III RURAL MARKETING IN INDIA ............. 50-78 3.1 Introduction......................................................................... 50

3.2 Rural area defined .............................................................. 50

3.3 India’s rural environment .................................................... 51

3.4 Rural scenario in Kerala ..................................................... 58

3.5 Rural environment of Kerala – An overview ....................... 60

3.6 Rural areas and rural marketing......................................... 68

3.7 Domain of rural marketing .................................................. 68

3.8 Structure of rural markets ................................................... 69

3.9 Magnitude of rural marks.................................................... 71

3.10

Market places of the rural consumers ................................ 73

3.11

Issues of rural marketing in India ....................................... 74

CHAPTER III

RURAL MARKETING IN INDIA

3.1 INTRODUCTION

India lives in villages is an often quoted fact. The Indian rural

markets with its vast size and demand base offer great opportunities

to marketers. ¾ th of the consumers live in rural areas (7417 lakhs as

per 2001 censes report) and more than half of the national income is

generated here. Our nation is distributed approximately in 6,30,000

villages which can be sorted in different parameters such as literary

levels, accessibility, income level, penetration, distance from nearest

town etc. It is only natural that rural India occupies an important

position in the marketing strategies both in the narrower and broader

spectrum . Since 1970’s and more particularly from the mid 1980’s,

the rural economy of India has started showing potentialities. During

90’s, there has been a steady shift to as well as growth of purchasing

power of rural India. Thus in recent years the rural sector provides a

unique opportunity to expand their market since the urban segment is

clearly showing signs of saturation. The nature and characteristics of

rural market is quite different than that of urban market. Therefore it is

worthwhile to understand the rural characteristics and environment as

a prelude.

3.2 RURAL AREA DEFINED

There is a clear-cut demarcation between urban and rural areas

due to the differences in the physical and functional characteristics.

Government of India, by conducting (census survey 1961) clearly

defined urban areas and those areas not coming under the purview of

urban area is considered as rural area. As per the census report

2001 an urban area is defined as following.

50

a) All places with a Municipality Corporation, cantonment board

or notified town area committee.

b) A place satisfying the following three criteria simultaneously.

1. Minimum population of 50002,

2. At least 75 percent of male working population engaged in non

agricultural pursuits and

3. Density of population at least 400 sq.mile (1000 per sq. mile).

Apart from these, the outgrowths of cities and towns have also

been treated as urban under urban agglomerations. Example.

Railway colonies, University campuses, port areas, military

camps etc.

All other areas not under the purview of the above definition are

considered as rural area.

3.3 INDIA’S RURAL ENVIRONMENT

Rural India is different from urban India with respect to its

economic and functional characteristics. The characteristics,

purchasing and consumption pattern of rural people are also different

from that of urban people. Due to the impact of globalization there is

drastic change in India’s rural environment. The composition of

demand has also changed significantly. To understand these

developments in the rural areas, awareness on current environment is

very essential. Knowing the exact change in size and consumption of

consumables and durables is also very important for the marketers to

deal with rural consumers. The following subheads will provide a view

of Indian rural scenario.

Population

More than 72 per cent of total population resides in rural areas (Table

3.1 in other words very consumer in urban area there are three in rural areas.

51

Table 3.1 Population and its Growth from 1901 to 2001

All India

Population(in lakhs) Decadal Growth Rate Census year

Rural Urban Total

1901 2125.4 258.5 2383.9 -

1911 2261.5 259.4 2520.9 2.3

1921 2232.3 280.9 2513.2 -0.31

1931 2455.2 334.6 2729.8 11.00

1941 2745.1 441.5 3186.6 14.22

1951 2986.5 624.4 3610.9 13.31

1961 3602.9 798.4 4392.3 21.64

1971 4390.5 1091.1 5481.6 24.80

1981 5238.7 1594.6 6833.3 24.66

1991 6286.9 2176.1 8463.0 23.86

2001 7416.6 2853.6 10270.2 21.34

Source; Census of India, 2001

Fig.3.1 Population and its Growth from 1901 to 2001

010002000300040005000600070008000

1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001

Year

Popu

latio

n (in

lakh

s)

Rural Urban

52

Though the proportion of rural population to total population is

showing a slight decrease over the years, in absolute numbers rural

population is increasing at a higher rate than the urban population. The

increasing rate of population in rural areas provides scope for marketing of

consumable and durable goods and services.

Distribution of villages in India

One of the deterrents for marketing men to exploit the rural market

potential has been the vastness of rural markets in terms of areas covered. It

is much easier to cater to the needs of urban population because of

concentration, but it is very difficult in the case of rural population because of

their wide spread nature. Table 3.2 presents the distribution of villages in

India.

Table 3.2 Distribution of villages in India as per Census Report 2001

Population No. of Villages Percentage to total

Less than 200 114207 17.9

200-499 155123 24.3

500-999 159400 25.0

1000-1999 125758 19.7

2000-4999 69135 108

5000-9999 11618 1.80

10000 and above 3061 0.5

Total 638365 1000 Source; Census of India 2001

From table 3.2 it may be seen that rural population is distributed in

about 638365 villages. It should also be noted that villages are not uniform in

size. About 42 percent of villages are having only population of less than 500.

Literacy level

Literacy level of rural population has considerable impact on as the

marketing strategies to be adopted by marketing men especially in

communication with the rural people. Higher the level of literacy scope for

penetration into rural areas also will be easy.

53

Table 3.3 Literacy level in India (in percentage )

1971 1981 1991 2001 Sex Rural Urban Rural Urban Rural Urban Rural Urban

Male 34 61 41 66 58 81 57.9 81.1

Female 13 42 18 48 31 64 30.6 64

Total 24 52 30 57 45 73 44.7 73 Source: Census of India 2001

It can be noticed from the table that although there is a rise in the

literacy rate during the last two decades, changes in the literacy rate from

1991 was only marginal. It can be further noticed that only 45 percent of rural

people are literate in our country even today.

Occupational Pattern Occupational pattern of rural households have also an impact

on the nature of income generation, which will in turn affect the

expenditure pattern. Purchase behaviour of the rural consumers

depends upon the nature of occupation and consistency in the

generation of income.

Table 3.4 Occupational pattern of rural households in India

Occupation Proportion of rural population

Agriculture 50

Agriculture Labour 27

Business 10

Non- Agricultural Labour 9

Salary Earners 2

Not gainfully employed 2

Total 100 Source T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.9

54

For a vast majority of rural population the main occupation is

agriculture and allied activities. So the disposable income in the

hands of rural people is very much conditioned by the status of

agriculture and other allied activities.

Fig. 3.2 - Occupational pattern of rural households in India

50

27

10

9 2 2

Agriculture Agriculture Labour BusinessNon- Agricultural Labour Salary Earners Not gainfully employed

The estimated number of rural households during 1999-2000

was 137.1 million out of which 55.1 million were Rural Labour

Households (RLHS) and 44.2 million were Agricultural Labour

Households (ALH) . The Occupational pattern reflects a pattern that

majority of the members were without occupation. I.e. 2.69 persons

out of the average household size of 4.67 persons at all India level,

1.44 were engaged in agricultural labour, 0.30 non agricultural labour

and 0.24 in other occupations.

Source of Income Generation

Income generation and occupational patterns are closely

related. The sources of income indicate the nature of stability and

seasonality in income generation. Table 3.5 indicates the sources of

income of rural people.

55

Table 3.5 Source of Income Generation

SLNo Source of income Proportion to total

1 Agriculture 59

2 Agricultural wages 16

3 Business 9

4 Non agriculture wages 7

5 Salaries 3

6 NRI’s 2

7 Others 4

8 Total 100

Source T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.10

Seventy per cent of income generation in rural areas is from agriculture

and agriculture related activities. It indicates that the development of rural

markets to a large extent depends upon the progress of agriculture. Further it

may also be noted that the income earned by rural people will be seasonal in

nature thereby the demand for goods and services also

Per capita National Income

The per capita real income, i.e., per capita net national product at

factor cost at constant (1993-94) prices, as per the quick estimates for 2003-

04 turns out to be Rs.11,799 as against the revised estimates of Rs.11013 for

2002-03. This indicates a growth of per capita real income of about 7.1

percent during 2003-04. At current prices, the per capita income is seen to

have grown by about 10.2 percent during the year from Rs.19040 (revised

estimate) in 2002-03 to Rs.20989 (quick estimate) in 2003-04. The per capita

real income for 2004-05, based on the Advance Estimate is Rs.12414

showing a rise of 5.2 percent over the previous year3.

Consumption expenditure

The monthly per capita of consumption expenditure is also an indicator

to marketers to market their products and services in the rural markets. The

56

purchasing power is a very important indicator to decide upon the range of

products and price affordable to the rural consumers. Table 3.6 gives the

details of distribution of persons over 12 monthly per capita consumer

expenditure (MPCE) classes of rural section on the basis of NSS survey 59th

round (2003)

Table 3.6 1000 distribution of persons in rural sector over MPCE year 2002

Monthly per capita Expenditure Classes

(000-300) (300-615) (615-950) >950

Major States

Persons (%) Persons (%) Persons (%) Persons (%)

Average MPCE (Rs)

Andhrapradesh 112 11.2 590 59.0 210 21.0 87 8.7 575

Assam 54 5.4 681 68.1 246 24.6 19 1.9 532

Bihar 198 19.8 699 69.9 90 9.0 13 1.3 424

Gujarat 110 11.0 549 54.9 241 24.1 100 10.0 590

Karnataka 116 11.6 676 67.6 154 15.4 53 5.3 513

Haryana 33 3.3 440 44.3 339 33.9 198 19.8 7.3

Kerala 20 2.0 349 34.9 331 33.1 300 30.0 881

Madya radesh 264 26.4 594 59.4 113 11.3 29 2.9 436

Maharashtra 116 11.6 605 60.5 218 21.8 61 6.1 545

Orissa 421 42.1 449 44.9 104 10.4 26 2.6 390

Punjab 10 1.0 657 65.7 697 69.7 236 23.6 788

Rajasthan 46 4.6 656 65.6 219 21.9 79 7.9 574

Tamil Nadu 131 13.1 590 59.0 186 18.6 93 9.3 542

Uttar Pradesh 166 16.6 649 64.9 141 14.1 44 4.4 486

West Bengal 120 12.0 693 69.3 151 15.1 36 3.6 493

All India 146 14.6 602 60.2 181 18.1 71 7.1 543

Source: State Planning Board (2005) 59th round of NSS, 2003. Economic Review p. 421

Table 3.6 shows that rural population is more concentrated in

lower levels of monthly per capita expenses class (MPCE) below Rs.

615 (74.8 percent). Inter state variations is substantial in the

distribution of the MPCE. At the all India level 14.6 percent lies in

the lowest expenditure day (000-300) and 7.1 percent lies under the

highest expenditure below 90. The average consumer expenditure

per person for the period of 30 days is given in table 3.7

57

Table 3.7 Average consumer expenditure per person for the period of 30 days

Rural Urban Year and round of NSS

Kerala India Kerala India

1970-71 25th 36.12 35.31 47.63 52.85

1972-73 26th 42.19 44.17 58.27 63.33

1977-78 32th 74.76 68.89 84.10 96.15

1983 38th 145.44 112.31 179.81 165.80

1987-88 43rd 211.47 158.10 266.81 249.93

1990-91 46th 261.85 202.12 369.36 317.75

1993-94 50th 390.4 281.60 493.5 457.70

1999-00 55th 765.71 486.00 932.0 855.00

2000-01 56th 841.31 494.91 1203.65 914.58

2002 58th 881.00 530.74 1266.64 1011.94

2003 Jan to Dec 981.00 554.0 1300.0 1022.0

Source: State Planning Board (2005) 59th round of NSS, 2003. Economic Review p. 425

Table 3.7 revealed that the average consumer expenditure of urban

and rural consumers showed an increasing trend. It can be also noticed that the

rural consumer expenditure is less than 50 of urban consumer expenditure.

3.4 RURAL SCENARIO IN KERALA – AN OVERVIEW

The state of Kerala, located in the south-west part of India, occupies

1.1 percent of India’s total area and 3.01 percent of India’s population.

Population density in Kerala is 8.9 percent per sq.km. Kerala’s population is

spread across the state and as such there are no big urban agglomerations.

Agriculture sector in Kerala contributes 12.68 per cent of the state income

and the rest is contributed by secondary and tertiary sectors. Moreover,

growth of real GDP originating from agriculture and allied activities in the

country also is showing a declining trend. This highlights that people of the

state depend more on other sectors than on agriculture. Ecology also plays

a role in the state by providing diversified national resource base enabling a

large degree of occupational diversification. Moreover the growth of service

sector is more prominent in Kerala than in the rest of the country. More than

an industrial state, Kerala is considered as a consumer state. The data with

respect to the major development indicators of Kerala are given in table 3.8.

58

Table 3.8 Development indicators of Kerala (2005)

Development Indicators Values

Total Population (percentage) 3.18

As percentage of India’s Population 3.1

Density of population (per square kilo meter) 819

Birth rate (per thousand) 17.2

Death rate ( per thousand) 6.4

Life expectation at Birth (percentage) 71

Infant Mortality Rate (per thousand) 13

Maternal Mortality Rate (per thousand) 0.87

Total Fertility rate (percentage) 1.7

Couple protection rate (percentage) 66

Percentage of old people 15

Rate of Literacy (persons) 90.92

Rate of Literacy (males) 94.2

Rate of Literacy (females) 87.86

HDI 0.638

Work participation rate 32.3

Unemployment rate (CDS) rural (Percentage) 21.7

Unemployment rate (CDS) urban (Percentage) 19.1

Educated unemployment rate (rural) (percentage) 25.3

Educated unemployment rate (urban) (percentage) 21.2

Sex ratio 1058

Number of emigrants from Kerala (2004) in lakhs 18.4

Remittances from emigrants (Rs.crores) 18465

Remittances as percent of NSDP 23.39

GSDP at current prices(2004 Rs.crores) 78933.13

GSDP at constant prices (2004 Rs.crores) 39736.13

Per capita income at current prices (Rs) 24053.0

Per capita income at constant prices (Rs) 12019 Source: Govt. of Kerala (2005), Selected indicators of development of Kerala and

India, Department of Economics and Statistics.

59

3.5 RURAL ENVIRONMENT IN KERALA

An over view of the economic Indicators and functional

characters of Kerala given in the succeeding sections will provide a

picture of existing rural environment in Kerala.

Population

The demographic trends in Kerala are far more positive in

several aspects. Kerala’s population as per census report 2001 was

318.39 lakhs with a decadal growth of 9.42 percent only. In absolute

terms, Kerala’s population has increased over the years which show

the vast potential of rural markets in Kerala.

Table 3.9 Population in Kerala State

Census ears

Kerala

Population( in lakhs) Decadal rowth rate

Rural Urban Total

1901 59.4(92.96) 4.5(7.04) 63.9 -

1911 66.2(92.59) 5.3(7.41) 71.5 -

1921 71.2(91.28) 6.8(8.7) 78 9.16

1931 85.9(90.32) 9.2(9.67) 95.1 21.85

1941 98.3(89.12) 12(10.88) 110.3 16.04

1951 117.2(86.49) 18.3(13.51) 135.5 22.82

1961 143.5(84.91) 25.5(15.09) 169.0 24.76

1971 178.8(83.75) 34.7(16.25) 213.5 26.69

1981 206.8(81.26) 47.7(18.74) 254.5 19.24

1991 214.1(73.60) 76.8(26.40) 290.9 14.32

2001 237.7(74.03) 82.7(25.97) 318.4 9.42

Figures in brackets indicate percentage. Source: Various Census Reports

60

Fig. 3.3 – Rural Population in Kerala State in 1901 to 2001

(in lakhs)

0

50

100

150

200

250

1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001

Year

Popu

latio

n in

Lak

hs

The population growth rate, sex ratio and density of

population of the state is given in Table 3.10

Table 3.10 Population growth rate, sex ratio and density in Kerala

Year Annual Growth

Rate (percent )

Sex Ratio

(females/1000’s)

Density

(per.sq.km)

1961 - 1022 435

1971 2.33 1016 549

1981 1.76 1032 654

1991 1.31 1036 749

2001 0.93 1058 819

Source: Various Census of India

Table 3.10 revealed that in Kerala, female out numbered males

which is contrary to all India pattern. With respect to the density of

population, Kerala’s population density is 60 percent more than the all

India average.

61

Literacy rate in Kerala

Literacy as a qualitative attribute of the population is one of

most important indicators of socio economic and political development

of a society. The national literacy rate is 65.38 percent (census 2001)

as against 52.21 per cent in 1991.The literacy rate of Kerala (90.92

percent) is well above the national average and highest among the

Indian states. Regional and gender disparities in literacy rate are also

minimum in Kerala.

Table 3.11 Proportion of Literate persons in Kerala

(percentage to total)

Year Kerala India Kerala India Kerala India

persons males females

1981 81.6 43.6 87.7 56.4 75.7 29.8

1991 89.8 52.2 93.6 64.1 86.1 37.3

2001 90.9 65.2 94.2 75.6 87.9 54.0 Source: Centre for Development Studies, (2005), Human development report,

CDS,Trivandrum

3.5.3 Unemployment in Kerala

Table 3.17 reveals that the unemployment rates for the

educated (15 years and above).

Table 3.12 The level of unemployment in Kerala (Percentage)

Kerala All India

1993-94 1999-00 1993-94 1999-00

Rural male 15.6 11.2 6.5 5.6

Rural female 32.3 36.7 15.0 14.6

Urban male 11.2 7.4 6.0 6.2

Urban female 34.9 34.2 18.2 14.2 Source: Centre for Development Studies, (2005), Human development report,

CDS,Trivandrum

62

Table 3.12 reveals that the unemployment among women is two to

three times higher than among men. While educated unemployment

has declined for all men in the 1990’s, it has increased for women

particularly in rural areas. In urban areas where it is the highest,

female educated unemployment is 34 percent in contrast to 7 percent

for men.

Per capita State Income Per capita income acts as an indicator of the standard of

living of the people. Table 3.13 depicts the position of state per capita

income at current earned constant prices.

Table 3.13 State Per capita Income

Years at current prices at constant prices 1993-94 7938 7988

7539 (-5.3)

8516 (6.2) 1994-95

11469 (34.2)

5748 (-48.0) 1995-96

13050 (12.0)

8987 (36.0) 1996-97

14231 9079 (1.0) 1997-98

(8.2)

16062 (11.3)

9371 (3.1) 1999-2000

18262 (12.0)

9678 (3.1) 2000-01

17978 (-1.6)

10754 (10.0) 2002-02

22776 (21.0)

11605 (7.3) 2002-03

24492 (7)

12328 (5.9) 2003-04

27048 (9.3)

13321 (7.5) 2004-05

Parenthesis indicates growth rate percentage. Source: Department of Economics and Statistics (2005). Economic Review, State Planning Board, p.7

63

Fig. 3.4 – State Per capita income at Constant prices

0

2000

4000

6000

8000

10000

12000

14000

1993

-

94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-200

0

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

State’s per capita income at current prices increased from

Rs.24492 in 2003-04 to Rs.27048 in 2004-05, registering a growth

rate of 10.4 percent compared to the growth rate of 7.5 percent during

2003-04. The per capita state income at constant prices (1993-94)

during 2004-05 was Rs.13321 as against Rs.12328 during 2003-04.

The per capita state income is higher than the per capita national

income.

3.5.2 State Agricultural Income

The sources of income generated in rural areas are very

important to know the rural purchase behaviour. The trends in

agricultural income in Kerala for the last 8 years are shown in table

3.14.

64

Table 3.14 State Agricultural Income

Year Agriculture Income (unit)

Rate of charge previous year

contribute state income (unit)

1993-94 6256 - 26.23

1994-95 6897 1.25 26.62

1995-96 6947 0.72 25.78

1996-97 7115 2.42 25.39

1997-98 6777 -4.75 23.67

1998-99 690 1.81 22.52

1999-00 7017 1.7 21.45

2000-01 5448 -22.36 16.23

2001-02 5312 -2.50 15.39

2002-03 5380 1.5 14.53

2003-04 5165 1.8 13

2004-05 5586 1.7 12.68 Source: Directorate of Economics and Statistics,(2005) Economic Review, State Planning Board p. 51-52

Fig. 3.5 – State Agricultural Income

6256 68

97

6947

7115

6777

690

7017

5448

5312

5380

5165 55

86

010002000300040005000600070008000

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

Year

Agr

icul

ture

Inco

me

The table 3.14 indicates that the contribution of agriculture to

state income has been on the decline. The state’s share has declined

from 26.23 per cent (1993-94) to 12.58 (2004).This implies that the

65

dependence on agriculture is declining from year to year which will in

turn affects the pattern of income generation and consequently the

consumption pattern.

Income Poverty in Kerala Kerala has made substantial progress in reducing the

incidence of both rural and urban poverty. Between 1957-58 and

1993-94, the head count index of poverty in Kerala declined at an

average annual rate of 24 percent, the maximum achieved among 15

major Indian states. (World Bank 1997:98)

Table 3.15 Head Count Index of Poverty in Kerala and India

Kerala Year Total India

Rural Urban

1973-74 59.19 62.74 59.79 54.88

1977-78 51.48 55.52 52.22 51.32

1983-84 39.03 45.68 40.42 44.48

1987-88 29.10 40.33 31.79 38.86

1993-94 25.73 24.55 25.43 35.97

1999-00 9.40 9.40 12.72 26.30

Source: Centre for Development Studies, 2005 Human Development Report, Centre for Development Studies, Trivandrum

Table 3.15 shows that till 1973-74, the incidence of poverty in

Kerala, both rural and urban, was higher compared to that in the rest

of the country. However after 1983-84, the incidence of poverty in

Kerala dropped below the national average. This was possible

because both rural and urban poverty in Kerala declined steadily

throughout the last four decades. Table 3.15 also indicated the head

count index of rural Kerala is much lower than urban Kerala.

Consumer Expenditure in Kerala

Per capita consumer expenditure is a major indicator of development

of a state. Though at all India level rural population is more concentrated in

lower levels on monthly per capita of consumer expenditure MPCE classes, in

Kerala percent of population in the lowest expenditure day (1000-3000) is only

2 percent as against 1.6 percent at all India level. Further it can be noticed

66

from table 3.7 that average consumer expenditure of rural Kerala is 40 per

cent higher than the rural India, i.e., 981 and 554 respectively in 2003.

Table 3.16 Proportions of consumer expenditure on food and non food items

Average Consumer Expenditure

1980-81 to 1990-91 1990-91 to 1999-2000 (in Rs.)

Period 2 / Period 1 (percent change)

Units (in Rs.)

Net State Domestic Product

Food 739.0 813.9 10.1

Non-food 513.4 847.1 64.9

Sub-total 1252.5 1661.0 32.6

Remittances

Food 28.1 356.1 1167.3

Non-food 19.8 342.1 1628.7

Sub-total 48.4 698.2 1342.6 Source: NSSO: 1983; 1993-94; and 1999-00 Rounds.

The structural shift in consumption, as brought out in Table

3.16, indicates that the main source of consumer demand was for non

–food items in the 1990’s. While total demand for food increased by

56 percent in the second period, the demand for consumer durables

more than doubled. It can be seen that the contribution of remittances

to consumer durables led growth in the 1990’s was 17 times more

than that in the first period. It is in this context the reinforcing

contribution of economic reforms had its significant impact. The

unregulated waves of the reforms made it possible to release pent up

demand in the case of a number of goods and services hitherto

unavailable. Thus, there was building up of an effective demand

backed by increased income in the economy for certain commodities

which remained unrealised in the face of substantial supply

constraints. In short, the role of emigration and remittances was to

remove the effective demand constraint in a developing economy,

while the reforms removing the supply constraints.

67

The above discussions substantiate the potential for rural

markets. The nature, pattern and structure of rural markets are

different from urban markets.

3.6 RURAL AREAS AND RURAL MARKETS

The transformation of rural markets in the country has

developed well with the improvement in monetization and techniques

of exchange. High risk and low profit margin were the twin conditions

of trade in rural areas during the colonial and pre colonial period,

which has gradually developed after world wars. In fact the use of the

term rural marketing is found in the reports of the sub-committee set

up in 1957 by the National Planning Committee. The committee mainly

focused the marketing for rural farm produce specially cash crops.

The process of exchange of agricultural commodities dates

long back with the beginning of human civilization. It has developed

gradually with the span of changing behavioral dimensions of the

settled and nomadic habitants through various sledges like gift

exchanges, barter deed, easy coinage and monetised exchanges. The

last stage may be the stage of commercialization. It is evident that the

commercialization of agriculture began with the right of property by

making land as an individual asset under civilization during the British

Colonalization in India which instilled the seeds of capitalist

entrepreneurship in agriculture. Further the composition of a heavy

revenue demand to be paid before harvest resulted in imperative need

to rise crops which in turn in distress sale.

3.7 DOMAIN OF RURAL MARKETING

Agriculture is the major occupation and income source of rural people

and rural markets were mainly agriculture produce markets. The advent of

commercial and market oriented farming, with the help of modern agricultural

technology, necessitated the use of manufactured inputs like fertilizers,

pesticides High Yielding Varieties of seeds etc. Mechanization of farming also

necessitated the demand for manufactured inputs like tractors, threshers,

68

winnowers etc. Thus the term rural marketing slightly widened to include the

agricultural inputs also. Later, the cottage and village industries also included

under the purview of rural markets. With the changing scenario of rural area

markets due to the increased income and other economic developments, the

demand for consumables and consumer durables and services increased

among rural folk. Hence, the scope of rural marketing further widened and

included the marketing of consumables, consumer durables and services

also. Considering the undergoing changes in the definition of rural marketing,

T.P Gopala Swami opined that rural marketing includes the flow of goods and

services from urban to rural and vice versa. In addition the flow of goods and

services within the rural areas also form a part of rural marketing.5

Thus the domain of rural marketing includes flow of goods and

services from rural to rural (e.g. bamboo baskets, ropes, small

agricultural tools, pad locks, aluminium utensils etc.), urban to rural

(eg. fertilizers, pesticides, seeds, tractors, branded consumable items,

consumer durables) and rural to urban transaction (i.e. agricultural

products like food grains oilseeds, cotton, sugarcane etc.)

Chart 1 - Domain of rural marketing

From/To Rural Urban

Urban 1. Consumables and Durable

Agricultural Inputs

No concerned

2. Consumables

3. Consumer Durables

Rural Rural Artisans Services and

Products

1. Agricultural and Allied

Production

2. Rural Artisans and

Rural Industry Products

Source T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.3

3.8 STRUCTURE OF RURAL MARKETS

Rural marketing is not an independent entity by itself. In fact,

there are sociological and behavioural factors which affect the

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economy of rural markets. Differentiation with regard to nature and

structure of villages and their socio economic characteristics restrict

treating the whole rural India as one. So the rural sector is dissected

into three development stages, primitive, developing and urban

analogues. Consumption characteristics and consumption behaviour

of consumers also undergo changes. Following table indicates various

aspects of consumer behavior in the three village development

stages.

Chart 2 - Aspect of consumer behaviour in the three village development

stage

Primitive stage Developing stage Urban Analogue stage

Low level of subsistence consumption orientation

Consumption orientation change subsistence

Consumption orientation influenced by high urban consumption value

Low knowledge of consumer goods

Some knowledge of consumer goods

Knowledge of consumer goods high

No first general buyers First generation buyers exist

Proportion of first generation buyer high

Low motivation to look for new consumer products. Low purchase aspiration for new consumer products

Purchase aspiration change and positive to new consumer goods and motivation improves vis- a vis purchase

Purchase aspiration positive to new products and motivation to purchase influences by retailers

Product utility perceived as illusory than high

Real product utility perception improves with knowledge

Real product utility perception is high

Negative valence of consumer product high

Valence of consumer products positive

Valence of consumer product similar to urban consumer

Caste head as the reference person

Influence of urban consumers

Urban consumers as reference person

Source: Das Mukunda V. (1986).

Rural Marketing Research in India: Some Aspects of Environmental influences on Respondents Bias : Paper presented at 1986. Academy of Marketing Science Annual Conference, California.

70

In addition to the changes in their consumer behavior in different

stages, rural people, also identify different market places for purchase of

different products or services.

3.9 MAGNITUDE OF RURAL MARKETS

The popular image of rural consumer is one who has limited

educational background, is exposed to limited products and brands, choosing

price over quality and is influenced by Word of mouth communication. But due

to the changes that took place in the economy and thereby in rural areas in the

avenues of investment, increased income, increased number of emigrants and

foreign remittance, change in the life style, arrivals of new products of different

brands both national and international, advancement of communication facilities

etc., changed the popular image towards the rural consumers. This shift can be

noticed from the increased demand for consumer durables, non-durables and

fast moving consumer goods in rural areas.

As is evident from National Council for Applied Economics

Research (1998) report the purchase and use of certain durables by

consumers in rural areas is more than the consumers in urban areas.

The durables for which purchase and use by consumers in rural areas

exceed those in urban areas are as follows (NCAER, 1998):

• Sewing machines;

• Radio/transistors;

• Wristwatches;

• Black and white television sets;

• Cassette recorders;

• Bicycles;

• Table fans;

• Pressure cookers;

In the case of consumer non durables, there are at least six

products where the rural market has a larger share than the urban

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market and table 3.17 shows the range of products as per 1999 data

(latest data are not available).

Table 3.17 Rural Market Share of Consumption in India

Non durable Product Share of Rural Share of urban

Analgesic tablets 45.7 54.3

Batteries 56.2 43.8

Blues 52.3 47.7

Coconut oil 41.6 58.4

Iodised salt 51.4 48.6

Safety razor blades 54.1 45.9

Tea 51.3 48.7

Toilet soaps 41.9 58.1

Washing cakes/bars 54.6 45.4

Washing powders/liquids 46.4 53.6

Source: Business world 7-21, April 1999.

Table 3.18 Fast Moving Consumer Goods Penetration in India (per cent)

FMCG Penetration Category Rural Urban

Analgesics/cold/ethical tablets 27.9 72.1

Batteries 21.3 78.7

Bulbs 29.9 70.1

Edible oils 84.7 15.3

Hair wash products 39.4 60.6

Iodized salt 61.5 38.5

Safety razor blades 45.4 54.6

Tea 79.1 20.9

Toilet soaps 88.3 11.7

Toothpowders 22.8 77.2

Toothpaste 33.1 66.9

Washing cakes/bars 87.5 12.5

Washing powders/liquids 70.3 29.7

Source: Business World, April 1999

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Table 3.18 revealed that washing cake, toilet soap, tea and washing

powder are the mostly penetrated fast moving consumer goods in rural areas

and penetration rate for these goods area higher than the urban areas.

National Sample Survey Organisation Survey (2002) revealed that

in rural areas, the audio- visual media, television appears to substitute the

radio / tape recorder as the standard of living improved, despite that the radio

tape recorder have become cheaper than 10 years ago. It is also revealed

that only 0.6 percent of rural households possess a personal computer and

that the internet facility is practically non existent in such households. Only 5.3

percent of rural households had one or more fixed telephones and 0.9 percent

has cell phones. These facts reveal the scope for further expansion and

potential of these products in rural areas.

3.10 MARKET PLACES OF THE RURAL CONSUMERS.

A typical village has clean identification of their places of requirement.

The first point of contract of rural consumer is the village shop from where he

normally purchases daily used items like, tea, kerosene, cigarettes,

provisions, rice etc. In most of the cases they maintain a credit account and

few cases barter also. Next level in the hierarchy is shandies, hats and

jathras. These markets functioning in a shandi is like a mini super bazaar. A

wide range of goods and even services are available in these places. They

also provide an opportunity to sell and purchase small quantities, local

agricultural and poultry products like vegetables grains, sheep or goat,

chicken etc. Jathras on the other hand, are markets held over a period of a

week to one month. Normally these are associated with some important

religious festivals

The next markets place in the hierarchy is the primary wholesale

assembling markets which is also sometimes called as secondary wholesale

assembling markets or terminal markets. Normally rural consumers will

purchase the items like fertilizers, pesticides, seeds etc. and also consumer

durable items. These are the places where they sell their commodities as

73

soon as harvest is over. Rural consumers also make occasional visits to cities

or metros or head quarter for any legally related issues.

The Hierarchy of market places identified by rural consumers has an

important implication to marketers, with regard to distribution, management

and arrangement. While rural consumers might purchase consumable items

at the local village shop or shandies, they will always prefer to purchase

consumer durable items from the towns or district head quarters, where

agricultural produce markets are located. Therefore, while appointing dealers,

buying shelf space, the purchase habits of rural consumers have to be born in

mind.

3.11 ISSUES OF RURAL MARKETING IN INDIA

Rural markets with substantial improvement in purchasing

power, increasing brand conscious, changing consumption pattern

and rapid spread of communication net work offers vast untapped

potential. It should also be recognized that it is not that easy to

operate in rural markets. Because of several attendant problems and

inherent characteristics with in the rural markets, rural marketing has

become a time consuming affair and requires considerable investment

in terms of availing appropriate strategies with a view to tackle the

problems. The major problems of rural markets are as follows:

Rural Population

Underdeveloped people and under developed markets are the

major barriers in rural markets. Though agricultural technology has

tried to develop the people and market in rural areas, the impact of

rural technology is not felt uniform through out the county. Therefore

wealth distribution in rural India is uneven and the top 13 percent of

the farmers land holding account for 57 percent of cultivated area.

Data show that the top 10 percent of rural population accounts for

about 37 percent of the expenditure on consumer goods, inference is

that the potential market is at the top of the spectrum. Low density of

population and inaccessibility make the problem of serving rural areas

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individually difficult and often uneconomical. Studies conducted by the

Marketing Research Department at industrial level, showed that about

90 percent of farmers visited the nearest town at least once in a

month to sell their product and purchase their requirements. In other

words, the towns with large agricultural hinter lands become the entry

into the local market. Further a vast majority of rural people are

tradition bound and belief in age old customs, traditions habits, taboos

and practices.

Lack of physical communication facilities

The attraction of a market depends not only on its potential but also

on its accessibility. A market cannot be exploited as a case of sour grapes.

Rural markets in India lack suitable physical communication to facilitate

and to attract the Multi National Companies. Nearly 50 percent of the

villages in the country do not have all weather roads. Therefore physical

communication / distribution to these villages is highly expensive. Even

today, most villages in the eastern part of the country are inaccessible

during monsoon season. Hence the distribution in rural areas becomes

expensive and sometimes not viable also.

Uneven Distribution & Vastness of Villages

The type of distribution of population warrants appropriate

strategies to decide the extent of coverage of rural markets. Census report

2001 shows that there are 638365 villages in our country. Out of these 17.9

percent of villages have only less than 2000 people and only 1.8 percent

having more than 5000 to 10000 people and only 6 percent is having more

than 10000 people. This shows the vastness of rural population which

indicates the difficulties in reaching rural mass.

Low Per Capita Income

The income level of the people has direct impact on the rural

consumers off take of product inventory levels, consumption pattern,

frequency of purchase etc. Although 33 to 35 percent of the GDP is

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generated in rural areas it is shared by 74 per cent (Inference from

Economic Review 2005) of the population.6 Hence the per capita

income of rural people is low compared to urban counter parts. Apart

from this income is unevenly distributed also. Therefore the marketing

men should identify appropriate consumer segments with different

levels of income while evolving rural marketing strategies.

Low Level of literacy

The rural literacy ratio is low compared to urban areas. As per

Census 2001, literacy rate of rural areas is 44 percent, where as the

figure is 73 percent in the case of urban population. Print media

become ineffective since its reach is poor because of low level of

literacy. The dependence should be more on cinema, radio and

television. However it should be noted that, the reach of TV in rural

areas is very less and advertisement through this media is very

expensive also.

Hierarchy of Market

Rural markets exist in a hierarchy manner. As most of the

rural people are agriculturists their pattern of income generation is

also different. They identify market places for different items of their

requirements (see Chart 3). Therefore it is very difficult to adapt a

uniform distribution pattern for all products and for all consumers.

Thus depending upon the purchase habits of rural population the

distribution net work of different commodities has to be different.

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Chart 3 - Hierarchy of Markets for rural Consumers

State capitals, cities and metro Legal matters and casual visits

Terminal markets Fertilizers, pesticides, seeds, durables like cycles, mopeds, sewing machines, jewellery, dry battery cells, radios, cosmetics, electrical goods, and agricultural finance, etc.

Secondary wholesale assembling markets

Primary wholesale assembling markets

Shandies, hats and jathras Cloth, cosmetics, soaps services, kitchen equipments, agricultural tools, bamboo baskets, etc.

Village shop Match boxes, cigarettes, tea, kerosene, edible oils, salt etc.

Source T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.3

Seasonal Demand Pattern

Since 75 percent of rural income is generated through agricultural

operations which are seasonal, the demand pattern is also seasonal.

For instance, the demand for fertilizers will be high during kharif and

rabi seasons and for consumables and consumer durables during

harvest season. During the festival season also the demand for these

items will be high. Hence the distribution net work in rural areas

should be tuned to meet the seasonal demand of the rural consumers.

In addition to all these, the rural markets are mainly agricultural

markets which faced with all problems inherent in the agricultural

marketing system also viz: - low price for the agricultural product, non

availability of storage facilities, distress sale due to indebtedness and

social obligation, high marketing cost, high rate of commission agents,

lack of co-operation and regulated market etc. are considered as

barriers in developing rural markets. Thus the vast cultural diversity

and vastly varying rural demographic / poor infrastructure be it

inadequate roads and high ways or the availability of telephones and

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electricity / low income levels and low level of literacy often tend to

lower the presence of corporate in the rural markets.

List of References

1. Census of India 2001

2. Ibid.P.10

3. State Planning Board (2006) Economic Review, Govt. of Kerala, Thiruvananthapuram Feb. 2006

4. Census of India 2001

5. T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.3

6. OP. cit.3

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