Wednesday, April 25, 2007

Money makers eye India’s rural market!

Why are national and multi-national companies increasingly giving more and more emphasis on rural market of India? Are they trying to help the rural folk out of their miseries or just trying to churn out more and more money for themselves at the cost of the common people?Such questions are of paramount importance in the age of globalization and privatization when our own government is pushing forward the new economic policies and so called reforms under the tacit understanding or guidance of certain foreign forces. It has already resulted into a situation of great miseries for the common people due to steep price hike for essential commodities which have become beyond their reach. Now the government of India is telling the people that they cannot control the price rise and inflation. It is certainly a time for more distress and miseries for people and we have to think twice before we blindly believe and follow the new policies led by developed countries including USA and European countries. The worst part of all this phenomena is that the term globalisation is now in currency in India and is being tried to popularize more and more. The forces working day and night for this want us to believe that everything western, from simple way of life to policies and philosophy are the only refuse.The painful aspect of Indian’s life is that we, after the six decades of our Political independence and approximately one and half decade of our so-called new economic policy, are now ready to become mere consumers. The first phase of the economic reform has already been over, and now the market forces are simply trying to tap more and more customers for their products. Having tapped the Indian urban market, these players are now trying to woo the rural customers.These companies are not only expecting a big boom in the Indian rural market for the consumption of their products, but also eyeing on the productive capacity of rural India. The idea is that the potentially vast capacity of the rural productivity can fulfill the emerging requirements of the big and small towns.Even in the villages these market players are indirectly enforcing the villagers to adopt their style of living. Even today the needs of our rural people are small ones in their traditional lifestyle: food, fuel, water, roads etc. Lately, electricity, telephone and television percolated to the rural areas. Further, a rapid change is being shown through TV ads to entice villagers to become consumers for new products. Now communication, automobile, beverage and FMGC goods are being developed as major requirements in the rural India.In fact, the rural India is trying to reduce its dependency on agriculture, mainly because agriculture has been reduced to unprofitable or less profitable activity for the farmers. This situation has been systematically created through the policies of our own governments in collaboration with certain forces. Albeit, our leaders have always been projecting themselves as saviours of rural India and shedding crocodile’s tears for the farmers.At present, a little less than half of rural GDP is from non-agricultural activities. This is creating a different kind of rural market. The rural market is becoming closer in its mindset to the urban market. This is already happening in the more developed higher-income states.Here are some market figures of 2004 collected by NSSO which showed the changing consumption trends in Indian rural and urban market.Average monthly per capita consumer expenditure (average MPCE) was Rs.559 in rural India and Rs.1052 in urban India at 2004-05 prices.Out of every rupee spent in 2004-05 by the average rural Indian on consumption, 55 paise was spent on food. Of this, 18 paise was spent on cereals and cereal substitutes, 8 paise on milk and milk products, 6 paise on vegetables, 5 paise on edible oil, 5 paise on sugar, salt and spices, and 5 paise on beverages, refreshments and processed food.Out of every rupee spent in 2004-05 by the average urban Indian on consumption, 43 paise was spent on food. Of this, 10 paise was spent on cereals and cereal substitutes, 8 paise on milk and milk products, 6 paise on beverages, refreshments and processed food, and 4 paise on vegetables.In both rural and urban India, fuel and light took up 10% of total consumer expenditure while clothing, bedding and footwear took up 5%.Medical expenses formed 7% of total consumer expenditure in rural India and 5% in urban India.Educational expenses formed 3% of total consumer expenditure in rural India and 5% in urban India.Conveyance expenses formed 4% of total consumer expenditure in rural India and 7% in urban India.Average quantity of cereals consumed per person per month was 12.1 kg in rural areas and 9.9 kg in urban areas.Average value of cereals consumed per person per month was Rs.101 in rural India and Rs.106 in urban India.In rural areas of Haryana and Punjab, expenditure on cereals formed only 9% of total consumer expenditure. But in rural areas of West Bengal and Assam cereals contributed 23% or more to total consumer expenditure, and in rural areas of Orissa, Chhattisgarh, Jharkhand and Bihar, they formed 27-28% of consumer expenditure.In urban areas of Punjab and Haryana cereals took up 6-7% of the household (consumption) budget; in urban areas of Bihar and Orissa they took up 17%.Between 1972-73 and 2004-05, the share of food in total consumer expenditure has fallen from 73% to 55% in rural areas and from 64% to 42% in urban areas. The share of cereals has fallen from 41% of consumer expenditure to 18% in rural India and from 23% to 10% in urban India. The share of fuel and light in total consumer expenditure has risen from under 6% to 10% in both rural and urban areas. The share of clothing in total consumer expenditure has fallen from 7-8% to 4.5% in rural India and from 5-7% to 4% in urban India.Quantity of cereals consumed per person per month has declined between 1993-94 and 2004-05, that is, in the decade preceding the survey, from 13.4 kg to 12.1 kg in rural India and from 10.6 kg to 9.9 kg in urban India.This new trend of Indian rural market is making room for a new way of success for the market players. The producers are also ready to tap this market. Reliance, Walmart, and other private sector companies are working now to catch the market trend in retail sector. TATA is trying to cover the small car market in Indian rural areas. Honda too gears up for the small Indian car market. After a major success in South and Western India, Dairy industry is set to tackle new challenges in North Indian rural market too.

No comments: