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Rural India spurs growth

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There was a time when companies used to focus on urban areas for test marketing and selling their products. During that period of time urban India was booming with job creation and rise in economic activities thereby resulting into higher disposable income and increased spending among consumers. The scenario changed after the world witnessed slowdown in the year 2008. When recession began many people lost their jobs as there was massive decline in manufacturing activities. The consumer spending too dipped especially in urban areas where people started reducing their monthly spending budget and deferring purchasing plans.

Urban areas started becoming saturated due to declining sales. On the other hand, rural India began booming on account of increased social spending on welfare schemes and easy availability of loans. Around 12 per cent of the world’s population resides in India’s rural areas. Thus companies started shifting their focus to hinterland and began introducing rural centric products. They noticed huge opportunity to cash in on the boom witnessed in the country side. The increasing wage rates too were responsible for the rise in spending in rural areas.
Manufacturing and FMCG companies started launching products for the rural market. The overall consumption in rural markets has started exceeding urban areas. Rural folks are now spending a lot more on pricier goods like phones, televisions and bikes – on top of basic necessities like soap and food staples.

Companies started introducing sachets for selling shampoos, detergents and small tubes for selling toothpastes. Most of the packs were introduced in the denominations of one, two and five rupees. The sachet became huge hit in rural areas due to the low price. Even banks have started launching new branches and ATM machines in the hinterland. Vehicular companies too have made a foray as cheaper loans are easily available in rural areas. Even telecom companies have started focusing on rural markets. Today smartphones have become a huge hit even in the villages too. About one in every two rural households now has a mobile phone. Even in India’s poorest states such as Bihar and Orissa, one in three rural households has a mobile phone.

Hindustan Uniliver Limited is generating around 40 per cent of its revenues from the countryside while Maruti and Coca-cola make around 30 per cent. Similarly, a third of Airtel’s 8.6 million DTH customers come from rural India.

Amul has already opened ice cream parlours in villages which is growing at a faster pace than its urban counterpart. Coca Cola has aggressively started marketing the soft drink at the new price point of Rs 5. One in two of ICICI’s branches exist in rural and semi-urban areas. Up to 60 per cent of its new branches set up in the last 18 months are in rural areas. Out of these 400 branches has been established in those areas which are unbanked.

Due to growing internet connectivity even penetration is rising in the country side. Some companies have earmarked 30 per cent of their budget for investing in rural areas. Thus India’s rural market has become a powerful economic engine.

Nearly 27 per cent rural households had someone employed under Mahatma Gandhi National Rural Employment Guarantee Scheme in 2009-10. And they are all cashing in on the opportunity being thrown up by the rural market, which is a unique combination of growing incomes and rising aspirations of around 850 million consumers living in 6,50,000 villages of India. Thus rural India is growing at a faster pace than urban India.

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