September 4, 2012

Rural India: On the tipping point of a boom or tremors of historic change?

copyright niti bhan

It seems 2012 will be the year of Rural India's ascendancy over the ubiquitous metros and urban elite in the minds of market makers and strategists alike. I was in New Delhi this last week of August and on my return I thought I'd write an update on my impressions of urban India today, starting with the visible rise of the "emerging global middle classes". A quick search online however changed my tune when I came across headlines highlighting recent findings from Crisil, the Indian subsidiary of Standard & Poor’s.

The Financial Times puts it succinctly:
Rural India spent $67.4bn more over that period, compared to $53.8bn for urban India.
It’s no surprise that rural India – where around 65 per cent of India’s 1.2bn people live in mostly dire circumstances – spend more on goods and services, thanks to their greater numbers. But the economic reforms of the early 1990s disproportionately benefited the urban, elite and already rich, boosting growth in those areas beyond that of rural areas. That has changed, Roopa Kudva, Crisil managing director, said in a release, because of increased rural incomes and government intervention.

“Underpinning this growth in rural consumption is a strong increase in rural incomes due to rising non-farm employment opportunities and the government’s rural focus through employment generation schemes,” Kudva said.

For instance, the Mahatma Gandhi National Rural Employment Guarantee Act that guarantees 100 days of unskilled non-farming paid work to one member of every rural family injected $9bn in the last fiscal year, benefiting 55m households, according to official data.
The Hindu, extracted August 30th 2012
The Hindu goes on to inform us that increasing migration and rising incomes are, however, unevenly distributed:
One of the outcomes of the higher level of income has been an increase in discretionary spends, a marked departure from the earlier trend of need-based consumption. About one in every two rural households across the country now owns a mobile phone, though in the case of states such as Bihar and Orissa, the ratio is about one phone for every three households. What is more, nearly 42 per cent of rural households owned a television set (up from 26 per cent five years before) and 14 per cent had a two-wheeler for conveyance (twice the level seen in 2004-05). In fact, more than half of India’s stock of consumer durables such as electric fans, TV sets and two-wheelers is now in rural areas.
However, the higher incomes in rich states do seem to skew the all-India average figures. For example, while one in two households in rural Punjab has a two or four-wheeler, a ratio higher than even urban Maharashtra and Karnataka, only six per cent of Bihar’s villagers own a two-or four-wheeler. 
But this is simply the tip of the rural iceberg. Deeper changes are afoot.

Not only is consumption on the rise in rural India, its complexion is also changing, rapidly, due to the influence of aspirational messages, telecommunications in addition to rising incomes and increased migration and thus, remittances:
"Rural shoppers are much more connected than they were 3 years back. Better employment opportunities, more money flowing back into the villages, awareness of large format retail has meant increased exposure and awareness (to the urban way of living)."
In Gupte's view, "The rural audience no longer wants to be seen as poor second cousins of their urban counterparts. They have the money and they are willing to experiment."
Yet the story of India, as the most recent findings emerging from India's Census 2011 "Houses, Household Amenities and Assets," report, summarized so carefully by  The Atlantic Cities shows, is still that of lack and scarcity:
  • 46.5 percent have mud floors
  • 39.4 percent are one-room households
  • 43.5 percent of households have tap water (though 26.5 percent of those are receiving water from untreated sources)
  • 33.5 percent of households get their water from handpumps
  • 67.2 percent of households have electric lighting (in urban households, that rate is 92.7 percent)
  • 31.4 percent rely on kerosene for lighting
  • 53.1 percent of households have no latrine facilities. 49.8 percent of households are left with no option but to urinate and defecate in the open
demonstrating that opportunities still abound for those seeking to serve the bottom, however, it seems as though the challenges have changed. Finding relevant and appropriate ways and means to serve this potential market profitably will take a shift in perception of who this customer actually is, in the context of the 21st century. Its the rural boat that's been lifting all others.


Already we see that not only is mobile phone use still growing at a fast clip, but Bharat (as rural India tends to be fondly called by marketing researchers and advertising agencies) is rapidly going online primarily for fun and entertainment. All they lack is local language content and the plethora of services we've gotten accustomed to on our English language internet.

At this point, all I can say is that the numbers are in and if they don't show the genuine upward mobility of the vast majority of the Indian population i.e economic development, in real and absolute numbers, Great Galloping Global Recession or no, then I suffer to think of what will. This elephant has taken one step forward, and I'm looking forward to understanding what it all means. For 2/3 of India lives in her villages and its all very informal, economically speaking, over there.

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