The Hindu Business Line : Robust rural

Marketers always like to keep a finger on the pulse of the rural markets. Obvious, one would say, given the fact that 57 per cent of sales of consumer goods come from rural areas and small towns while 59 per cent of durables sales come from rural markets as well. While urban India is in the midst of a slowdown, what with the meltdown in the US economy as a result of the sub-prime crisis, the slowdown has had an adverse impact on several sectors in India such as IT, exports, real estate and automotive, to name a few.

However, it would gladden the hearts of marketers to learn that the rural markets are ticking along well. So says a recent study by the Rural Marketing Association of India (RMAI) which commissioned MART to conduct a study using both secondary data and a dipstick study covering the four regions of the country. The study, says Pradeep Kashyap of MART, attempts to assess the macro economic scenario in rural India and examines major sectors – agriculture, non-farm, housing, telecom, health, education and other services. Interviews were conducted with consumers, retailers, building contractors, and insurance agents to understand how the recent meltdown has affected rural incomes and the demand for FMCGs, durables and services, and whether the savings, investments and spending habits of people have undergone any change, particularly spending on weddings and other occasions. The study also tries to assess their plans for future spending.

Presenting the findings recently, Kashyap, Vice-President of RMAI & CEO of MART, emphasised that “there has been no impact of the economic slowdown on the rural economy. On the other hand, rural markets offer great opportunities to marketers trying to find a way out of the current economic crisis.”

The study reveals that rural incomes are on the rise driven largely by continuous growth in agriculture for four consecutive years, a feat achieved for the first time in the last 40 years. A record harvest of 230 million tonne food grains last year coupled with a sharp increase of 40 per cent in minimum support price of wheat and paddy over a two-year period has resulted in farmer incomes rising sharply. The rural economy, the study says, has got a further boost with the farmer loan waiver of Rs 71,600 crore; wage payout of Rs 30,000 crore under the National Employment Guarantee Act and the Bharat Nirman Programme with an outlay of Rs 1.8 trillion for improving rural infrastructure for better road connectivity and digital access to villages for marketers. Kashyap points out that usually a good year in agriculture is followed by a bad one, thus wiping out the gains for farmers but four years of sustained growth has helped rural incomes, even though last year the growth was lower at 2.2 per cent.

The study found that the rural and small town economy (locations with less than 50,000 population) which accounts for 60 per cent of India’s income has remained insulated from the economic slowdown as employment opportunity and income streams are intact and growing steadily with consistent demand for goods and services. The percentage of salaried workers in rural India is a third of urban and that too mostly in government service.

In this context, Kashyap points out that there is hardly any impact of job layoffs except in select pockets of the country. The study also found that as rural people save in post office or bank fixed deposits their wealth has not been eroded unlike people in urban areas who have lost huge sums of money in the stock market.

Higher disposable surplus among consumers in these markets is leading to smart buying at rock bottom prices and advancing of purchase in many categories including house construction materials, apparel and durables.

The FMCG sector continues to grow at 20 per cent (urban growth 17 per cent) with no downgrading of brands despite the price increase in some categories, durables at around 15 per cent with upgrading from regular to flat screen colour TVs and a sharp rise in DVD sales and DTH connections. Telecom growth has been at over 30 per cent while insurance and housing have also not shown any signs of slowdown.

Spending on weddings has not shown any reduction nor have spends on travel for pilgrimages. In fact, in many places rural people were not even aware of the severity of the economic slowdown as their lives have not been impacted adversely, says the study. With the result that rural markets today boast of more households having televisions and two-wheelers than urban.

Says Kashyap, “Consumer confidence is high; trade and industry are equally bullish about the growth in demand in rural markets and many companies are drawing up plans to enter these markets in a serious way.”

In addition to the economic indicators and the mood of rural folks, even the rural marketing agencies dealing with rural initiatives have done well in 2008-09 and have a number of new prospects to deal with in the coming year, explains R.V. Rajan, President of RMAI. The management institutes specialising in rural management/marketing courses such as Indian Institute of Rural Management, Anand, and Xavier Institute of Management, Bhubaneshwar, have reported 100 per cent placement while many other leading management institutes are struggling to get placements for their students, he adds.

Source: MART/RMAI

Rajan points out that besides the strong showing of consumer goods in rural areas, the mobile revolution that is sweeping the hinterland of the country is completely changing the way one connects with rural folks. Mobile connectivity today, he says, is helping marketers transcend the traditional forms of communicating with them. That will be RMAI’s next effort as it is planning to have its next industry-focussed event on ‘rural telephony with emphasis on the mobile revolution in rural India.

Do send in your queries, feedback and suggestions to brandline@thehindu.co.in

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