Start-ups in Rural India

Why in the news?

Start-ups are emerging as a beacon of hope in Rural India, especially in the realm of agriculture. 

Role of Start-ups in Rural Economy

• Rural Development: Scaling startups focused on tackling issues in traditional livelihood practices can push for overall rural economic improvement and achieve the vision of 'Atmanirbhar gaon'. 

• Employment Generation: Rural startups not only provide innovative solutions to problems but also create employment and livelihood opportunities in rural India.  E.g., Meesho, Udaan etc. 
• Education and Skill Development: Rural-urban divide in accessing education has been abridged by the emergence of rural Ed-tech startups. E.g., Paathshaala, Learning Delight etc.
• Financial Inclusion: Fintech start-ups are working towards providing access to affordable financial services like microcredit, insurance, and digital payments in rural areas. E.g., Bank Saathi
• Women Empowerment: The SHG led startups have led to the socio-political and economic empowerment of rural women. E.g., Lijjat Papad, Saral Jeevan Sahelis, Farm Didi etc. 
• Environmental Sustainability: Rural startups have been contributing to the vision of clean and green India by focusing on harnessing renewable energy. E.g., AgriVijay, Earthshastra Ecotech pvt. Ltd. 
• Water Governance: Several Start-ups are striving to make water accessible and affordable, save agriculture water etc. E.g., Water lab India, Kheyti, boon etc.
• Agricultural innovation: such as Irrigation as a Service (IaaS).
  • IaaS is an irrigation technology that provides hassle free, pay per use and cost effective on demand irrigation to small and marginal farmers.
  • It functions on a subscription or pay-per-use basis meaning farmers pay a fixed monthly fee or a fee based on water usage.
  • Benefits: Improved water efficiency and crop yields, beneficial for water intensive crops like sugarcane, soil health monitoring etc.

Initiatives Undertaken

• Startup India: Launched in 2016 to build a strong eco-system for nurturing innovation and startups in the country which will drive economic growth and generate large scale employment opportunities. 
• Startup India Seed Fund Scheme: It aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization. 
• NewGen Innovation and Entrepreneurship Development Centre: It has a mission to promote knowledge based and technology-driven startups by harnessing young minds and their innovation potential in an academic environment.
• Innovation & Agri-Entrepreneurship Programme: Aims to nurture and promote agri-entrepreneurs by providing financial assistance and nurturing the innovation ecosystem in the agriculture sector. 
• Agriculture Accelerator Fund (AAF): Under the AAF, financial support is provided to entrepreneurs in the field of agriculture and allied sectors to set up their startups.

Challenges Faced by the Rural Startups 

• Connectivity gap with Suppliers in Urban Areas: It results in delays, increased costs, and logistical complexities for rural startups and impacts their overall operational efficiency.
• Financial Accessibility: Rural startups face financial accessibility issues such as reluctance of lending by financial institutions, limited availability of banking services in rural areas.
• Lack of Support System: The absence/lack of mentorship, networking opportunities, and incubation centers has impeded the growth of rural startups.
• Difficulty in Finding Early Adopters in Rural Areas: Rural startups have faced issues of limited communication channels, lower income, and lower digital penetration to find early adopters in rural areas.
• Limited Funding Mechanism in Rural Areas: Rural startups often face ignorance on the part of the venture capitalists and angel investors.
  • Urban startups in Bangalore, Delhi and Mumbai have collectively accounted for 92% of startup funding over the past 9 years.

Way Forward

• Policy Support: To address the challenges faced by rural startups such as infrastructure gaps, access to finance, and skill development. 
• Institutional Support: A comprehensive network of relevant institutions is vital for the transformation of agri-startup intentions into profitable enterprises.
• Community Engagement: The startups led by SHGs must be promoted through adequate policy support, as these lead to the development of local community.
• Government and NGO Collaboration: To align efforts and resources for rural startup development.
• Sustainability instead of Scalability: The rural startups must aim to evolve into sustainable employment generating enterprises, aligning with the broader vision of Vikasit Bharat.