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Indian Rural Market

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Indian Rural Market

February, 2013

Indian Rural Market: Brief Overview

Rural markets have emerged as an important growth engine in the Indian consumption story. With about 70 per cent of the Indian population residing in the hinterlands, rural markets seem to be a significant opportunity for business conglomerates. Rural spending was significantly higher at Rs 3, 75, 000 crore (US$ 69.44 billion) than urban consumption at Rs 2, 99, 400 crore (US$ 55.44 billion) between 2009-10 and 2011-12; wherein rural consumption per person outpaced its urban counterpart by 2 per cent, according to a study by CRISIL and preliminary data released for 2011-12 by the National Sample Survey Organisation (NSSO).

Rural penetration of major durables has seen a significant up-surge. For instance, TV penetration has moved from around 31 per cent in 2007 to 39.8 per cent in 2010 while motorcycles/scooter penetration increased from 9.5 per cent to 13.9 per cent in the same period. Around 75 per cent of the sales in fast moving consumer goods (FMCG) and consumer durables sectors are accounted by Indian rural markets.

Industry experts are already saying that rural India is not only shining, but also is the new driver of growth for the Indian economy.

Key Investments/ Developments

Seeing a significant business opportunity in India' numerous districts, villages and semi-urban areas, marketers are laying intense focus to device strategies to attract consumers residing in the hinterlands. The consumer behaviour witnessed in early 2000s in smaller towns is now being seen in rural areas, according to industry experts. Several government-sponsored projects are also responsible for this.

  • In a bid to harness the vast potential rural markets offer, at least four Tata Group companies are ready to take the plunge in-there. These include Tata Motors, Titan Industries, Tata Chemicals and Tata Teleservices. Tata Motors initiated a rural marketing initiative called 'Neev' in 2010-11 and has sold over 13, 000 vehicles till-date under the program. The company now plans to go national by the end of 2013 and project additional sale of 70, 000 units by then which will add US$ 500 million to its turnover
  • India's FMCG major, Hindustan Unilever (HUL) sells almost 40 per cent of its brands in the hinterlands. The company will further increase its focus on rural markets as it considers rural India a powerhouse which can even be bigger than the urban markets. Mr Harish Manwani, HUL Chairman, stated that rural India is an incredible opportunity of potentially adding US$ 1.8 trillion to the country's economy, equal to current gross domestic product (GDP) and called for convergence of urban and rural marketers so that prosperity spreads to the rural areas