This document summarizes key aspects of the rural marketing environment in India based on Chapter 2 of the textbook "Rural Marketing, 2e". It describes the evolution of rural marketing through four phases from an unorganized market to initiatives focused on rural development. It then analyzes the rural demographic, physical, social, cultural, political, and technological environment. Finally, it examines the rural economic structure including the farm and non-farm sectors, rural enterprises, migration trends, income and expenditure patterns, and changing consumption patterns in rural India.

1. Rural Marketing, 2e
Chapter 2
The Rural Marketing Environment

2. Rural Marketing, 2e
Learning Objectives
• Describe the evolution of rural marketing
• Track the rural marketing environment in terms of
demographic, physical, social, cultural, political and
technological aspects
• Understand the rural economic environment, the changing
rural economic structure, and income spending pattern
• Understand rural infrastructure, government support, and
its relevance for marketing
• Describe the initiatives in the rural employment generation
programme
2

3. Rural Marketing, 2e
The Evolution of Rural
Marketing
•Marketing of rural products in rural and urban markets and
agricultural inputs to rural markets.
•A totally unorganised market
Phase I
(Prior to the
60s)
•Green revolution ushered in scientific farming practices resulting in
exponential growth in agricultural production
•White revolution gave a fillip to cooperative movement
•Establishment of distribution networks by FMCG companies
Phase II
(60s to 80s)
•Increased rural thrust and strengthening of local governance resulted
in socio-economic progress.
•Growth in consumables and durables
Phase III
(90s)
•Going rural becomes the mantra even for high value products and
services
•Government initiatives of rural loan waiver, employment and rural
infrastructure development provide further acceleration
Phase IV
(2000 to
present)

4. Rural Marketing, 2e
Rural Environment
Demographic
Physical
Social and Cultural
Political
Technological
4

5. Rural Marketing, 2e
Rural Demographic
Environment
• Rural population is nearly 70% of total population down
marginally from 74% in 1991
• Total number of households 165 million with average family
size of 5 per household
5
The Rural Population in India

6. Rural Marketing, 2e
Rural Demographic
Environment
6
A Break-up of the Type of Households in India
Others includes siblings living together, etc.
Source: Indian Readership Survey
•Joint family structure giving way to individualized joint families
staying in the same house but with separate kitchens

7. Rural Marketing, 2e
• 35% of the population is in the consuming age group of 15 to
34 years
The Rural Population in India
Rural Demographic
Environment

8. Rural Marketing, 2e
Rural Demographic
Environment
• Literacy rate up from 53% in 2000 to 63% in 2010
Literacy Among Individuals of Age 12 years and Above

9. Rural Marketing, 2e
• Land fragmentation, rising education and increased skill sets
have encouraged shift from agricultural to non-agricultural
occupation
Rural Demographic
Environment
Occupation Break-up in Rural Areas

10. Rural Marketing, 2e
Rural Demographic
Environment
• Total land under farming almost constant but growth in
small and marginal farmers
• Per capita income up from INR 11,227 in 2004-05 to INR
15,173 in 2010
The Landholding Pattern in Rural India

11. Rural Marketing, 2e
Rural Physical Environment
Settlement Size
• Total of 6.39 lac villages of
which 5.93 lac inhabited
Housing Structure
• Type of houses indicators
of economic growth
• Share of pucca houses up
from 31% in 1990 to 65%
in 2010
Spread of Villages in Rural India
The Housing Pattern in Rural Areas
Source: Census of India and Indian
Readership Survey.

12. Rural Marketing, 2e
Rural Physical Environment
Settlement Size
• 36.4% of villages have
population of 500 or less
with no shops
• Villages with population of
2,000+ (15.7%) most
prosperous with 50% of the
rural population and 60% of
the rural wealth
Housing Structure
• Type of house was part of
SEC classification in rural

13. Rural Marketing, 2e
Rural Social and Cultural
Environment
• India has 56 socio-cultural regions which were later split into 90
to be used for market segmentation and targeting
• Villages have local Gram Panchayats with reservations on caste
and gender lines
• The role of elders as influencers now giving way to youth and
knowledgeable
• Houses in villages are owner occupied
• Houses in villages are clustered by caste or religion
• The influence of the caste system reducing over the last few
years

14. Rural Marketing, 2e
Rural Political Environment
• Panchayati Raj provides a three-tier system of self-
governance in all states with a population of over two
million with elections every five years
• Villages with a population of 5,000 or a cluster of villages
with a population of 5,000 form a panchayat
• A minimum of 33% seats are reserved for scheduled castes,
scheduled tribe and women
• Involved in preparation of economic development plans and
their implementation
• Gram Sabhas (assembly of all sections of society) to meet
at least once a quarter

15. Rural Marketing, 2e
Rural Technological
Environment
• Rapid mechanization
 Total cropped area constant at around 190 million
hectares
 Tractors nearly doubled between 1994 and 2006
15
Rapid Growth of Farm Mechanization

16. Rural Marketing, 2e
• Share of animal power down from 16% to 7%
Increasing Mechanization: Source of Power
Source: India Brand Equity Foundation, www.ibef.org
Rural Technological
Environment

17. Rural Marketing, 2e
Rural Technological
Environment
• Information and communication revolution enhancing
exposure to weather forecasts, mandi rates, health and legal
advice, job opportunities
• Effectiveness of e-Choupal introduced by ITC
17

18. Rural Marketing, 2e
The Rural Economic
Environment
Rising rural incomes is
fuelling consumption growth
increasing the share of total
Parameter Contribution of Rural India (%)
Total Population 70
Total Income 56
Total Expenditure 64
Total Savings 33
• Rural growth was the
highest in 2009
• All human development
indicators on the rise
• Persons below the poverty
line down from 27% to
22%
18
Table 2.9

19. Rural Marketing, 2e
The Changing Face of Rural
Development
• Growth in nominal rural GDP has increased to over 12% per
annum over the last few years.
• Political environment more friendly.
• All human development indicators in rural India are
improving
19
Growth in Rural Consumption
Source: Credit-Suisse

20. Rural Marketing, 2e
The Changing Face of Rural
Development
• Six fold increase in budget allocations for agriculture and
rural development between the 8th and the 11th Five Year
Plan
• Farm to non-farm income at 40:60 in 2010
• Shift from food grains to cash crops
• Off-land activities like livestock, poultry and fisheries on the
increase
20
Sectoral Allocations During Five Year Plans (billion, INR)

21. Rural Marketing, 2e
The Transition of the Rural
Economy
Transition has occurred at three
levels:
• Food grain crops
• On-land activities
• Farm activities
Transition linked to high
opportunity for value addition
resulting in high rural incomes.
Farm sector now contributes
only 40% of the rural income
with non-farm activity
contributing to 60%.

22. Rural Marketing, 2e
The Rural Economic
Structure
From food grain-scarce
economy to a food grain-
surplus economy
India largest producer of
coconut, mangoes,
bananas, milk and dairy
products, cashew nuts,
pulses, ginger, turmeric
and black pepper.
Second largest producer of
rice, wheat, sugar, cotton,
fruits and vegetables.

23. Rural Marketing, 2e
The Farm Sector
• Shift from staples to more lucrative cash crops
• Area under food grains and coarse grains declined by 2 and
18% while sugarcane and cotton up by 25 and 10%
respectively
• Minimum Support Prices now being increased at a faster
pace
• Production of foodgrains in 2009–10 is estimated at 216.8
million tonnes.
• Allied activities like dairy, poultry and fishing also growing
23

24. Rural Marketing, 2e
The Non-farm Sector
Secondary sector
• Cotton textiles, wood, pottery, food, metal products,
handicrafts
• Electrical equipment, paper, chemicals and power looms
Tertiary sectors
• Trade, transport, food business, education, personal
services
Non-farm sector accounts for 60% of rural GDP employing
only 27% of the rural workforce
• Estimated to contribute 70% by 2020
24

25. Rural Marketing, 2e
Rural Enterprises
• Total rural enterprises 25.54 million (61% of total)
• Non-agricultural enterprises 19.83 million (58% of total)
• Retail trade (39%) dominant activity followed by
manufacturing (26%)
• Number of workers employed up by 20 million between
1990 and 2005
25

26. Rural Marketing, 2e
Rural Enterprises
26
The Status of Rural Enterprises in India
Non-agricultural Establishments in Rural India
Source: Economic Census, 2005.

27. Rural Marketing, 2e
Changing Migration Trends
• Migration from rural areas
has a positive impact on
rural incomes since money is
remitted home
• Migration from rural to rural
highest indicating higher
opportunities in rural.
• 24% of male migrants
returned to their homelands
in 2007–08
27
Migration Pattern

28. Rural Marketing, 2e
Income and Expenditures
• Healthy increase of 50% in rural incomes in last five years
The Rural Income–Expenditure Profile (in INR)
Source: Max–NCAER and Edelweiss–MART Survey.
• Spending up by 33% in same period.
• Maximum income growth experienced by labourers
(includes both farm and non-farm)

29. Rural Marketing, 2e
Income and Expenditures
• Non-farm households reported higher incomes led by
salaried and self-employed
Changes in Rural Income by Occupation Groups

30. Rural Marketing, 2e
• More buying power among non-farm households
The Rural Income–Expenditure Profile (in INR)
Source: Max–NCAER and Edelweiss–MART Survey.
Income and Expenditures

31. Rural Marketing, 2e
Income and Expenditures
Income Disparity
• Top quintile earns seven times that of bottom quintile
• Top two quintiles contribute to 60% of total rural incomes
Distribution of Rural Population and Income by Income Quintiles

32. Rural Marketing, 2e
Income and Expenditures
Rural Spending
• Rural consumption market: USD 190 billion
• Share of food dropped from 58% to 42% in the last decade
• Sectors gaining were transport, education and recreation
• Shift from unbranded to branded goods
• Durables have not grown in wallet share largely due to
drop in prices
• Rural consumption market will triple by 2020 as per
Edelweiss estimates

33. Rural Marketing, 2e
The Changing Wallet Share in Rural India
Source: NSSO and Edelweiss–MART Survey
Income and Expenditures

34. Rural Marketing, 2e
The Rural Infrastructure
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• Bharat Nirman, covering all-round infrastructural
development launched in 2005
• Road connectivity through Pradhan Mantri Gram Sadak
Yojna launched in December 2000
Areas of Development Under Bharat Nirman

35. Rural Marketing, 2e
The Rural Infrastructure
35
• Rural eletrification is 95% although proportion of electrified
households is only 60%
• Rural housing (Indira Awas Yojna): 7.2 million
households built between 2005–06 and 2008–09
Drinking water through Rajiv Gandhi National Drinking
Water Mission (RGND-WM) under Bharat Nirman
• Provide a supply of 40 litres of safe drinking water per
capita per day to rural households

36. Rural Marketing, 2e
The Rural Infrastructure
Telecommunications
• Total rural users: 219 million
• 26 fold growth in teledensity in the last eight years
• Between 2006 and 2010 mobile penetration grew seven
times in rural India against threefold growth in urban
Rural Teledensity Growth

37. Rural Marketing, 2e
The Rural Employment Generation
Programmes
37
The Mahatma Gandhi National Rural Employment
Guarantee Act (MNREGA)
• Launched in February 2006 covering 619 districts and
promising 100 days of guaranteed wage employment in a
financial year
The Swarnjyanti Gram Swarozgar Yojna (SGSY)
• Launched in April 1999 and now covers over four million
Self Help Groups and 15.4 million swarozgaris
The Pradhan Mantri Rojgar Yojna (PMRY)
• Launched in October 1993 and provides self-employment to
educated unemployed youth from economically weaker
sections

38. Rural Marketing, 2e
Rural Marketing Case
NREGA
Refer to video case and answer the following questions:
• How have ICT-enabled info-kiosks helped NREGA workers
in rural India?
• What kind of technology is being used in NREGA and why?
• What kind of benefits are NREGA workers getting with
ICT’s intervention?
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39. Rural Marketing, 2e
Rural marketing is marketing to a rural mindset, not a
rural market.
It is all about understanding the mind rather than
manipulating it or adapting marketing theory to a rural
environment.
Successful Mantra in Studying
Rural Marketing Environment