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Rural Market

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Rural Market

May, 2012

Brief Overview

With rural markets representing the heartland of the true culture and demographic identity of India, the market assumes great significance as majority of India lives in the rural regions. The rural market represents the largest potential market in the country. With over 70 per cent of India's population residing in rural areas, capturing these markets is becoming one of the most lucrative options for all sectors.

Over the last few years, much emphasis has been given on the empowerment of rural India, which has translated into impressive economic growth. Key drivers behind this growth include Government initiatives and schemes, infrastructure development, industry projects across the country and the emphasis on local-employability.

With rapid penetration of communication and broadcasting services in the rural areas, the demand for lifestyle products is rapidly increasing, providing huge opportunity to the players in organised sector to expand their reach into the rural India. Also, with the Government of India looking to improve the physical infrastructure of the country and planning huge investment, the penetration of organised sector products will increase rapidly over coming years, even in the farthest corners of the country.

Market Size

It is interesting to note that a mere one per cent increase in India's rural income translates to a large buying power of Rs 10,000 crore (US$ 1.79 billion). Nearly two-thirds of all middle-income households in the country are in rural India. According to consulting firm BCG, 50 per cent of the market is made up of bottom of the pyramid consumers while another 24 per cent at present comes from small town and rural India.

A report by the National Council of Applied Economic Research (NCAER) shows that rural segment comprises more than 50 per cent of consumers constituting as a prime market for consumer goods.

Recent trends/investments

  • Corporate businesses in India are under pressure to capture the untapped rural market to increase their profitability and market share. Companies are adopting rural marketing in a broader context of sustainability in the era of intense competition to grow their businesses and thereby, also contributing towards the economic development and the welfare of the rural economy.
  • There has been a rising trend of rural Indians developing desire for packaged foods, personal care products, consumer durables and IT products, two- and four-wheelers, and fashion accessories. Significantly, over the last few years, some consumer product companies have recognised the potential of rural markets and invested time and resources to explore and tap into this opportunity - understanding and segmenting the consumer, based on their spends and lifestyles. Some companies have even re-made products, pricing and packaging to customise features for these markets.
  • Indian logistics firms grew at over 25 per cent in fiscal 2011-12 led by a large-scale outsourcing of logistics services by manufacturing and services sectors and a steady rise in rural consumption. Rising demand in rural economy has led to many logistics firms improving their warehousing capacity since various sectors have been looking to tap potential in rural economy
  • With the objective of expanding its business territorially, Rajkot-based Champion Agro Limited is planning to invest about Rs 100 crore (US$ 17.9 million) in the next two years. As part of its expansion plans, the company is planning entry into North India and will look to tap states like Punjab, Delhi and Haryana. The agri retail company already has 40 stores in Gujarat and is planning to open another 25 such stores in North India
  • Suzuki Motorcycle India has very quickly understood that to succeed in India, rural market holds the key. To achieve this, the company has launched a mass market motorcycle Hayate, at an aggressive price of about Rs 40,000 (US$ 717.46). The company is doubling its manufacturing capacity by setting up another plant at Rohtak
  • HDFC Bank, the second largest private sector lender in the country, is all set to open one-man branches in rural centres. The move will help the bank meet priority sector commitments and aid its financial inclusion drive
  • Fruit juice concentrates maker Rasna is looking at a 40 per cent sales growth in 2012, as it increases its focus on the hinterland to drive business. Rasna's plan to dig deeper into hinterland follows the other fast moving consumer goods marketers, who have made it big by targeting the bottom of the pyramid in recent years