How India’s Tech Ecosystem Is Fuelling Rurbanisation

How India’s Tech Ecosystem Is Fuelling Rurbanisation


It is audacious to assume that India will continue to remain rural and it will be almost blasphemous from an economist’s lens, to predict that India is likely to become more rural in the next few decades

Rurbanisation (reverse-urbanisation) in India is driven by tech-enabled business models and could very well be one of the most important growth drivers for the Indian economy in times to come

The belief and confidence towards India’s rurbanisation arise from the spiked emergence of new age technology-led models in rural India in the last decade

India is likely to become 43.2% urban (approx. 675 Mn people) by 2035 as per the United Nations – Habitat’s World Cities Report 2022. This urbanisation will be driven by growth in the Indian population as well as migration from villages to cities. The report said that “cities are here to stay, and the future of humanity is undoubtedly urban”. 

India already has about 50 cities with a population of over a million people and this number is likely to grow in line with urbanisation trends. In fact, Delhi will emerge as the world’s largest urban conglomerate with a population of over 39 Mn by 2030. Going by the trends seen in the western world, urbanisation is a sign of economic growth. Most developed economies in the world have more than 75% share of urban population.

In this context, it will be an audacious statement to make that India will continue to remain rural and it will be almost blasphemous from an economist’s lens, to predict that India is likely to become more rural in the next few decades. Irrespective of how counterintuitive and contrarian it may sound, rurbanisation (reverse-urbanisation) in India is driven by tech-enabled business models. In fact, rurbanisation could very well be one of the most important growth drivers for the Indian economy in times to come. 

The belief and confidence towards India’s rurbanisation arise from the spiked emergence of new age technology-led models in rural India in the last decade, triggered by the more-than-anticipated willingness of rural India to embrace technology for higher incomes and business transformation.  Unlike urban-centric tech evolutions (largely focused on driving efficiency and consumption), rural tech adoption trajectory is technology → higher incomes → consumption (with an increase in incomes at the core).   

Another positive part of rural tech adoption is that very little of it is driven by a cash-burn or promotion-led approach.  Among the multiple sources of income for people in rural India, agriculture is and will continue to remain at the fulcrum. In the field of agriculture alone, we have seen an ocean of innovative business models in the last decade, solving any problem plaguing the sector for ages.

The majority of the tech-driven innovations in agriculture are led by about 2,000 plus startups. This count is growing and is likely to cross 10,000 before 2030. The best parts of rural-centric startups are relatively low mortality, higher survival probability in funding winter and the fact that there is not even a remote possibility of monopolisation of the market by a handful of startups.

With ‘A’griculture at the core, the six other ‘As’ which will play out in India’s rurbanisation journey are Aggregation, Asset creation, Arbitrage opportunities, Ancillary Industries, Access and Aspirations. Let’s discuss how technology and innovations are catalysing and empowering these six ‘As’.


In the context of rural India, technology is driving aggregation in at least four dimensions: farm produce, farmers, farmland and data. 

Aggregation Of Farm Produce

The aggregation of farm produce has traditionally been supply-driven with about 6,600 APMC mandis and many smaller mandis as the key aggregation points. With organisation of the demand for food products at the front-end, supply-side aggregation is catching up to sync up with demand-side aggregation originating from institutional buyers, HORECA, modern trade, ecommerce, quick commerce, kirana stores and end consumers. 

Over the last decade, there is a demonstration of tech-enabled demand-driven aggregation of farm produce in multiple categories such as staples, horticulture, animal protein and milk by startups like WayCool, Dehaat, FarMart, Agribazaar, Hesa, Innoterra, Gram Unnati, Country Delight, Licious, Aquaconnect, Bioveda, Urban Harvest, Farmers Fresh Zone, Maalexi, Origin Konnect, TradeBridge to name a few. The transactional volume ranges from a few tonnes to a few thousand tonnes of farm produce on a daily basis.

The farm produce aggregation models necessitate the involvement of local village communities and microentrepreneurs, creating both entrepreneurial and employment opportunities in the villages. Out of approximately 1000 Mn tonnes of food consumed and exported in/from India annually, the share of new-age-demand-led-aggregation models is still less than 2%, leaving large headroom for growth. Millions of jobs will be created or formalised in this process with accelerated aggregation, with most of the jobs being created in villages.

Aggregation Of Farmers

The aggregation of farmers is largely led by government schemes for promoting FPOs (Farmer Producer Organisations), SHGs (Self Help Groups) and cooperatives.  There are about 5,000 FPOs, 8 Mn SHGs and 8 Lakh cooperatives in India, with the majority of members being farmers or from farming families including women farmers and rural youth.

FPOs, though in their nascent stage, are making using technology for both backward (for the purchase of inputs) and forward integration (for buyer/price discovery). The second phase of FPO evolution will likely pivot to the value addition of farm produce and FPO’s transformation into FPPDO (Farmer Producer Processor Distributor Organisation) throwing open many innovative models and creating opportunities for skilled manpower to manage these companies. 

SHGs are also undergoing transformation, with over 1 Mn SHGs being digitised through E-Shakti project, a clear indicator of tech adoption. Cooperatives have been there for decades and demonstrated the power of aggregation (case in point, dairy cooperatives which were instrumental in the white revolution and continue to play a pivotal role in the dairy value chain).  

However, there has been a lack of transparency and efficiency in the cooperative structure. The government has renewed its focus on cooperatives with the formation of a dedicated ministry called ‘Ministry of Cooperation’. There is a plan to digitise 63,000 Primary Agricultural Credit Societies (PACS) over the next five years.  The digitisation of SHGs and cooperatives will be a hotbed for innovations for anyone serving rural markets.

The multi-tiered aggregation among village communities is bound to drive thousands and millions of innovative business models. Even among agri startups, FPOs are already becoming an important target segment. Samunnati, Falca and Sahyadri Farms are some of the emerging FPO-centric business models and we are likely to see many more of them. 

Aggregation Of Farmland

This is one of the most difficult aggregations because of the continued fragmentation of agricultural land (average farmland holding has come down from over 2 hectares to about 1 hectare in the last five decades). 

Pooling of farmland is imminent in India with a monstrous need for mechanisation across all sizes of farmland with farm labour becoming scarce, sporadic at times and expensive. Though some mechanical tools work on small parcels of land, land pooling makes small farms amenable to mechanisation through the use of emerging technologies such as drones, robots, sensors, IoTs, computer vision, harvesters, land levellers and many other such hardware pieces of equipment.  Given that a significant number of farms in India are already cultivated by sharecroppers, land pooling at a large scale is highly possible.

Mechanisation-led land pooling will open doors for millions of rental entrepreneurs who can provide products and services on a pay-per-use basis. Custom hiring centres that provide equipment on rent is a testimony to this trend.  

Startups focused on mechanisation such as Krish-e, Tractor Junction, Mera Tractor, Toolsvilla, Agrictools, Sickle Innovations, Marut Drones, Garuda Drones, General Aeronautics, IoTechWorld, Fasal, Cultyvate and SoilSense are bringing both product and process innovation for mechanised farming.

Aggregation Of Data 

The Indian agricultural supply chain suffers from perennial dyslipidaemia, leading to triple vessel blockage in three vital arteries of the value chain (pre-harvest, production and post-production). The clogged value chain can be cured through the aggregation of data synergised with the multitiered aggregation of farms, farmers and farmland as discussed above.

Aggregation of farm data has been attempted by every other agritech startup by developing their proprietary stacks to capture information about farms, farmers, crops, soil, weather, cattle, the quality of commodities, etc. Data stacks created by the likes of SatSure, CropIn, Krishitantra, Bhu-Praikshak, Harvest Global, Borlaug Web Services, Kheti Buddy, Ingreens, Agnext, GoMicro, WRMS, Skymet, IBISA, etc. have demonstrated how real-time, accurate and aggregated data can be used for multiple applications in agriculture. However, data collection, cleaning and validation are always onerous jobs for young startups, especially when their hearts and souls lie in data analytics. 

The recent budget announcement regarding creating a public digital ecosystem (so-called Agristack) for agriculture is a massive step in aggregating scattered data points. The good news is that data is available (mostly collected and owned by the state governments) and digitised to a large extent. A unified Agristack can make the data standardised and interoperable. And once it is made open-source, it can create opportunities for numerous APIs, innovations and business models that solve farmers’ access to markets, inputs, advisory services, credit and insurance. 

Asset Creation

To unlock the value of the rural economy, the confluence and convergence of physical and digital assets is the key. Digital highways created by startups can become digital expressways with data aggregation and access to public platforms, which can significantly bring down the transactional cost of first and last-mile access to farmers.

However, digital assets must be supplemented with millions of physical assets that can enable farmers and farmer groups to become value chain participants (rather than just producers) at the farm + 2 level, as a processor as well as a distributor. 

The farm and near-farm processing can drive a farmer’s transition to a value chain custodian with higher value capture in the post-harvest phase. The decentralised warehousing and processing will also synchronise the food value chain with the fragmented land holdings. 

Startups like S4S Technologies, Innofarms,, Ergos, Digigrain, Suri Agrofresh, Ecozen, Inficold and Promethean are great examples of building physical infrastructure (in many cases complementary to the digital layer). This gives options to farmers to store as well as process, to bankers to digitally lend seamlessly and to processors to buy efficiently. The Agri Infra Fund (AIF) scheme of the Government, which provides concessional financing for setting up farm and near-farm assets is playing a catalytic role in the creation of physical assets in rural areas.

Arbitrage (Mitigation) Opportunities

Indian agriculture has genetically inherited three kinds of arbitrages — regional, seasonal and informational. The information asymmetry can be addressed through aggregated data stacks, as discussed above.

There is also an opportunity to build business models to mitigate seasonal and regional arbitrages as consumer demand patterns become uniform throughout the country. The case in point is that the conventionally rice-eating belts in southern India are eating more chapatis (made from wheat flour) and north Indians are eating more rice dishes. 

Biryani, having strong localised associations with certain cities like Hyderabad, Lucknow and Kolkata, is gaining national character. The demand for dairy products in the eastern region (which is milk deficit) is growing no less than in other parts of the country. Thanks to improved access to food through disruptions in food retail and delivery by the likes of Instamart, Blinkit, Swiggy and Zomato, the disparity in food consumption across age groups and gender is also diminishing. 

The regional and seasonal arbitrage in agriculture is largely attributed to the agroclimatic conditions. For example, apples are mostly produced in the Himalayan regions of J&K and Himachal; potatoes in western Uttar Pradesh and West Bengal; Onions in Nasik; Chillies in Guntur and Khammam districts etc. To top it off, most crops are produced in two to six-month windows during the year, and their perennial availability becomes a function of storage and shelf-life extension from one harvest to another.

A combination of technologies reducing the seasonal and regional arbitrages are already in practice, such as those globally acknowledged as Controlled Environment Agriculture (CEA). CEA is essentially a portfolio of hardware and software products to control temperature, humidity, nutrition, respiration, light, etc. to grow crops with the use of greenhouses or polyhouses, hydroponics, vertical farming, aquaponics, aeroponics and agribiotech products. 

These technologies improve not just productivity per unit of land but also make supply chains climate-resilient with optimised use of inputs. Covid times highlighted the need for local food supply chains to become atmanirbhar or self-sufficient, which could very well be addressed by CEA technologies. 

Many of the CEA models started with a focus on niche vegetables such as bell peppers, cherry tomatoes and salad leaves, but the focus is shifting towards high-volume vegetables catering to mass demand. Absolute Foods, Eeki Foods, Gourmet Garden, Barton Breeze, Greenpod and Bioprime are some examples of startups working in this space.

CEA can throw open many innovative business models for the ‘grow local = sell local + sell global’ supply chain. Financing upfront investments (that could be in the range of $50-100K per hectare) with strong market linkages to offload produce is key to scaling.  We are going to witness an army of entrepreneurs building, installing, managing and financing CEA models. 

Ancillary Industries

The income from crops accounts for about 40% of farmers’ income, which is an indicator of diversification in sources of income. There is a huge role for ancillary industries, especially dairy, poultry, fisheries, fibres, bamboo, millets and beekeeping, in making farmers’ income less and less dependent on conventional crops. 

This occupational diversification is also in sync with emerging consumer demand patterns shifting in favour of protein (milk and animal proteins) and fibre (coming from horticultural produce) with a reduced share of fats and carbohydrates. Dairy and vegetables are also relatively high-liquidity products, putting cash in farmers’ pockets on a weekly or fortnightly basis, unlike crops which are highly working capital intensive.

There are multiple models emerging in the digitisation and organisation of such value chains (Stellapps, Greenikk, Oxecart, Desai Fruits, Mango Dairies, Sasya Produce, Fruitfal, Milklane, Moofarm, MeraPashu360, Eggoz, Gfresh, FreshR, Flokx, Goataway). They offer opportunities to village-level entrepreneurs to be part of vertically integrated chains. 

Given the perishability and complexity of such value chains, there is an opportunity to create thousands and millions of aggregation points, collection centres, cold rooms, ripening chambers, CA storages, dehydrators, and more. which can create ‘low-capex-decentralised-employment’ models in the villages as well as tier-2 and tier-3 towns.


All four ‘As’ described above are driving farmers’ access to markets, processing, storage, data, advisory, decision-making tools, good quality inputs, mechanisation and financing.  This has the potential to make farm economics work for smallholder farmers. The tech-enabled access is not just making farming remunerative for farmers but also bringing on board new-age farmers and a new breed of microentrepreneurs.

Also, this access is working in the reverse direction as well, enabling ecosystem players (processors, distributors, input dealers and financial institutions) to reach out to farmers in a more time- and cost-efficient way. The transactional cost of direct-to-farmer access has been prohibitive for many businesses. 

Technology has the potential to bring transactional costs down by as much as 90%. As an example, many bankers are working with several agri-fintechs to use technology for farmer onboarding, risk assessment, underwriting and loan recovery. This can, at scale, change the dynamics of rural fintech, making it more cash-flow-driven than collateral-driven. 

Avanti Finance, Jai-Kisan, Credit Siddhi, Upaz, Agrifi and Whatsloan have demonstrated the use of technology for the purpose of farmer and value chain financing. Likewise, other value chain players like Bighaat, Behtar Zindagi, Agrostar, Freshokartz, Unnati, Farmology and Agribolo, among others have built platforms to digitally connect, advise and sell to farmers either directly or through intermediaries.


It is difficult to pen down and articulate the aspirations of India’s rural youth. The only way you can experience it is to travel deep into India’s rural heartland and spend time with them.

In my experience, rural aspirations are not that different from their urban counterparts. It’s indeed a surprise to witness the emerging homogeneity in aspirations despite so much cultural and linguistic diversity. Thanks to social media, youngsters in rural India are well-informed on emerging technology trends. The majority of them are on WhatsApp, Facebook, Instagram and YouTube. There are startups like Agrishots and Krishify that are building farmer networks for targeted and customised information. 

The drivers for migration for rural youth are usually education, skill development and jobs with income stability (please note: not more income). A robust rural entrepreneurial ecosystem is the need of the hour, which can mentor and curate their business ideas in places where they belong. They also have aspirations of building their own venture but need support in structuring and articulating their thought process along with intensive training on fundraising skills. The government needs to be complimented for their continued focus on rural incubation and seed funding some of these ideas. The ‘accelerator fund’ for agri startups announced in the recent Budget can be a game changer in scaling rural innovations.

It is only a matter of time before the sons and daughters of Indian farmers will be a significant share of the growing breed of agri and rural tech startups. Given their deep and clear understanding of problem statements, my guess is that they will pivot less (against a norm of 4 to 5 pivots to achieve product-market fit for the majority of startups). The beauty of agri and rural tech is that one can build $100 Mn top-line businesses within a radius of 50-100 Km, without necessarily going too far from their home villages. 


The big question is whether the above ‘As’ can make rural markets attractive enough to drive rurbanisation. Let’s do some back-of-the-envelope calculations. Each village in India has on average $1.2 Mn or approximately INR 10 Cr of economic opportunity ($600 Bn farm output + $60 Bn agri-input sales divided by about 600,000 villages), arising out of agricultural and agri-adjacent businesses. 

The farm services and emerging business models can potentially add another INR 2 Cr of the economic value per village, making it approximately INR 12 Cr or $1.5 Mn per village. Even with a 5% market share, entrepreneurs can create $100 Mn top-line businesses by catering to about 1300 villages. Mathematically, one need not go beyond two districts (on average, India has 780 villages per district) to achieve this scale.

The other question is how much value can be unlocked while creating tech-enabled rural businesses. There is empirical evidence that suggests that many agritech startups have unlocked value aggregating at INR 30,000 per hectare of land (not including ancillary opportunity) for farmers, value chain players and themselves. Going by empirical evidence, there is a potential to unlock value in the range of INR 4 to 5 Lakh Cr ($50-60 Bn) for about 150 Mn hectares of arable land in India with the increasing adoption of tech-enabled innovations. The best part is that farmers will gain a fair share of this value.

Sometimes, mathematical calculations make opportunities sound very attractive. Yes, the opportunity is indeed attractive, but it cannot be achieved without literally soiling one’s hand, going deep into villages and supply chains and building trust with farmers through partnerships to drive technology adoptions. 

It is said that it takes a village to raise a child. Similarly, it will take the entire ecosystem (policymakers, central/state/district/village administrations, FPOs, farmers, universities, multilaterals, system integrators, investors, incubators, accelerators, and, of course, startups) to build scalable and sustainable new-age-village-centric businesses to unlock unrealised value. 

I am hopeful that the sheer size of the opportunity catalysed by tech integration will create enough entrepreneurial and employment opportunities for rural youth in their own backyards without the need to move to cities. 

The other question is whether this opportunity is attractive enough for urban youth to explore rural markets. We already have some early signals of this, as demonstrated by the growing number of agritech and rural tech startups. However, this number has to grow manyfold for rurbanisation to become mainstream. 

We also need to build schools, colleges, hospitals and other infrastructure in villages to make them attractive enough for urban youth. Thanks to the government’s massive push towards building rural infrastructure (including expressways, highways, rural roads, housing, and education) and driving broadband/4G connectivity deep into villages, there is a good chance that many edtech, healthtech, cousmertech and fintech startups who have conventionally focused on top 50-100 cities in India may go rural. Given the overcrowding in some of these spaces, a rural orientation can provide a much-needed breather to many urban-centric startups that are walking on eggshells to pursue sustainability in claustrophobic and me-too urban markets. 

What Implications Does Rurbanisation Have For Investors? 

It’s positive news, as it will open up thousands of investible businesses. These will be unique in many ways (definitely not silicon valley copy-paste), scalable in India and portable to other markets, with a high degree of capital efficiencies and ROIs. 

However, investors have to look beyond HSR Layout, Indiranagar, Gurgaon, Noida, Lower Parel, Hitech City and travel to unnoticed and yet-to-be-venture invested pin codes in India to find these entrepreneurs. This opportunity requires investors to go the extra mile to remote places to discover, conduct due diligence and invest in these untapped business models. There is an opportunity to create a ‘proprietary deal flow’ at least in the near to medium term and enter at fair and reasonable valuations.

To conclude, taking ‘India to Bharat’ rather than the other way around will truly democratise our startup ecosystem by bringing new-age technologies to the hinterland. This process will help create many ‘Bharatcorns’ serving India’s farmers and the rural population at large. 

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

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