Monday, March 17, 2008

Perspectives on Retailing in India and Rural Marketing - II

Continued from previous post.....

Emerging Trends from Rural India

Employment: Non-farm activities in rural areas are witnessing a rise in entrepreneurship and employment, which are growing at a faster rate than urban areas. These trends can be seen in the findings of the Fifth Economic Census 2005, excluding crop production and plantation, which puts about 25.81 million enterprises (61.3 per cent of total enterprises) operating out of rural areas. These rural enterprises are clocking an average annual growth of about 5.53 per cent and employ more than 50 million people (51 per cent of the total). Further, rural enterprises are recording an average annual growth of 3.33 per cent in total employment, which is higher than that of urban enterprises. What is striking about rural enterprise is the rising level of entrepreneurship, which is indicated through low number of hired workers (presently standing at about 2/5 of total persons employed).

Salient Features of the Fifth Economic Census

Income: There are as many middle income and above households in rural areas as there are in urban and almost twice as many lower middle income households as there are in urban areas. National Council of Applied Economic Research (NCAER) projects that middle and high-income households in rural areas would grow from 80 million households to 111 million households by the end of 2007. Nearly half the 145 million rural households earn between Rs 1000 – 5000 per month[1]. Further, rural BPL trend is registering a decline over the years.[2] as shown in the table below

Percentage of Population Below Poverty Line[3]


1973 -74

1977 -78 1983 1987 -88 1993 -94 1999 -00 2003 -04
Rural 56.4 53.1 45.7 39.1 37.3 27.1 21.8
Urban 49 45.2 40.8 38.2 32.4 23.6 21.7
Total 54.9 51.3 44.5 38.9 36 26.1 21.8

Consumption: Rural Consumption patterns are suggesting a shift from sustenance driven consumption through a near parity between amount of expenditure on food and non-food items. Further, rural consumption expenditure is growing at nearly double the rate of urban consumption expenditure growth. The 61st round of the National Sample Survey (NSS) report 2004-05 on consumer expenditure in rural and urban areas reveals that the average monthly per capita consumption expenditure (average MPCE) in rural areas to be Rs 559, a bit more than half of urban India. Further, about 5 per cent of the total rural population has MPCE of Rs 1155 or more and another 5 per cent has MPCE in the range of Rs 890 – Rs 1155. Rural consumption expenditure, when compared over the two time periods of 1999-00 and 2004-05 indicate an increase of 7.81 per cent, which is substantial when compared with urban consumption expenditure that grew by just 4.32 per cent.

% Distribution of MPCE by NSS Rounds in Rural India 
Another interesting feature of the findings were that the pattern of rural consumption are now showing a near balance between the amount spent of food items and non-food items. While food items account for 55 per cent of the total consumption expenditure, non-food items like fuel & light, clothing & footwear, education, medical, miscellaneous consumer goods, conveyance, other consumer services and durable goods accounted for 10, 5, 3, 7, 6, 4, 4 and 3 per cent respectively. Until 2000, food consumption expenditure accounted 62 percent of total consumption expenditure. It is worth noting that there has not been a fall in the real expenditure on food, indeed per capita real spending on food has grown by over 3 percent. At the same time, non-food items registered an increase of 17 percent over a period of five years since 2000. Certain other trends have been briefly covered below

Rural India is also increasingly recognized for Rising Awareness Levels and its Consequent Influence on Lifestyle, this is primarily being led by development of telecommunications, exposure to televisions & media and rise in literacy levels that are dramatically affecting rural perceptions. As a result, rural India is registering Changing Consumption Patterns; which is again being catalyzed by the transition towards varied economic activities like manufacturing, fisheries and services. With this changing economic scenario, rural consumers are not only becoming more aware about the availability of a large number of products but are also willing to try out brands.

Findings from Hansa Research, 2006

Continued with III post here

[1] Raj, S John Mano & P Selvaraj, “Social Changes and the Growth of Indian Rural Market: An Invitation to FMCG”; 2007

[2] Chandramouli S, “Innovations as Cutting Edge Solutions in Rural Marketing” at Rural Marketing Summit; FICCI- 2007
[3] Source: Government of India

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