The recently held CII Conference on Rural India was a wonderful stock taking on where Rural India stands as we speak. There was unanimity of opinion that it was far more advanced on most counts than is the general impression of it, in our minds. Even the development sector folk at the conference agreed that there was a new rural India that had a URAL – urbanized rural mind set (Dileep Ranjekar, Azim Premji Foundation) and was as avid consumer of microfinance for entrepreneurial ventures (Annie Dufflo, Micro Finance Institute).
The NRS presentation made the point eloquently with data, that Rural India was not quite the dark continent, and had surprising amounts of consumption and media exposure. A few years ago, at a FICCI Conference, Ashok Das of HRG had made the case, using IRS data, that there was a ‘developed’ rural, not insubstantial in number, which had ‘close to urban’ consumption and media characteristics. According to Badrinath, the Director of NRS, there would be about 36 millions R1 & R2 (top two social classes of rural) households and 30 million ABC (top 3 social classes of urban India) households in urban India. R1 & R2 households, he guestimates, will have about 60% the consumption power of ABC households mostly because of infrastructure and access limitations, rather than for lack of purchasing power or awareness. The number made me stop in my tracks. I have said, for quite some time now, that we are seeing the development of an urban – rural continuum market of reasonable scale, at the top end. It now appears that while we were despairing at our average per capita GDP numbers, we actually are within shooting distance of a 66 million ‘middle class plus” “consuming class”.
At the Conference, Omkar Goswami and I presented our proprietary year long work on the structure of the rural market, culled from analysis of a variety of data sources: a different lens from the NRS but coming to the same conclusion: that Rural India is way ahead of what our dominant mental model of it has been all along. First of all, rural is far more than agriculture. Half of the rural economy is non-agriculture and 35% of the rural households are engaged in non-agriculture. The non-agriculture households are far bigger per capita spenders than agriculture households; and the top 10% of rural India are discontinuously high spenders compared to the rest. At least 150 districts of rural India have wealth and assets comparable to urban India: And the list of all this evidence goes on.
The other interesting aspect that has emerged from our work is that if you look at all the usual expenditure pattern indicators that tell you how sophisticated or basic a market is, rural India is more sophisticated than we assume it to be. For example, the high percentage of households where non-food expenditure exceeds food expenditure and the rapid growth in expenditure on education and health care and transportation. What’s more, our work has shown that rural per capita income has grown at the same pace as urban per capita income. In real terms, real rural income has grown three times as fast as agricultural income.
What’s the ‘so what’ of all this? First, as I have always said, India morphs – it changes from within, slowly, in ways not apparent to the casual observer or to the observer who views things through his old mental models. Second, it stands to reason that the self-image and aspiration of young Rural India has probably changed dramatically compared to their parents given the environment they are growing up in. I think its time to stop thinking of rural India as one monolithic mass, defined by its lowest common denominator. We are then guilty of doing with rural India what foreign markets did with urban India …. and failed!
May be we should resurrect the once fashionable term Semi Urban; or better still calibrate rural consumer pockets into “75% urban”, “50% urban” and so on. And finally, just as we have urged MNCs to create specially for India and not recycle ten year old models from the developed world, may be it is time for us to think of rural as the new emerging market and create businesses and business models especially made for it – rather than recycling ten years old urban models. That’s why ITC echaupal will emerge as a big winner. Because it is creating for this market, from zero base, using all modern technology for support.