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

Urban 26%

Rural Urban

Rural 74%
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.

Occupation Pattern of Rural India

2% 9% 10% 50%
Agricultural Labour Business Non-agricultural Labour Salary Earners Notgainfully employed

2%

Agriculture

27%

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

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.

Literacy Levels in India

ILLITERATE LITERATE

100 80 60 40 20 0 Rural Urban

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

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:

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 Rural Population Urban Population Total Population Total 1971 43.90 cr 10.91 cr 54.81 cr 82 20 100 % Total 1981 50.20 cr 15.62 cr 65.82 cr % Total 1991 76.3 64.1 cr 23.7 20.3 cr 100 84.4 cr 76 24 100 % Total 2001 74.2 cr 28.5 cr 102.7 cr 72.3 27.8 100 %

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.

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 Very Rich 0.8

2006-07 1.6 NUMBER HOUSEHOLDS MILLIONS OF IN

Consuming Class Climbers Aspirants Destitutes

26.8 54.7 25 20.9

41.3 63.3 14.7 12.2