III RURAL MARKETING IN INDIA .............

50-78
3.1 Introduction ......................................................................... 50

3.2 Rural area defined .............................................................. 50

3.3 Indias rural environment .................................................... 51

3.4 Rural scenario in Kerala ..................................................... 58

3.5 Rural environment of Kerala An overview ....................... 60

3.6 Rural areas and rural marketing ......................................... 68

3.7 Domain of rural marketing .................................................. 68

3.8 Structure of rural markets ................................................... 69

3.9 Magnitude of rural marks.................................................... 71

3.1 Market places of the rural consumers ................................ 73

0

3.1 Issues of rural marketing in India ....................................... 74

1
 CHAPTER III

RURAL MARKETING IN INDIA

3.1 INTRODUCTION

India lives in villages is an often quoted fact. The Indian rural

markets with its vast size and demand base offer great opportunities
th
to marketers. of the consumers live in rural areas (7417 lakhs as
per 2001 censes report) and more than half of the national income is
generated here. Our nation is distributed approximately in 6,30,000
villages which can be sorted in different parameters such as literary
levels, accessibility, income level, penetration, distance from nearest
town etc. It is only natural that rural India occupies an important
position in the marketing strategies both in the narrower and broader
spectrum . Since 1970s and more particularly from the mid 1980s,
the rural economy of India has started showing potentialities. During
90s, there has been a steady shift to as well as growth of purchasing
power of rural India. Thus in recent years the rural sector provides a
unique opportunity to expand their market since the urban segment is
clearly showing signs of saturation. The nature and characteristics of
rural market is quite different than that of urban market. Therefore it is
worthwhile to understand the rural characteristics and environment as
a prelude.

3.2 RURAL AREA DEFINED

There is a clear-cut demarcation between urban and rural areas

due to the differences in the physical and functional characteristics.
Government of India, by conducting (census survey 1961) clearly
defined urban areas and those areas not coming under the purview of
urban area is considered as rural area. As per the census report
2001 an urban area is defined as following.

50
 a) All places with a Municipality Corporation, cantonment board
or notified town area committee.

b) A place satisfying the following three criteria simultaneously.

1. Minimum population of 50002,

2. At least 75 percent of male working population engaged in non

agricultural pursuits and

3. Density of population at least 400 sq.mile (1000 per sq. mile).

Apart from these, the outgrowths of cities and towns have also
been treated as urban under urban agglomerations. Example.
Railway colonies, University campuses, port areas, military
camps etc.

All other areas not under the purview of the above definition are
considered as rural area.

3.3 INDIAS RURAL ENVIRONMENT

Rural India is different from urban India with respect to its

economic and functional characteristics. The characteristics,
purchasing and consumption pattern of rural people are also different
from that of urban people. Due to the impact of globalization there is
drastic change in Indias rural environment. The composition of
demand has also changed significantly. To understand these
developments in the rural areas, awareness on current environment is
very essential. Knowing the exact change in size and consumption of
consumables and durables is also very important for the marketers to
deal with rural consumers. The following subheads will provide a view
of Indian rural scenario.

Population

More than 72 per cent of total population resides in rural areas (Table
3.1 in other words very consumer in urban area there are three in rural areas.

51
 Table 3.1 Population and its Growth from 1901 to 2001

All India
Decadal
Population(in lakhs)
Census year Growth Rate
Rural Urban Total

1901 2125.4 258.5 2383.9 -

1911 2261.5 259.4 2520.9 2.3
1921 2232.3 280.9 2513.2 -0.31
1931 2455.2 334.6 2729.8 11.00
1941 2745.1 441.5 3186.6 14.22
1951 2986.5 624.4 3610.9 13.31
1961 3602.9 798.4 4392.3 21.64
1971 4390.5 1091.1 5481.6 24.80
1981 5238.7 1594.6 6833.3 24.66
1991 6286.9 2176.1 8463.0 23.86
2001 7416.6 2853.6 10270.2 21.34
Source; Census of India, 2001

Fig.3.1 Population and its Growth from 1901 to 2001

8000
7000
Population (in lakhs)

6000
5000
4000
3000
2000
1000
0
1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001
Year

Rural Urban

52
 Though the proportion of rural population to total population is
showing a slight decrease over the years, in absolute numbers rural
population is increasing at a higher rate than the urban population. The
increasing rate of population in rural areas provides scope for marketing of
consumable and durable goods and services.

Distribution of villages in India

One of the deterrents for marketing men to exploit the rural market
potential has been the vastness of rural markets in terms of areas covered. It
is much easier to cater to the needs of urban population because of
concentration, but it is very difficult in the case of rural population because of
their wide spread nature. Table 3.2 presents the distribution of villages in
India.

Table 3.2 Distribution of villages in India as per Census Report 2001

Population No. of Villages Percentage to total
Less than 200 114207 17.9
200-499 155123 24.3
500-999 159400 25.0
1000-1999 125758 19.7
2000-4999 69135 108
5000-9999 11618 1.80
10000 and above 3061 0.5
Total 638365 1000
Source; Census of India 2001

From table 3.2 it may be seen that rural population is distributed in

about 638365 villages. It should also be noted that villages are not uniform in
size. About 42 percent of villages are having only population of less than 500.

Literacy level

Literacy level of rural population has considerable impact on as the

marketing strategies to be adopted by marketing men especially in
communication with the rural people. Higher the level of literacy scope for
penetration into rural areas also will be easy.

53
 Table 3.3 Literacy level in India
(in percentage )

Sex 1971 1981 1991 2001

Rural Urban Rural Urban Rural Urban Rural Urban

Male 34 61 41 66 58 81 57.9 81.1

Female 13 42 18 48 31 64 30.6 64

Total 24 52 30 57 45 73 44.7 73
Source: Census of India 2001

It can be noticed from the table that although there is a rise in the
literacy rate during the last two decades, changes in the literacy rate from
1991 was only marginal. It can be further noticed that only 45 percent of rural
people are literate in our country even today.

Occupational Pattern
Occupational pattern of rural households have also an impact
on the nature of income generation, which will in turn affect the
expenditure pattern. Purchase behaviour of the rural consumers
depends upon the nature of occupation and consistency in the
generation of income.

Table 3.4 Occupational pattern of rural households in India

Occupation Proportion of rural population

Agriculture 50
Agriculture Labour 27
Business 10
Non- Agricultural Labour 9
Salary Earners 2
Not gainfully employed 2
Total 100
Source T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.9

54
 For a vast majority of rural population the main occupation is
agriculture and allied activities. So the disposable income in the
hands of rural people is very much conditioned by the status of
agriculture and other allied activities.

Fig. 3.2 - Occupational pattern of rural households in India

9 2 2

10

50

27

Agriculture Agriculture Labour Business

Non- Agricultural Labour Salary Earners Not gainfully employed

The estimated number of rural households during 1999-2000

was 137.1 million out of which 55.1 million were Rural Labour
Households (RLHS) and 44.2 million were Agricultural Labour
Households (ALH) . The Occupational pattern reflects a pattern that
majority of the members were without occupation. I.e. 2.69 persons
out of the average household size of 4.67 persons at all India level,
1.44 were engaged in agricultural labour, 0.30 non agricultural labour
and 0.24 in other occupations.

Source of Income Generation

Income generation and occupational patterns are closely

related. The sources of income indicate the nature of stability and
seasonality in income generation. Table 3.5 indicates the sources of
income of rural people.

55
 Table 3.5 Source of Income Generation
SLNo Source of income Proportion to total
1 Agriculture 59
2 Agricultural wages 16
3 Business 9
4 Non agriculture wages 7
5 Salaries 3
6 NRIs 2
7 Others 4
8 Total 100

Source T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.10

Seventy per cent of income generation in rural areas is from agriculture

and agriculture related activities. It indicates that the development of rural
markets to a large extent depends upon the progress of agriculture. Further it
may also be noted that the income earned by rural people will be seasonal in
nature thereby the demand for goods and services also

Per capita National Income

The per capita real income, i.e., per capita net national product at
factor cost at constant (1993-94) prices, as per the quick estimates for 2003-
04 turns out to be Rs.11,799 as against the revised estimates of Rs.11013 for
2002-03. This indicates a growth of per capita real income of about 7.1
percent during 2003-04. At current prices, the per capita income is seen to
have grown by about 10.2 percent during the year from Rs.19040 (revised
estimate) in 2002-03 to Rs.20989 (quick estimate) in 2003-04. The per capita
real income for 2004-05, based on the Advance Estimate is Rs.12414
showing a rise of 5.2 percent over the previous year3.

Consumption expenditure

The monthly per capita of consumption expenditure is also an indicator

to marketers to market their products and services in the rural markets. The

56
purchasing power is a very important indicator to decide upon the range of
products and price affordable to the rural consumers. Table 3.6 gives the
details of distribution of persons over 12 monthly per capita consumer
expenditure (MPCE) classes of rural section on the basis of NSS survey 59th
round (2003)

Table 3.6 1000 distribution of persons in rural sector over MPCE

year 2002

Monthly per capita Expenditure Classes Average

MPCE
Major States (000-300) (300-615) (615-950) >950 (Rs)
Persons (%) Persons (%) Persons (%) Persons (%)
Andhrapradesh 112 11.2 590 59.0 210 21.0 87 8.7 575
Assam 54 5.4 681 68.1 246 24.6 19 1.9 532
Bihar 198 19.8 699 69.9 90 9.0 13 1.3 424
Gujarat 110 11.0 549 54.9 241 24.1 100 10.0 590
Karnataka 116 11.6 676 67.6 154 15.4 53 5.3 513
Haryana 33 3.3 440 44.3 339 33.9 198 19.8 7.3
Kerala 20 2.0 349 34.9 331 33.1 300 30.0 881
Madya radesh 264 26.4 594 59.4 113 11.3 29 2.9 436
Maharashtra 116 11.6 605 60.5 218 21.8 61 6.1 545
Orissa 421 42.1 449 44.9 104 10.4 26 2.6 390
Punjab 10 1.0 657 65.7 697 69.7 236 23.6 788
Rajasthan 46 4.6 656 65.6 219 21.9 79 7.9 574
Tamil Nadu 131 13.1 590 59.0 186 18.6 93 9.3 542
Uttar Pradesh 166 16.6 649 64.9 141 14.1 44 4.4 486
West Bengal 120 12.0 693 69.3 151 15.1 36 3.6 493
All India 146 14.6 602 60.2 181 18.1 71 7.1 543
Source: State Planning Board (2005) 59th round of NSS, 2003. Economic Review p. 421

Table 3.6 shows that rural population is more concentrated in

lower levels of monthly per capita expenses class (MPCE) below Rs.
615 (74.8 percent). Inter state variations is substantial in the
distribution of the MPCE. At the all India level 14.6 percent lies in
the lowest expenditure day (000-300) and 7.1 percent lies under the
highest expenditure below 90. The average consumer expenditure
per person for the period of 30 days is given in table 3.7

57
 Table 3.7 Average consumer expenditure per person for the
period of 30 days
Rural Urban
Year and round of NSS
Kerala India Kerala India
th
1970-71 25 36.12 35.31 47.63 52.85
th
1972-73 26 42.19 44.17 58.27 63.33
1977-78 32th 74.76 68.89 84.10 96.15
th
1983 38 145.44 112.31 179.81 165.80
rd
1987-88 43 211.47 158.10 266.81 249.93
1990-91 46 th 261.85 202.12 369.36 317.75
th
1993-94 50 390.4 281.60 493.5 457.70
1999-00 55 th 765.71 486.00 932.0 855.00
th
2000-01 56 841.31 494.91 1203.65 914.58
th
2002 58 881.00 530.74 1266.64 1011.94
2003 Jan to Dec 981.00 554.0 1300.0 1022.0
th
Source: State Planning Board (2005) 59 round of NSS, 2003. Economic Review p. 425

Table 3.7 revealed that the average consumer expenditure of urban

and rural consumers showed an increasing trend. It can be also noticed that the
rural consumer expenditure is less than 50 of urban consumer expenditure.

3.4 RURAL SCENARIO IN KERALA AN OVERVIEW

The state of Kerala, located in the south-west part of India, occupies

1.1 percent of Indias total area and 3.01 percent of Indias population.
Population density in Kerala is 8.9 percent per sq.km. Keralas population is
spread across the state and as such there are no big urban agglomerations.
Agriculture sector in Kerala contributes 12.68 per cent of the state income
and the rest is contributed by secondary and tertiary sectors. Moreover,
growth of real GDP originating from agriculture and allied activities in the
country also is showing a declining trend. This highlights that people of the
state depend more on other sectors than on agriculture. Ecology also plays
a role in the state by providing diversified national resource base enabling a
large degree of occupational diversification. Moreover the growth of service
sector is more prominent in Kerala than in the rest of the country. More than
an industrial state, Kerala is considered as a consumer state. The data with
respect to the major development indicators of Kerala are given in table 3.8.

58
 Table 3.8 Development indicators of Kerala (2005)

Development Indicators Values

Total Population (percentage) 3.18
As percentage of Indias Population 3.1
Density of population (per square kilo meter) 819
Birth rate (per thousand) 17.2
Death rate ( per thousand) 6.4
Life expectation at Birth (percentage) 71
Infant Mortality Rate (per thousand) 13
Maternal Mortality Rate (per thousand) 0.87
Total Fertility rate (percentage) 1.7
Couple protection rate (percentage) 66
Percentage of old people 15
Rate of Literacy (persons) 90.92
Rate of Literacy (males) 94.2
Rate of Literacy (females) 87.86
HDI 0.638
Work participation rate 32.3
Unemployment rate (CDS) rural (Percentage) 21.7
Unemployment rate (CDS) urban (Percentage) 19.1
Educated unemployment rate (rural) (percentage) 25.3
Educated unemployment rate (urban) (percentage) 21.2
Sex ratio 1058
Number of emigrants from Kerala (2004) in lakhs 18.4
Remittances from emigrants (Rs.crores) 18465
Remittances as percent of NSDP 23.39
GSDP at current prices(2004 Rs.crores) 78933.13
GSDP at constant prices (2004 Rs.crores) 39736.13
Per capita income at current prices (Rs) 24053.0
Per capita income at constant prices (Rs) 12019
Source: Govt. of Kerala (2005), Selected indicators of development of Kerala and
India, Department of Economics and Statistics.

59
3.5 RURAL ENVIRONMENT IN KERALA

An over view of the economic Indicators and functional

characters of Kerala given in the succeeding sections will provide a
picture of existing rural environment in Kerala.

Population

The demographic trends in Kerala are far more positive in

several aspects. Keralas population as per census report 2001 was
318.39 lakhs with a decadal growth of 9.42 percent only. In absolute
terms, Keralas population has increased over the years which show
the vast potential of rural markets in Kerala.

Table 3.9 Population in Kerala State

Census Kerala
ears
Population( in lakhs) Decadal
rowth rate
Rural Urban Total
1901 59.4(92.96) 4.5(7.04) 63.9 -
1911 66.2(92.59) 5.3(7.41) 71.5 -
1921 71.2(91.28) 6.8(8.7) 78 9.16
1931 85.9(90.32) 9.2(9.67) 95.1 21.85
1941 98.3(89.12) 12(10.88) 110.3 16.04
1951 117.2(86.49) 18.3(13.51) 135.5 22.82
1961 143.5(84.91) 25.5(15.09) 169.0 24.76
1971 178.8(83.75) 34.7(16.25) 213.5 26.69
1981 206.8(81.26) 47.7(18.74) 254.5 19.24
1991 214.1(73.60) 76.8(26.40) 290.9 14.32
2001 237.7(74.03) 82.7(25.97) 318.4 9.42
Figures in brackets indicate percentage.
Source: Various Census Reports

60
 Fig. 3.3 Rural Population in Kerala State in 1901 to 2001
(in lakhs)

250

200
Population in Lakhs

150

100

50

0
1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001
Year

The population growth rate, sex ratio and density of

population of the state is given in Table 3.10

Table 3.10 Population growth rate, sex ratio and

density in Kerala
Year Annual Growth Sex Ratio Density
Rate (percent ) (females/1000s) (per.sq.km)
1961 - 1022 435
1971 2.33 1016 549
1981 1.76 1032 654
1991 1.31 1036 749
2001 0.93 1058 819
Source: Various Census of India

Table 3.10 revealed that in Kerala, female out numbered males

which is contrary to all India pattern. With respect to the density of
population, Keralas population density is 60 percent more than the all
India average.

61
Literacy rate in Kerala

Literacy as a qualitative attribute of the population is one of

most important indicators of socio economic and political development
of a society. The national literacy rate is 65.38 percent (census 2001)
as against 52.21 per cent in 1991.The literacy rate of Kerala (90.92
percent) is well above the national average and highest among the
Indian states. Regional and gender disparities in literacy rate are also
minimum in Kerala.

Table 3.11 Proportion of Literate persons in Kerala

(percentage to total)

Year Kerala India Kerala India Kerala India

persons males females
1981 81.6 43.6 87.7 56.4 75.7 29.8
1991 89.8 52.2 93.6 64.1 86.1 37.3
2001 90.9 65.2 94.2 75.6 87.9 54.0
Source: Centre for Development Studies, (2005), Human development report,
CDS,Trivandrum

3.5.3 Unemployment in Kerala

Table 3.17 reveals that the unemployment rates for the

educated (15 years and above).

Table 3.12 The level of unemployment in Kerala (Percentage)

Kerala All India

1993-94 1999-00 1993-94 1999-00
Rural male 15.6 11.2 6.5 5.6
Rural female 32.3 36.7 15.0 14.6
Urban male 11.2 7.4 6.0 6.2
Urban female 34.9 34.2 18.2 14.2
Source: Centre for Development Studies, (2005), Human development report,
CDS,Trivandrum

62
 Table 3.12 reveals that the unemployment among women is two to
three times higher than among men. While educated unemployment
has declined for all men in the 1990s, it has increased for women
particularly in rural areas. In urban areas where it is the highest,
female educated unemployment is 34 percent in contrast to 7 percent
for men.

Per capita State Income

Per capita income acts as an indicator of the standard of
living of the people. Table 3.13 depicts the position of state per capita
income at current earned constant prices.

Table 3.13 State Per capita Income

Years at current prices at constant prices

1993-94 7938 7988
7539 8516
1994-95
(-5.3) (6.2)
11469 5748
1995-96
(34.2) (-48.0)
13050 8987
1996-97
(12.0) (36.0)
14231 9079
1997-98 (1.0)
(8.2)
16062 9371
1999-2000
(11.3) (3.1)
18262 9678
2000-01
(12.0) (3.1)
17978 10754
2002-02
(-1.6) (10.0)
22776 11605
2002-03
(21.0) (7.3)
24492 12328
2003-04
(7) (5.9)
27048 13321
2004-05
(9.3) (7.5)
Parenthesis indicates growth rate percentage.
Source: Department of Economics and Statistics (2005). Economic Review,
State Planning Board, p.7

63
 Fig. 3.4 State Per capita income at Constant prices

14000

12000

10000

8000

6000

4000

2000

0
1993- 94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

2004-05
States per capita income at current prices increased from
Rs.24492 in 2003-04 to Rs.27048 in 2004-05, registering a growth
rate of 10.4 percent compared to the growth rate of 7.5 percent during
2003-04. The per capita state income at constant prices (1993-94)
during 2004-05 was Rs.13321 as against Rs.12328 during 2003-04.
The per capita state income is higher than the per capita national
income.

3.5.2 State Agricultural Income

The sources of income generated in rural areas are very

important to know the rural purchase behaviour. The trends in
agricultural income in Kerala for the last 8 years are shown in table
3.14.

64
 Table 3.14 State Agricultural Income

Year Agriculture Rate of charge contribute state

Income (unit) previous year income (unit)
1993-94 6256 - 26.23
1994-95 6897 1.25 26.62
1995-96 6947 0.72 25.78
1996-97 7115 2.42 25.39
1997-98 6777 -4.75 23.67
1998-99 690 1.81 22.52
1999-00 7017 1.7 21.45
2000-01 5448 -22.36 16.23
2001-02 5312 -2.50 15.39
2002-03 5380 1.5 14.53
2003-04 5165 1.8 13
2004-05 5586 1.7 12.68
Source: Directorate of Economics and Statistics,(2005) Economic Review, State
Planning Board p. 51-52

Fig. 3.5 State Agricultural Income

7115

7017

8000
6947
6897

6777
6256

7000
5586
5448
Agriculture Income

5380
5312

5165

6000
5000
4000
3000
2000
690

1000
0
1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

Year

The table 3.14 indicates that the contribution of agriculture to

state income has been on the decline. The states share has declined
from 26.23 per cent (1993-94) to 12.58 (2004).This implies that the

65
dependence on agriculture is declining from year to year which will in
turn affects the pattern of income generation and consequently the
consumption pattern.

Income Poverty in Kerala

Kerala has made substantial progress in reducing the
incidence of both rural and urban poverty. Between 1957-58 and
1993-94, the head count index of poverty in Kerala declined at an
average annual rate of 24 percent, the maximum achieved among 15
major Indian states. (World Bank 1997:98)
Table 3.15 Head Count Index of Poverty in Kerala and India

Year Kerala Total India

Rural Urban
1973-74 59.19 62.74 59.79 54.88
1977-78 51.48 55.52 52.22 51.32
1983-84 39.03 45.68 40.42 44.48
1987-88 29.10 40.33 31.79 38.86
1993-94 25.73 24.55 25.43 35.97
1999-00 9.40 9.40 12.72 26.30
Source: Centre for Development Studies, 2005 Human Development Report,
Centre for Development Studies, Trivandrum

Table 3.15 shows that till 1973-74, the incidence of poverty in

Kerala, both rural and urban, was higher compared to that in the rest
of the country. However after 1983-84, the incidence of poverty in
Kerala dropped below the national average. This was possible
because both rural and urban poverty in Kerala declined steadily
throughout the last four decades. Table 3.15 also indicated the head
count index of rural Kerala is much lower than urban Kerala.

Consumer Expenditure in Kerala

Per capita consumer expenditure is a major indicator of development

of a state. Though at all India level rural population is more concentrated in
lower levels on monthly per capita of consumer expenditure MPCE classes, in
Kerala percent of population in the lowest expenditure day (1000-3000) is only
2 percent as against 1.6 percent at all India level. Further it can be noticed

66
from table 3.7 that average consumer expenditure of rural Kerala is 40 per
cent higher than the rural India, i.e., 981 and 554 respectively in 2003.

Table 3.16 Proportions of consumer expenditure on food and non food

items
Average Consumer Expenditure
1980-81 to 1990-91 1990-91 to 1999- Period 2 /
Units (in Rs.) 2000 (in Rs.) Period 1
(percent
change)
Net State Domestic Product
Food 739.0 813.9 10.1
Non-food 513.4 847.1 64.9
Sub-total 1252.5 1661.0 32.6
Remittances
Food 28.1 356.1 1167.3
Non-food 19.8 342.1 1628.7
Sub-total 48.4 698.2 1342.6
Source: NSSO: 1983; 1993-94; and 1999-00 Rounds.

The structural shift in consumption, as brought out in Table

3.16, indicates that the main source of consumer demand was for non
food items in the 1990s. While total demand for food increased by
56 percent in the second period, the demand for consumer durables
more than doubled. It can be seen that the contribution of remittances
to consumer durables led growth in the 1990s was 17 times more
than that in the first period. It is in this context the reinforcing
contribution of economic reforms had its significant impact. The
unregulated waves of the reforms made it possible to release pent up
demand in the case of a number of goods and services hitherto
unavailable. Thus, there was building up of an effective demand
backed by increased income in the economy for certain commodities
which remained unrealised in the face of substantial supply
constraints. In short, the role of emigration and remittances was to
remove the effective demand constraint in a developing economy,
while the reforms removing the supply constraints.

67
 The above discussions substantiate the potential for rural
markets. The nature, pattern and structure of rural markets are
different from urban markets.

3.6 RURAL AREAS AND RURAL MARKETS

The transformation of rural markets in the country has

developed well with the improvement in monetization and techniques
of exchange. High risk and low profit margin were the twin conditions
of trade in rural areas during the colonial and pre colonial period,
which has gradually developed after world wars. In fact the use of the
term rural marketing is found in the reports of the sub-committee set
up in 1957 by the National Planning Committee. The committee mainly
focused the marketing for rural farm produce specially cash crops.

The process of exchange of agricultural commodities dates

long back with the beginning of human civilization. It has developed
gradually with the span of changing behavioral dimensions of the
settled and nomadic habitants through various sledges like gift
exchanges, barter deed, easy coinage and monetised exchanges. The
last stage may be the stage of commercialization. It is evident that the
commercialization of agriculture began with the right of property by
making land as an individual asset under civilization during the British
Colonalization in India which instilled the seeds of capitalist
entrepreneurship in agriculture. Further the composition of a heavy
revenue demand to be paid before harvest resulted in imperative need
to rise crops which in turn in distress sale.

3.7 DOMAIN OF RURAL MARKETING

Agriculture is the major occupation and income source of rural people

and rural markets were mainly agriculture produce markets. The advent of
commercial and market oriented farming, with the help of modern agricultural
technology, necessitated the use of manufactured inputs like fertilizers,
pesticides High Yielding Varieties of seeds etc. Mechanization of farming also
necessitated the demand for manufactured inputs like tractors, threshers,

68
winnowers etc. Thus the term rural marketing slightly widened to include the
agricultural inputs also. Later, the cottage and village industries also included
under the purview of rural markets. With the changing scenario of rural area
markets due to the increased income and other economic developments, the
demand for consumables and consumer durables and services increased
among rural folk. Hence, the scope of rural marketing further widened and
included the marketing of consumables, consumer durables and services
also. Considering the undergoing changes in the definition of rural marketing,
T.P Gopala Swami opined that rural marketing includes the flow of goods and
services from urban to rural and vice versa. In addition the flow of goods and
services within the rural areas also form a part of rural marketing.5

Thus the domain of rural marketing includes flow of goods and

services from rural to rural (e.g. bamboo baskets, ropes, small
agricultural tools, pad locks, aluminium utensils etc.), urban to rural
(eg. fertilizers, pesticides, seeds, tractors, branded consumable items,
consumer durables) and rural to urban transaction (i.e. agricultural
products like food grains oilseeds, cotton, sugarcane etc.)

Chart 1 - Domain of rural marketing

From/To Rural Urban

Urban 1. Consumables and Durable No concerned
Agricultural Inputs
2. Consumables
3. Consumer Durables
Rural Rural Artisans Services and 1. Agricultural and Allied
Products Production
2. Rural Artisans and
Rural Industry Products
Source T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.3

3.8 STRUCTURE OF RURAL MARKETS

Rural marketing is not an independent entity by itself. In fact,

there are sociological and behavioural factors which affect the

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economy of rural markets. Differentiation with regard to nature and
structure of villages and their socio economic characteristics restrict
treating the whole rural India as one. So the rural sector is dissected
into three development stages, primitive, developing and urban
analogues. Consumption characteristics and consumption behaviour
of consumers also undergo changes. Following table indicates various
aspects of consumer behavior in the three village development
stages.

Chart 2 - Aspect of consumer behaviour in the three village development

stage

Primitive stage Developing stage Urban Analogue stage

Low level of subsistence Consumption orientation Consumption orientation

consumption orientation change subsistence influenced by high urban
consumption value

Low knowledge of Some knowledge of Knowledge of consumer

consumer goods consumer goods goods high

No first general buyers First generation buyers Proportion of first

exist generation buyer high

Low motivation to look Purchase aspiration change Purchase aspiration

for new consumer and positive to new positive to new products
products. Low purchase consumer goods and and motivation to
aspiration for new motivation improves vis- a purchase influences by
consumer products vis purchase retailers

Product utility perceived Real product utility Real product utility

as illusory than high perception improves with perception is high
knowledge

Negative valence of Valence of consumer Valence of consumer

consumer product high products positive product similar to urban
consumer

Caste head as the Influence of urban Urban consumers as

reference person consumers reference person
Source: Das Mukunda V. (1986).
Rural Marketing Research in India: Some Aspects of Environmental
influences on Respondents Bias : Paper presented at 1986. Academy of
Marketing Science Annual Conference, California.

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 In addition to the changes in their consumer behavior in different
stages, rural people, also identify different market places for purchase of
different products or services.

3.9 MAGNITUDE OF RURAL MARKETS

The popular image of rural consumer is one who has limited

educational background, is exposed to limited products and brands, choosing
price over quality and is influenced by Word of mouth communication. But due
to the changes that took place in the economy and thereby in rural areas in the
avenues of investment, increased income, increased number of emigrants and
foreign remittance, change in the life style, arrivals of new products of different
brands both national and international, advancement of communication facilities
etc., changed the popular image towards the rural consumers. This shift can be
noticed from the increased demand for consumer durables, non-durables and
fast moving consumer goods in rural areas.

As is evident from National Council for Applied Economics

Research (1998) report the purchase and use of certain durables by
consumers in rural areas is more than the consumers in urban areas.
The durables for which purchase and use by consumers in rural areas
exceed those in urban areas are as follows (NCAER, 1998):

Sewing machines;

Radio/transistors;

Wristwatches;

Black and white television sets;

Cassette recorders;

Bicycles;

Table fans;

Pressure cookers;

In the case of consumer non durables, there are at least six

products where the rural market has a larger share than the urban

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market and table 3.17 shows the range of products as per 1999 data
(latest data are not available).

Table 3.17 Rural Market Share of Consumption in India

Non durable Product Share of Rural Share of urban

Analgesic tablets 45.7 54.3
Batteries 56.2 43.8
Blues 52.3 47.7
Coconut oil 41.6 58.4
Iodised salt 51.4 48.6
Safety razor blades 54.1 45.9
Tea 51.3 48.7
Toilet soaps 41.9 58.1
Washing cakes/bars 54.6 45.4
Washing powders/liquids 46.4 53.6
Source: Business world 7-21, April 1999.

Table 3.18 Fast Moving Consumer Goods Penetration in India (per cent)
FMCG Penetration Category Rural Urban

Analgesics/cold/ethical tablets 27.9 72.1

Batteries 21.3 78.7

Bulbs 29.9 70.1

Edible oils 84.7 15.3

Hair wash products 39.4 60.6

Iodized salt 61.5 38.5

Safety razor blades 45.4 54.6

Tea 79.1 20.9

Toilet soaps 88.3 11.7

Toothpowders 22.8 77.2

Toothpaste 33.1 66.9

Washing cakes/bars 87.5 12.5

Washing powders/liquids 70.3 29.7

Source: Business World, April 1999

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 Table 3.18 revealed that washing cake, toilet soap, tea and washing
powder are the mostly penetrated fast moving consumer goods in rural areas
and penetration rate for these goods area higher than the urban areas.

National Sample Survey Organisation Survey (2002) revealed that

in rural areas, the audio- visual media, television appears to substitute the
radio / tape recorder as the standard of living improved, despite that the radio
tape recorder have become cheaper than 10 years ago. It is also revealed
that only 0.6 percent of rural households possess a personal computer and
that the internet facility is practically non existent in such households. Only 5.3
percent of rural households had one or more fixed telephones and 0.9 percent
has cell phones. These facts reveal the scope for further expansion and
potential of these products in rural areas.

3.10 MARKET PLACES OF THE RURAL CONSUMERS.

A typical village has clean identification of their places of requirement.

The first point of contract of rural consumer is the village shop from where he
normally purchases daily used items like, tea, kerosene, cigarettes,
provisions, rice etc. In most of the cases they maintain a credit account and
few cases barter also. Next level in the hierarchy is shandies, hats and
jathras. These markets functioning in a shandi is like a mini super bazaar. A
wide range of goods and even services are available in these places. They
also provide an opportunity to sell and purchase small quantities, local
agricultural and poultry products like vegetables grains, sheep or goat,
chicken etc. Jathras on the other hand, are markets held over a period of a
week to one month. Normally these are associated with some important
religious festivals

The next markets place in the hierarchy is the primary wholesale

assembling markets which is also sometimes called as secondary wholesale
assembling markets or terminal markets. Normally rural consumers will
purchase the items like fertilizers, pesticides, seeds etc. and also consumer
durable items. These are the places where they sell their commodities as

73
soon as harvest is over. Rural consumers also make occasional visits to cities
or metros or head quarter for any legally related issues.

The Hierarchy of market places identified by rural consumers has an

important implication to marketers, with regard to distribution, management
and arrangement. While rural consumers might purchase consumable items
at the local village shop or shandies, they will always prefer to purchase
consumer durable items from the towns or district head quarters, where
agricultural produce markets are located. Therefore, while appointing dealers,
buying shelf space, the purchase habits of rural consumers have to be born in
mind.

3.11 ISSUES OF RURAL MARKETING IN INDIA

Rural markets with substantial improvement in purchasing

power, increasing brand conscious, changing consumption pattern
and rapid spread of communication net work offers vast untapped
potential. It should also be recognized that it is not that easy to
operate in rural markets. Because of several attendant problems and
inherent characteristics with in the rural markets, rural marketing has
become a time consuming affair and requires considerable investment
in terms of availing appropriate strategies with a view to tackle the
problems. The major problems of rural markets are as follows:

Rural Population

Underdeveloped people and under developed markets are the

major barriers in rural markets. Though agricultural technology has
tried to develop the people and market in rural areas, the impact of
rural technology is not felt uniform through out the county. Therefore
wealth distribution in rural India is uneven and the top 13 percent of
the farmers land holding account for 57 percent of cultivated area.
Data show that the top 10 percent of rural population accounts for
about 37 percent of the expenditure on consumer goods, inference is
that the potential market is at the top of the spectrum. Low density of
population and inaccessibility make the problem of serving rural areas

74
individually difficult and often uneconomical. Studies conducted by the
Marketing Research Department at industrial level, showed that about
90 percent of farmers visited the nearest town at least once in a
month to sell their product and purchase their requirements. In other
words, the towns with large agricultural hinter lands become the entry
into the local market. Further a vast majority of rural people are
tradition bound and belief in age old customs, traditions habits, taboos
and practices.

Lack of physical communication facilities

The attraction of a market depends not only on its potential but also
on its accessibility. A market cannot be exploited as a case of sour grapes.
Rural markets in India lack suitable physical communication to facilitate
and to attract the Multi National Companies. Nearly 50 percent of the
villages in the country do not have all weather roads. Therefore physical
communication / distribution to these villages is highly expensive. Even
today, most villages in the eastern part of the country are inaccessible
during monsoon season. Hence the distribution in rural areas becomes
expensive and sometimes not viable also.

Uneven Distribution & Vastness of Villages

The type of distribution of population warrants appropriate

strategies to decide the extent of coverage of rural markets. Census report
2001 shows that there are 638365 villages in our country. Out of these 17.9
percent of villages have only less than 2000 people and only 1.8 percent
having more than 5000 to 10000 people and only 6 percent is having more
than 10000 people. This shows the vastness of rural population which
indicates the difficulties in reaching rural mass.

Low Per Capita Income

The income level of the people has direct impact on the rural
consumers off take of product inventory levels, consumption pattern,
frequency of purchase etc. Although 33 to 35 percent of the GDP is

75
generated in rural areas it is shared by 74 per cent (Inference from
Economic Review 2005) of the population. 6 Hence the per capita
income of rural people is low compared to urban counter parts. Apart
from this income is unevenly distributed also. Therefore the marketing
men should identify appropriate consumer segments with different
levels of income while evolving rural marketing strategies.

Low Level of literacy

The rural literacy ratio is low compared to urban areas. As per

Census 2001, literacy rate of rural areas is 44 percent, where as the
figure is 73 percent in the case of urban population. Print media
become ineffective since its reach is poor because of low level of
literacy. The dependence should be more on cinema, radio and
television. However it should be noted that, the reach of TV in rural
areas is very less and advertisement through this media is very
expensive also.

Hierarchy of Market

Rural markets exist in a hierarchy manner. As most of the

rural people are agriculturists their pattern of income generation is
also different. They identify market places for different items of their
requirements (see Chart 3). Therefore it is very difficult to adapt a
uniform distribution pattern for all products and for all consumers.
Thus depending upon the purchase habits of rural population the
distribution net work of different commodities has to be different.

76
 Chart 3 - Hierarchy of Markets for rural Consumers

State capitals, cities and metro Legal matters and casual visits

Terminal markets Fertilizers, pesticides, seeds,

durables like cycles, mopeds,
Secondary wholesale assembling sewing machines, jewellery, dry
markets battery cells, radios, cosmetics,
electrical goods, and agricultural
Primary wholesale assembling finance, etc.
markets

Shandies, hats and jathras Cloth, cosmetics, soaps services,

kitchen equipments, agricultural
tools, bamboo baskets, etc.

Village shop Match boxes, cigarettes, tea,

kerosene, edible oils, salt etc.

Source T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing house, p.3

Seasonal Demand Pattern

Since 75 percent of rural income is generated through agricultural

operations which are seasonal, the demand pattern is also seasonal.
For instance, the demand for fertilizers will be high during kharif and
rabi seasons and for consumables and consumer durables during
harvest season. During the festival season also the demand for these
items will be high. Hence the distribution net work in rural areas
should be tuned to meet the seasonal demand of the rural consumers.

In addition to all these, the rural markets are mainly agricultural

markets which faced with all problems inherent in the agricultural
marketing system also viz: - low price for the agricultural product, non
availability of storage facilities, distress sale due to indebtedness and
social obligation, high marketing cost, high rate of commission agents,
lack of co-operation and regulated market etc. are considered as
barriers in developing rural markets. Thus the vast cultural diversity
and vastly varying rural demographic / poor infrastructure be it
inadequate roads and high ways or the availability of telephones and

77
electricity / low income levels and low level of literacy often tend to
lower the presence of corporate in the rural markets.

List of References

1. Census of India 2001

2. Ibid.P.10
3. State Planning Board (2006) Economic Review, Govt. of
Kerala, Thiruvananthapuram Feb. 2006
4. Census of India 2001
5. T.P Gopalaswamy (1995) Rural Marketing Wheeler Publishing
house, p.3
6. OP. cit.3

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