Economics & Politics / Rural India

Rural India : The Land of Immense Opportunities

The real story of India‘s growth is still untold, it is still laying low in the dusty & hard to approach 640,867 villages. Yes the number is correct, there are more than six hundred thousand village (as per the latest 2011 census report) in India,  accounting for 69% of its total 1.21 billion population; about 833 million people.

While the Urban Indian population itself is more than the total population of United States of America. The rural population of India 833 million people is close to the total population (885 million) of all the G8 countries USA, Canada, UK, Japan, France, Germany, Italy and Russia put together.

And the future looks highly positive as the economic growth dividends to the vast majority of Indian rural population are yet to be delivered. This 2010-20 potential could be the decade of Rural India.

The Indian rural growth story has just started…

  • Strong domestic consumption (58% of GDP (FY12E at 2004-05 prices)
  • Demographic dividend in rural
  • Growing and aspiring middle class
  • Rising disposable incomes and increasing rural wealth
  • Income pyramid morphing from triangle into diamond…Population earning >US$ 1 will grow from 400mn to 650mn.
The FMCG companies are bullish about their sales targets from rural India
US$ Billion Sales
Companies FY 2012E FY2013E FY2014E
ITC 5.3 6.2 7.1
HUL 4.6 5.2 6.0
Nestle 1.5 1.9 2.3
Dabur 1.0 1.2 1.4
Marico 0.8 0.9 1.1
GCPL 0.9 1.1 1.3
Britannia 1.1 1.3 1.5

Source: PINC Research Company

And why not, Share of Rural Wallet indicates an impressive increase in discretionary expenses.

The future truly looks bright for the folks who have lived in the darkness for a pretty long time. 

  • By 2017 Rural per capita consumption of FMCG’s to equal current urban levels
  • From Agriculture rural will become service driven economy…
  • Non farm sector to contribute 70% of rural incomes by 2020
  • 40% Tele density in Rural India by 2014
  • Construction of 12 million pucca houses between 2010-15 under Govt.’s Indira Awas Yojana
  • Health spend to rise 2 fold from INR1.1 trillion in 2010 to INR2.5 trillion by 2025
  • 100% road connectivity by 2020
  • 100% literacy by 2020

Both consumer & industry experts are in-sync with the balanced optimistic future outlook; though Farm sector needs to deliver big times consistently which can help change the outlook of the Indian farmer’s who currently feels a bit pessimistic

  • Majority of Indian seem optimistic about future growth in 2012… but the warning signs are pessimism primarily among the Farmers

“input cost has increased, profits have come down significantly” – Paddy Farmer, WB

“we are landowners yet we have to do labor ourselves, as there is no labor available for farm work” -Sugarcane Farmer, UP

“Cant even think of farm work without tractor now-a-days, farm labor is so hard to get” -Paddy Farmer, AP

“Everything is becoming so expensive due to inflation, we have to spent more money on necessities” – Farmer, UP

“Even the cost of tea has increased so much, but what to do, we cant stop having tea also” – Farmer, Maharashtra

“Highest ever MSP, growing disposal income, innovative efforts by consumer companies to make products avialble through haats, mobile vans are paying off, temporary ups and downs apart, I am a firm believer in rural” – Amitabh Mall, Partner & Director, BCG

“Earlier our direct reach to rural business was 16% which has now increased to 22%.. This kind of initiatives will further help to boost our sales ahead. – N.H Bhansali, CEO Emami Group

“Last quarter of 2011 has not been very fruitful for the consumer durables industry… prices of durables were hiked almost 4-5 times last year because of increase in raw material prices …” – Anirudh Dhoot, Director Videocon & President CEAMA

“At Maruti, the contribution of rural sales has gone up from 22% in 2010 to 26% this year.” -Mayank Pareek, Maruti Suzuki

“Hero MotoCorp’s profit jumps 43% on strong rural demand… rural share at 45%”  – Livemint

“In the overall environment, we don’t look at numbers on a quarter-by-quarter basis. Our strategy does not change by quarters. The numbers may keep shifting …But if we look at the full year, the rural growth story is intact” – Harish Manwani , Chairman, HUL

“ I am hearing the prediction(of rural growth slowing), but I do not buy that. When it comes to daily utilities like toilet soaps and other household items, consumption remains unaffected….” A Mahendran, MD, Godrej Consumer Products

“…I am hopeful that rural demand is growing ahead of urban India going forward. All the indicators are there in terms of good agri output, higher MSP’s etc. ” -Sunil Duggal, CEO, Dabur, India

“The FMCG segment in particular has registered good growth in rural areas, and in some segments it has been even better than in the urban areas” Adi Godrej, chairman, Godrej Group


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