the Indian startup ecosystem to become the first in the world. However, the startup ventures must be well connected with the rural population and the government agencies to deliver its full potential. The digital divide, which may pose hurdle to the most deserving categories in accessing the startup tools, must also be bridged.

Chapter 5- Startups as the Engine of Growth for North-East India

• India needs entrepreneurs for two reasons: one is to capitalize on new opportunities, and the second is to create wealth and new jobs.
• Startups will play an important role in helping India become the third-largest economy in the world.
• Around 49% of the startups are from Tier 2 & 3 cities.
• Historically, there was a perception that small towns were difficult places to conduct business. However, with improved internet penetration, vastly better physical infrastructure, road, rail, and air connectivity, and supportive government is no longer true.

Startups in North-East India

• Although the region does not have a very rich history of entrepreneurship, through the policy intervention of the Government it is witnessing accelerated growth towards a better economy.
• Each state has come up with its own startup policy and a clear mandate for promoting startups.
• Assam and Manipur are the leading states in terms of startup ecosystems in NER.
• Startups in North-East are found primarily in the following sectors: Agriculture and allied, Handloom and Textiles, Tourism, IT&ITES, Retail and Logistics, Health and Wellness, Edutech, Waste management and Renewables, Media and Entertainment etc.
• The majority of the startups are in the agriculture & allied sector, followed by ITES, handloom & textiles, retail & logistics, and education.
• Most startups face two major concerns: access to funding and mentorship support.

In NER, owing to the still evolving and growing ecosystem, the challenges faced by the startups are much bigger compared to the startups in more mature ecosystems of the metros.

Some of the common challenges are-

• Access to funds
• Access to new markets
• Lack of skilled manpower
• Continued mentorship support
• Access to professional support services like regulatory compliances, liasoning, patent filing, etc.
• The startups from NER are relatively new and cater to a smaller market.
• employment generation is still restricted.
• Very Few highly innovative startup ideas using technology in designs and processes
• Limited patents filed by startups from the region

The Possible Way Ahead

• There is a need to empower startups by integrating design thinking, creative capacity building, and collaborative problem solving.
• Structured support is needed in terms of raising funds, documentation (often startups have a lot of ideas and bottlenecks in their minds and are not able to structure them in a document), and
• Creating a vibrant and inclusive community of entrepreneurs from the region.
• Evolve outcome oriented sustainable incubation modes that support competitive businesses that may not be venture-funded.
• Build Leaders of incubators and accelerators, Expert mentors, consultants, lawyers, accountants and other experts and vendors; and
• Integrate information, infrastructure, funding, and other efforts across the stakeholder groups that include government agencies, private incubators, and funding institutions.
• There is a need to organise academic programme/courses for startups.

India’s robust economic growth and vast market potential provide a promising backdrop for startups across various sectors, be it technology, healthcare, and renewable energy, or other industries.

The global landscape is ripe with opportunities for Indian startups, with the potential to drive innovation, growth, and sustainability through international collaboration.

This path aligns with North- East India’s journey to be the gateway to Southeast Asia through the Act East Policy and offers startups a remarkable platform for success.

Chapter 6- Drone Revolution

• India is on the brink of a drone revolution that not only could reshape the rural economy but also has the potential to profoundly impact and improve countless lives.
• In Africa, drones are being used to support small-scale farmers in Mozambique and agribusiness in Morocco.
• Japan has incorporated agricultural drones to help rice farmers maximize their yield.
• In Europe, Spain is at the forefront of using drones in agriculture, where drones are being used in activities ranging from crop monitoring to precision farming.
• Malaysia, Singapore, and Australia have implemented laws regarding the use of drones.

A Bright Outlook

• In the United States, a staggering 84 per cent of farmers utilise drones on a daily or weekly basis.
• The adoption rate in developing nations such as India remains considerably lower.
• India is actively exploring and promoting drone technology. This is because these cost-effective, unmanned-aerial vehicles hold promise to address various challenges and issues prevalent in Indian agriculture.
• As per projections from the Ministry of Civil Aviation, the drone industry in India is expected to experience significant growth, reaching a turnover of Rs. 12,000-15,000 crore by 2026.

The Indian Government has initiated several schemes to promote the drone industry within the country such as-

1. Production-Linked Incentive (PLI) Scheme: It offers incentives to manufacturers in this domain. Its objective is to stimulate significant growth in the emerging drone sector, potentially generating over 10,000 direct jobs within the next three years.
2. Scheme for Women Self-Help Groups (SHGs): It focuses on providing drones to women self-help groups (SHGs) engaged in agriculture.
3. Ban on Drone Imports: It is anticipated to fuel the growth of the local drone manufacturing industry and subsequently lead to the creation of job opportunities.
4. Drone Shakti Scheme for Startups: This scheme targets startups within the drone industry, offering financial assistance for research and development, product development, and marketing.
5. The Drone Rules, 2021: These rules establish a comprehensive regulatory framework for drone operations within the country.
6. Certification scheme: It allows agricultural drones to carry payloads excluding chemicals or other liquids utilised in spraying activities.
7. Drones in Agricultural Research:  It to inspire emerging researchers and entrepreneurs to explore cost-effective drone solutions aligning with the broader vision of fostering innovation and technology adoption in agriculture.
8. SMAM: The Indian Government is also providing financial assistance for the purchase of drones under the Sub-Mission on Agricultural Mechanization (SMAM) for its demonstration on the farmer’s field.

Advent of Kisan Drones

• Kisan Drones are aimed at helping farmers in various aspects of farming from crop health analysis to pesticide spraying.
• Use of Kisan Drones is being promoted for crop assessment, digitisation of land records, and spraying of insecticides and nutrients.
• It allows farmers to monitor their crops more efficiently, identify issues early, and take necessary actions promptly.
• Kisan Drones can help in enhancing crop yields by providing detailed data on crop health.
• It also helps in reducing costs by identifying areas of the farm that require attention, thereby reducing the need for manual labour and the use of pesticides and other chemicals.

Drones prove valuable across various industries, yet their influence on agriculture, and consequently, the rural economy, is a subject of significant interest and harbors considerable promise.

Drones boost the rural economy in the following ways-

1. Enhanced Operational Efficiency: By swiftly covering expansive agricultural landscapes.
2. Increased Crop Yields: by identifying areas requiring attention.
3. Cost Reduction: by pinpointing areas needing intervention, reducing reliance on manual labor, and minimising the usage of pesticides and other chemicals.

Here are some ways farmers can benefit from drones-

1. Precision Agriculture- These unmanned aerial vehicles, armed with advanced sensors, meticulously collect essential data for soil analysis.
2. Planting and Crop Sowing: Drones execute precise and efficient sowing across vast agricultural expanses.
3. Precision Spraying:  Equipped with advanced sensors and imaging technologies, drones conduct real-time scans of crop fields, allowing for site-specific spraying of liquids like pesticides and nutrients.
4. Crop Monitoring:  By empowering farmers with comprehensive and timely information, drones enhance the precision and efficiency of crop monitoring, contributing to the overall resilience and productivity of modern farming systems.
5. Irrigation Management: Equipped with thermal sensing cameras, agricultural drones provide insights into soil moisture conditions, guiding precise water application.
6. Crop Health Assessment:  The ability to detect potential health issues at an early stage allows for prompt and targeted interventions, safeguarding the crop and minimising the impact of diseases.

Pros of Drones-

• Agri-drones in Indian agriculture bring several advantages, enhancing security, efficiency, and cost- effectiveness.
• High efficiency of drones, working at double the speed of human labor without operational delays.
• Low cost and easy maintenance.
• sturdy designs, detachable containers, low-cost frames, and precise pesticide spraying capabilities, making them accessible and practical for Indian farmers.

Cons of Drones-

• Connectivity issues in rural areas,
• Limited online coverage
• investment in internet connectivity, introducing additional recurring expenses.
• Weather dependency, as drones are highly reliant on favorable weather conditions.
• Lack of knowledge and skill required for using drone technology daily.

Given the strong government focus, regulatory backing, liberal incentives, and appropriate training programmes, drones have the potential to revolutionise Indian agriculture, playing a pivotal role in uplifting the rural economy.

Chapter 7-Championing Social Startups for Rural Development

• India is set to cross its GDP from USD 5 trillion in 2026-27 and USD 26 Trillion by 2047-48, the centenary of Indian political independence, making it a high- and middle-income country. The role of startups in achieving this cannot be undermined.
• Low productivity, a lack of market access and infrastructure, and a lack of bargaining power, among other reasons, have resulted in decreased incomes from traditional livelihood activities.

India's Rural Startup Ecosystem is More than just Agri-startups

• Startups in rural India are not just about agriculture.
• Over 450 startups are actively engaged in the agri-tech sector, attempting to solve farmers' problems such as smart agriculture, resilient downstream service supply chains, value addition at the farm level, and farm mechanisation.
• In the non-farm sector, several startups have effectively created an impact at the ground level through their innovations, specifically in animal husbandry, food processing, textiles and handlooms, and healthcare.
• Several cleantech startups (businesses that provide renewable energy-powered solutions) have been instrumental in bringing the energy transition to rural communities to increase their earnings while also ensuring that their livelihood practices have no negative environmental impact.

Key Value Chains that Startups could Focus on in Rural India

1. Value addition and food processing activities at the farm level- A variety of technologies, including cold storage, dryers, milling machines, small oil expellers, and food processors can enable the value addition and processing of farm produce.
2. Animal Husbandry-The productivity of cattle and rising expenses are two of the primary difficulties confronting the dairy business.
3. Textiles and Handlooms- Use of machine has led to improved productivity as high as twice that of their earlier outdated traditional practices.
4. Healthcare- In rural areas, startups working in telemedicine, supply chain management, and low-cost diagnostic and vaccination equipment, among others, are making a huge impact.
5. Service-related Digital Innovations- number of startups have emerged that provide farmers with digital solutions, such as market aggregation platforms, e-commerce platforms, digital payments, fintech solutions, Al algorithms for on-farm predictions, and expert advisory support.

India's rural startups remain resilient, but certain challenges could impede progress

1. Challenge with Scaling up
2. Lack of Ecosystem Support
3. Absence of Go-to-Market Strategy
4. Difficulty in Catering to Scattered Demand and
5. Providing after-sales service
6. Other External Factors such as-

• Competition from low-quality, low-cost goods and services. Because the rural population is wary of overspending, they resort to purchasing low-cost alternatives.
• Natural disasters, pandemics, and climate change can all greatly impact the success of businesses.
• Market factors such as increased import/export levies and trade bans, among others, may significantly impact the startup ecosystem.

A Few Recommendations to Foster the Rural Startup Ecosystem in India

• Social startups should prioritise gathering and analysing evidence to unlock support.
• Social startups should strive to leverage existing government schemes
• Prioritise a positive overall product experience for rural consumers
• Social startups should have an explicit focus on gender mainstreaming

The rural startup ecosystem has the potential to generate jobs, boost rural entrepreneurship, and stimulate reforms in the digital, fiscal, and physical infrastructure sectors. Scaling small-scale businesses (or startups) focused on tackling issues in traditional livelihood practices might thereby pave the path for overall rural economic improvement and achieve the vision of 'Atmanirbhar gaon'.