Indian Rural Market: A Brief Profile

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Learning objectives
To understand demographic profile of rural India
Be aware of different poverty alleviation and

developmental programmes of government in the rural

areas
Analyze the rural consumption and spending patterns

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Learning objectives
Draw an interrelationship between agriculture, rural

income and consumption patterns

Understand the electricity infrastructure availability

across rural India

Comprehend the nature and characteristic of rural

market

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Rural India: A Brief Profile

75% of Indias and 12.2% of worlds population lives in 6,

38,365 villages of India spread over 32 lakh square km.

90% of rural population is concentrated in the villages

with population less than 2000.

Comprises of 13.5 crore households, constituting 72%

of total households in India with 48 crore adult

individuals.
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Rural India: A Brief Profile

Rural is not homogeneous across the country.

Variations in exposure to urban centers and extent of

development in a region have resulted in tremendous
heterogeneity.

The consumers willingness to accept innovation varies

significantly from one rural market segment to another.

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Rural Income Distribution

Rural India is generating more than half of

national income.
41% of Indian middle class homes and 58% of

disposable income exist in rural India.

Income contribution of 55.6% to the national

income by rural population of 74.6 crore is

higher than urban Indias with 25.4 crore people
contributing 44.6%.
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Rural Income Distribution

Per capita income turns out to be significantly lower in

rural areas because of the large population base. Study by

NCAER revealed that annual household income for rural
areas in 2002 was Rs.56,630 as compared to Rs.1, 02,963 in
urban areas.
Rural accounts for 92 lakh middle-income households,

having annual income in range of Rs.30,001 to Rs.1,25,000

and urban like consumption.
If there are 1.0 crore high and upper-middle income

households in urban India then there are 76 lakh in rural

India.
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Income in Rural and Urban Areas: A

Comparative Analysis
As per NCAER, in 2002 per capita annual income in rural

areas was Rs.9, 481 whereas in urban areas it was Rs.19,

407 and the national average was Rs.12, 128.

Rural incomes Compounded Annual Growth Rate (CAGR)

between 1970-71 and 1993-94 was 10.95% compared to

10.74% in urban areas. (ETIG 2002-03)

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Income in Rural and Urban Areas: A

Comparative Analysis
Rural and urban incomes were more evenly distributed in

1994-95 compared to 1975-76, but all India inequality has

marginally increased. The share of rural income in 1975-76
was 66.8%. According to the MIMAP survey of 1975-76, the
urban household earned an income on an average 1.82 times
the rural households, while the MIMAP survey in 1996
indicated the gap has widened and increased to 2.1 times.
(Pradhan, 2000)

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Income in Rural and Urban Areas: A

Comparative Analysis
The Gini Index, which is a standard measure of

income distribution among individuals or

households in a country, shows that inequality had
risen from 30 in 1991 to 38 in 1997, owing to the wide
disparity in economic growth and distribution
between rural and urban India.

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Income in Rural and Urban Areas: A

Comparative Analysis
Only 3.8% of the rural households, with 2.8% of rural

population reported an income of more than Rs.1200 per

capita per month while 28.5% of households with 24% of
population reported similar income in the urban areas.
Per capita income in rural India is only about half of urban

Indias, the status of disposable income is a roughly the

same with the rural consumer paying virtually nothing for
health, education, housing and food.

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Income Distribution in Rural Areas

Rural is not as poor as it is widely perceived to be. If there

are large number of poor people in villages than good

number of rich are also present.
Between 1982 and 1999 per capita village incomes

increased by 70%, population increased by 47% and the

share of non-farm income in total village income rose to
almost 50%.
In 1971, 82% of men in the 25 to 44 age group in rural

areas reported their primary activity was either farming or

agricultural labour, this figure dropped to 73% in 1982 and
to 53% in 1999.
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Income Distribution in Rural Areas

Between 1971 and 1982 the proportion of prime working age men

earning income outside the agricultural sector rose from 10% to

16%, by 1999 this figure had more than doubled to 36%. As this
ratio increases, the cyclical and unpredictable nature of Indian
agriculture may have lesser impact on rural incomes and
consumption than before.
Comparison of findings of MIMAP survey in 1994-95 with similar

survey conducted by NCAER in 1975-76 revealed a significant

decrease in share of income from farm sector from 37.8% to 20.5%,
increase in share of income from salaries from 22.7% to 33.6% and
other incomes from 7.2% to 12.4% during the two decades (1975-76
to 1994-95).
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Magnitude of Poverty in Rural India

32.5 crore people lived below poverty line (BPL) in

India, which is around one third of the population.

Incidence of poverty in rural areas at 39.4% is much

higher than 28.4% in urban areas.

About 80% of poor lived in rural areas in 1995, but that

does not mean rural is only poor. More than 60% of rural
population is above poverty line and in actual terms it
comes out to be large number.

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Magnitude of Poverty in Rural India

Percentage of BPL families declined from 46% to 27%.

But, actual numbers remain almost same.

Figure of population BPL varies significantly from one

state to another. Orissa having 48% population below

poverty line is different from Punjab where it is just 6%
(Planning Commission, Govt. of India).
Therefore, far ranging generalities cannot be developed

on the basis of nationwide figure and regional

variations need to be taken into account while
developing any strategies for rural market.
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Poverty Alleviation Programmes and

Rural Development
Land reforms
Gram Sadak Yojna
Providing Urban Amenities in Rural Areas (PURA)
National Rural Employment Guarantee Act
Integrated Rural Development Programme (IRDP)
Jawahar Rozgar Yojna: largest rural poverty alleviation

programme through public works. It was launched in

1989 by merging National Rural Employment
Programme (NREP) and Rural Landless Guarantee
Programme (RLEGP).
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Rural Consumption
As per Francis Kanoi Marketing Planning Services, rural

market for FMCG was Rs.65,000 crore, for durables

Rs.5,000 crores, for tractors and Agri-inputs Rs.45,000
crore and for two and four wheelers Rs.8000 crore a total
of Rs.1,23,000 crores.

Not competing in rural market removes a company from

about half of necessity products market 1/3 of emerging

products and a 15% of lifestyle products in value terms.
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Rural Consumption
Per capita expenditure on education of the urban

households was 4.5 times that of rural, twice on health,

five times more on rent. Rural households hardly change
their house or go for vacation. They save only fraction of
money and spend the rest. And when there is growth in
income, the money goes straight into consumption.
Thus, the actual disposable income in a rural household
comes nearly to be the same of urban ones.
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Rural Consumption
There was three-fold increase in consumption of packaged goods

in rural areas (1984-89) and percentage of rural market in all Indian

market increased from 28 to 37%.
Rural FMCG market was worth Rs.44,000 crore in 1998 amounting

to over half of total Indian market and grew at an annual average

rate of over 12% between 1993-98.
The share of expenditure on food item is going down in rural areas.

In 1993-94, food accounted for 65% of average rural per capita

natural expenditure. By 1999-2000, it had come down to 62%. It is
not because of any fall in the real expenditure on food. In fact there
has been a sharp rise in the per capita real spending on non-food
items.
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Rural Consumption
Rural household spends Rs.3, 203 per year for FMCGs

that is Rs.267, per month and this figure excludes cereals,

pulses, vegetables and milk. This amount could vary
between Rs.365 and Rs.175 depending in the socioeconomic status of the household (IRS 1999). This seems
to be a small number but in the context of huge market
size of rural India it leads to huge numbers.
Rural telephone density has gone up by 300% in the last

10 years; every 1000 plus population is connected by STD.

During 1981 - 2001 number of pucca houses doubled from
22% to 41% and kuccha houses halved (41% to 23%).

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Literacy in Rural India

Rural literacy has improved from 36% to 59%, but a long

way to go.
There is increasing trend of public school education

even in rural areas, especially in progressive and

developed states like Punjab.
There are more literate people in rural India (16.5 crore)

then in urban India (16 crore) but, head of household

reported no formal education in 51% of rural
households and same was only in 16% of urban
households, while the all India level is 41%. The share
of income of these 41% of households was only 27.9%.
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Literacy in Rural India

More than 55% of head of households reported at least

secondary education in urban areas whereas figure was

15% in rural areas.

In about 26% households, head was a graduate or a

technical degree/diploma holder in urban areas, had

38.5% of income, while 2.3% of such households have
4% of income in rural areas.

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Electricity Availability in Rural India

56% of the households in the country had an electricity

connection in 2005. The majority of households not

having electricity are in the rural India.

Overall electricity connections, duration of power

availability, and power fluctuation in rural parts, needs

to be considered while designing the products for the
rural market.

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Electricity Availability in Rural India

There is a great deal of variation amongst states.

About 90% of houses in Punjab and Goa are

electrified, in Jharkhand it is 25%, whereas in Bihar, at
the bottom it is 10.3%. In states like Haryana, Jammu
& Kashmir, Gujarat, Karnataka, Tamil Nadu,
Maharashtra, Kerala and Madhya Pradesh more than
70% households are electrified.

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Development Indicators in Rural India

India was ranked 138th as per Human Development

Report (HDR) 1997.

Indias infant mortality rate of 75 per thousand live

births is one of the highest in the world.

Access to potable water, health care, sanitation and

shelter are a far cry, particularly in the rural sector.

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Development Indicators in Rural India

Kerala has highest HDI, 80% higher than national

average, although its per capita income is less then

17states.

India is at 103rd rank in 123 countries in Gender

Disparity Index (GDI) with a value of 0.41. But, Keralas

GDI value of 0.597 is at par with Mauritius, which is
80th in the world and UPs GDI value of 0.31 match the
tail end countries.
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Characteristics of Rural Market

Large and Scattered market
Heterogeneous market
Significant %age of Income from agriculture
Lack of Infrastructure Facilities

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Summary: Points to Ponder

Rural is a highly heterogeneous and widely

scattered.
Rural is not as poor as it is perceived to be, it

contributes to more than half of the national income.

Rural market consumes about half of necessity

products, 1/3 of emerging products 15% of lifestyle

products in value terms.

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