India's poverty stricken village market is not a paranoia to the corporate world. Undeterred by 37.5 per cent of the population (about 100 million people) living below the poverty line, the corporate are foraying into rural market. The growth story is spreading to India's hinterland. Indian rural market is booming with surging agriculture growth since the mid of 2000'. It has also provided cushion for the recession hit urban market. It was not hit by global recession. Only 11 percent of the rural market depends on bank credit.
Today, Maruti, the country's biggest automobile maker, is targeting rural market to sustain its auto dominance in the country. Launching the rural drive only two years back, its rural sales soared to 16.5 per cent or about 1,65,000 vehicles in 2009-10. At present, rural market accounts for hefty shares in several market segments 70 percent in toilet soaps, 50 per cent in TV and 55 per cent in LIC policies. FMCG companies are reaping high revenue from rural market 45 per cent each of Colgate Palmolive and Hindustan Lever, 50 per cent of Hero Honda and 60 per cent of Mahindra and Mahindra
While the urban market is shrinking, rural market is growing uninterrupted. In FMCG, rural market witnessed 23 per cent growth in 2009-10. It is projected to grow at 40 percent against 25 percent in urban areas. In telecom, rural market was growing at 70 percent. As of June 2009, rural wireless subscribers were 125.95 million against 70.83 million in June 2008. Rural market accounts for 30 per cent of mobile telephones .
The rural market in India is a home for 790 million consumers. The total income in rural India will reach US$ 425 billion in 2010-11, a 12 percent annual growth since 2004-05. This exponential growth in rural income was derived from four main factors, in addition tom agricultural growth : no tax, NREGA ( National Rural Employment Guarantee Programme ), loan waiver in 2009-10 and increase in MSP ( Minimum Support Prices).
NREGA emerged a driving force for propelling up the rural market. As of 2009, 44.9 million households, comprising of five members per household, benefited from the programme. One member from each household was offered employment for 100 days under the programme. According to official, majority of the beneficiaries reported increase in their consumption, health expenditure and savings. An estimation reveals that of about Rs 7000 earned by per household every year, about 50 per cent were spent for non-food items.
Over the period of three years since NREGA was launched in February 2006, US$ 12 billion (Rs 53,605 crores) was infused in the rural market as wages. Of theses, if 50 per cent were spent on non-food, the rural India generated US $ 6 billion (Rs 26,802 crore) new market during these three years period. During 2010-11, about US$ 6 billion ( Rs. 27,268 crore) will be infused as wages under the scheme. Of these, 50 per cent or US$ 3 billion ( Rs 13,634 crore) will be added to the rural market.
Corporations are adopting different strategies to capture the rural market. Small packaging at lower prices, use of IT services to communicate the agriculture and weather information and special distribution systems are some of the innovative steps taken to penetrate into the rural market. New bottle water brand Bonaque by Coca Cola, customized TV Samporna by LG with manual in regional languages, Shanti Amla oil by Marico are some of the brands generated to lure the rural consumers.
New retailing strategies were grafted to woo the rural people. Rural India accounts almost 55 per cent of retail market. Haryali Kisan Bazar by DCM, Choupa Sagar by ITC , Kisan Sansars by Tata are some of the success stories for retailing in rural market. Product adaptation, suiting to rural market, is another strategy by the corporate. Nokia felt the need to dwarf the infrastructure lacking. It introduced a mobile phone Nokia 1100 - with in-built torch , an alarm clock and a radio. It launched Life Tool service, which offers agriculture information, education and entertainment targeting rural India.
In summing up, despite the vagaries of monsoon, rural market will soar with the infusion of big public and infrastructure development expenditures. It ushers for a transformation from poor to lower middle income group and to middle income group people. It may serve as a strong back-up support for the flip flop urban market.