Tuesday, March 18, 2014



While a variety of factors in this concern have brought about the big growth in the rural demand, a few of them are discussed as follows:

New income due to agricultural/rural development: The technological breakthrough, popularly known as the green revolution, which took place in Indian agriculture from the mid-1970s onwards, has added to the prosperity of rural India considerably. Moreover, in recent years, as part of the new farm policy, high support prices are offered for farm products. As a result, there is now more money in the hands of the owner-farmers in the rural areas. There have also been some concerted efforts towards rural development in general, besides agriculture development. This has generated new employment and new income and purchasing power among the rural people. The rural population can no longer be labeled en masse as a poverty-stricken lot.

The expectation revolution: The expectation revolution among the rural folks completes the picture. The 'rising expectations' of the rural people have greatly influenced the rural, market environment. It has enlarged the desire as well as awareness of the rural people; it has strengthened their motivation to work, earn and consume. The rise in income provides substance to the aspirations.

Season: Rural demand is more seasonal compared to urban demand. The pre-dominance of agriculture in the income pattern is one main reason for this. The relatively greater influence of marriages and festivals on the purchase pattern is another. Interestingly, marriages and festivals often coincide with the harvest. Besides being seasonal, rural demand is somewhat irregular as well. The pre-dominance of agriculture in the income pattern is again the main reason for this. Agriculture in many parts of India still depends on the vagaries of the monsoons. A variety of factors have rendered the rural market quite attractive to corporate in recent years.


The following factors are favoring the attraction towards rural market in India.

1.      The Growing Opportunity: The growing opportunity in the rural market is no doubt the prime factor. In the preceding section, we saw that rural demand has been growing rapidly and its composition has been changing for the better in recent years. The increased income/purchasing power of the rural consumer and the improved income distribution have enhanced rural demand for several products. Better access too many modern products brands have added to this growth.

2.      Heat of Competition in the Urban Market: The opportunity in the rural market becomes all the more rosier when the corporate see it in combination with the growing competition in the urban markets. The heat of competition in the urban market actually serves as the stronger driver behind the growing interest of corporate in the rural market. The fact that the rural market is still largely an untapped and virgin market and the fact that the early entrants can tap it without having to face intense competition as in the case of the urban market, makes the rural market all the more attractive to them. Corporate have been finding the going increasingly tough in the urban market, especially for products in respect of which penetration levels are already high. For example, penetration level for toothpaste in the urban market has now reached close to 80 per cent. In contrast, it is below 30 per cent in the rural market. Obviously, any substantial further growth in the product can come only from the rural market. Moreover, in the urban market, many consumers have been using particular toothpaste for quite some time and have settled down to the brand, its flavor and other characteristics. They cannot be expected to switch their brands very easily. In contrast, in rural areas, there are a lot of first-time users of toothpaste whom the companies can tap from the scratch. Toothpaste is but one example. Corporate find that the highly penetrated urban markets 'allow little room for volume growths for most of what are called 'necessity products' (toothpaste, bath soap, washing products, tea, etc.). Growth opportunity for many of the 'emerging products' (coffee, 'shampoo, biscuits, talcum powder, etc.) too is rather low in the urban market. The rural market thus becomes essential for companies with strong growth aspirations. Not competing in the rural market will keep them out of about half of the country's market for 'necessity' products and one-third of the market for 'emerging' products by value.