rural market environment

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RURAL MARKET ENVIRONMENT

I. Introduction:

The emergence of an active cash economy is bound to create is bound to create a strong rural demand and

promote rural consumption. The traditional growth and dominance of urban industrial centres is undergoing

rapid changes. A more equitable distribution in rural areas would also help in slowing down the rapidly

increasing influx of people from rural to urban areas.

There are two sections of rural population:

A large portion has a low income and low consumption levels;

The rest are rural rich.

The rural population forms a major portion of the Indian population as seen below:

Division of Population in India

Rural

74%

Urban

26%Rural

Urban

About 75% of the Indian people reside in rural areas. In other words, for every consumer in the urban area,

there are three of them in the rural areas. Though the proportion of rural population is showing a slight

decrease over the years, but in absolute numbers, the rural population is growing at a higher rate than the

urban population. This large population will require a wide range of consumable and durable goods and

services. At the same time the need of the rural areas does not automatically guarantee a market, unless it is

backed by income and the resultant purchasing power.

For a vast majority of the rural population, the main occupation is agriculture and allied activities. The

graph below gives the distribution of rural population as per their occupation pattern.


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Occupation Pattern of Rural India

50%

27%

10%

9%

2% 2%Agriculture

Agricultural

LabourBusiness

Non-agricultural

Labour

Salary Earners

Notgainfully

employed

About half of the rural population own or lease land to cultivate it for their livelihood. Another 27% are

dependent on these cultivators for their jobs as agricultural labourers. Thus, a total of 77% of rural

population depend on land only for their living and land is their source of living.

There are others, constituting small proportions, who are engaged in business like petty shopkeepers or

merchants and salary earners like teachers, health workers and village level officials. The implication of

this is that the income generation in rural areas entirely depends on how the land is used, what crops are

cultivated, how much is marketed, how much is consumed and the marketing arrangements for the

production. If rainfall is adequate, weather conditions are favourable and appropriate technology is

available, the rural areas prosper as it has happened in the states of Punjab, Haryana and Western Uttar

Pradesh. So the disposable income in the hands of the rural people is very much conditioned by the status

of agriculture and other allied activities. This also indicates that major part of income generated is a source

of agriculture. 75% of income generation in rural areas is from agriculture and agriculture-related activities.

One of the deterrents for marketers to exploit the rural market potential has been the vastness of the rural

market in terms of areas covered and the location of the rural population. It is much easier to cater to the

needs of the urban population because of their concentration, but it is very difficult in the case of rural

population because of their widespread nature.

The villages are also not uniform in size. Nearly 48% of the villages have a population of less than 500

persons or about 100 households, which is probably of no consequence to marketers. This may be

acceptable since the proportion of population covered by these 48% of villages account for only 12% of the


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total population. Yet it should be borne in mind that the people of these villages also have land and

cultivate and generate some income.

Thus the location and size of population of villages throw a challenge to marketers. This phenomenon is

not true for the whole country and there are wide variations among the different states. In states with high

irrigation and fertile lands, the concentration of population is more when compared to states with low

irrigation facilities and lack of arable land.

0

20

40

60

80

100

Rural Urban

Literacy Levels in India

ILLITERATE

LITERATE

Given the distribution of rural and urban population, it can be seen that the number of literates in rural areas

are more than in urban areas. It is an interesting got note that has been a considerable increase in the

number of literate persons in rural areas since the last two decades. This has its implications in

communicating with the rural population. It appears to prove that communication should not prove to be

such a big hurdle. Today, television has proved to be an effective medium for communication with the rural

masses. The telecasting network in the country today covers about 93% of the population.

Assuming that the entire urban population is covered by the television but the television, which is only

23%, then nearly 67% of the rural population will be covered by television. Thus, television reaches a

larger segment of the rural population than any other form of mass media. Though radio is also very

popular, people like to see to believe.

The above factors point that the potential for marketing of goods and services depends heavily on

agriculture, since it is the main occupation in rural areas. The market for agricultural inputs fertilizers,

pesticides, insecticides, tractors, irrigation equipment and seeds has been expanding over the years in


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rural areas as the Indian farming is fast becoming market-oriented. But the rural market has remained a

dark area for those manufacturing and marketing consumables and consumer durables. To successfully

exploit the potential offered by the rural market, there is a need to first understand the rural market in terms

of the characteristics mentioned above. Only a few established companies HLL, Lipton, Brooke Bond,

TOMCO, and P & G have been trapping the potential of the rural market for a long time.

I. The Features of Indian Rural Markets

1) Large and Scattered Market : - The rural market of India is large and scattered in the sense that it

consists of over 63 crore consumers from 5, 70,000 villages spread throughout the country.

2) Major Income from Agriculture : - Nearly 60 % of the rural income is from agriculture. Hence

rural prosperity is tied with agricultural prosperity. Roughly speaking, a location is defined as

rural, if 75 per cent of the population is engaged in agriculture related activity. In India, close to

70 per cent of the population is agrarian and contributes to about one-third of Indias GNP.

3) Low Standard of Living : - The consumers in the village area do have a low standard of living

because of low literacy, low per capita income, social backwardness, low savings, etc.

4) Traditional Outlook : - The rural consumer values old customs and tradition. They do not prefer

changes.

5) Diverse Socio-Economic Backwardness : - Rural consumers have diverse socio-economic

backwardness. This is different in different parts of the country.

Infrastructure Facilities: - The Infrastructure Facilities like roads, warehouses, communication system,

and financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to

inadequate Infrastructure Facilities.

II. Profile of the rural consumer:

1. Size of the Rural Consumer :


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The size of the rural consumer group can be understood from the following details provided in the

table:

Population of India

Rural v/s Urban: 1971, 1981, 1991 and 2001

Population Total % Total % Total % Total %1971 1981 1991 2001

Rural Population 43.90 cr 82 50.20 cr 76.3 64.1 cr 76 74.2 cr 72.3

Urban Population 10.91 cr 20 15.62 cr 23.7 20.3 cr 24 28.5 cr 27.8

Total Population 54.81 cr 100 65.82 cr 100 84.4 cr 100 102.7 cr 100

Rural population forms a major portion of the Indian population as seen in the table. If we consider

the state level picture, in several states like Uttar Pradesh, Rajasthan, Madhya Pradesh and Kerala, the

rural population constitutes more than 80% of the total population. In states like Bihar and Orissa 90%

of the population is in rural areas.

2. Location Pattern of Rural Consumer :

The urban population of India is concentrated in 3200 cities and towns and the rural population is

scattered over 6, 38,365 villages. Statistics shows that out of the 6,38,3645 villages have populations of

more than 5000 persons each. About 55% of the villages have population in the range of 500 people or

less.

The influence is clear, rural demand is scattered over a large area, unlike the urban demand,which is highly concentrated.

3. Literacy Level :

It is estimated that there are 23% literate in rural India as compared with 365 of whole country.

The rural literacy in the rural area is on an increase. Among the rural population Kerala tops with 77%.

The literacy rate has its implication in communication with the rural population. It appears that

communication should not prove a hurdle, provided appropriate means are chosen.

4. Rural Income :

An analysis of the rural income pattern reveals that nearly 60% of the rural income is from

agriculture. Rural prosperity and the discretionary income with rural consumers are directly tied up

with agricultural prosperity. The pre-dominance of agriculture in the income pattern has one more

significance-rural demand is more seasonal.


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5. Rural Savings :

The rural consumers have been drawn into the saving habit in a big way. The commercial banks

and the co-operative have been marketing the saving habit in the rural areas for quite some years.

Today nearly 70% of the rural households are saving a part of their income.

The habit is particularly widespread among salary earners and self-employed non-farmers.

6. Significant Aspects :

It can be seen in general sense low purchasing power, low standard of living, low per capita

income, low literacy level and overall low social and economic positions are the traits of the rural

consumers.

By and large, the rural consumers of India are a tradition bound community; religion, culture and even

superstition strongly influence their consumption habits.

Rural Consumer Class

2001- 02 2006-07

Very Rich 0.8 1.6 NUMBER OF

HOUSEHOLDS IN

MILLIONSConsuming Class 26.8 41.3

Climbers 54.7 63.3

Aspirants 25 14.7

Destitutes 20.9 12.2

rural market environment

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