Using E Commerce To Fuel Rural Growth In India by Sohag Sarkar


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This Business Papper analyzes how E-Commerce can help stimulate the growth in rural India.

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Using E Commerce To Fuel Rural Growth In India by Sohag Sarkar

  1. 1. A Business Paper on“Using E-commerce to fuel rural growth in India” (Towards “In search of excellence” Business Paper Writing Competition) Using E-commerce to fuel growth in Rural India
  2. 2. Using E-commerce to fuel rural growth in India “There is one thing which is stronger than all the armies of this world, and that is an idea whose time has come” -Victor Hugo1. IntroductionIf wishes were horses, rural India would have progressed far beyond her present state. What wesee instead is that policy makers, administrative workers and citizens are at a loggerhead whilerural businesses are still waiting to take off. The purpose of this paper is to define the role ofE-commerce in fueling rural growth in the country. It tries to identify the contemporary needs andaspirations of rural India and proposes a model to acknowledge the same.1.1 Why Rural India?India with a billion plus population holds 600 million of her people in the rural areas. And a hefty66% of the workforce is employed in agriculture; which is credited to the rural areas. It is therefore,imperative to toil hard for rural growth & development.1.2 Why E-commerce?E-commerce has already added many feathers to its cap, and is being viewed as a strategic toolthat can fuel rural growth in various developed and developing economies of the world. India hasalready moved ahead to grab the opportunity and did almost Rs 450 Crores of e-commercebusiness in 2004. There is no wonder why the same success story cannot be repeated in India’slargest consumer segment i.e. the rural market.2. E-commerce & Rural IndiaE-commerce in India is still in nascent stage, but even the most pessimistic projections indicate aboom. For the multifarious benefits that e-commerce offers make it a preferred choice for possibleadoption in rural India.2.1 What is E-commerce?It literally means buying and selling of goods and services on the Internet especially using theWorld Wide Web (WWW). E-commerce provides multiple benefits to the consumers in the form ofavailability of economical goods or services, wider choice and saves time. People can buy andsell goods or services with a click of a mouse button without moving out of their house or office. Using E-commerce to fuel growth in Rural India
  3. 3. 2.2 Traditional Rural SetupUrban & Rural India is categorized based on population, primary employment of males &population density. The rural business encompassed agricultural activities like cultivation,livestock, forestry, fishing, plantation, etc and other non-agricultural activities. Past economicfigures have registered rural contribution of 50% (20-25% by Agricultural activities alone) towardsGross Domestic Product (GDP).The agricultural market is inefficient given the asymmetry of price information, as the pricesprevailing at the mandis are often not known to them. This is because of the presence ofnumerous middlemen who siphon off a large part of the price and consequently pass only a smallamount to the farmers. They are also duped while making purchases of agricultural resources.Asymmetry of information is a formidable problem for the growth of rural India; be it agriculture,education or entrepreneurship development.2.3 Introduction of E-commerceE-commerce can promise an effective market place for the rural populace by doing away with thetraditional roadblocks and asymmetry of information. E-commerce is a wider term andencompasses: e-governance, e-business & e-citizen.Needless to mention, that to provide such an e-commerce infrastructure would be an uphill task.But, it has been aptly said: "Growth begins when we begin to accept our own weakness" - Jean Vanier Using E-commerce to fuel growth in Rural India
  4. 4. 2.4 Benefits of E-commerceE-commerce is a cost-effective simulation of common-place market operations. It reduces space& time boundaries. It also promotes transparency & accountability and enables swift delivery ofinformation and services. The rural populace can reap the benefits of this medium by actualizingtheir long-established market operations into this.3. Feasibility StudyThe billion dollar question is “Can the success stories of e-commerce be paralleled with ruralIndia?” This would require a lot of introspection: research & analysis. Methodically speaking, itwould be wise to first gauge the bottlenecks and then try to find solutions to them.3.1 The BottlenecksThere are several impediments which make this endeavor a daunting task. The formidable onesbeing: 3.1.1 Infrastructure E-commerce requires the use of Internet and Communication Equipment viz. typically a Personal Computer (PC). On a broader sense, e-commerce requires the use of Telecommunication Infrastructure for connectivity and Power Infrastructure for electricity. At present the rural teledensity stands at an abysmal 1.70 (with negligible contribution coming from mobile services). While only 30.54 per cent of rural households have electricity [HDR 2002]. 3.1.2 Technology Information & Communication Technologies (ICT) has to be looked at the backdrop of e-commerce bottlenecks. Issues relating to content and connectivity have to be addressed. 3.1.3 Finance Such a model has to be backed with promising monetary funding. It needs to be seen, as to who would be at the forefront to this. 3.1.4 Human Resources Trainers, motivators, supporters, administrators among other people would be required for such a project to take off. 3.1.5 Diversity It would be imprudent to consider rural India as a homogenous sector. Perhaps it is very diverse and her culture, dialect, aspirations, economics, environment, politics, etc maybe poles apart. Using E-commerce to fuel growth in Rural India
  5. 5. 3.2 The SolutionsWe cannot waste another generation to see this project to reality; it’s nor or never. Theimplementation has to be fast and should be backed by continuous feedback and assessment. 3.2.1 Infrastructure The Ministry of Communication & Information Technology is looking forward to teledensity of 22 by 2007 (prioritizing rural India). The private company like Reliance has promised to expand in the rural areas. Prices of PCs are coming down heavily and abridged versions are being created for the rural masses. The concept of Thin Clients and Fat Servers is just another example which can help provide low-cost computing solution. The indigenously made Simputer can be tested here. Various organizations are promoting the use of non-conventional sources of energy like solar energy, biogas, etc. 3.2.2 Technology Wireless solutions like WiFi, WiMAX and VSAT would be preferred over wired solutions. But what is interesting is that the Optical Fiber backbone is not being highlighted in this frame of discussion. Considering the present or proposed OFC Network of BSNL (4,00,000 km), Indian Railways (35,000 km), Power Grid (14,0000 km), GAIL (14,500 km), Reliance Infocomm (60,000 km) among others, the ball certainly seems to be in our court. Today 85% of the taluka headquarters have optic fiber, which can provide the backbone for telecom and Internet connectivity. 3.2.3 Finance There are various Government Organizations that support such initiatives. Individual efforts to provide used PCs to the rural populace have also been in the light of all things; also the work done by local NGOs. But it would be the private organizations which can provide a Win-Win solution here. The Government funded projects do not stand much of a chance for successful completion. This can be explained by a simple philosophy. There are four ways in which money can be spent: Money earned by us and we spend it on ourselves; Money earned by us and we spend it on others; Money earned by someone else and we spend it on ourselves; and Money earned by someone else and we spend it on others. We tend to be less and less prudent and lackadaisical in money management as we move from category one through four. And Government funding unfortunately falls in the latter category and thus prone to abuse and under-utilization. 3.2.4 Human Resources Training can be imparted by engaging a group of teachers from the upper primary schools. Rural population has a primary school within 1 km and in 85% of the areas an upper primary school within a distance of 3 km. We have one of the largest elementary education system networks in the world. Using E-commerce to fuel growth in Rural India
  6. 6. 3.2.5 Diversity The cultural diversity is a cause of concern especially the local dialect, but in majority of the areas the national languages (i.e. Hindi and English) are either spoken or understood. The intended audience should be trained on English or Hindi software applications. Software giants like Microsoft has launched a scaled-down and low-cost versions of its Windows XP Operating System (OS) and has been working on its Project Bhasha since 2003. It is also developing Microsoft Windows and Office in 14 regional languages. Similarly, Linux has also launched its Hindi version Linux v4. Usually the village panchayat plays an essential role when projects are Government driven; but for Private projects the local human resources are put to use. The success of Broadband in South Korea (having highest connectivity) can be attributed to the Government’s initiative to promote the use of Internet and making the use of E-learning mandatory in the schools. Once the rural populace brings the use of Internet into its culture then there would be no looking back for us. The government should promote the National languages at any cost, and may even go a step ahead in making it compulsory throughout India. Needless to mention, the popularity of any languages cannot come unless there is some commercial angle to it, English being the befitting example.4. The ModelOnly a strategic model can turn the E-commerce project into a reality. The model that would caterto short as well as long term objectives; would be reviewed periodically and subjected to dynamicalterations and/or adaptations. It is here that the “5-Star Model” can be proposed: Strategize & Setup Spread Simplify 5 Star Model Showcase Simulate Using E-commerce to fuel growth in Rural India
  7. 7. The following steps would drive the 5-Star Model:Step I: Strategize & SetupExtensive research has to be carried out for the selecting the appropriate locations or villages.The various parameters that have to be gauged are: Infrastructure (Electricity,Telecommunications, and Education), Population, Road & Transport, Postal & Courier Services,Primary employment activities, geographical advantages, climate, etc.After the research, the primary or secondary data would be analyzed to identify threshold valuefor the selected parameters. Villages can be selected in this way where the e-commerce can beapplied to fuel rural growth.The villages may be segmented based on several criterion, for example villages nearMahabaleshwar can be classified as Strawberry producing zone; whereas those in and aroundNagpur may be classified as Orange producing zone.These villages would be called as “Hot-Spot” zones, because most of the experiments would becarried out only within this region. The potential customers would also be studied for example:cultivators, distributors, transporters, stock-keepers, agro-based companies, etc.Once the areas are decided, a proposal would be drafted for setting up the required infrastructure:PCs, Internet, Hot-Spot Kiosks, etc.Step II: SimplifyNext step would be to process of simplification of the use of e-commerce. It is here that the OSlike Linux v4 or Windows XP would come handy. Every Process or FAQs would be well-documented in the local language, for example: “What has to be done when the PC or theInternet connection requires maintenance?” These minute things can hinder the smooth flow ofany project. Till this step there wouldn’t be any interaction with the target segment i.e. the peoplewho would actually be using the services offered by e-commerce.Step III: SimulateThe process of selling and buying would be explained to the villagers. They would undergo shorttrainings for the same; also the concept of electronic money & online bank accounts would beintroduced to them in due course of time. A real world simulation of the e-commerce webpagewould be provided. The villagers would be given some amount of money (in their online bankaccount) and they have to trade their produce over the e-commerce portal and simultaneouslypurchase goods (like fertilizers, seeds, etc) or services. Every villager would we allowed to playthe simulation over the weekends, and winners would be given some token gifts. The idea is tomake them understand the concept of online transactions, of economics (sell for more & buy forless) and of online banking. This being carried out in a playful mood. And, there is also some Using E-commerce to fuel growth in Rural India
  8. 8. reward for performance at the end of the day. Rest would be done by word-of-mouthadvertisement which spreads like wild fire in any rural area.Stem IV: ShowcaseThe villagers would gradually be introduced to the real world e-commerce portals; where theywould be offering their products or services as also request for the same. It should always beremembered that if villagers are not able to make profit out of the e-commerce project; then thatwould be the end of the story. We expect that the villagers would learn with their experiences andmake good money out of it. It would be then that the success stories need to be showcased inupcoming hot-spots or potential areas that can be turned into a hot-spot.Step V: SpreadOnce the process takes off then the frequency of the hot-spots can be increased in the adjoiningor new areas. This would help spread the 5-Star Model thus providing greater reach of e-commerce as also the extent of rural growth.5. Various E-commerce ApplicationsAll customers identified during the research phase would be motivated to use the commone-commerce portal. Initially it would be very elementary & easy to use. Later on advancementsand modifications can be introduced into the portal. A lot of creativity & innovation can go into thee-commerce portals and nominal charges can be levied on the customers. But the benefit thatcan be derived out of the mass utilization of e-commerce would be immense considering thesecond most populous country in the world. Some of the rural applications may include:Job openingsThis can help in solving the unemployment problems in the rural areas.MatrimonialTo help in the selection of suitable bride or bridegroom; across villages.Land Record MaintenanceTo end disputes over land-ownership (which is very common) by means of digitization of records.Agricultural TechnologyNew agricultural equipments/hybrid seeds or any other technological advancement can beintroduced to the rural farmers.Rural TelephonyEconomical voice services (using IP Telephony) can be provided to the villagers who want tocommunicate to their friends or relatives outside India (inside India it is still not legalized) Using E-commerce to fuel growth in Rural India
  9. 9. TravelLot of information can be made available for travels and tours; as also online booking orreservations.TeleMedicine or TeleDoctorMedical consultations can be sought by means of written communication or video conferencingvia economical web cams.Agriculture ConsultancyOnline consultancy can be sought about farm productivity, soil requirements, nourishments, plantdiseases & remedies.Talent Search ContestParticipation in various talent search events by means of online registration.Online BankingThis would come much to the respite of insurance and others companies involving bill receipt andpayments like electricity, telephone, etc.Rural E-lance rdThe rural populace can outsource their products or services to any 3 party and vice versa.Example: Producing potatoes for use in French Fries by MNC or big retail food outlets likePizzahut or Nirulas.AuctioningRural products can also be auctioned over the Internet, for example: used farm equipments, etc.Courier ServiceLocal courier service would grow with the growth of e-commerce transactions.Market ResearchA population of 600 million is a potential market especially for FMCG companies like HLL. Tounderstand the diverse moods and aspirations of this rural market, paid market researches canbe conducted.In fact, there may be numerous applications that can get a berth in the rural e-commerce portal.6. Success StoriesThere are several projects that have been introduced with the prime objective of fueling ruralgrowth. Its’ not important to know if they succeeded or failed, what’s important is to know whythey succeeded or failed? Using E-commerce to fuel growth in Rural India
  10. 10. Here are a few to quote:BhoomiBhoomi is a self-sustainable e-governance project for the computerizing land records and makingthem available to the people of Karnataka for a nominal fee.TaraHaatIt is an e-marketing portal for the rural populace.GyandootThe goal of the project is to establish community-owned, technologically innovative andsustainable information kiosks in the rural areas of Madhya Pradesh.eSevaIt has been initiated by the Andhra Pradesh government to provide “one stop non stopGovernment-to-Citizen (G2C) services”.Information VillageIt is a MS Swaminathan Research Foundations’ experiment to electronically deliver knowledge tothe rural masses in Pondicherry.DrishteeIt is an organizational platform for developing IT enabled services to rural and semi-urbanpopulations through the usage of state-of-the-art software.ITC’s eChoupalseChoupals have been set across the agricultural belt to offer the farmers all the information,products and services they need to enhance farm productivity, improve farm-gate price realizationand cut transaction costs. All these information are received through their Hindi portal.AkashgangaBased in Gujrat, it has been conceived with the objective to spread IT among dairy cooperatives.SetuAn initiative by the Maharashtra Government to create a foundation for citizen centric e-governance at district as well as taluka headquarters.ShristiIt is a NGO setup to strengthen the creativity of grassroots inventors, innovators and ecopreneursengaged in conserving biodiversity and developing eco-friendly solutions to local problems.Other Technology-related initiativesMedia Lab Asia (MIT Media Lab & Indian Govt.), Warana Wired Village (Sugarcane Cooperatives,Maharashtra), SARI (Tamil Nadu), FRIENDS and Akshaya (Kerela), Mahiti Shakti Kendras(Gujrat)Other Educational IT initiativesHeadstart (Madhya Pradesh), AP Schools (Andhra Pradesh & NIIT), Vidya Vahini, CommunityLearning Centres (Azim Premji Foundation) Using E-commerce to fuel growth in Rural India
  11. 11. 7. ConclusionE-commerce can fuel rural growth. But, for it to succeed, we have to first step into the shoes ofthe rural populace and strategize from all angles. To put it straight, if they are not able to makemoney out of it, then the project is doomed to fail. Administrative reorganization happens at theend of political tenure, red-tapism still persists and government process are not time efficient.Thus the initiative should come from the private players; it is they who can provide a Win-Winmodel. And there should be continuous monitoring and assessment to make it succeed. “The line between failure and success is so fine that we scarcely know when we pass it; so fine that we are often on the line and do not know it” -Elbert Hubbard Using E-commerce to fuel growth in Rural India