What is Rural?

According to the census of India village with clear surveyed boundaries not having a municipality, corporation or board, with density of population not more than 400sq.km and with at least 75 per cent of the male working population engaged in agriculture and allied activities would quality as rural. According to this definition, there are 6.38,000 villages in the country. Of these, only 0.5 cent has a population above 10,000 and 2 per cent have population between 5,000 and 10,000. Around 50 per cent has a population less than 200. Interestingly, for FMCG and consumer durable companies, any territory that has more than 20,000 and 50,000 population, respectively, is rural market. So, for them, it is not rural India which is rural. According to them, it is the class-II and III towns that are rural. According to the census of India 2001, there are more than 4,000 towns in the country. It has classified them into six categories-around 400 class-I towns with one lakh and above population (these are further classified into 35 metros and rest non-metros), 498 class-II towns with 50,000-99,999 population, 1,368 class-III towns with 20,000-50,000 population, 1,560 class-IV towns with 10,000-19,999 population. It is mainly the class-II and III towns that marketer's term as rural and that partly explains their enthusiasm about the so-called "immense potential" of rural India. Demographic details of Indian Rural Markets: • • • • • • • About 285 million live in urban India whereas 742 million reside in rural areas, constituting 72% of India's population resides in its 6, 27,000 villages. The number of middle income and high income households in rural Indian is expected to grow from 46 million to 59 million. Size of rural market is estimated to be 42 million households and rural market has been growing at five times the pace of the urban market. More government rural development initiates. Low literacy rate Increasing agricultural productivity leading to growth of rural disposable income. Lowering of difference between taste of urban and rural customers.

Rural Initiators "Going rural" the new marketing mantra-all corporate companies agreed that the rural market the key to survival in India. The real India lives in villages-6, 38,365 villages to be precise. This is where the fortunes of many of Indian biggest corporations are likely to be shaped. To expand the market by tapping the countryside, more and more MNC`s are foregoing into rural markets. Among those that have made some headway are HLL, Cocacola, LG Electronics, Britannia, Standard life, Philips, Colgate Palmolive, ITC and the foreigninvested telecom companies. Gone are the days when a rural consumer went to a nearby city to but branded Products and services`. Time was when only a select household consumed branded goods, be it tea (or) jeans. There were days when big companies flocked to rural markets to establish their brands. Today, rural markets are critical for every marketer-be it for a branded shampoo (or) an automobile. Time was when marketers thought van campaigns, cinema commercials and a few wall paintings would suffice to entice rural folks under their folds. Thanks to television, today a customer in a rural area is quite literate about myriad products that are on offer in the market place. An Indian farmer going through his daily chores wearing jeans may sound idiotic. Not for Arvind Mills, though. When it launched the Ruf & Tuf kits, it had created quite a sensation among the rural folks as well within few months of their launch. Rural Marketing-Challenges and Opportunities

The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc. The success of a brand in the Indian rural market is as unpredictable as rain. It has always been difficult to gauge the rural market. Many brands, which should have been successful, have failed miserably. More often than not, people attribute rural market success to luck. Therefore, marketers need to understand the social dynamics and attitude variations within each village though nationally it follows a consistent pattern.While the rural market certainly offers a big attraction to marketers, it would be naive to think that any company can easily enter the market and walk away with sizable share. Actually the market bristles with variety of problems. The main problems in rural marketing are: • • • Physical Distribution Channel Management Promotion and Marketing Communication

The problems of physical distribution and channel management adversely affect the service as well as the cost aspect. The existent market structure consists of primary rural market and retail sales outlet. The structure involves stock points in feeder towns to service these retail outlets at the village levels. But it becomes difficult maintaining the required service level in the delivery of the product at retail level. One of the ways could be using company delivery vans which can serve two purposes- it can take the products to the customers in every nook and corner of the market and it also enables the firm to establish direct contact with them and thereby facilitate sales promotion. However, only the bigwigs can adopt this channel. The companies with relatively fewer resources can go in for syndicated distribution where a tie-up between non-competitive marketers can be established to facilitate distribution. As a general rule, rural marketing involves more intensive personal selling efforts compared to urban marketing. Marketers need to understand the psyche of the rural consumers and then act accordingly. To effectively tap the rural market a brand must associate it with the same things the rural folks do. This can be done by utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals, celebrations, festivals, melas and other activities where they assemble. One very fine example can be quoted of Escorts where they focused on deeper penetration .In September-98 they established rural marketing sales. They did not rely on T.V or press advertisements rather concentrated on focused approach depending on geographical and market parameters like fares, melas etc. Looking at the 'kuchha' roads of village they positioned their mobike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punchline 'Jandar Sawari, Shandar Sawari'. Thus, they achieved whopping sales of 95000 vehicles annually. One more example, which can be quoted in this regard, is of HLL. A year back HLL started 'Operation Bharat' to tap the rural markets. Under this operation it passed out low–priced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million households. Thus looking at the challenges and the opportunities which rural markets offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage.

Rural Trends in India Tends indicates that the rural the rural markets are coming up in a way and growing twice as fast as the urban, witnessing a rise in sales of hitherto typical urban kitchen gadgets such as refrigerators, mixer-grinders and pressure cookers. According to a National Council for Applied Economics Research (NCAER), study, there are as many 'middle income and above' households in the rural areas as there are in the urban areas. There are almost twice as many 'low middle income' households in rural areas as in the urban areas. At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas. According to Mr.D.Shiva Kumar, Business Head (Hair), personal products division, Hindustan Lever Limited, the money available to spend on FMCG (Fast Moving Consumer Goods) products by urban India is Rs.49,500 crores as against is Rs.63,500 crores in rural India. As per NCAER projections, the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In Urban India, the same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be double that of urban India. Rural income levels are largely determined by the vagaries of monsoon and, hence, the demand there is not an easy horse to ride on. Apart from increasing the geographical width of their product distribution, the focus of corporate should be on the introduction of brands and develop strategies specific to rural consumers. Britannia industries launched Tiger Biscuits especially for the rural market. An important tool to reach out to the rural audience is through effective communication. A rural consumer is brand loyal and understands symbols better. This also makes it easy to sell look-alike. The rural audience has matured enough to understand the communication developed for the urban markets, especially with reference to FMCG products. Television has been a major effective communication system for rural mass and, as a result, companies should identify themselves with their advertisements. Advertisements touching the emotions of the rural folks, it is argued, could drive a quantum jump in sales.

Why do rural-urban linkages matter? Extracted from: DANIDA Workshop Papers: Improving the Urban Environment and Reducing Poverty; December 5, 2000; Copenhagen, Denmark. What is ‘urban’ and what is ‘rural’? The implications of administrative definitions The difference between urban centres and rural areas may seem so obvious that definitions should not be an issue. However, there can be major variations in the ways in which different nations define what is an urban centre. The criteria used include population size and density, and availability of services such as secondary schools, hospitals and banks. However, the combination of criteria applied can vary greatly. Even the population thresholds used can be

different: for many African nations it is 5,000 inhabitants, while for most Latin American and European nations it can be as low as 2,000 or 2,500 or even just a few hundreds inhabitants. This wide fluctuation in definitions has three important implications. • Official classifications should be treated with caution – for example, a large proportion of settlements classed as ‘rural’ in China and India would fall within the ‘urban’ category if they used the criteria and population thresholds adopted by many other countries. Given the size of the population of these two countries, this would significantly increase the overall proportion of urban residents in Asia and in the world. International comparisons are difficult, as they may look at settlements which, despite being classed in the same category, may be very different in both population size and infrastructure. In addition, the reliability of data on urbanization trends within one nation can be compromised by changes in the definition of urban centers over time. Public investment in services and infrastructure tends to concentrate on centers that are defined as urban. As a consequence, investment can bypass settlements not defined as urban even if these can, and often do, have an important ‘urban’ role in the development of the surrounding rural areas. Within national and regional urban systems, larger cities also tend to be favored with public investment over small and intermediate-sized urban centers, including those with important roles in supporting agricultural production, processing and marketing.

Outside the city boundaries: the peri-urban interface The physical boundaries of urban built-up areas often do not coincide with their administrative boundaries. The areas surrounding urban centers generally have an important role in providing food for urban consumers, with proximity lowering the costs of transport and storage. It is difficult to make generalizations on the nature of peri-urban areas, which depends on the combination of a number of factors including the economic and infrastructural base of the urban center, the region and the nation; the historical, social and cultural characteristics of the area, and its ecological and geographical features. Peri-urban areas around one center are also not necessarily homogenous: high- and middle-income residential developments may dominate one section, while others may host industrial estates and others provide cheap accommodation to low-income migrants in informal settlements. The peri-urban interface around larger or more prosperous urban centres is also the location where processes of urbanisation are at their most intense and where some of the most obvious environmental impacts of urbanisation are located. They are often characterised by:

Changes in land use: land markets are subject to competitive pressure as urban centres expand and speculation is frequent. Whether low-income groups such as small and marginal farmers or residents of informal settlements can benefit from these changes, or end up losing access to land, depends largely on land rights systems. Changing farming systems and patterns of labour force participation: because periurban agriculture can be highly profitable, small farmers may be squeezed out by larger farmers who can invest in agricultural intensification. As a consequence, wage agricultural labour often becomes more important than small-scale farming, attracting migrant workers. On the other hand, residents of peri-urban areas may benefit from employment opportunities in the city.

Changing demands for infrastructure and pressure on natural resource systems, with many rural dwellers’ access to resources having to compete with urban demand (for example, for water, fuelwood and land for non-agricultural uses) or affected by urbangenerated wastes.

Variations in the characteristics of peri-urban areas can be important. For example, in the growing number of extended metropolitan regions in Southeast Asia, agriculture, small-scale industry, industrial estates and suburban residential developments co-exist side by side. Availability and affordability of transport are essential for the intense movement of goods and the extreme mobility of the population. In other contexts, and especially in less industry-based economies such as many countries in sub-Saharan Africa, agriculture still prevails in peri-urban areas although often with significant shifts in land ownership and use. This is especially the case where smallholder productivity is low because of the increasing costs of inputs and limited credit availability. Other problems include poor access to urban markets due to a lack of roads and physical infrastructure and the tight control over access to the urban market-places by middlemen and large traders. Thus, despite proximity to urban consumers, small farmers may be easily squeezed out, especially as the value of land in peri-urban areas increases with the expansion of the built-up center. The extra-urban impact of urban activities: cities’ ecological footprints Most cities draw heavily on their surrounding regions for freshwater resources. Most urban wastes end up in the region surrounding the city, for example, solid wastes disposed of on periurban land sites (either official or illegal) and liquid wastes either piped or finding their way through run-offs into rivers, lakes or other water bodies close by. Peri-urban areas may also be affected by urban air pollution. Understanding rural-urban differences and rural-urban linkages There is a need for an understanding of development that • • Encompasses both rural and urban populations and the inter-connections between them; Acknowledges that where people live and work and other aspects of their local context influences the scale and nature of deprivation (whether they live or work in rural or urban areas); and Recognizes that there are typical ‘urban’ and ‘rural’ characteristics that cause or influence people’s livelihoods, although care is needed in making generalizations because of great diversity between different urban locations (and rural locations). Livelihoods and the rural-urban continuum RURAL >> ILivelihoods drawn from crop cultivation, livestock, forestry or fishing (i.e. key for livelihood is access to natural capital) Access to natural capital Rural-urban interface << URBAN Livelihoods drawn from labor markets within nonagricultural production or making/selling goods or services Greater reliance on house as an economic resource

as the key asset and basis for livelihood Access to land for housing and building materials not generally a problem More distant from government as regulator and provider of services Access to infrastructure and services limited (largely because of distance, low density and limited capacity to pay?) Fewer opportunities for earning cash; more for self-provisioning. Greater reliance on favorable weather conditions.

(space for production, access to income-earning opportunities; asset and income-earner for owners – including de facto owners) Access to land for housing very difficult; housing and land markets highly commercialized More vulnerable to ‘bad’ governance Access to infrastructure and services difficult for low-income groups because of high prices, illegal nature of their homes (for many) and poor governance Greater reliance on cash for access to food, water, sanitation, employment, garbage disposal.......

Urban characteristics in rural locations (e.g. prosperous tourist areas, mining areas, areas with high value crops and many local multiplier links, rural areas with diverse non-agricultural production and strong links to cities....)

Rural characteristics in urban location (urban agriculture, ‘village’ enclaves, access to land for housing through nonmonetary traditional forms.......)

The figure emphasizes some of the most ‘rural’ characteristics of people’s livelihoods in the column on the left and some of the most ‘urban’ characteristics in the column on the right. These should be regarded as two ends of a continuum with most urban and rural areas falling somewhere between these extremes. The text noted earlier the importance of non-farm income sources for many rural households (including remittances from family members working in urban areas) and the importance of agriculture and/or of rural links for many urban households (including urban centers with many residents who work seasonally in rural areas). For all the contrasts between ‘rural’ and ‘urban’ highlighted in the figure, there are many exceptions. It is also useful to see in the middle of the continuum between ‘rural’ characteristics and ‘urban’ characteristics a ‘rural-urban’ interface in which there are complex mixes of ‘rural’

and ‘urban’ characteristics. For instance, many of the areas around prosperous cities or on corridors linking cities have a multiplicity of non-farm enterprises and a considerable proportion of the economically active population that commute daily to the city or find work seasonally or temporarily in urban areas. Many rural areas also have tourist industries that have fundamentally changed employment structures and environmental pressures. Governing across and beyond the rural-urban boundary If well managed, the interactions between towns and countryside are the basis for a balanced regional development which is economically, socially and environmentally sustainable. Local development is increasingly associated with decentralisation processes, on the assumption that local government is ‘closer’ to citizens – meaning that it is both more accountable to them and that it has a better understanding of local needs and priorities. With regard to rural-urban linkages, local government can play an important role in facilitating positive interactions and limiting negative exchanges:

It is best placed for decision-making on physical transport and communication infrastructure; however, expenditure for infrastructure can be significant and well beyond the means of local government. Wider alliances, which increase access to financial resources, are therefore necessary. The management of natural resources and wastes is an important area of local government intervention. However, it often includes much wider areas than those administered by local authorities, and requires alliances with other local, regional, national and sometimes cross-border governments. National level policies also have an important role, for example, with respect to access to land and land ownership and titling in both rural and urban areas. Clearly, this is not the responsibility of local authorities but is nevertheless crucial for local development planning and practice.

In short, understanding rural-urban linkages matters because it provides the basis for measures that can improve both urban and rural livelihoods and environments. Ignoring them means that important opportunities will be lost, and in many cases it will also contribute to poor and marginal people’s hardship. There are urban initiatives that can reduce ecological damage to rural areas, and help support regional development. However, with a narrow urban-centric approach, such initiatives are unlikely to be given the priority they deserve.

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