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Rural Market

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Indian Rural Market

August, 2013

Indian Rural Market: Brief Overview

There’s no second thought about the fact that the Indian rural market is increasingly becoming the economic powerhouse of the country. The hinterlands, accounting for about 50 per cent of India’s gross domestic product (GDP) and housing nearly 70 per cent of the country’s population, are showing remarkable multiplier effect and thereby excite policy makers and business leaders.

Moreover, rural areas, where 12 per cent of the world population is residing, are witnessing enormous growth in their incomes and crucial shift in consumer behaviour.

Companies have realised this enormous opportunity and are largely tuning their strategies to woo the rural clan through their products and services.

Certain facts that strengthen the position of rural India as an economic segment are enlisted hereafter-

  • Rural India accounts for around 55 per cent of the manufacturing GDP; rural areas were host to nearly 75 per cent of new factories built in the last decade, and rural factories account for 70 per cent of all new manufacturing jobs.
  • Rural consumption per person has increased by 19 per cent yearly between 2009 and 2012; two percentage points higher than its urban peers. In incremental terms, spending in rural India during this period, increased by US$ 69 billion, significantly higher than US$ 55 billion by urban populations.

Key Investments/ Developments

Business conglomerates are increasingly getting attracted by the immense growth potential Indian rural markets possess. They have not only customised their offerings to suit rural consumers, but have also devised innovative ways to convince them and please them.

  • With rural consumers increasing their appetite for better products and high-standard services, fast-moving consumer goods (FMCG) companies intensified their efforts in rural India in 2012-13. FMCG majors like Dabur India and Hindustan Unilever (HUL) vouch for their rural markets and consider them to be extremely critical for the growth of their businesses.

HUL’s decade-old Shakti initiative underwent a technology-overhaul in 2012 wherein about 40, 000 Shakti Ammas were equipped with a basic smartphone. These smartphones had inbuilt software that enabled them to take and bill orders, manage inventory and receive updates on promotional schemes offered by the company. This enhanced their productivity. Reportedly, the Shakti initiative delivers around 20 per cent of Unilever’s overall rural sales.

While HUL empowered rural women as Shakti Ammas, Dabur India made rural people use the company’s sample products and experience the benefits for themselves. The idea was to spread the awareness about the company’s products through the word-of-mouth advertising.

  • Havells India Ltd projects that housing sector, particularly in rural areas, is set to see a boom in coming years. As higher demand for houses imply greater demand for lighting and other domestic electrical goods, the fast moving electrical goods and power distribution equipment manufacturer plans to enter into rural India market with its newly-launched 'Rio' switches.
  • Marketers focussed on the countryside adopt a multipronged approach to reach the rural fragmented markets. They apply various permutations and combinations of strategies to woo the rural consumers. For instance, two-wheeler manufacturer Hero Motors added authorised representative dealers to its existing hub-and-spoke network. Appointed by the authorised dealers, the representatives facilitate easy purchasing and servicing of the bikes for locals. This step added more than 5, 000 touch points to Hero's channel strategy, enabling the company to extend its reach to 20 per cent of India's 600, 000 villages.