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Rural Markets in India
 

Rural Markets in India

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Study Sponsor IMA (Associate of Economist Intelligence Unit) ...

Study Sponsor IMA (Associate of Economist Intelligence Unit)

The EIU, through its Indian subsidiary International Market Assessment, and Indicus Analytics conducted a joint study on the attributes and potential of Indian rural markets (2002)

Content

Demographic Profile

Population profile of India
Family Sizes and Dependence in Rural Areas
Distribution of Household Size
Age and Sex Distribution in Rural India
Progressively Fewer Children – Less than 10 years of Age
Family Characteristics
Literate people (Total Population)
Sex Ratio across Demographic Segments in rural areas
Educational Characteristics


Occupation

Percentage of people in the work force
Primary Employment Characteristics of Head of Household
Finer break-up of Rural Employment Characteristics(%)
Percentage Of work force in a Wage Earning Job Error! Bookmark not defined.
Land Cultivation: Size of Land and Number of Households
Land ownership and expenditure profile of households


Expenditure Characteristics

Expenditures by All Households
Occupations and Expenditures
Land Owned by Self Employed in Agriculture and expenditures
Expenditure Distribution of an average household
Annual Expenditure per Household and Annual Market Size
Defining Economic Classes
Annual Expenditures by Rural Households
Total Amount Spent by different categories of households
Rural Market Size Of Different Commodities
Rural Market Across Expenditure Classes- 1
Rural Market Across Expenditure Classes- 2
How to define Major Economic Classes
Household’s Value of Purchases Across Economic Classes
Expenditure Profile
Rural Economic Classes -Expenditures per household
Rural Economic Classes - Expenditure Characteristics
Expenditure Profiles of Broad Economic Classes
Expenditure Distribution across Broad Economic Classes
Access To Media


Seasonality in Expenditures

Seasonality in Rural Consumption Expenditures
Seasonality in Rural Consumption Expenditures: The Affluent and Middle Classes
Seasonality in Rural Consumption Expenditures: The Marginally Non-poor and Poor Classes
Seasonality Across Economic Classes: Comparing the Per household Monthly Expenditures


The Geography of Rural Markets

Where are the Better-off Households located?
The states in terms of Rural Affluence
The Affluence Rates in Rural sub-regions
What determines Rural affluence?
Consumption characteristics of the affluent.
Similar types of affluence across India


Trends
Population Characteristics
Number of households engaged in different types of work
Number of rural households per every 1000 in different size class of land
cultivated
Literacy rate
Number of persons in different education levels
Section 5B: How will Rural Markets evolve?
Close relationship between Agricultural Value Added and GDP
What would the agricultural GDP be?
Demand for Agricultural Inputs .
Where would the future take Rural India?
The Great Unknowns

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    Rural Markets in India Rural Markets in India Document Transcript

    • Rural Markets in India Submitted to: IMA (Associate of Economist Intelligence Unit) Indicus Analytics Indicus Analytics 1
    • Section 1: Demographic Profile Contents Population profile of India 3 Family Sizes and Dependence in Rural Areas 4 Distribution of Household Size 5 Age and Sex Distribution in Rural India 6 Progressively Fewer Children – Less than 10 years of Age 7 Family Characteristics 8 Literate people (Total Population) 9 Sex Ratio across Demographic Segments in rural areas 10 Educational Characteristics 11 Indicus Analytics 2
    • Population profile of India Parts of Total population Percentage Total No. of households Average India (in millions) (%) (in millions) household size Rural 741.6 72.2 148.3 5.0 Urban 285.4 27.8 63.4 4.5 Total 1,027.0 100.0 211.7 4.9 Population Urban 28% Rural 72% • Bulk of the population is rural – more than 740 million Indians reside in rural areas. • Average rural household has five members; slightly higher than in urban areas Whom and where should marketing efforts be targeted? Indicus Analytics 3
    • Family Sizes and Dependence in Rural Areas Population Characteristics Distribution by Economic Class Poorest 5% Richest 5% All Households Households Avg. Household Size 6.0 3.6 5.0 Avg. no of adults per Household 3.0 2.8 3.2 Avg. no of children per 3.0 0.7 1.9 Household (0 to 10 years) Household Size 6 5 3.6 Top 5% Average Bottom 5% Economic class Poorer households have larger families, and more children tribution of Household size per 1000 households The better-off have smaller family sizes Household size Largely due to fewer children Part 1 2 3 4 5 6 7 8 9 10+ Rural More available for 187 190 140in richer households 50 91 122 lesser people 87 52 30 50 Urban 106 83 131 225 179 118 65 39 20 35 S: page17 Indicus Analytics 4
    • Distribution of Household Size Distribution of households as per household size 250 Rural Urban 200 Households per 1000 150 100 50 0 1 2 3 4 5 6 7 8 9 10+ Household size By and large family sizes in rural areas are not highly different from urban areas Incidence of joint families is only marginally more in rural areas Incidence of single person households largely due to migration What are the age-sex characteristics? Indicus Analytics 5
    • Age and Sex Distribution in Rural India Population Age Profile Male Female > 90 80 to 90 70 to 80 60 to 70 50 to 60 40 to 50 30 to 40 20 to 30 10 to 20 < 10 100 80 60 40 20 0 20 40 60 80 100 Number in millions • 63% of the rural population is below 30 years of age • Half of the population is aged below 21 years • For every 100 people in the 20 to 60 year age group there are 117 dependents (above 60 and less than 20 years). A young market Indicus Analytics 6
    • Progressively Fewer Children – Less than 10 years of Age Population Age Profile 8 to 10 6 to 8 Years 4 to 6 2 to 4 0 to 2 0 5 10 15 20 25 30 35 40 45 Numbers in millions • Fewer children in the 0 to 2 and 2 to 4 age groups • Reflects falling birth rates Population growth will not forever lead market growth Indicus Analytics 7
    • Family Characteristics Family Category Percentage of All Average number of . households individuals per household Unitary 12.2 1.6 (Single person or with spouse) Nuclear 50.8 4.7 (Couple with children) Extended 28.2 6.1 (Parents with one married child) Joint 4.3 10.3 (More than one married siblings) Miscellaneous 4.5 8.7 • Most households contain individuals or couples. • Nuclear households are the norm in rural India. • Extended households include elders living with married children. Nuclear households are the norm and Joint families are an exception. Indicus Analytics 8
    • Literate people Rural Rural + Urban Literates (millions) (millions) Male 226.3 339.9 Female 140.4 226.8 Total 366.7 566.7 Sex Ratio of Literates (per 1000 males) 620 667 Literates (All India) 340 350 300 227 Population in Millions 250 200 150 100 50 0 Male Female • According to the Census 2001, 65.38% of the country’s population is literate. • Females have a much lower literacy rate than men in general. • Rural women have an even lower likelihood of being literate. Though there are more women than men in rural India, literate women are significantly fewer Indicus Analytics 9
    • Sex Ratio Females per Sex Ratio 1000 males All Population 933 Rural 946 901 Urban Sex Ratio in Rural and Urban areas Urban Rural All Population 600 650 700 750 800 850 900 950 1000 Females per 1000 male Rural India in general has more females per male than in urban India This is due to two factors: Poorer tend to have greater females per male, and rural population tends to be poorer. Migration of males to urban areas also contributes Significantly larger proportion of females in the population Indicus Analytics 10
    • Educational Characteristics Education Category Rural male (%) Rural female (%) Non-literate 40.1 61.1 Literate below primary 19.6 25.1 Literate up to primary 13.3 9.8 Literate up to middle 12.6 7.6 Literate up to secondary 6.7 3.2 Up to higher secondary 3.1 1.2 Graduate and above 2.1 0.6 Others 1.4 1.2 Education levels of usually employed 70 Rural male (%) 60 50 Rural female (%) Percentages 40 30 20 10 0 Non-literate Literate below Literate up to Literate up to Literate up to Up to higher primary primary middle secondary secondary • About Every 2 in five males are literate; every 3 in five females are illiterate in rural areas. • Among the female employees around 74% in rural India are illiterate. • The percentage of workers, who are graduates and above, is comparatively much smaller. Large increases in literacy have only generated basic ability to read , but education levels continue to remain low Indicus Analytics 11
    • Section 2: Occupation Contents Percentage of people in the work force 13 Primary Employment Characteristics of Head of Household 14 Finer break-up of Rural Employment Characteristics(%) 15 Percentage Of work force in a Wage Earning Job Error! Bookmark not defined. Land Cultivation: Size of Land and Number of Households 18 Land ownership and expenditure profile of households 19 Indicus Analytics 12
    • Percentage of people in the work force Part of India Male (%) Female (%) Rural 54 30 Urban 54 15 People in labor force 60 Percentage of population 50 40 Rural 30 Urban 20 10 0 Male Female The work force comprises of people willing and able to work outside of home. Both rural and urban male populations have broadly equal proportions in the work force. But rural females are significantly more likely to be in the labor force than urban females Indicus Analytics 13 Rural females are twice as likely to be working than urban females
    • Primary Employment Characteristics of Head of Household Rura Urba Nature of work l n Self Employed 46.1 34.4 Wage/regular/salaried 40.2 55.7 workers Others 13.7 9.7 Employment characteristics of head of household 60 50 40 Self Employed Percentage 30 Wage/regular/salaried workers Others 20 10 0 Rural Urban Indicus Analytics 14
    • Rural households have a much higher ratio of self owned businesses (46%) . Urban households are more likely to be dependent on being employed by others. 41.7% of the urban salaried/wage worker households are employed on a regular basis; 14% are on a casual basis. Incomes less stable in rural areas due to lower regular wage employment Finer break-up of Rural Employment Characteristics(%) Households whose main occupation is: Self- Self- employe employe Agricultu Other d in d in non- Others Total ral labor labor agricultu agricultu re re 32.7 13.4 32.2 8.0 13.7 100.0 Indicus Analytics 15
    • Others Self-employed in agriculture Other labor Agricultural labor Self-employed in non-agriculture The bulk of the rural self-employed households are involved in agriculture This is also true of those who are employed by others Maximum no. of households (around 64%)in rural India earn their livelihood by agriculture related activities Largely an agriculture based demography Indicus Analytics 16
    • Age Distribution of Work Force Employment rate (Male) Employment rate (Female) Age groups 15 to 25 years 49.6 19.3 26 to 35 years 75.3 20.3 36 to 45 years 85.4 21.5 46 to 55 years 85.3 21.2 56 to 65 years 81.9 18.5 Employment rate calculated on the basis of those working for a wage paying job or working in a family business out of the total work force (those able and willing to work) Those involved in household chores not included Males in lower age groups much less likely to be working that those in middle and higher age groups Females employment rate though significantly lower is more stable across age groups Indicus Analytics 17
    • Land Cultivation: Size of Land and Number of Households Number of Households Land Cultivated in Ha. (millions) Percent 0 to 1 115.9 78.1 1 to 2 16.4 11.1 2 to 3 7.5 5.1 3 to 4 3.0 2.0 4 to 5 2.2 1.5 >5 3.5 2.3 Total 148.5 100.0 Most households cultivate insignificant amount of land – close to four fifths. Barely 4 percent of the households (5.5 million) cultivate land greater than 4 hectares Only way farmers’ economic condition will improve is by greater use of fertilizers and better seeds. Indicus Analytics 18
    • Land ownership and expenditure profile of households Land Owned by Self Employed Average Monthly No. of Households in Agriculture in Ha. Expenditure (Rs.) (millions) 0 to 1 2,256 22 1 to 2 2,635 12 2 to 3 2,828 6 3 to 4 3,401 3 4 to 5 3,537 2 >5 4,303 3 All Landowning households 2,689 49 Only about a third of the total households own agricultural land. The topmost category in terms of land ownership makes less than double monthly expenses the lowest category. Indicates large numbers of poorer households Indicus Analytics 19
    • Section 3: Expenditure Characteristics Contents Expenditures by All Households.................................................................................................... 21 Occupations and Expenditures...................................................................................................... 22 Land Owned by Self Employed in Agriculture and expenditures .................................................. 23 Expenditure Distribution of an average household........................................................................ 24 Annual Expenditure per Household and Annual Market Size ....................................................... 25 Defining Economic Classes........................................................................................................... 26 Annual Expenditures by Rural Households................................................................................... 27 Total Amount Spent by different categories of households........................................................... 28 Rural Market Size Of Different Commodities ................................................................................ 29 Rural Market Across Expenditure Classes- 1................................................................................ 30 Rural Market Across Expenditure Classes- 2................................................................................ 31 How to define Major Economic Classes........................................................................................ 32 Household’s Value of Purchases Across Economic Classes........................................................ 33 Expenditure Profile ........................................................................................................................ 34 Rural Economic Classes -Expenditures per household ............................................................... 35 Rural Economic Classes - Expenditure Characteristics ............................................................... 35 Expenditure Profiles of Broad Economic Classes ......................................................................... 36 Expenditure Distribution across Broad Economic Classes ........................................................... 37 Access To Media ........................................................................................................................... 38 Indicus Analytics 20
    • Expenditures by All Households Annual Per Capita Average no. of Annual Total Expenditure in individuals per Family Category Expenditure in Rs. Rs. household Unitary (Single person or with spouse) 12,214 7,973 1.6 Nuclear (Couple with children) 24,617 5,541 4.7 Extended (Parents with one married child) 29,909 5,069 5.7 Joint (More than one married siblings) 51,551 5,078 10.2 Miscellaneous 42,003 4,916 8.2 • Larger households spend greater amounts in total than smaller households • Per capita expenditure falls with household size • Economies of scale presumably play a strong role in household expenditures Do occupation play a strong role in determining expenditures? Indicus Analytics 21
    • Occupations and Expenditures Total Amount Spent in Rs. Average Yearly Expenditure Households Bill. Type of Households per household(Rs.millions) (Rs. millions) Agriculture Labour 20 47 935 Self Employed in Agriculture 32 49 1,575 Other Labour 25 12 291 Self Employed in Non Agriculture 29 20 577 Others 29 21 615 Total 135 149 3,993 Almost two-thirds of the households depend upon agriculture for their main source of livelihood. The self-employed tend to have much higher expenditures in rural areas. The self-employed agriculturalists are both greater in number and have higher spending power than other broad categories How does ownership of land impact expenditures? Indicus Analytics 22
    • Land Owned by Self Employed in Agriculture and expenditures Average Monthly Total Amount Spent per Year Land Owned (Hectares) No. of Households (Millions) Expenditure (Rs.) by Households 0 to 1 2,256 22.2 60,232 1 to 2 2,635 11.9 37,888 2 to 3 2,828 6.3 21,425 3 to 4 3,401 2.5 10,507 4 to 5 3,537 2.1 9,163 >5 4,303 3.4 17,945 All 2,689 48.7 157,301 About 48 million households are self employed in agriculture Land size directly linked with expenditures Of these barely 30 percent have land greater than 2 hectares Agriculture based households would tend to have lower expenditures than those in other professions Per Household expenditures rise sharply beyond 3 hectares, but l k i f ll b ff b Indicus Analytics 23
    • Expenditure Distribution of an average household Percentage Areas of expenditure Allocation Food and basic needs 59 Cereal 22 Fuel & light 8 Total non food, non 41 basic Clothing & footwear 8 Medical 6 Toiletries and Misc. 10 Transport & services 12 Durables 3 Others 2 The major expenditure is in basic requirements that include cereals and other food and fuel Non basic expenditures that include everything else, are allocated only two out of five rupees spent. Clothing and footwear, and toiletries (e.g. cosmetics, detergents) account for less than half the non basic expenditures. Purely manufactured items (above plus durables) account for only one in five rupee spent by a rural household Per Household expenditures rise sharply beyond 3 hectares, but total Indicus Analytics 24
    • Annual Expenditure per Household and Annual Market Size Total Market Expenditure per household (Rs.) Expenditure category (Rs. Billion) Basics (food and fuel) 18,433 2,710 Of which, Fuel 1,925 283 Clothing 2,003 294 Medical 1,757 258 Of which, Non-institutional 1,365 201 Medicine Toiletries 886 130 Commuting and Transport 654 96 Education related articles 413 61 Institutional Medicine 391 58 Footwear 331 49 Rent 117 17 Entertainment 62 9 Misc. Goods & Services 770 113 But these break-ups are likely to be different across economic classes Indicus Analytics 25
    • Defining Economic Classes First rate households on the basis of its monthly total expenditures Then see how various components of expenditures change as total expenditure of the households increases Obtain insights into the same Use these insights to define broad economic classes Study the expenditure profile of these economic classes Answer questions of the type: What are the higher economic classes? Where are they located? What are their other characteristics? Indicus Analytics 26
    • Annual Expenditures by Rural Households Annual Expenditute by Expenditure Ranked Households 200,000 180,000 160,000 140,000 Expenditure in Rs. 120,000 100,000 80,000 60,000 40,000 20,000 0 100 80 60 40 20 0 Lowest Spending Classes Highest Spending Classes Most households spend more than Rs. 24,000 per year Top 1% of the households (about 1.5 million) spend greater than Rs. 100,000 per year Some possibility that high expenditure households are under-reporting expenditures (dashed line represents this possibility) Great potential for low priced commodities A large but poor market Indicus Analytics 27
    • Total Amount Spent by different categories of households 140,000 120,000 100,000 Rs. Million 80,000 60,000 40,000 20,000 0 100 90 80 70 60 50 40 30 20 10 0 Lowest Spending Classes Highest Spending Classes In total rural household spent about Rs. 4000 billion in the year 2000. Of this the higher economic classes spent the largest amounts, despite having significantly fewer households The poorest sections of the rural population do not have high purchasing power individually as well as in the aggregate. The richest 10% of the households spent Rs. 670 billion, the next 10% spent Rs. 583 billion, the next 10% Rs. 440 billion, a similar amount by the next 10%. Apart from the top and the bottom 10% rest of the households are similar in terms of their spending characteristics Indicus Analytics 28
    • Market Size Of Different Commodities Total Market Size (Rs. Expenditure per Expenditure Category Bill.) Household (Rs.) Food 2,452 16,508 Commuting, Travel & Misc. 326 2,194 Clothing 298 2,003 Fuel & Light 286 1,925 Medical 261 1,757 Non Institutional Medical 203 1,365 Durables 146 986 Toiletries & Cosmetics 132 886 Institutional Medical 58 391 Footwear 49 331 Food, Clothing, Fuel, and Medical expenditures are the highest household expenditure categories. Travel, commuting, and miscellaneous services are also a high expenditure category Manufactured items such as durables, toiletries, and footwear bring up the rear. How do these expenditures differ across expenditure classes? Indicus Analytics 29
    • Market Size Across Expenditure Classes- 1 Total Expenditures of Rural Households across Economic Classes: Concave Expenditures 10 9 8 7 6 Rs. Bill. 5 4 3 2 1 0 0 10 20 30 40 50 60 70 80 90 100 Expenditure Class of Households Durables Non Institutional Medical Institutional Medical Commuting,Travel & Misc Commodities with concave expenditures shoot up across higher expenditure classes. With economic growth these expenditures should increase the most Indicus Analytics 30
    • Market Size Across Expenditure Classes- 2 Total Expenditures of Rural Households across Economic Classes: Convex Expenditures 7 6 5 4 Rs. Bill. 3 2 1 0 0 20 40 60 80 100 Fuel & Light Toileteries & Cosmetics Footwear Clothing Expenditure Class of Households Commodities with convex expenditures do not shoot up across higher expenditure classes. Minor fall in prices will greatly increase penetration among lower expenditure classes Indicus Analytics 31
    • How to define Major Economic Classes The Broad Economic Classes: Division Based on Durable to Non-Durable Expenditures Affluent Middle Marginally non-poor Poor 0 20 40 60 80 100 Many ways of deciding the cut-off between broad economic classes We use expenditure on durables Among lowest expenditure classes, the ratio of expenditures on durables to non-durables increase in a linear manner (Red and green lines) There is however a slight non-linearity among the 22nd to 10th percentiles, (the blue curve) this curvature is strongest in the topmost 9% of the households (the mauve curve) The curve implies that the proportional expenditure on durables increases at a much higher rate. This denotes the poor, marginally non-poor, the middle, and the affluent classes respectively Indicus Analytics 32
    • Household’s Value of Purchases Across Economic Classes Marginally Affluent Middle Class Poor Non-Poor Top 9% 9 to 22% 22 to 52% 52 to 100% Number of households 13 18 45 71 (in millions) Number of people 113 123 255 271 (in millions) Average yearly expenditure per 5,790 3,355 2,296 1,228 household All expenditures in Rs. • The rural consumers can broadly be divided into four categories The poor - Bottom 48% of the economic classes The marginally poor – 22 to 52 percent The rural middle class –9 to 22 percent The rural affluent – Top 9 percent • We find that there is homogeneity of expenditure profile within a category • Caution: Rural affluent and middle classes have a very different profile than urban affluent and middle classes Indicus Analytics 33
    • Expenditure Profile Basic Goods Non - Basic (Food + fuel) Non-basic Non-Durables Durables (Clothing, footwear, toiletries, etc.) (TV, automobiles, etc.) • Broad hierarchy of expenditures • Basic and non-basic expenditures • How do the expenditures differ across economic classes? • We would expect the poor to spend the bulk of their expenditures on basic goods, and insignificant amounts on durables Indicus Analytics 34
    • Rural Economic Classes -Expenditures per household Affluent Middle Class Marginally Non-Poor Poor Top 9% 9 to 22% 22 to 52% 52 to 100% AYE on Basic commodities 39,983 27,079 19,759 11,183 AYE on non-basic non-durables 24,269 11,887 7,123 3,256 AYE on durables 5,223 1,303 679 287 All expenditures in Rs Rural Economic Classes - Expenditure Characteristics Affluent Middle Marginally Poor Class Non-Poor Top 9% 9 to 22% 22 to 52% 52 to 100% Basic/Total 0.57 0.67 0.71 0.75 Toiletries/Other non-basic non- durables 0.08 0.11 0.13 0.16 Durable/ Other non-basic non- durables 0.21 0.10 0.09 0.08 Indicus Analytics 35
    • Expenditure Profiles of Broad Economic Classes Annual Expenditure per Household ( in Rs.) Expenditure category Affluent Middle Marginal Poor Basics (food and fuel) 39,983 27,079 19,759 11,183 Of which, Fuel 3,910 2,746 2,060 1,245 Misc. Goods & Services 16,271 6,954 3,734 1,512 Toiletries 1,951 1,308 937 537 Medical 7,175 2,751 1,498 622 Commuting & Transport 2,392 1,109 590 242 Education related articles 1,709 727 371 110 Entertainment 175 108 60 29 Rent 285 251 117 49 Clothing 5,099 3,069 2,108 1,063 Footwear 939 554 338 151 Durables 5,223 1,303 679 287 Total 69,466 40,267 27,555 14,733 Food remains the main expenditure segment across economic classes Unlike in urban areas rent is insignificant across various economic classes How does the expenditure distribution vary across economic classes? Indicus Analytics 36
    • Expenditure Distribution across Broad Economic Classes Distribution of average yearly expenditure per household Durables 100% Footwear 90% Percentage of total expenditure Clothing 80% 70% Toiletries 60% Misc. Goods & 50% Services Basics 40% (food and Affluent Middle Marginal Poor fuel) Expenditure on basic items like food and fuel increases as the household becomes poorer .The poor households spend more than 70% of their total expenditure on basic items. On the contrary expenditures on miscellineous goods and durables decreases as we move across richer to poorer households. Indicus Analytics 37 The share of expenditure on clothing , footware and toiletries, almost remain the same across all economic segments.
    • Access To Media Affluent Middle Marginally Poor All Class Non-Poor Newspapers 1 17% 3% 1% 0% 3% >1 1% 0% 0% 0% 0% Television Colour 14% 2% 0% 0% 3% BW 44% 29% 13% 2% 16% Cable TV with Cable 14% 4% 2% 0% 3% TV w/out Cable 44% 27% 11% 1% 15% Radio 61% 44% 28% 14% 30% Telephones 8% 1% 0% 0% 2% Note: The figures above are estimates and may be biased downwards by about 10 percent. Low access to media across economic classes. The poor and the marginal classes have insignificant exposure to media barring radio. Access to cable TV is much higher than access to a telephone. Radio has the highest penetration among mass media. Low levels of access to all types of media Indicus Analytics 38
    • Section 3B – Seasonality in Expenditures Contents Seasonality in Rural Consumption Expenditures 40 Seasonality in Rural Consumption Expenditures: The Affluent and Middle Classes 41 Seasonality in Rural Consumption Expenditures: The Marginally Non-poor and Poor Classes 42 Seasonality Across Economic Classes: Comparing the Per household Monthly Expenditures 43 Indicus Analytics 39
    • Seasonality in Rural Consumption Expenditures Seasonality: Total Consumption Expenditures 35.00 30.00 25.00 Rs. Billion 20.00 15.00 10.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Rural household consumption expenditures show distinct seasonality They tend to follow agriculture cycles Rural seasonality differs highly from urban seasonality – Note the trough in October and November Is likely to be different across different geographical regions Do consumption expenditures differ across economic classes? Indicus Analytics 40
    • Seasonality in Rural Consumption Expenditures: The Affluent and Middle Classes Affluent 6,400 6,200 6,000 5,800 5,600 5,400 5,200 5,000 Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec Affluent expenditures are concordant with major agriculture output selling M iddle 3,600 3,400 3,200 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Indicus Analytics 41
    • Seasonality in Rural Consumption Expenditures: The Marginally Non-poor and Poor Classes Marginal 2,400 2,200 Jan Feb M ar Apr May Jun Jul Aug Sep Oct Nov Dec Poor 1,400 1,200 1,000 Jan Feb M ar Apr May Jun Jul Aug Sep Oct Nov Dec The expenditures of the poor are concordant with the harvesting times Indicus Analytics 42
    • Seasonality Across Economic Classes: Comparing the Per household Monthly Expenditures 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Affluent Middle Marginal Poor Affluent expenditures show the highest level of seasonality The other economic classes show very low levels of seasonality in rupee terms. The Affluent spend about 20% higher in the highest expenditure months than the lowest expenditure month. The poorest spend about 9% higher in the highest expenditure months than the lowest expenditure month. For the Marginal and Middle classes this is only 2%. Seasonality in rural areas is different from that in urban areas; it is highly dependent on the agricultural seasons; and differs highly across economic categories Indicus Analytics 43
    • Section 4: The Geography of Rural Markets Contents Where are the Better-off Households located? .................................... 45 The states in terms of Rural Affluence ................................................. 46 The Affluence Rates in Rural sub-regions............................................ 47 What determines Rural affluence? ....................................................... 48 Consumption characteristics of the affluent.......................................... 49 Similar types of affluence across India ................................................. 50 Indicus Analytics 44
    • Where are the Better-off Households located? Orissa Assam Haryana Punjab Tamil Nadu Kerala Karnataka Gujarat Madhya Pradesh Rajasthan Andhra Pradesh West Bengal Maharashtra Bihar Uttar Pradesh 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Affluent Middle Marginal Indicus Analytics 45
    • The states in terms of Rural Affluence Affluent – Middle – Affluent Affluent + Middle States (Only Rural Households in Households in in State Total in State Total areas) ‘000s ‘000s (%) (%) Rural Delhi 276 299 36.2 75.4 Haryana 837 642 30.9 54.6 Punjab 817 729 27.1 51.3 Goa 27 45 16.8 45.2 Kerala 1,004 1,075 20.6 42.7 Himachal Pradesh 208 258 18.5 41.5 Rajasthan 1,180 1,560 17.0 39.5 Gujarat 800 1,135 12.3 29.8 Uttar Pradesh 3,125 3,628 12.9 27.8 Karnataka 618 886 8.0 19.6 Maharashtra 882 1,412 7.0 18.2 Assam 154 492 3.9 16.4 West Bengal 584 1,270 4.8 15.4 Madhya Pradesh 745 1,062 6.2 15.0 Bihar 723 1,467 4.6 13.8 Tamil Nadu 529 668 5.2 11.8 Andhra Pradesh 449 933 3.2 9.7 Orissa 194 411 2.9 9.0 Sorted in descending order by Affluent + Middle in state total The Haryana – Delhi – Punjab rural belt is the highest in terms of affluence rates. Southern India has the lowest rates of rural affluence Uttar Pradesh, Kerala, and Rajasthan have the highest numbers of the affluent How are the affluent distributed within the states? Indicus Analytics 46
    • The Affluence Rates in Rural sub-regions Indicus Analytics 47
    • What determines Rural affluence? Afluence and Agriculture Production (Logarithmic Scale) 100,000,000 . No of Affluent Households 10,000,000 1,000,000 100,000 10,000 10,000 100,000 1,000,000 10,000,000 Foodgrain and Pulses Production Close relationship between presence of affluence and agricultural production. However other factors are also important, such as handicrafts, rural industry, trade, migration, etc. The middle class also follows a similar same relationship. The most important relationship of the presence of rural affluent, not surprisingly, is with agricultural production. Indicus Analytics 48
    • Consumption characteristics of the affluent Indicus Analytics 49
    • Similar types of affluence across India Indicus Analytics 50
    • Section 5 – Trends Population Characteristics ..................................................................................52 Number of households engaged in different types of work ................................53 Number of rural households per every 1000 in different size class of land cultivated.............................................................................................................54 Literacy rate ........................................................................................................55 Number of persons in different education levels ................................................56 Section 5B: How will Rural Markets evolve?.......................................................57 Close relationship between Agricultural Value Added and GDP.........................57 What would the agricultural GDP be? .................................................................58 Demand for Agricultural Inputs ...........................................................................60 Where would the future take Rural India?...........................................................61 The Great Unknowns ..........................................................................................62 Indicus Analytics 51
    • Population Characteristics Year Household Size Sex Ratio (Females per 100 males) 1978 5.2 96 1983 5.1 96 1988 5.1 95 1994 4.9 94 2000 5.0 96 Minor fall in household size – expected to continue at similar rates Fall in females per male throughout the late seventies till mid nineties Has it been reversed? Inconclusive evidence Indicus Analytics 52
    • Number of households engaged in different types of work Occupation Structure 1988 1994 2000 Self Employed Agriculture 37.7 37.8 32.7 Agriculture Labour 30.7 30.3 32.2 Agriculture 68.4 68.1 64.9 Self Employed non-Agriculture 12.3 12.7 13.4 Other Labour 9.0 8.0 8.0 Others 10.1 11.2 13.7 Total 100.0 100.0 100.0 Fall in farmers who cultivate their own land Self employment in other activities on the increase This may also be the result of absence of other employment activities Sustained fall in importance of agriculture as a main source of employment Indicus Analytics 53
    • Number of rural households per every 1000 in different size class of land cultivated Size of Land Cultivated by 1988 1994 2000 Household in Ha. Less than 0.40 54.4 57.5 63.2 0.4 to 1.0 17.3 17.1 16.8 1.0 to 2.0 13.9 13.5 11.2 2.0 to 4.0 8.6 7.6 5.9 Greater than or equal to 4.0 5.8 4.3 3.0 Total 100 100 100 Sustained fall in size of land cultivated by each household Will not be able to take the burden of a large number of rural youth Expect a rapid increase in out-migration in the absence of rural employment opportunities Indicus Analytics 54
    • Literacy rate Year Male Literacy Female Literacy 1983 44.9 21.9 1988 48.4 26.0 1994 54.5 32.1 2000 58.8 38.5 60 50 40 30 20 1983 1988 1994 2000 Male Literacy Female Literacy Rapid advances in the eighties and nineties on the literacy front The relative increase for females much higher Expected to continue in the next few years Population’s level of education increasing steadily, but still low by international standards Indicus Analytics 55
    • Number of persons in different education levels Educational attainment 1994 2000 1994 2000 Male Female Male Female Not literate 45.5 41.2 67.9 61.5 Literate up to primary school 33.7 34.2 23.0 26.0 Middle school 10.9 12.6 5.6 7.5 Secondary School and above 9.8 11.7 3.4 5.0 All 100.0 100.0 100.0 100.0 Though literacy is increasing, the general of education is quite low, and is likely to remain so. Female education levels are abysmally low Current growth rate indicates it will be a long time before a significant chunk of the rural population will attain educational standards above simple literacy Indicus Analytics 56
    • Section 5B: How will Rural Markets evolve? Close relationship between Agricultural Value Added and GDP Agriculture Value Added and GDP at Factor Cost GDP at Factor Cost Agri Value Added Strong relation between GDP and Agricultural GDP Other factors are not as important econometric analysis But it is not clear what causes agriculture growth, they both feed into each other. Indicus Analytics 57
    • Our trend analysis is based on – GDP estimate Agriculture Value Added estimate Value of Agriculture Inputs estimates What would the agricultural GDP be? Agriculture GDP and Overall GDP Trends Rs. Billion (1995 Constant Rs.) 25000 20000 15000 10000 5000 0 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 Agriculture, value added (constant 1995 Rs. Bill) GDP at factor cost (constant 1995 Rs. Bill) In the year 2000 we estimate it to have been approximately Rs. 4300 billion If 6% per annum growth in GDP is to continue through till 2010 then based on past relationships Agri GDP should be about Rs. 7000 Billion (at 2000 price levels) Indicus Analytics 58
    • For every Rs. 1 growth in GDP we have observed a Rs. 0.21 paise increase in Agriculture value added in the past. Estimates till 2010 are based on this finding Indicus Analytics 59
    • Demand for Agricultural Inputs What would be the growth in Agriculture inputs? 4500000 45000000 4000000 40000000 3500000 35000000 3000000 30000000 2500000 25000000 2000000 20000000 1500000 15000000 1000000 10000000 500000 5000000 0 0 1961 1971 1981 1991 2001 Agricultural machinery, tractors . Fertilizer consumption (metric tons) . By 2010 the number of tractors in the country would have doubled from about 2 million currently to 4 million. Fertilizer growth would be marginally higher – from current levels of about 20 million metric tones consumed annually, it would reach about 42 million metric tons Indicus Analytics 60
    • Where would the future take Rural India? Positives Large number of people will enter the workforce They will be relatively better educated than their elders Better information availability and greater opportunities for commerce Negatives Falling size of land. Over dependence on limited land. Poor living conditions will continue for the bulk of the population Indicus Analytics 61
    • The Great Unknowns Unlike past growth estimates, these figures are not based on any high assumptions of economic growth. However changes in the structure of the economy could impact them adversely or positively. The Great unknowns for the future: Political ups and downs Dependence on rains Impact of WTO Large group of young people reaching adulthood – positive if opportunities exist. But what would happen if opportunities are absent? Indicus Analytics 62