Understanding Changing Rural Markets

Bengal Chamber of Commerce & Industry

Pradeep Kashyap

Saturday | August 29th , 2015

CEO & Founder - MART

Where Does India Live

GDP
share

Population

25%

12 %

25%

18%

50%

70 %

Source : Census of India 2011,, India Urbanization Econometric Model -McKinsey Global Institute ,MART Knowledge centre

48
1 Million +
large cities

7,834
towns

640,000
Village

< 1 Million

< 10,000

Rural India : Some facts & Figures

380 mn mobile users in 168 million households
Smartphones growing rapidly

70 million new rural accounts opened (Jan Dhan Yojna)

20 million DTH connections (60% of total)
Broadband to

250,000 village councils under implementation

Manufacturing shifting to Small Towns &

Rural

75% of new factories in last decade in small town & rural

70% of all new manufacturing jobs created in rural
Out of 36 million non-agri enterprises in India,

20 million in rural (55%)

Rudrapur
Then..

Now

Rudrapur

.Now

Budget Hotel- Hotel Ginger,

a Tata enterprise in Sidcul

Radisson Blu

OMAXE & METROPOLIS CITY

(Back side of Radisson)

SIDCUL
(Rudrapur outer/Pantnagar, on NH 87)
6

Migration to metros slowing down

50%
1981-1991

45%

1991-2001
2001-2011

40%

Growth in Urban population,

2001 to 2011

35%
30%
25%
20%
15%
10%
5%
0%
Delhi

Mumbai

Kolkata

Chennai

Bangalore

Hyderabad
Source: Census Bureau of India 7

Rural Growth Drivers

Government Initiatives
oNREGA
oBharat Nirman

oImproved Infrastructure

(all 500+ population villages will be connected by

road by 2015)

oIncrease in electrified HHs

(51% in 2011 vs 44% in 2001)

Financial Inclusion (Jan Dhan Yojana)

Transformation in Agriculture
Rural becoming a non farm economy
Growing real wages
8

Agri Transformation in Last Decade

50 mn tonnes increase in food grains production from 213
mn tonnes in FY04 to 263 in FY14
Increasing farm mechanisation , 40-45% mechanization
contributes 1/3rd of global tractor sale

Eight good monsoons

More than two fold increase in support price of food
grains
9

Agri allied sector growing at faster pace

creating more jobs
18
16
14
12
10
8
6
4
2
0

Jobs created in animal farming (chicken/fish)

1.6
1.3
3.8 mn jobs created
in rural areas

14.3
11.1

2005

2010

People employed in animal farming in rural (mn)

Urban (mn)

Jobs created in poultry industry has been equal to that created by MNREGA (for
the period 2005-10)
Source: NSSO, Dept of Animal Husbandary, Credit Suisse estimates

10

Shift towards horticulture crops

Horticulture more productive for land)

42

Banana

32

Chrysanthemum

14

Cauliflower

10

Sugarcane

Brinjal

Tomato

Wheat

10

20

30

40

50

Net income per hectare (x times of wheat)

Increase of 2.5 million hectares under horticulture (2007-12)now

accounts for more than 10 % of total farm land
Source: NSSO, Dept of Animal Husbanday, Credit Suisse estimates

11

Emergence of Service Sector

100%

100%

Service

90%

90%

(40%)

80%

80%

70%

70%

60%

60%

Industry

50%

(30%)

50%

40%

40%

30%

30%

Agriculture

20%

(30%)

20%

10%

10%

0
Mar-00

Mar-03

Mar-06

Mar-09

Mar-12

Salaried employment doubled, regular and steady HH Income

Source: Government of India, Credit Suisse estimates

12

Employment Pattern three fold growth in

construction in last decade
100%
90%
80%
70%

4
11
10
3
10

60%

11

Construction

12

Manufacturing

10
4
10

50%

Transport,communication & storage

Others*
Agriculture

40%
30%

Trade, hotels & restaurants

60

53

20%
10%
0%

2000

2010

Source: Employment & Unemployment Situation in India, NSSO

13

Growing Real wages for rural labor

8
7
6
5
4
3
2
1
0
1983-94

1994-2000

2000-05

2005-08

2008-13

Real Wage Growth (%)

Source: Labour Bureau, NSSO, Credit Suisse estimates

14

Pyramid Morphing to Diamond

2010

2020
Per capita Income USD/Day

50

>5

150

350

1-5

500

400

<1

250

800 million

900 million

15

Growing Rural Demand

FMCG Growth (2014
over 2013) (%)

Personal Care

Household
care

Rural

Urban

Rural

Urban

Volume Growth

Per capita rural GDP grew at 6.2% CAGR

against 4.7% in urban since 2000

Value Growth

Percentage increase in monthly per capita expenditure

Source: NSSO, IMRB report 2015

16

Growing Rural Spending

Rural consumption growing at 1.5 times urban

500

400

Monthly per capita consumption expenditure ( INR, at constant prices 1993-94)

401
355
311

300
200

175

188

221

100
0

Rural

Urban
2004-05

2009-10

2011-12

Monthly per capita spending jumped 17% in rural and 12% in urban

Source: NSSO

Rural India : The Silent Transformation

Self- sustaining, productivity-driven job creation transforming Rural India

Source: Credit Suisse

18

Rural ahead in house ownership & work participation

catching up on others
120
100

95

100

92

92

80

80
65

69

68

63
55

60

70

54

42
40

35
Rural
Urban

20

Source: Census 2011 & IRS 2011

Road connectivity

HHs availing
banking services

Electrified HHs

Permanent
Houses

House ownership

Literacy levels

Work
participation rate

Rural ahead in female work participation

45
40
35
30
25
20
15
10
5
0

42
35

35
26
22

21
Rural
Urban

Double income families

Source: Census 2011 & IRS 2011

No kinds, double
income

Share of working
women

Rural occupation.. Domination of Self Employed

80

Distribution of HHs by occupation (%)

58

60
40

41

22

21 19

20
0

37

1
Self Employed

Labour

Urban

Regular Salaried

Others

Rural

Source : Pre Launch Survey Report of Insurance Awareness Campaign , NCAER 2011

21

Incomes
.. Steep rise in rural incomes

120000
100000

108000

Average Annual Household Income(Rs)

88700
75400

80000

67700

60000

40000

33000
21000

20000
0

Income

Expenditure

Rural

Disposable Surplus

Urban

Source : Pre Launch Survey Report of Insurance Awareness Campaign , NCAER 2011 , MART analysis

22

Rural catching up with urban

higher spend on health & apparel

60
49

50
40

% of Total HH Spending

38
Urban

Rural

30
17

20
6 7

10

5 6

6 6

Clothing

Durables

8 9

11

0
Food

Health

Transport & Education

leisure travel

Source : NSSO , 68th Round, 2011-12

Housing

fuel & Light

Others

23

Growing non- food spending in Rural

Composition of Consumer Expenditure (%)
2004-05

5 3 4

55

2009-10

54

2011-12

49
Total food items
Conveyance
Education & health
Other non food

5 5

19

18

10

18

Consumer services excl conveyance

Apparel
Durables

Non food spend rose from 45 % in FY2005 to more than 50% in FY2012
Source : NSSO Rounds

24

Potential for Consumption Growth

Rural
penetration (%)

Category

Headroom
for Growth

Urban
penetration (%)

2001

2010

2010

Toothpaste

32

45

75

Shampoo

16

46

62

Television

37

78

Pressure Cooker

13

24

73

Motorbike

11

45

Rural Youth
Visit nearby town for higher education.High
exposure to town life.
Urban aspirations
Spoken English & computer knowledge
.Vocational & career oriented

High mobility for education & jobaspire to

work in city.
Objectivefathers current earning as his first
salary
Trend setter.Growing Individualism
Owns Smartphone & rides bike tech savvy

Shift from Loose to Packaged

Packaged

loose

Multi Brands within family & by Individual

28

New Brands Entering Rural HHs

Packed Food

Premium
Brands

Personal
Hygiene

29

Shift from Affordability to Economy

30

Aspiration matching Urban

31

English Medium Private Schools

32

Private Tuitions

33

Ready Stitched No Tailoring

34

Better Road Connectivity

Then

Now

35

Improved Transport Facility: Public to

Personal Transport

36

Smart Phone : Increasing Internet Penetration

37

New Shop Categories

Beauty Parlors

Readymade Garments
Shop

Cosmetic shops

38

Trading uphigh spend on product upgradation

Source : Census , 2011

39

Imperatives of Union Budget 2015-16driving long term

consumption boom

Ease of doing business in India GST by April 2016

JAM (Jan Dhan, Aadhar & Mobile) for direct benefit transfer

High thrust on Agriculture

oIncreasing irrigates areasimproving existing systems

oValue addition & reasonable price for produce

oINR 8.5 lakh crore target for agri credit in 15-16

Rural infrastructure development

o INR 25000 crore allocation for RIDF

oContinuation of MNREGA and other social and developmental initiatives

Rural Housing for all 40 mn houses by 2022

Growing entrepreneurial spirit
oTurning youth into job creators Self employment & talent utilization (SETU)
o Funding the unfunded MUDRA Bank
oElectronic platform for MSME financing

Skilling India National Skill mission, Deen Dayal Gramin Kaushal Yojana

Social security for all

40

Skilling

Skills
Creating
Incomes

500 Million people by 2022

57 Million surplus in India
46 Million global shortage

India can emerge as skill capital of the world

Broadband to 250,000
Panchayats
100 mn Internet users

IT&ITES

350 mn mobile users

Smartphone growing rapidly
100 mn bank accounts direct
transfer

Democratizing Information

7 million SHGs
1 ASHA for every 1000
pop

Social
Infrastructure

1,40,000 rural post offices

2,00,000 NYKS youth clubs

Political

Rural

Social

Soul of India

Cultural

Economical

Thank You