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F) Impediments
G) Recommendations.
Neha Singhal
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Rural Scenario in India:
Rural India accounts for roughly 70% of the population. Almost 6, 27,000 villages
are home to 790 million Indians today.
At present 85% of the organized retailing takes place in India’s urban areas. But
the good thing is that the retail focus has already shifted to the rural areas. The
Indian rural market with its vast size and demand base offers great opportunities
to marketers. Two-thirds of country’s consumers live in rural areas and almost
half of the national income is generated here.
15% of rural population lives in 20,000 large “non urban” areas with population
more than 5,000 people. 63% of rural population lives in villages of 1000 to 5000
people. Remaining 3, 90,000 villages have fewer than 1000 people accounting
for 22% of the population.
Neha Singhal
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Opportunity from changing Demographics in India
The above diagram depicts the population of Rural India divided on the basis of
household incomes. Strivers and seekers constitute the middle class. The
diagram depicts how the increase in household income will lead to increased
consumption by various levels of consumers in the pyramid.
Neha Singhal
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By 2015 the aspirer class of household will be the largest group at 47% of rural
population or 80 million households and will control 55% of the spending.
In 2015, 47% of rural population (aspirers) will account for 55% of the rural
consumption. Wherein in 2025 one-fifth of the population (seekers) will account
for roughly one-third of the rural consumption.
The shift in rural population from one segment to another will shift rapidly. Hence
it will be important for the retailer to keep a track of this and change the
merchandise mix in the store accordingly.
Neha Singhal
neeha.singhal@gmail.com
Enablers for growth in Rural Retail
Rural India will see the consumption growth on per household basis. It will grow
at a compounded annual growth rate of 5.1% during next two decades and will
reach today’s urban level till 2017. This also depicts the change in consumption
basket of rural consumers over a period of time. This means that rural retailers
will have to constantly work on their merchandise mix with the increasing
purchasing power of the rural households.
According to MGI forecast Rural market will nearly triple till 2025 creating a vast
potential of $577bn.
With the increase in income rural population will spend increasingly on other
products then spending on food.
Bharat Nirman Plan would provide rural infrastructure at a rapid growth between
2005 and 2009. This would help organized retailers.
Neha Singhal
neeha.singhal@gmail.com
3. Improvements within agriculture sectors.
Average annual household incomes will increase at a rate of 3.6% in next two
decades will lead to shift of significant number of households from the deprived
to the aspirer income bracket.
Neha Singhal
neeha.singhal@gmail.com
Highlights of significant players:
When organized retail first made its presence felt in rural India, it wasn’t a pure
retailing operation targeting the rural masses. Companies like DSCL and Godrej
who had significant agri-business interests, set them up to meet the needs of
farmers in a store’s catchments area. These stores are one-stop shops meant to
meet the occupational needs of farmers by providing agri-inputs and fertilizers.
These stores tend to target farmers with all sizes of holdings. While organised
retail centered on these stores, unorganized retail revolves around the local
village shop and the haat.
The various retailers who have ventured in rural retailing are discussed as under:
Each store covers an area of 3-4 acres and is managed by a team of 7-8 people
whom the Company trains continuously.
The total number of Hariyali outlets stood at 101 as of 30th Sep, 2007, which
DSCL plans to expand to 250-300 outlets by the end of FY 2008-09.
Hariyali Kisaan Bazaar offers the rural household all farming and consumer
products and related services along with financial services under one roof. These
include wide choice and multi-brands of agri-inputs, FMCG, consumer durables,
apparels, footwear, toys, general merchandise, insurance etc. The outlets also
provide the farmer, the expert advice of agronomists and the technological
support in shifting from subsistence farming to technology led commercial
farming.
The company also launched credit services during its second quarter 2007-08, in
association with HDFC bank, providing loans for various purposes.
The company also stepped up its bulk procurement activity and trading activity
under review to include various grains (maize, wheat), pulses (chana), oilseeds
(mustard), menthe oil, coriander etc.
2. Aadhaar
Godrej Aadhaar is the agri services cum retail initiative of Godrej Agrovet Ltd. It
is a complete solution provider for the Indian farmers and provides professional
guidance with an objective to improve productivity, higher returns and improved
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cost benefit ratio. The services offered are crop advisory services, soil & water
testing services; buy back of output, crop finance, supply of agri inputs and
animal feeds, transfer of information (weather, price, and demand supply), door
delivery of products etc. While, the venture begun by offering agri solutions to the
farmers, based on their feedback, it has over the last few months diversified into
offering a number of other product categories like – durables, FMCG, apparels,
footwear etc, thus catering to the complete requirement of the rural household –
A one stop shop for Rural India. A number of corporates are already in the
process of partnering Aadhaar for various projects for furthering the initiative.
Presently there are 49 Aadhaar Centers across the country in the States of
Maharashtra (Mancher, Alephata, Ranjini, Umbraj, Ozar Sangli, Dindori, Niphad,
Shikrapur, Ottur, Akluj).
GAVL also opened its second petro format Aadhaar Express in Kashti,
Maharashtra. GAVL revamped its Warden Road “Nature’s Basket” outlet by
positioning it as “Authentic World Food”. This store has introduced new product
categories like wine, cheese, cold-cuts, processed foods in addition to its existing
portfolio of fresh fruits, vegetables & herbs and specialty foods.
3. Project Shakti
HUL launched Project Shakti in the year 2001, in keeping with the purpose of
integrating business interests with national interests
The model was piloted in Nalgonda district of Andhra Pradesh in 50 villages in
the year 2000. The Government of Andhra Pradesh took the pioneering step of
supporting the initiative by enabling linkages with the network of DWACRA
Groups of rural women set up for their development and self-employment. Most
SHG women view Project Shakti as a powerful business proposition and are
keen participants in it. It has since been extended to in Andhra Pradesh, Bihar,
Chattisgarh, Gujarat, Haryana, Jharkhand, Karnataka, Madhya Pradesh,
Maharashtra, Orissa, Punjab, Rajasthan, Tamilnadu, Uttar Pradesh and West
Bengal with the total strength of over 39,880 Shakti Entrepreneurs.
Under the project, HUL offers a range of mass-market products to the SHGs,
which are relevant to rural customers. HUL is investing significantly in resources
that work with the women on the field and provide them with on-the-job training
and support. This is a key factor in ensuring the stabilization of their fledgling
businesses.
HUL imparts the necessary training to these groups on the basics of enterprise
management, which the women need to manage their enterprises. For the SHG
women, this translates into a much-needed, sustainable income contributing
towards better living and prosperity. Armed with micro-credit, women from SHGs
become direct-to-home distributors in rural markets.
Neha Singhal
neeha.singhal@gmail.com
A typical Shakti entrepreneur conducts a steady business which gives her an
income in excess of Rs.1,000 per month on a sustainable basis. As most of
these women live below the poverty line, and hail from extremely small villages
(with populations of less than 2000), this earning is very significant, and almost
twice the amount of their previous household income.
For most of these families, Project Shakti is enabling families to live with dignity,
with real freedom.
In addition to money, there is a marked change in the woman's status within the
household, with a much greater say in decision-making. This results in better
health and hygiene, education of the children, especially the girl child, and an
overall betterment in living standards.
The most powerful aspect about this model is that it creates a win-win
partnership between HUL and the consumers, some of whom will depend on the
organization for their livelihood, and builds a self-sustaining cycle of growth for
all.
‘i-Shakti’ has been set up in 400 villages in Andhra Pradesh, and have been
functional since August 2003.
Through i-Shakti kiosks, ICICI Bank and HUL will work together to provide a new
delivery channel for rural India, which offers a multitude of products and services
to the rural customer. In the first phase, Life and General Insurance will be
offered through this channel. Other financial services including Investment
products (Equity, Mutual Funds, Bonds) ICICI Bank Pure Gold (gold coins),
Personal Credit, Rural Savings Accounts and Remittances will be introduced
subsequently.
Neha Singhal
neeha.singhal@gmail.com
E-Choupal is an entirely new channel for procuring the purchase of the farmers.
Today they operate throough 6,500 choupals in 9 states. In e-Chaupal they
started with two channels known as Sanchalak and Sanyojak.
Sanchalak: Sanchalak is the person in whose house the ITC sets up the e-
Choupal. E-Choupal consists of a computer; linked to the Internet via phone lines
or, increasingly, by a VSAT connection. Each Sanchalak serves an average of
600 farmers in 10 surrounding villages within about a five kilometer radius.
Samyojak: Samyojak is the cooperating commission agents. They look for the
logistical support and are responsible for cash disbursement to the local farms for
their produce. They basically facilitate the purchase of the products for ITC from
farmers.
They take care of 40 Choupals and the average distance a farmer has to travel to
reach Samyojak to sell his produce is 25-35 kilometers.
Chaupal Sagar:
Chaupal Sagar are built near Samyojak, so that when farmers come to sell their
produce to samyojak and receive cash money then they can shop in Chaupal
Sagars. Till now there are 19 Choupal Sagars. All of these stores are located in
the rural areas of Madhya Pradesh, Uttar Pradesh and Maharashtra.
Kisan Seva Kendra is a low cost business model by Indian Oil corporation of a
retail outlet offering fuel and other non fuel value added services with penetration
in rural markets generating high returns.
Neha Singhal
neeha.singhal@gmail.com
Regulations and Policies for the rural retail
1. APMC
2. Essential commodity act: The fertilizer industry is centrally regulated by
the government through an administered pricing mechanism &
sales allocation under Essential Commodities Act (ECA). In
the year 2002-03, the government announced a long term
Pricing policy for urea.
3. Indian Land Acquisition Act 1894
4. Urban Land (Ceiling and Regulation) ACT, 1976
5. Agricultural Produce (Grading & Marking) ACT, 1937 (ACT No. 1 of 1937)
(as amended up to 1986)
6. Non Agricultural Use Clearance
7. Under PN4/2006 100% FDI is allowed through the automatic route in -
Floriculture, Horticulture, Development of Seeds, Animal Husbandry,
Pisciculture, aqua-culture, cultivation of vegetables,, mushrooms,
under controlled conditions and services related to agro and allied
sectors
8. Intra state agricultural land taxes vary, prompting the current finance
minister to moot for a common GST (Goods and services tax) which would
help in bringing all the various state taxes under a common fold including
the agricultural income taxes levied individually state to state.
Neha Singhal
neeha.singhal@gmail.com
Impediments:
Recommendations
• Creating retail stores which should be rural in nature so that the rural
masses identify themselves with these stores.
Neha Singhal
neeha.singhal@gmail.com