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Union Budget: Agritech Sector Calls For Tax Holidays To Drive Innovation And Growth

Agritech seeks tax holidays in the upcoming budget for innovation and growth, calls for targeted incentives to drive sector advancement

From launching the 'Agriculture Accelerator Fund' to increasing the agricultural credit target to Rs 20 Lakh Crore, last year's budget consisted of big announcements for the agriculture sector, particularly pushing for growth in the agritech segment.

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Last year's Economic Survey disclosed that agritech startups had garnered close to Rs 6,600 crore in funding from private equity investors over the preceding four years, showcasing an impressive annual growth rate exceeding 50 per cent. However, a report released last September by FSG highlighted a troubling pattern, revealing a 45 per cent decrease in investments in Indian agritech startups from FY22 to FY23.

But, it would be wrong to ignore the funding crunch witnessed by the startup space globally. For India's agritech segment to grow, industry leaders suggest that introducing a targeted incentive, such as a tax break or tax holiday spanning 10-15 years for agritech startups, could encourage the involvement of tech-driven players in tackling India's agricultural challenges. Amith Agarwal, Co-founder & Director, Staragri believes that this measure is poised to foster innovation and progress in the agri-tech sector.

"Similar to urban infrastructure projects, the government should allocate capital expenditure to strengthen rural and farm infrastructure. Offering low-cost funds for constructing modern warehouses is essential, considering the capital-intensive nature of this business. The budget should consider innovative measures like tax breaks and attractive depreciation rates to incentivize further investments in farm infrastructure," he added.

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While interim budgets usually don't encompass major announcements, the upcoming budget might pave the way for slight adjustments, given the climate impacts of El Nino and the need to meet domestic demand.

In FY23, the agricultural exports of the country witnessed a rise of nearly 6 per cent, reaching $53 billion, compared to FY2022.

Amit Sinha, Co-Founder, Unnati, expects the budget to focus on promoting climate-friendly products, aligning with sustainability goals. "A thoughtful subsidy structure for fertilizers can incentivize farmers towards economically and environmentally responsible practices. We anticipate a budget emphasizing awareness creation, robust market linkages, and policies supporting technology and infrastructure," Sinha said.

While the share of agriculture in India's GDP is witnessing a steady decline, there is a huge headroom in the sector that can be leveraged by startup players, however, incentives may be essential to fuel growth in the agritech segment.

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