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India in Transition:

Challenges and Opportunities in Fresh Produce Marketing and

Agricultural Technology

George Alexander Wilbanks

University of California, Davis

M.S. International Agricultural Development

Capstone Report

Advisory committee:

Travis Lybbert, J.K. Ladha, and Jeffrey Williams

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Acknowledgements

Thokchom Sony, I cherish all our adventures in Delhi (past, present, and future) and the warmth of your friendship (and space heater) after long days spent traipsing to far flung meetings throughout NCR. I am still thankful for your family’s kindness nursing me through fevered tropical illness during my time in Imphal. Abhimanyu Singh Ranawat, Aditi, Ameera, Aryan, and Twitch, I cannot thank you all enough for the delicious meals, winter fires, storytelling, and the warm guest room – thanks again for taking a third child into your home! Rinchen Norbu Wangchuk, inveterate newspaperman and beloved conversationalist, I am thankful for your (and Sharon’s) gracious hospitality and connections in Bangalore. I will be continually in your debt for the invaluable insights you continue to provide on both hiphop and the Indian political and media landscape (and introducing me to Mangalorean cuisine). To the Chakraborty Clan, our excursions in Bombay were lovely but forced a devastating re-examination of the lies we told ourselves about living in Delhi. Anindita and Ipshita, you are both marvelous women, thanks again for never missing an opportunity to inform me I’m wrong and that my Hindi is garbage. Etrajisahibsir, India Hand and global financial sage, your wisdom and patient guidance have provided invaluable context for my experiences in India.

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Preface

In the Spring of 2012, I quit my job in New York working for a family office investment

advisory consultant and boarded a flight to Hyderabad, India.1 I spent several months visiting a

friend who was working for an impact investor, Bob Pattillo, through the IDEX Accelerator.

IDEX is a unique social enterprise fellowship program which, at the time, was matching young

professionals with executive teams at social enterprises (primarily affordable private schools)

throughout Andhra Pradesh to serve as management consultants. Bob is an interesting

character who, I would come to learn later in my career, has had a hand in guiding the careers

of several prominent figures in the impact investing and social enterprise space through his

various endeavors IDEX, Gray Matters Capital, and Gray Ghost Ventures (including, in no small

part, influencing my own professional trajectory).

My first two months in India I interviewed with firms across several industries and was

offered a role with a newly launched Delhi-based boutique corporate sustainability and

development finance consulting firm. cKinetics was founded by two of the original partners at

the Aavishkaar-Intellecap Group, a prominent Indian impact investment advisory firm. During

the two years I spent with cKinetics, frequently working 80-100 hour six day weeks, our projects

fell into four areas:

• Operational consulting work in textiles funded by Stockholm International Water Institute

• Informing the design and adoption of non-financial (ESG) disclosure regulations promulgated by the Indian Institute of Corporate Affairs and funded by the German development agency GIZ

• Leading field operations and data collection efforts for a Rockefeller Foundation funded project exploring rural electrification

• Conducting due diligence for a €20 million KfW (German development bank) loan facility targeting conventional energy service companies (ESCOs), micro-grid companies, solar irrigation installers, and telecom developers/tower managers.

1 Out of college, I worked as a personal research assistant to Jed Emerson

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On a daily basis, I was a voracious consumer of India’s vibrant English language media

landscape and an avid spectator of Indian politics during what would turn out to be some of the

more contentious and transformational years of the past several decades.2 Food and

agriculture dominate India’s political discourse in a manner which is difficult to convey to

American audiences. On a nearly monthly basis, newspapers would run front page stories

about volatility in onion markets and critiques of recent political pandering to farmers. Lal

Bahadur Shastri, the second Prime Minister of India, coined the political slogan “Jai Jawan! Jai

Kisan!” [“Salute the Soldier! Salute the Farmer!”] rallying the nation at the outset of the Indo-

Pakistani War of 1965.3 Some fifty years later, this mantra seems strangely apropos in India’s

current political environment, as the Bharatiya Janata Party (BJP)-led Union government has

faced election defeats stemming from agricultural economic distress, the Congress Party’s

Rahul Gandhi is videotaped on social media driving a tractor through campaign events in

Punjab, and both parties clamor to support farm loan waivers (writing off nearly Rs. 1.9 trillion,

or approximately $27B USD) (Bera 2018b and Scroll 2019). Simultaneously, the country finds

itself again embroiled in a series of military engagements with Pakistan along the Line of

Control. In 2019, while delivering a speech to the 106th Indian Science Congress, PM Modi

explicitly appropriated Lal Bahadur Shastri’s words while asserting his government’s

commitment to supporting scientific research.4

2 Narendra Modi (right wing Bharatiya Janata Party) was swept into office in 2014 amidst the considerable ascent of Hindu nationalism throughout the country. Arvind Kejriwal assumed office as Chief Minister of Delhi in 2013 and his newly launched populist Aam Aadmi Party has won numerous seats in several critical Delhi Assembly elections, carrying 67 of 70 seats in 2015. Modi’s “Make in India” initiative was launched in 2014. Foreign direct investment (FDI) restrictions were also relaxed in several sectors while I was there. 3 You will also frequently see this translated as “Hail Soldier! Hail Farmer!” 4 https://www.outlookindia.com/website/story/india-news-pm-modi-adds-jai-anusandhan-to-jai-jawan-jai-kisan-and-jai-vigyan/322875

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During a consulting engagement with cKinetics, a colleague and I sat in the office of an

executive at ITC (India Tobacco Company) pitching a sustainability reporting project within their

agricultural supply chains which spanned multiple businesses from tobacco to branded foods,

personal care products, and hotels. It became clear very quickly that the firm was not

interested in having us uncover Environmental, Social, and Governance (ESG) irregularities

within a supply chain encompassing some several million smallholder farmers. During my

numerous visits to India, I have ridden approximately 20,000 miles by motorcycle through

Manipur in the Northeast, coastal Tamil Nadu in the south, from Manali to Leh, Uttarakhand

and Himachal Pradesh, throughout Hyderabad, in addition to daily commuting throughout Delhi

NCR. India’s last mile challenges in agricultural value chains were brought into sharp focus

while stopping at roadside dhabas (truck stop/restaurants) next to smallholder operations hand

harvesting rice and sugar cane, riding through fields in Punjab where one farmer is irrigating

with diesel pumps while his neighbor drives cattle around a water lift, avoiding tractor and

bullock carts hauling sugar cane loaded twenty feet high, or passing overturned trucks with

workers shoveling rice and wheat back into large woven polypropylene bags.

Frequenting fresh produce markets (subzi mandis), joking around with the local

vegetable stall owner (subziwallah), and cooking in Delhi were central parts of my life and

favorite topics of conversation with my colleagues and friends. In numerous discussions with

Indian professionals ranging from academics at prominent economic think tanks, investors,

NGO staff, and a cohort of visiting Fulbright scholars I solicited perspectives on how agriculture

in India might modernize in the coming decades, and the subsequent impacts this might have

on the economy and politics as rural communities transitioned into new professions (and

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potentially resettled). There was a consistent skepticism around the idea that India’s structural

transformation would resemble anything like the path to modernization in agriculture

elsewhere. I have spent a great deal of time attempting to deconstruct the various anxieties

that are baked into this commonly held belief – that there is something inherently different

about the role of agricultural productivity in India’s ongoing, very unique, path to structural

transformation.

Introduction

India’s unique path toward structural transformation is captured in myriad contrasts

between public and private, old and new, analog and digital, biological and mechanical, rural

and urban. This capstone is the culmination of my struggle to comprehend the astonishing

scale and scope of India’s impending structural transformation and contextualize my own

experiences witnessing the rate of modernization in Indian agriculture. This paper explores the

historical roots of several central structural challenges which currently impede improvements in

India’s agricultural productivity. Through the course of my research, it is clear many of these

same challenges have been identified by Indian agricultural technology entrepreneurs as

central opportunities to innovate within fresh produce value chains (Appendix 1).

I examine land reform as a domain with particularly salient historical roots and an

enormously complex contemporary political legacy. This paper provides analysis which

contrasts traditional models of uncoordinated, smallholder, production with the increased

popularity of contract farming networks as a strategy developed by large processors to

maintain consistency and predictability in their supply chains.

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As India’s economy continues to liberalize, many of its legacy socialist institutions have

struggled to remain relevant and responsive to market-driven trends. I examine the Indian

agricultural research and extension model and provide case studies highlighting the Indian

Government’s attempt to promote technology adoption among smallholder farmers. In

contrast, the project introduces a new paradigm, in which private players in the processing

space have stepped in and are actively providing extension services and introducing technology

platforms within their contract farming networks.

Finally, this paper will examine the historical motivations behind government

intervention in markets and subsequent public policy reforms in recent years. Produce markets

in India, through their unique function, provide a useful means of contrasting traditional

markets, where smallholders are disadvantaged through fraught credit relationships and

information asymmetries with the advent of large-scale, technology-enabled, coordination of

downstream processors and demand aggregators reaching upstream to the farm gate.

Methods of Analysis

This project provides an analysis of India’s unique agricultural political economy through

a review and synthesis of the literature, case studies, and key informant interviews. Several

case studies are introduced around land holding, agricultural extension, and fresh produce

marketing to examine the motivating factors underlying several key government interventions

in the function of these markets.

To supplement this analysis, from December 9th, 2018 through January 11th, 2019 I

spent five weeks in India visiting Bombay, Delhi, and Bangalore to conduct key informant

interviews with a diverse group of Indian agricultural business, policy, and finance stakeholders

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(Table 1). These conversations were structured around identifying the underlying challenges to

improving agricultural productivity on a per hectare basis, soliciting detailed descriptions of the

organization’s function or business model, and attempting to capture existing efforts to

promote technology adoption with key fresh produce value chain participants.

For simplicity, I have opted to focus my analysis primarily on activity in fresh produce

value chains targeting large metropolitan areas in India. While this focus arguably captures

trends largely driven by demand from wealthier urban consumers, the share of smallholders

operating in fruit/vegetable cropping systems is higher than in food grains – so there may very

well be important trends captured here. Additionally, high-value horticultural production in

India has witnessed substantial growth in both volume and value over the past two decades,

overtaking food grain production in 2010. Furthermore, the feedback that I received

throughout my conversations in India indicated that fruit and vegetable production had the

highest levels of private sector investment and entrepreneurial participation with relatively low

levels of government intervention.

Indian Agriculture: A Primer

“Reality is not a function of the event as event, but of the relationship of that event to past, and future, events.”

—Robert Penn Warren, All the King’s Men

In the Zamindars’ Shadow

Rural land tenure is a subject of both tremendous complexity and considerable historical

import in India. Beginning in the medieval period, India’s rural land was administered through

the zamindari system, an agrarian feudal hierarchy which institutionalized the

disenfranchisement of a rural peasantry in a manner not dissimilar to the function of the

European system of serfdom (Bandyopadhyay 1993). Zamindars were an aristocratic ruling

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class which facilitated the administration of the Mughal Empire through taxing the peasantry, a

function which they continued to perform (largely unchanged) through British colonial

administration in India. While not a facsimile, the current function of traders is often viewed

rather unfavorably through this lens (essentially as a tax by wealthier merchants on the rural

poor). This paper will not attempt to describe in depth, or provide any critique on, post-

Independence redistributive land reform policies beyond noting that this process abolished the

zamindari system and has been differentially administered at the state level across four broad

categories laid out by (Besley and Burgess 2000):

i) tenancy reform (regulating contractual terms – often included efforts to transfer ownership to tenants) ii) abolishing intermediaries (previously worked on behalf of Zamindars as rent collectors) iii) implementing ceilings on landholdings (redistributing surplus land to the landless) iv) consolidation of disparate landholdings

During my conversation in Delhi with Dr. P.K. Joshi (South Asia Director at the

International Food Policy Research Institute), in response to my line of inquiry regarding the

Land Ceiling Act’s continued relevance, he provided an invaluable perspective on the

importance of Indians’ connection to land and how the history of dispossession has played a

complex role influencing post-Independence land policies. Currently, several state laws only

allow individuals to acquire agricultural land with some that further restrict ownership to

residents of that state while other states allow companies and individuals both to acquire and

farmland (these include Delhi, Goa, Bihar, and Tamil Nadu). However, in all states, foreigners

are prohibited from buying agricultural land.

Land leasing reform has been the subject of some interest lately, an important white

paper was released in 2015 by Arvind Panagariya, then Vice Chairman of The National

Institution for Transforming India (NITI Aayog), encouraging the states to revisit their

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regulations to reduce barriers to leasing agricultural lands. This appeal seems to have gained

little to no traction in the ensuing 4 years. Farmer Producer Organizations (FPOs) and

cooperatives are other mechanisms for aggregating agricultural land into units large enough to

warrant the requisite investment in germplasm, inputs, mechanization, postharvest

storage/processing, transportation, and organizing aggregation of supply which allows farmers

to exert market power in channels outside of the traditional mandi/trader relationship. Given

that approximately 85% of farms are small and marginal (< 2 hectares) with 70% of holdings < 1

hectare, there is intense introspection around the viability of smallholders as India looks to

increase yields to meet domestic demand while also meeting goals the government has set to

increase participation in high-value export markets (Agarwal 2010 and Mehta 2013).

Similarly, restrictions around foreign direct investment (FDI) in agriculture have been a

highly politicized subject closely regulated by the Indian government. Only in 2011 did the

Department of Industrial Policy and Promotion allow 100% FDI in several limited areas of

agriculture (while it remains explicitly banned in any other activity), these include (Government

of India 2011):

• floriculture, horticulture, apiculture and cultivation of vegetables and mushrooms (under controlled conditions: greenhouses, net houses, and poly tunnels)

• development and production of seeds and planting material

• animal husbandry and aquaculture (under controlled conditions)

• services related to agro and allied sectors

This is a significant consideration given the financing landscape for innovative businesses

addressing production, processing, and marketing challenges in India’s agriculture sector. For

venture capital funds with portfolio companies in the Indian agricultural technology space, a

significant percentage of the general partners (GPs) I spoke with were managing money from

limited partners (LPs) that included (mostly foreign): institutional investors, foundations,

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development finance organizations, and large family offices. Several entrepreneurs I spoke

with had domestic Indian corporates, VCs, commercial banks, and ultra-high net worth

individuals, as well as foreign foundations (Gates Foundation) participating in various funding

rounds. Reliable data around LPs allocating capital with private equity and venture funds

focused on Indian agriculture is somewhat spotty with anecdotal coverage coming from media

outlets like AgFunder (US-based), VCCircle (Indian-based), Global AgInvesting (US-based with

minimal India coverage), and occasionally Indian financial daily newspapers. Admittedly, I also

have not consulted any legal professionals to determine precisely how these instruments are

impacted by FDI rules.5 Anecdotally, most of the capital fueling the innovation landscape in

Indian agriculture (horticultural production) appears to be foreign in origin – creating an

interesting tension with the intended political goals of FDI restrictions.

Public Law (P.L.) 480 – Food for Peace

India’s total export growth in agricultural products in the 2000s is astonishing, increasing

686% from $5B USD (2003) to $39.3B USD (2013) (USDA 2014). One of the regrettable state

interventions in the agricultural export market has been the occasional imposition by the

Commerce Ministry of either an ad-hoc ban (frequent in milk powder, wheat, edible oils,

pulses, and non-basmati rice) or what is known as the Minimum Export Price (MEP) for an

individual commodity (usually onions, potatoes, and basmati rice) (Saini and Gulati 2017). MEP

is usually fixed above actual export market prices, to disincentivize traders from exporting, with

the stated goal of stabilizing domestic prices in times of volatility (often citing food security

5 i.e., if you are an India-based VC or Non-Banking Financial Company (NBFC) – does it even matter if you are managing foreign money?

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concerns). As of 2018, there were indications emanating from both Arun Jaitley (finance

minister) and Suresh Prabu (commerce minister) that the MEP on onions would be lifted in an

effort to promote exports as part of Modi’s promise to double exports by 2022 (to roughly $60

billion USD) (Bera 2018a). Whether this is an indication of permanent reform or temporary

concession in the perennial political tug of war between farmer incomes (wholesale) and

enraged consumers (retail) remains unclear (The Hindu Business Line, 2018).

A scarcity mindset pervades the Government of India’s approach to regulating

agricultural markets, particularly in staple food grains. This commentary was voiced in virtually

every single conversation I had with investors and bankers throughout my last visit to India.

Several investors suggested that I dig into the literature surrounding P.L. 480 and indicated

their strong conviction that this experience had a profound psychological impact on the

Government of India’s agricultural policy in the ensuing sixty years. The broad argument is that

the bitter taste leftover from this experience was the impetus for successive regimes of import

substitution, export restrictions, and the operation of buffer stock schemes on a grand scale in

several staple commodities.

In fairness, this mentality is a conviction borne out of a fairly recent, valid, lived

experience by many policymakers in which food scarcity was a calamitous reality as recently as

the mid-1960s. India’s post-Independence years were racked by food shortages and as foreign

exchange reserves began to evaporate in the mid-1950s, the government, under Jawaharlal

Nehru took on politically sensitive negotiations around securing food aid and concessional sales

through the Public Law (P.L.) 480 program. Briefly, the function of this disbursement of aid

involved sales by the Indian government of imported commodities with the proceeds being

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directed toward rural development projects to improve agricultural productivity. In what may

be one of the more elegant presentations of the calculating, Cold War containment, rationale

which ultimately brought the United States into negotiations with India, (Cullather 2007)

describes the coalescing around economic development as a bulwark against “an evolving

strategy of Communist subversion employing influence, negotiation, and economic

penetration.”

Ray Vickery, in his text The Eagle and the Elephant: Strategic Aspects of US-India

Engagement offers insight into President Johnson’s instructions to Secretary of Agriculture

Orville Freeman ahead of his November 1965 meeting with Indian Minister for Agriculture C.

Subramaniam in Rome. In Vickery’s account, Johnson left Freeman with “strict orders to ‘trade

hard’ to secure a written document setting forth Indian commitments on agricultural reform”

noting that the document which was produced from this meeting offered several key

concessions, “the first provision of the agreement was that India would double its investment in

agriculture during the Fourth Plan period as compared to the previous Five-Year Plan” this

agreement further spelled out that “India would be ceding to bilateral agreement with the

United States not only overall actions but also to internal governmental processes by which

those actions would be accompanied.” To add salt to the wounds, there were several hard

bargains driven which advantaged the US-based fertilizer industry (the leading importer to

India) with provisions that for any shortfalls in agreed upon application rate targets, the

difference would be made up in imports at unsubsidized market rates. It is the intention of this

capstone merely to provide a brief exploration of the potential relevance of P.L. 480’s legacy in

shaping India’s contemporary agricultural political economy rather than a rigorous evaluation

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of the macroeconomic soundness and overall economic impacts of P.L. 480 regimes in the

1950s and 60s. However, a significant body of literature has set out to provide just such

analysis (Rath and Patvardhan 1967, Seevers 1968, Srivastava 1972, Shenoy 1974, Isenman and

Singer 1975, Hatti 1977, and Ahlberg 2007). However, the legacy of both land reform and P.L.

480 arguably loom large over policy responses to the seemingly intractable productivity

dilemma for India’s smallholder farming population.

“The Indian farmer is doing agriculture, not agribusiness.”

--Dr. P. K. Joshi, South Asia Director, IFPRI

I have seen derivations of the following yield gap table, sourced from what appears to

be 2011 FAO data, reproduced in at least three different slide decks presented by Indian

academics at global agricultural conferences and feel that it is invaluable for contextualizing the

productivity challenges facing India’s agriculture sector (Pandey 2009, Mehta 2013, Singh 2014.

FAO 2019).6

Crop Global Production Rank Global Productivity Rank

Fruits 2nd (10.9% global share) - Vegetables 2nd (8.6% global share) - Paddy Rice 2nd 30th Wheat 2nd 22nd Maize 6th 35th Total cereals 3rd 36th Groundnut 2nd 40th Rapeseeds 3rd 28th Pulses 1st 44th Potato 4th 26th Sugarcane 2nd 9th

6 Singh 2014 has estimates which show significant improvements in Productivity Rank (however, it is unclear where he is sourcing these numbers from) – the Production/Productivity numbers from Pandey 2009 and Mehta 2013 largely match up). Exploring the most recent data from 2017/2018 would be an interesting comparison with the 2011 data I present here.

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While estimates tend to vary, India’s net sown area is roughly 140 million hectares (42%

of India’s total land area) with 55-60% of Indians participating in agricultural production and

71% of the population living rural areas (Gov’t of India 2001, 2014, 2018 and Mehta 2013).7

Agriculture and Allied Sectors represent roughly 16% of GDP (as of 2015-16) representing a

significant decline from the 1960s, when it represented roughly 50% of India’s GDP (Gov’t of

India 2018). Provisional results from India’s Agriculture Census: All India Report on Number and

Area of Operational Holdings (covering 2015-16) does not paint a very optimistic picture

regarding the viability of many of the country’s farming operations (Rao 2016). Operational

holdings in the Agriculture Census 2015-2016 are broken into the following classes:

Group Size of holding 2015-16

Operational holdings (% of total)

Marginal 0.5 < 1.0 ha. 69%

Small 1.0 < 2.0 ha. 18%

Semi-medium 2.0 < 4.0 ha. 9%

Medium 4.0 < 10.0 ha. 4%

Large 10.0 – 20.0 + ha. 1%

An alarming pattern can be observed in a 176% increase from 1970-71 to 2015-16 in the

number of Marginal operational holdings throughout the country (Figure 1) while the average

size of holdings dropped over the same period from 2.28 ha to 1.08 (Figure 2) with the area

operated under Large holdings falling by 71% (Figure 3). As the average area under cultivation

has been on a decline, so too has the availability of labor in peak season. Several bankers I

spoke with indicated this trend resulted from a combination of migration to cities and the

relative vitality of employment in rural non-farm economy in recent years (in part bolstered by

7 I have seen this Ag labor force participation number vary somewhat, from (56.6%) in the 2001 Census data, (this 2001 number is then cited as 58.2% and then as 55% in the Ministry of Finance’s Economic Survey 2017-18) and (59%) in the National Sample Survey Report No. 554: Employment and Unemployment Situation in India, 2011-12

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MNREGA: the Mahatma Gandhi National Rural Employment Guarantee Act). With 87% of

farming operations under 2 ha., economically viable investments in the underlying agronomic

resources to increase yields (e.g., mechanization, high quality germplasm, nutrients, herbicides,

pesticides, fungicides, irrigation, and harvesting labor) can be a challenging proposition.

Table 2: Mechanization Adoption Rates

Adapted from (Mehta 2013) and (Government of India 2018)

This is by no means a condition unique to India’s smallholders, marginal farming operations the

world over struggle to attain economically viable scales of operation, maintain consistency in

quality and production, and finance appropriate postharvest processing/storage/transport

infrastructure.

(Agarwal and Agrawal 2016) have produced one of the more remarkable analyses I have

seen around farmer sentiment using National Sample Survey data from 2003 (Situation

Assessment Survey). In response to the question “Do you like farming?” the 51,770 farm

households surveyed through NSSO in 2003, 40% indicated that they did not and that, provided

the opportunity, they would prefer an alternative livelihood (Agarwal and Agrawal 2016). This

study builds on additional datasets to produce the following, arresting, graph.

Operations Penetration Rate (mechanization)

Cultivation and seed bed prep 42% Seeding and planting 29% Plant protection 34% Irrigation 34.5%

Harvesting and threshing 60-70% for wheat/rice

and <5% for other crops

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Figure 4: Land ownership and the probability of liking farming

Why should this matter? Plenty of people are unhappy in their chosen vocations! I

believe this reflects, in part, the lack of economic viability in marginal landholdings and a very

rational series of frustrations regarding smallholders’ inability to gain power in marketing,

access to affordable credit, and scale to profitability. Using World Bank workforce estimates

(around 510 million as of 2019) and assuming a 40% dropout rate (Agarwal and Agrawal 2016)

from India’s agricultural workforce (approximately 60% of total employment), this represents

approximately 122,400,000 workers who will need to be retrained, relocated, and reemployed

(World Bank 2019a). To put this in context, Japan’s most recent population estimate (as of

October 2018) is 126,443,000 (Government of Japan 2019). Researchers at the St. Louis Federal

Reserve Bank have provided an interesting analysis of India’s atypical structural transformation

by comparing it to the United States, where the percentage of the population participating in

agriculture went from around 50% in 1860s to under 2% by 2000 (Goel and Restrepo-Echavarria

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2015). If we look at the Indian agricultural labor force and apply that same percentage

reduction, assuming only 12% of the existing agricultural labor force is retained, you are talking

about transitioning almost 147 million people out of agriculture, which is roughly the

population of Russia.

Mechanization and Tractors: A Lens into Technology Adoption

What if there was a way to make farming more attractive to those who decide to stay in

the occupation? “Tractorization” in India is an area which has generated a substantial body of

academic literature in agricultural economics and is the subject of government promotion

schemes dating back to the Agro Industries Corporations (AICs) of the mid 1960s (Puri and

Gumpert 2016). Trends in mechanization offer an interesting perspective on adoption

challenges and opportunities in other realms of agricultural technology going forward.

Beginning in the 1960s, the government provided irrigation pumps, tractors, power

tillers/threshers on a rent-to-buy model through AIC-sponsored Agricultural Machinery Service

Centres. AICs were a spectacular failure and suffered massive losses from bad loans and were

eventually shuttered. Private entrepreneurs entered this segment and by the time the

Government of India introduced the Agro-Service Centre (ASCs) model in 1971, there was

already a burgeoning rental (custom hiring) industry in many parts of the country. ASCs

provided custom hiring (machine rental) services for tractors and tractor-operated equipment

in addition to input sales and servicing facilities for machinery (Puri and Gumpert 2016). In

2010, the government introduced 100 agricultural extension centers under the National

Innovations on Climate Resilient Agriculture (NICRA) program located throughout

“drought/flood/hill area and other difficult terrains” and these provided an important platform

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for popularizing custom hiring services. As part of the 12th Five Year Plan, the Government of

India’s Sub-Mission on Agricultural Mechanization (SMAM) has been tasked with expanding

access to mechanization to small and marginal farmers through providing financial assistance

and expanding custom hiring centers (Government of India 2019). SMAM has laid out seven

components:

1. Promotion and strengthening of agricultural mechanization through training, testing, and demonstration

2. Introduction of new postharvest technology and management 3. Financial assistance or procurement subsidy for selected agricultrural machinery/equipment 4. Establishing farm machinery banks for custom hiring by small/marginal farmers 5. Establishing hi-tech and high productivity equipment hubs for custom hiring 6. Enhancing farm productivity at village level through the introduction of appropriate farm

mechanization (in selected villages)

7. Promoting farm equipment ownership among small/marginal farmers in the east/northeastern regions

Mechanization adoption rates are a significant indicator in the substantial productivity gains

which tend to accompany the deployment of equipment across all cropping systems, in cereals

for instance, this yield relationship is striking as presented in (Mehta 2013) (Figure 6). YES

Bank’s Food and Agri Strategic Advisory and Research unit, under Nitin Puri, has compiled a

comprehensive list of custom hiring programs as of 2016 (Puri and Gumpert 2016) (Figure 7).

Private sector participation through supporting platforms which promote adoption

through reducing financial barriers to entry is an important innovation to highlight with the

extension space. For instance, niche startups like Gold Farm (an Uber-type platform for

harvesting equipment) are actively working with sugar mills to try and scale a model to make

mechanized harvesting equipment more available to their contract farming networks. These

mills tend to run sporadically, through actively coordinating resources in the field these

processor players are working toward driving predictability into harvesting which, hopefully,

leads to more consistent mill operations (and higher profitability). Addressing the perceived

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shortcomings of imported equipment manufactured in more developed countries, Kamal Kisan

is a small firm manufacturing mechanized tillage, seeding, and input application equipment

tailored to specifically to Indian smallholder management strategies. Mechanization presents a

compelling model where initial efforts undertaken by the Indian Government have laid the

groundwork for private sector distribution models to innovate. It will be important to track

how these platforms begin to incorporate technologies which move beyond mechanization into

geospatial imagery interpretation, precision agriculture, no-till seed drills, -- the challenge will

be to evaluate the ability of these firms to provide adequate customer training and support on

these newer technologies. This presents a unique opportunity for public private partnerships

to emerge around collaborations with technology providers, equipment manufactuers, and

India’s National Agricultural Research System (NARS).

Agricultural Research and Extension in India

National Agricultural Research System (NARS)

With 102 research institutes and 73 agricultural universities across the country, India’s

NARS is a bureaucratic undertaking on such a massive scale, and with such institutional

complexity, that even under close examination it remains a struggle to understand how all the

parts fit together (Figure 8). The Indian Council of Agricultural Research (ICAR) has a storied

history dating back to its founding in 1929 as the Imperial Council of Agricultural Research, the

organization played a key role during the Green Revolution and has continued to support

innovation in Indian agriculture (Figure 9). The Integrated National Agricultural Resources

Information System (INARIS) is a fascinating project which will make critical agronomic data

available to the public with the real potential to generate substantial economic value for

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industry if the government can execute on generating up-to-date and accurate cropping system

maps, soil resource maps, GIS overlays for water resources and farm mechanization rates

(Figure 10).

Krishi Vigyan Kendras (KVKs)

According to the ICAR, there are currently 706 KVKs spread across eleven distinct

Agricultural Technology Application Research Institute (ATARI) zones through the country

(Government of India 2019d).8 Managed by State Agricultural Universities and volunteer

organizations, KVKs provide general extension services, field-level demonstrations of new

technologies, and on-farm trainings around agronomic best practices. KVKs also conduct on-

farm trials of specific technologies to collect data on their regional and site-specific

performance (Singh et al. 2013). Opinions were mixed in my conversations about the relevance

of KVKs for providing tangible value for disseminating new technologies and making meaningful

impact on adoption rates. Some key informant interviewees expressed opinions that the KVK

system was a hold-over from a bygone, centrally planned, socialist era whose function was

essentially to assist farmers with transitioning to new crops at the direction of a centrally

planned decision-making apparatus.

8 This is a number which varies depending on which government publication you consult (it ranges from the mid-600s with 706 as an upper bound)

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Figure 11: Agricultural Extension System in India

Adapted from (Balaguru 2015)

Staff at the National Bank for Agriculture and Rural Development (NABARD) and IFPRI

felt that KVKs would continue to play an important role in the adoption process through

demonstrating new technologies locally in farmers’ fields. Sentiment in the private sector was

overwhelmingly skeptical with numerous individuals indicating there was no clear channel of

communication around ongoing projects within KVKs and expressing dismay that there seemed

to be minimal accountability or interest in partnering with industry. There was, however, some

interest in the Agricultural Technology Management Agency (ATMA) as a promising district-

level mechanism for technology dissemination. An interesting development from my

interviews was the frequent mention of several very successful extension partnerships between

private sector food processors, ICAR Crop Science Institutes, and private agronomists engaging

directly with farmers to solve very specific crop quality and yield issues (case studies outlining

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this extension work will be discussed at length in the “Emergence of Alternate Marketing

Channels” section).

Extension IT Projects: Experimenting with e-Extension

Limited resources available for farm-level interactions across both State Agricultural

Universities (SAUs) and the KVKs are a challenge which results in approximately 60% of farmers

in India having no access to extension services (Bhattacharyya et al. 2018). This shift to focusing

on e-Extension has significant implications for adoption rates based on my conversation with P.

K. Joshi at IFPRI in which he noted that, while KVKs were important for demonstrations, he was

observing adoption moving much more rapidly through farmer social networks than the KVKs.

While India’s smart phone penetration rate was only 27% in 2017, this number is predicted to

jump to 60% of the population by 2022 (Bhattacharya 2018). Coupled with the highly

competitive market for mobile data and relatively robust data network coverage, the ability to

effectively contact farmers via smartphone-enabled platforms, web portals, and social

networks all appear to be highly viable channels for communicating extension services.

mKisan is a SMS-based platform launched in 2013 to provide the roughly 380 million

rural cell phone users with the ability to send queries which, in turn, receive a response from a

wide swath of government resources relating to agriculture available in 12 different languages

with semi-literate and illiterate farmers targeted with voice message responses (Government of

India 2013). Similarly, Department of Agriculture & Cooperation, Ministry of Agriculture

launched twenty-five Kisan Call Centers in 2004 across the country which also provided local

language responses to agriculture-related questions from farmers. ICAR Central Institute for

Cotton Research’s CICR Cotton App for farmers provides weekly and daily updates and

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extension information on cotton cultivation and is currently translated into Hindi, Marathi,

Gujarati, Telegu, and Tamil. In the NGO space, Digital Green was introduced as a platform

which spun out of Microsoft Research in 2008 and has worked with over 15,000 villages in India

and provides extension and marketing services across their Community Videos, data collection

efforts, Training Courseware, crop marketing ap, and innovation lab. Marketing is an area

which continues to benefit immensely from these types of farmer-focused digital information

exchange platforms which provide pricing information and low-cost, secure, payment systems.

Fresh Produce Marketing in India

Agricultural Produce Market Committees (APMCs)

APMCs are constituted by State Governments and oversee specific agricultural

commodities governed under that state’s Agricultural Produce Market Committee Act. APMCs

are tasked with ensuring price transparency, publishing daily arrival data, and same day

payments to farmers for their products across the 2,477 regulated markets and 4,843 sub-

market yards they operate across the country. These committees have several other functions

which include providing market-based extension services to farmers and promoting agricultural

processing to add value across all commodities (Government of India 2019b). The stated goals

and function of APMCs are laudable, to protect farmers from entering distress sales with their

creditors while ensuring transparent pricing and timely payment for their commodities.

However, the function of these committees has left much to be desired. Once market

committees define a market area or jurisdiction, wholesale marketing activities may only take

place under the aegis of the APMC by its licensed commission agents. This has historically

prohibited farmers from entering into contract farming arrangements with large processors or

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manufactures. Furthermore, levies and other market charges vary widely between states which

has the effect of distorting prices and erecting barriers to entry. During my conversations with

technology entrepreneurs and investors looking at wholesale markets, there was consensus

that the role of APMC as regulator and market was fraught and they felt very often APMC

personnel were forming cartels with traders and commission agents, creating monopsonies

which put farmers at a significant disadvantage.

In response to the lack of integration and numerous distortions in state agricultural

marketing schemes, the Union Ministry of Agriculture introduced the State Agricultural Produce

Marketing (Development and Regulation) Act in 2003 (alternatively referred to as the Model

APMC Act of 2003) and subsequent Agricultural Produce and Livestock Marketing (Promotion &

Facilitation) Act of 2017. This key reform allows farmers to sell outside of APMC-administered

markets, gives wholesalers more options around where they can buy and sell, and loosens up

licensing and fees levied on sales (Government of India 2003). Because agricultural markets

remain a state subject, adoption of the Model APMC Act of 2003 has been uneven across the

country.

The National Agricultural Market (NAM) first appeared in the Union Budgets of 2014-15

and 2015-16 and became a highly publicized reform topic for the Union Cabinet (Government

of India 2019c). Launched in 2016, e-Nam (as it is known) is a national online trading platform

connecting APMC mandis with the goal of creating a single marketplace for some 90

commodities across India’s approximately 22,000 distributed agricultural markets by 2022 (PTI

2019). e-NAM’s potential, both to link farmers to buyers and provide a massive source of price

and transaction data holds tremendous promise for increasing the efficiency of marketing fresh

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produce in India. Data generated on this platform represents an immense wealth of

information that would be invaluable for informing the more intelligent design of futures

contracts and the refining of agricultural credit and insurance products (both of which remain a

significant challenge in a data poor environment). However, with only 585 mandis up on the

platform as of January 2019, adoption continues to be a struggle – notably, as of December

2018, Delhi’s Azadpur Mandi and six other markets in the National Capital Region (NCR) have

yet to join the e-NAM platform (Sally 2018) (Figure 12).

Traditional Marketing Channel: Mandis and Arthiyas

Figure 13: Traditional Marketing Channels in India

Admittedly, the above rendering is a vast oversimplification which does not account on

myriad regional permutations nor does it account for multiple actors participating

simultaneously in multiple marketing channels (e.g., a potato farmer could be selling to a

commission agent (Arthiya) in Azadpur Mandi while at the same time contract farming and

selling directly to a processor (McCains or Pepsico), or directly to a large retail outlet (Big

Bazaar or Safal). These alternate marketing channels will be explored at length later in this

section. However, this model is instructive for providing a general framework for how fresh

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produce is bought and sold in India metros. Typically, a household has three primary outlets

where they will be purchasing fruits and vegetables:

1. Push/Bicycle cart vendors are a ubiquitous feature of Delhi neighborhoods, these vendors will announce their presence and wares early mornings and are a very convenient, highly affordable, and popular option for purchasing staple vegetables and some generic fruits.

2. Vegetable traders in “wet markets” will typically all be located right next to one and other in single area of a neighborhood. These very basic shops will tend to offer a wider selection of fruits/vegetables (arguably, you can expect to see higher quality here versus pushcarts). Some vendors in more affluent neighborhoods will also offer expensive imported items (mostly fruit).

3. Kiranas are local family-owned and operated small neighborhood grocery stores, not unlike bodegas in New York City, which sell a wide variety of consumer goods and generally have fruits and vegetables displayed out in front.

Disintermediation is a very sexy topic in both the value chains academic literature and

pitch decks from myriad private ventures vying to cut out middlemen and pocket some of their

margins through various efficiency-based business models. Price spreads between farmers and

consumers in emerging market value chains tend to be quite large and are often attributed to

postharvest losses (Murthy et al. 2009), trader margins (Mahalanobis 1972), and

transportation/packaging costs (Kumar and Arora 2003). During my conversations, a number

entrepreneurs were scaling demand aggregation models which sought to “cut out the

middlemen” and purchase directly from farmers, sort/grade, transport, store, and deliver

product directly to end consumers like Kiranas, large institutional clients (hotels, hospitals,

etc.), and newer branded grocery stores. Middlemen, particularly traders, are often maligned

in India and tend to be viewed as rent-seeking actors who are often instrumental in corrupting

government officials (weights/measures, false price reporting, etc.) and exploiting farmers by

leveraging information asymmetries and colluding with commission agents (Arthiyas). In

fairness, it does seem to be the case that in many mandis traders do, indeed, act as

oligopsonists (depressing prices paid to farmers).

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(Ghosh 2013) makes a compelling case that traders provide several important functions

in fresh produce value chains which are often not well understood, these include:

• Bridging low information rural producers with urban center consumers

• Understanding government rules and regulations

• Assisting in physical exchanges

• Providing timely finance and inputs to producers

• Operating in markets and areas of tremendous uncertainty (willingness to undertake risk)

• Maintaining informal, highly personalized, relationships with producers

Traders tend to be located closer to markets (demand side) and have deeper “domain

knowledge” about consumer markets than do producers (and vice versa when transmitting

information back up the supply chain). While this information asymmetry can be a source of

margin for traders, traders can also play an important role as “knowledge transfer conduits” as

they disseminate market information to growers in rural areas (Mulky 2008). Traders and

Commission agents (Arthiyas) both play a critical role in a vast system of informal credit,

providing working capital loans to numerous participants throughout the value chain. These

actors will play the role of insurer (through preharvest contracts) and as merchant bankers,

extending informal credit down the supply chain to growers and up the supply chain to Kiranas,

Masakhors, and even push/bicycle cart vendors. (Celestine 2011) has done some fantastic

reporting on this, documenting that Arthiyas “say they are tapped by farmers for finance to buy

everything, from seeds to sacks to bag their produce, and even to finance weddings and

homes” while traders at the local level will run sometimes run shops and extend store credit to

farmers to purchase groceries. This credit comes at a price, while agricultural loans in India

average 8-9% informal credit will run farmers around 25% (it is still unclear to me if this is

annualized or is based on some much shorter tenure: 3 days, weekly, monthly) and represents,

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according to official estimates, roughly 35% of the total agriculture credit industry (Yamunan

2017).

Azadpur Mandi: Up Close and Personal

It is 1:00am on a weekday and the CH. Hira Singh Wholesale Vegetable Market (Azadpur

Mandi), Asia’s largest wholesale fruit and vegetable market, is teaming with activity as massive

trucks maneuver through tight alleys backing up and being offloaded by “palledars” carrying

loads atop their heads to market stalls and bicycle rickshaw carts. Motorbikes, rickshaws, and

small trucks zip in and out of storefronts laden with men and massive cargos of tightly packed

fresh produce. Delhi’s thick winter fog hangs in the covered stalls and mixes with the acrid

smell of beedi smoke, chai, frying parathas, and the sweet earthy smell of ripe fruit (Figure 14).

A 12 km drive from Connaught Place, Azadpur Mandi is located in Northwest Delhi on 76

hectares and handles roughly 15-20 MT of fresh produce on a daily basis. Trading in

approximately 60-70 vegetables and around as many fruits commences in the late evening and

runs through the early morning.

Around 2,000 commission agents (Arthiyas) act as brokers for farmers and will run

auctions on lot sizes greater than roughly 10 kg and charge the farmer a 5-6% commission

(fixed by the state APMC legislation) on the final sale price plus any costs associated with

loading/unloading and transport. However, we heard from several industry contacts that the

commission agents are frequently illegally charging higher rates of around 7-8%. Arthiyas are

market makers, providing liquidity using traders (to whom they extend credit) to buy from

farmers in the mandi (5% commission is paid) or directly at the farm level (no commission is

paid). I was unable to determine the interest rates charged by Arthiyas (a few people I asked all

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said generally the same thing, “it depends” – indicating this is a very high touch, relationship-

based, business). Traders and Arthiyas will additionally provide some small value addition

grading/sorting functions, both are also acting as arbitrageurs attempting to profit from the

price spreads between different markets within the region, between the farm gate and the

Azadpur Mandi, and across markets in other states. As previously mentioned, Arthiyas also

provide a critical function up and down the value chain through extending informal lines of

credit.

Arthiyas were conducting bidding in two forms, the first was open outcry, although

voices were never raised, and several sources indicated they often ran auctions in code

(signaling in an effort to fix prices with other wholesale middleman buyers). The second, and

far more interesting format, is what one trader described as the “Under Cover Method” for

which price discovery involved a handkerchief and some hand signals with no public

announcement of a final sale price. If you are buying on credit, this latter method is

mandatory. This was a practice I witnessed multiple times but wasn’t eager to capture on

camera; however, (Ahmed and Siddiqui 2015) have some fantastic pictures documenting the

practice (Figure 15). To be very clear, this is illegal and should, technically, be cracked down on

by the 500-600 co-located Agricultural Produce Market Committee (APMC) staff who are tasked

with collecting price data and then listing the day’s “Model Rate” for every commodity (this

work is supported through a 1% fee charged on each transaction).

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Figure 15: The “under cover” method of price discovery at Azadpur market

For lots smaller than 10 kg, Masakhors (or middlemen) will buy from Arthiyas (commission

agents) and then sell on to retailers and vendors (90% of whom are buying on credit) – at this

point, some additional level of sorting and grading is happening. As might be expected, prices

are constantly changing throughout the evening and according to several people we spoke with

the prices track quality and tend to decrease as it gets later into the morning (most Kiranas and

street vendors want to be back in their respective neighborhoods to capture early morning

footfall).

The Emergence of Alternate Marketing Channels

APMC reforms post-2003 have been critical to encouraging innovation in marketing

fresh produce through opening new channels for farmers to directly access buyers ranging from

large modern grocery chains, burgeoning e-grocers (BigBasket and Grofers) to multinational

corporate food processors (McCain Foods India and PepsiCo India). Demand aggregation

business models are driving efficiency into the fresh produce value chain across a number of

key metro markets (Ninjacart, Crofarm, Farm Taaza, and DeHaat), circumventing traditional

market yards by pooling various categories of buyers and providing end-to-end logistics from

farm to distribution center and local delivery (Figure 16). Lawrencedale Agro Processing (LEAF)

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provides another example of business models actively disintermediating traditional marketing

channels. LEAF started in the value chain for carrots and the firm is now directly sourcing 7,000

tons of fresh produce across 55 commodities annually from farmers and working with over 300

store clients in south India (these include: Spar Hypermarket, Star Bazaar, Aditya Birla More,

Future Group, and Godrej Nature’s Basket).

ITC Limited’s e-Choupal platform connects to their Agribusiness Division’s supply chain

of some 4 million farmers covering soy, coffee, wheat, rice, pulses, and shrimp in 35,000

villages in 10 states. ITC is very careful to note that they are not disintermediating the physical

functions of agricultural marketing channels but rather “‘e-Choupal' makes use of the physical

transmission capabilities of current intermediaries - aggregation, logistics, counter-party risk

and bridge financing - while disintermediating them from the chain of information flow and

market signals.” ITC’s platform focuses on removing information asymmetries through

launching 6,100 village-level internet kiosks “sanchalaks” which provide farmers with local

language information on weather, updated market prices, agronomic extension information,

and connection to farm input sales channels (ITC 2019).

Despite being the second largest producer of fresh produce globally, less than 2% of

India’s fruits and vegetables are entering commercial food processing (Sidhu 2005). As the

country’s middleclass experiences an upward trend in income, purchasing habits shift away

from more traditional retailers and toward diets that incorporate a larger percentage of

processed food products. To meet this growing demand, processors are attempting to face the

challenge of how to source quality produce consistently throughout the year to keep their

manufacturing operations running smoothly. It bears mentioning that some of these “new”

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business models, interestingly, appear to mirror some of the traditional functions of traders in

the value chain. DeHaat, for instance, provides farmers with inputs, crop advisory, and

marketing services with a value proposition for farmers based in cost savings, access to quality

inputs, and facilitating marketing while promising companies a more predictable supply of

higher quality produce.

Potato Value Chains

Based in New Brunswick Canada, the McCain company is the world’s largest

manufacturer of frozen potato products. Beginning in the late 1990s, McCain India has grown

to become a dominant force in Indian potato processing with a strong contract farming

network throughout the state of Gujarat. McDonald’s was struggling to source potatoes for

frying, Indian potatoes typically had higher sugars, low starch content, and were small (all

negative characteristics for producing ideal french fries) (Lee and Rammohan 2013). After a

failed $10M initial joint venture between french fry supplier Lamb Weston and India-based

Tarai Foods, McDonald’s approached McCain to develop a domestic potato supply chain (Figure

17). In the early phases of its Indian breeding program, McCain was multiplying germplasm at

high elevations (In the remote Spiti Valley, 13,000 feet in the Himalayas) based on the

subsequent high vigor of plant material propagated in these growing conditions. McCain has

since invested considerably in agronomy staff, germplasm importation, and conducting regional

field trials with 13 potato cultivars including on its own research farms. Additionally, the

company has a strong focus on developing cultivation and postharvest storage best practices

which included deploying over 2,000 acres of drip irrigation throughout its contract farming

network (Business Standard 2013). Agronomic improvements included mechanizing planting

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and harvesting, optimizing bed spacing, and managing the application of high-quality inputs

(Lee and Ramomohan 2013). In 2007, 0% of McDonald’s potato value chain was locally

sourced. By 2008, 30% of their supply was sourced locally in India, by 2010 that number was

75% (Lee and Rammohan 2013) (Figure 18).

Within their own supply chain, McCain has actively partnered with several India-based

agricultural technology startups to assist in managing their vast contract farming network.

Agricx, which includes McCain in its client list, is a startup which is actively deploying a field-

based mobile imaging technology which provides highly accurate grading/sorting services to

potato processors. In an effort to help its field-based agronomists track farm-level

recommendations, McCain has partnered with CropIn and its SmartFarm tool, a farm

management software platform based in Bangalore. CropIn streamlines data gathering, record

keeping, and relationship management with customers including farming companies, seed

breeders, agri input providers, financial services (crop insurance and ag credit), and government

agencies.

In the most recent iteration of the World Bank’s “Ease of Doing Business” rankings, India

landed 163rd of 190 countries in terms of “Enforcing Contracts” – fifteen places behind

Venezuela and only five ahead of Zimbabwe (World Bank 2019b). This reality creates significant

challenges in the context of contract farming arrangements, particularly when considering the

investment of time and treasure McCain has made in developing and maintaining proprietary

cultivars. Anecdotally, in my conversations several agribusiness professionals noted that

McCain initially had problems with farmers selling their proprietary potatoes into local mandis

when the prices moved against the agreed upon price in their contract (mandi price exceeded

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contract price). McCain solved this, in part, by offering a floating premium above mandi prices

to ensure they were getting back the germplasm they had distributed to contract farmers.

Other players in the potato value chain have been considerably less adroit risk managers, most

notably PEPSICO Holding India Ltd. (Frito Lay India). In April 2019, PEPSICO launched litigation

against a group of Gujarati growers that it alleged were producing one of its proprietary

varieties out of contract, seeking damages of $142,840 from each farmer (Bostock 2019).

Perhaps, unsurprisingly, the optics of this litigation did not work in the company’s favor,

generating an immediate political backlash from the ruling Bharatiya Janata Party (BJP) and

inciting a global media furor, resulting in the prompt withdrawal of the lawsuit in May (Reuters

2019). Despite setbacks, these agtech innovations represent an interesting example of

processors embracing technology solutions and promoting adoption throughout their contract

farming networks. Agricx and CropIn are only a small example of a broader innovation

ecosystem which has witnessed explosive growth and funding activity in the five years.

Indian Agtech Investment Landscape

From 2013-2017, Indian agtech entrepreneurs raised $1.66B from Indian venture capital

investors across 558 deals compared to $10B raised by peers globally (Omnivore and AgFunder

2018). Downstream deals saw the overwhelming majority of investment ($1.47B) across 412

deals in business models such as e-grocery, premium branded retail/food, food delivery, and

restaurant supply marketplaces (Figure 19). Only $189M, 146 deals, was invested in deals

focused upstream on demand aggregation, midstream technologies, fintech, biotech,

robotics/machinery, and farm management (Figure 19). Venture capital participation in the

agriculture and food sector has seen a substantial acceleration in the past several years;

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however, several specialist investors stand out as having developed considerable domain

expertise in the Indian agtech landscape, these include: Omnivore, Aspada, Aavishkaar, Bharat

Innovation Fund, Mistletoe, the Bill and Melinda Gates Foundation, and Besteller Foundation.

The incubation and acceleration of agtech entrepreneurs and burgeoning startups is an

area where India’s private banks, government development agencies, international

foundations, and investment partners have facilitated a remarkably robust innovation

ecosystem in recent years. Nearly a dozen incubators launched by agricultural lenders,

agribusinesses, venture investor networks, and Indian universities are active in the food and

agriculture technology space (Figure 20). In conversations with Hemendra Mathur, a mentor

and co-founder of Bharat Innovation Fund and incubator ThinkAg, the key challenge in the

space seems to be creating a forum in which entrepreneurs and Indian agribusiness players

(consumer brands, food processors, seed companies, and manufacturers of

inputs/machinery/irrigation equipment/etc.) are able to connect on a regular basis to facilitate

industry mentorship around specific value chain interventions and projects which, in turn,

ideally lead to strategic investments or acquisition opportunities. The richness of this

incubation ecosystem both the most surprising and encouraging revelation during my last visit

to India.

Conclusion

While the regulatory landscape in Indian agriculture has seen slow progress towards

liberalization, the private sector has provided critical support to entrepreneurs developing

uniquely Indian business models to tackle a variety of seemingly intractable value chain

challenges in the fresh produce space. This capstone project has sought to, briefly, provide

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several case studies that reflect on important contrasts around land ownership, agricultural

extension, marketing, and venture finance in an effort to provide several unique windows into

India’s rapidly modernizing agricultural production systems. Each of the areas discussed in the

paper represent a small, but critical, component of an impending economic transformation

across India’s entire economy. The innovations in logistics, farming systems, and technology

platforms that have been unleashed in the agricultural economy over the last ten years

represents what I believe may be the beginning of India’s structural transformation. India’s

economic dynamism is in many ways a reflection of the considerable intellectual endowment,

and tenacity, of its entrepreneurs who are often forced to negotiate monolithic policy regimes

promulgated by governments that have historically struggled to embrace innovation and

liberalization.

Recommendations

Increased Indo-US Collaboration around Agricultural Technology Innovation

I have been fortunate to have the opportunity to develop a unique perspective on the

challenges of supporting a nascent agricultural technology sector having invested the past two

years working with industry initiatives in California’s agricultural technology ecosystem through

the UC Division of Agriculture and Natural Resource’s VINE initiative. As I close out my final

months working with UC ANR and The VINE, I will be focused formalizing several relationships

and collaborations between Indian agtech incubators and our work here in California in an

effort to open up markets for entrepreneurs in both geographies and provide a digital platform

for sharing market-specific innovations. Collaborations between incubators, entrepreneurs,

and government agencies in India and their peers active in other countries focused on

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agricultural technology seemed to be occurring in a sporadic manner. However, Davis had little

to no presence in many of my conversations with private sector leaders and this appears to be

an area where the University of California and other US land grant institutions should invest

more aggressively to develop invaluable relationships with industry and government

institutions focusing on value chain research, venture incubation, and developing new

technology-based exchange programs between cooperative extension professionals.

Making good on “Make in India”

Modi’s seminal manufacturing modernization and trade promotion program, “Make in

India” has faced intense criticism in recent years as projections around youth unemployment

slide into the double digits. Before the number of individuals employed in agriculture begins to

decrease, the government will need to embark upon ambitious investments in education,

vocational training, and resettlement programs to support this transition out of the rural farm

economy. Focus in agricultural policies must support FDI in value-added processing, input

application efficiency, and the marketing of new higher-value specialty crops for export. I

would encourage Indian policymakers to take seriously some of the projections around

workforce reductions in agriculture over the next several decades. Without endeavoring to

predict the future, the Indian Government should be concerned by the fact that their

agricultural population is now transitioning at a time when widespread mechanization has

already happened elsewhere and cropping systems can easily scale with far less labor than at

any point in history. “Leapfrogging” in other technologies, such as the widespread adoption of

cellular data networks (in lieu of home phones) in the developing world, is often celebrated as

an economic boon. However, in the case of structural transformation, in an economy where

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manufacturing and services industries already exist, the potential for displacement of labor out

of agriculture on a massive scale isn’t out of the realm of possibility and is an eventuality which

I believe ought to be taken more seriously than it currently is.

Legacy domestic industrial players coupled with the elite capture of democratic

institutions in India represent a noteworthy locus of political opposition to increased market

liberalization and innovation. Modi, and generations of politicians to follow, must contend with

pushback from domestic captains of industry who may not welcome the entrance of globally

competitive agricultural value chain players into the Indian market. However, I believe that

through intelligent joint ventures between Indian and foreign firms with a focus on improving

productivity and entering new export markets, there is an opportunity to generate significantly

larger economic opportunities than have previously realized in this space.

Areas for Future Research

There are numerous areas where this work could be expanded upon. However, after

the excitement of observing real-time trading at the Azadpur Mandi and then spending time

with three large demand aggregation agtech firms (Ninjacart, FarmTaaza, and Crofarm) I felt

like I was starting to open a window into some interesting emerging trends in marketing. Given

more time and funding, I would have liked to explore the dynamics of these rapidly evolving

marketing channels for fresh produce (which appeared to be highly segmented/regional, crop-

specific, and often focused on specific urban markets). Potentially, the data and models being

generated by many of these new technology-enabled wholesale trading market participants

could provide value in informing the design of new contracts which might encourage wider

participation in the Indian agricultural commodity derivatives market (Rajib 2015).

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While India’s national marketing system (eNAM) moves ahead with key reforms, it is

important to note that the fresh produce sales business in the United States is by no means an

exemplary model of technological supremacy or perfect information. In my own personal

experience with the leafy greens industry and professional contacts with produce brokers, in

California this remains a very high touch, relationship-based, industry. Speaking recently with

David John III of Sacramento’s General Produce, it is clear that both price discovery and sales

still occur largely through late night phone calls and in-person handshake deals between

wholesalers and farmers. It would be interesting to explore other digital marketing platforms in

the fresh produce space globally and identify what the various adoption challenges have been

and explore opportunities to modernize trading in these markets. An area where India may be

able to borrow from the US produce industry is in the consideration of an Indian iteration of the

Perishable Agricultural Commodities Act (PACA) which “facilitates fair trade practices through

education, mediation, arbitration, licensing and enforcement.”9 Exploring India’s appetite for

industry-driven food safety/quality standards and dispute resolution mechanisms of this nature

would be a fascinating industrial organization research topic.

9 https://www.ams.usda.gov/rules-regulations/paca

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References The Hindu Business Line. 2018. “Govt Removes Cap on Onion Export Price,” February 3, 2018.

https://www.thehindubusinessline.com/economy/govt-removes-cap-on-onion-export-price/article22643834.ece.

Business Standard. 2013. “McCain Foods to Source 85% Potatoes from Gujarat,” February 6, 2013. https://www.business-standard.com/article/companies/mccain-foods-to-source-85-potatoes-from-gujarat-106012001044_1.html.

The Economic Times. 2019. “Government Plans to Link 22,000 Mandis with e-NAM Platform by 2022,” January 23, 2019. https://economictimes.indiatimes.com/news/economy/agriculture/government-plans-to-link-22000-mandis-with-e-nam-platform-by-2022/articleshow/67657819.cms.

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Appendix 1:

Thomas Reardon has been a driving force behind the identification of the rapid

transformation underway in agricultural value chains across several developing countries.

Reardon identifies and explores this trend in entrepreneurial, private sector-led, innovation in

emerging markets globally and his work stands out in an area where the literature has struggled

to keep pace with the rate of innovation on the ground in these countries. Reardon has

described what he has interpreted as a “quiet revolution” across India and numerous other

emerging market value chains (Reardon et al. 2019a, Reardon et al. 2019b, Rao et al. 2017,

Reardon 2015, Minten et al. 2015, Reardon et al. 2012). I had the opportunity to meet Tom and

hear him speak at Berkeley’s annual Innovation in Agrifood Supply Chains conference in 2018

and found his talk to be a highly engaging validation of what I had been seeing transpire on the

ground through my experiences in India.

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Table 1: Key Informant Interviews

Organization Individual Title Location Farm Taaza Kumar Ramachandran CEO Bangalore

Kamal Kisan Devi Murthy Founder and MD Bangalore

Aspada Tom Hyland Co-Founder & Partner

Bangalore Romit Mehta Senior Associate

FlyBird Farm Innovations Pvt. Ltd.

Satish KS Co-Founder & CEO Bangalore

Agricx Ritesh Dhoot Founder Bangalore

CropIn Chittaranjan Jena Co-Founder, CTO Bangalore

Farmizen Shameek Chakravarty Founder & CEO Bangalore

Ninjacart

Vasudevan Chinnathambi

Co-Founder Bangalore

Satsure Ishan Tomar Co-Founder, CTO Bangalore

Gold Farm Abhilash Thirupathy Co-founder Bangalore

Bharat Innovation Fund

Hemendra Mathur Venture Partner Delhi / NCR

ThinkAg Co-founder Delhi / NCR

YES BANK (Food and Agri Strategic Advisory and Research)

Nitin Puri

Senior President & Global Head, Food & Agri Strategic Advisory & Research

Delhi / NCR Pradeep Shrivastava

Vice President, Food & Agribusiness

Khushrow Chinoy Senior Manager, Food & Agribusiness

Triton Foodworks Dhruv Khanna Co-Founder Delhi / NCR

Natures Miracle LLP Ankur Anand Cultivation Head Delhi / NCR

Crofarm Varun Khurana Co-Founder and CEO Delhi / NCR

Ankur Capital Ritu Verma Co-Founder, Managing Partner

Bombay

Omnivore Mark Kahn Managing Partner Bombay

NABARD - National Bank For Agriculture And Rural Development

Jiji Mammen Chief General Manager, Business Initiatives Department

Bombay

INI Farms

Purnima Khandelwal CEO Bombay

Pankaj Khandelwal Chairman and Managing Director

Atul Wable Senior Quality Manager Vasunde Packing House (rural Maharashtra)

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Figure 1: Number of Operational Holdings by Size (Agriculture Census 2015-16)

Source:

Agriculture Census 2015-16, All India Report on Number and Area of Operational Holdings

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Figure 2: Average Size of Operational Holdings (Agriculture Census 2015-16)

Source:

Agriculture Census 2015-16, All India Report on Number and Area of Operational Holdings

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Figure 3: Area Operated by Operational Holdings (Agriculture Census 2015-16)

Source:

Agriculture Census 2015-16, All India Report on Number and Area of Operational Holdings

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Figure 5: Mechanization Rate vs. Population Engaged in Agriculture, 2011

Source:

https://www.oav.de/fileadmin/user_upload/5_Publikationen/5_Studien/170302_Farm_Mechanization_

in_India.pdf

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Figure 6: Farm Power Availability and Foodgrain Yield (2010-2011)

Adapted from (Mehta 2013)

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Figure 7: Comparison of Custom Hiring Initiatives

Adapted from (Puri and Gumpert 2016)

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Figure 8: India’s National Agricultural Research System (NARS)

Adapted from (Balaguru 2015)

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Figure 9: Indian Council of Agricultural Research (ICAR) Organizational Structure

National Institutes

Indian Agricultural Research Institute (IARI), New Delhi

Indian Veterinary Research Institute (IVRI), Izatnagar

National Dairy Research Institute (NDRI), Karnal

Central Institute of Fisheries Education (CFIE), Mumbai

National Academy of Agricultural Research Management (NAARM), Hyderabad

National Bureaus

National Bureau of Plant Genetic Resources (NBPGR), New Delhi

National Bureau of Animal Genetic Resources NBAGR), Karnal

National Bureau of Fish Genetic Resources (NBFGR), Lucknow

National Bureau of Soil Survey & Land Use Planning (NBSS & LUP), Nagpur

National Bureau of Agriculturally Important Microorganisms (NBAIM), New Delhi

Central Research Institutes

Crop Science Institutes

Central Rice Research Institute (CRRI), Cuttack

Central Research Institute for Jute and Allied Fibers (CRIJAF), Barrackpore

Central Tobacco Research Institute (CTRI), Rajahmundry

Indian Grassland and Fodder Research Institute (IGFRI), Jhansi.

Sugarcane Breeding Institute (SBI), Coimbatore

Indian Institute of Sugarcane Research (IISR), Lucknow.

Central Institute of Cotton Research (CICR), Nagpur

Vivekananda Parvatiya Krishi Anusandhan Shala (VPKAS), Almora

Indian Institute of Pulses Research (IIPR), Kanpur

Horticulture and Plantation Crops Institutes

Indian Institute of Horticultural Research (IIHR), Bangalore

Central Institute for Subtropical Horticulture (CISH), Lucknow

Central Institute of Temperate Horticulture (CITH), Srinagar

Central Tuber Crops Research Institute (CTCRI), Trivandrum

Central Plantation Crops Research Institute (CPCRI), Kasargod

Central Institute for Arid Horticulture (CIRH), Bikkaner

Central Potato Research Institute (CPRI), Shimla

Indian Institute of Spices Research (IISR), Calicut

Indian Institute of Vegetable Research (IIVR), Varanasi

Resource Management Institutes

Central Soil and Water Conservation Research and Training Institute (CSWCR&TI), Dehradun

Central Soil Salinity Research Institute (CSSRI), Karnal

Central Arid Zone Research Institute (CAZRI), Jodhpur

Central Research Institute for Dry land Agriculture (CRIDA), Hyderabad

ICAR Research Complex for North-Eastern Hill Region (ICAR-NEH), Barapani

ICAR Research Complex for Goa (ICAR-GOA), Ela

ICAR Research Complex for Eastern Region (ICAR-ER), Patna

Central Agricultural Research Institute (CARI) for Andaman and Nicobar Islands, Port Blair

Indian Institute of Soil Science (IISS), Bhopal

Technological Institutes

Central Institute of Agricultural Engineering (CIAE), Bhopa

Central Institute for Research on Cotton Technology (CIRCT), Bombay

National Institute of Research on Jute and Allied Fiber Technology (NIRJAFT), Calcutta

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Indian Lac Research Institute (ILRI), Ranchi

Central Institute of Post-harvest Engineering and Technology (CIPET), Ludhiana

Animal Science Institutes

Central Sheep and Wool Research Institute (CSWRI), Avikanaga

Central Institute for Research on Goats (CIRG), Makhdoom

Central Avian Research Institute (CARI), Izatnagar

Central Institute for Research on Buffaloes (CIRB), Hisar

National Institute of Animal Nutrition and Physiology (NIANP), Bangalore

Fisheries Institutes

Central Inland Fisheries Research Institute (CIFRI), Barrackpore

Central Marine Fisheries Research Institute (CMFRI), Cochin

Central Institute of Fisheries Technology, (CIFT), Cochin

Central Institute of Brackish-water Aquaculture (CIBA), Chennai

Central Institute of Freshwater Aquaculture (CIFA), Bhubaneshwar

Social Science Institutes

Indian Agricultural Statistics Research Institute (IASRI), New Delhi

National Center for Agricultural Economics and Policy Research (NCAP), New Delhi

Adapted from

https://aiasa.org.in/wp-content/uploads/2015/07/NARS-India.pdf

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Figure 10: Cooperating Centers: (INARIS project)

IASRI, New Delhi • Develop architectural infrastructure for Central Data Warehouse

• Develop extraction, cleaning and load tools of warehouse

• Develop warehouse management and querying tools of Warehouse

NBSS & LUP, Nagpur • Develop and integrate database on Soil parameters and resources of country including resource map on soil parameters through GIS

CRIDA, Hyderabad • Develop and integrate database on physical climatic parameters and resources of the country

• Generation of physical and climatic databases on agro-ecological sub regions

• Digitization of various climatic variables through GIS

IIHR, Bangalore • Develop and integrate database on horticultural crops including resource maps of major horticultural crops through GIS

CPCRI, Kasargod • To develop and integrate database on important Plantation Crops including development of resource map of plantation crops through GIS

PDCSR, Modipuram • To develop the database on Cropping Systems in the country including the resource map through GIS

NBFGR, Lucknow • Integrate existing database on Fish resources and develop database on fish genetic resources

• Development of resource map on fisheries resources through GIS

NCAP, New Delhi • Integrate existing database on socio economic indicators relevant to agricultural research in particular and agricultural development in general

• Design and develop various socioeconomic parameters for identified cropping systems in selected regions

• Develop resource map on important socioeconomic parameters through GIS

NRC-AF, Jhansi • Design and develop a database on agro forestry system in the country including development of resource map of different agro-forestry systems through GIS

DWMR, Patna • Develop and integrate database on water resources including development of water resource map of the country through GIS

HSR, Calicut • Develop and integrate database on spices including development of resource map of important spices in the country through GIS

NBPGR, New Delhi • Develop and integrate database on plant genetic resources including development of resource maps of plant genetic resource of the country through GIS

CIAE, Bhopal • Design and develop and integrate database on various aspects of agricultural farm mechanization including development of resources throughout the country via GIS

Source: http://www.unapcaem.org/Activities%20Files/A17/China_Presentation01.pdf

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Figure 12: State and mandi-level Adoption of National Agricultural Market (eNam) Platform

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Figure 14: Azadpur Market Photographs Below photos sourced from:

http://www.barcroft.tv/largest-fruit-vegetable-market-asia-azadpur-mandi-delhi

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Below photo sourced from: https://economictimes.indiatimes.com/topic/Azadpur-Mandi-Traders-Association

Source: Google Maps

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Figure 16: Alternate Marketing Channels in India

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Figure 17: Potato Value Chain in India

Source: McDonald’s India

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Figure 18: Sourcing for McDonald’s in India

Source: McDonald’s India

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Figure 19: Indian Agtech Financing

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Figure 19: Indian Agtech Incubator/Accelerator Landscape AgriTech Startup Accelerator National Institute of Agricultural Extension Management (MANAGE) Centre for Innovation & Entrepreneurship (CIE) @ Indian Institute of Technology, Hyderabad https://www.manage.gov.in/incubation/agritech.asp https://www.manage.gov.in/incubation/incubation.pdf

ThinkAg Bharat Innovations Fund Ankur Capital Syngenta India https://www.thinkag.in/ Gastrotope https://gastrotope.com/ Mistletoe10* ** Taizo Son is the younger brother of SoftBank Group founder Masayoshi Son “YES SCALE” AgriTech YES Bank http://www.yesfintech.com/yesscale/agri-tech/

NABVVENTURES (Fund I) National Bank for Agriculture and Rural Development (NABARD) https://www.vccircle.com/nabard-floats-100-mn-vc-fund-for-rural-agriculture-startups/ Villgro https://www.villgro.org/tag/agriculture/ Centre for Innovation Incubation and Entrepreneurship (CIIE) https://ciie.co/ Indian Institute of Management, Ahmedabad a-IDEA (Association for Innovation Development of Entrepreneurship in Agriculture) https://aidea.naarm.org.in/ ICAR-National Academy of Agricultural Research Management, Hyderabad (ICAR-NAARM) Department of Science & Technology, Govt. of India (DST, GOI)

10 Mistletoe, a Japanese startup support business led by Taizo Son, established a joint venture with accelerator GSF India and Infobridge Marketing and Promotions, a Tokyo-based consulting company that specializes in the Indian market.

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Andhra Pradesh Agtech Summit 2017 https://www.dalberg.com/our-ideas/improving-lives-marginalized-farmers-through-technology organized in partnership with Bill & Melinda Gates Foundation Innovation Hub (iHub) https://www.icrisat.org/tag/ihub/ International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) in Hyderabad Syngenta Foundation https://www.syngentafoundation.org/agriservices/wherewework/india

Foundation for Innovation and Social Entrepreneurship https://www.tatatrusts.org/article/inside/foundation-for-innovation-and-social-entrepreneurship Tata Trusts Marico Innovation Foundation https://www.maricoinnovationfoundation.org/ TERRA Agtech Accelerator (not India exclusive) Rabobank RocketSpace https://www.terraaccelerator.com/