New Market Penetration Strategy in Rural India

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Team name: Two idiots
Institute IMT Ghaziabad
Team Members: Sankha Mandal: 9434134144 Udai Singh : 7838590282

Rural market- opportunities-
“India lives in her villages”, a maxim attributed to Mahatma Gandhi, rings true when we see rural India retaining its old domination of the national population and economy in its 627000 villages, even after six decades of a development model that cherishes urbanization and industrialization. Close to 69% of Indians—743 million people or 138 million households—live in rural areas, generating 56% of the national income. With urban markets showing signs of saturation, companies are getting increasingly excited about the potential of rural India. But they're also finding it a tough nut to crack. In 1994-95, around 60 per cent of the rural population was in the low-income group of Rs 25,000 and below. By 2006-2007, only 20 per cent of them will be left in this category. The tremendous increase in purchasing power of rural consumers will be courtesy bumper crops. The rural propensity to spend on durables and fast-moving consumer goods is expected to rise accordingly. Total credit flow to the agriculture sector through institutional channels is expected to increase. The setting up of agricultural export zones should help farmers and thus increased marginal propensity to consume. First, let’s get the obvious facts that everyone knows out of the way. Rural India is a major part of India’s domestic consumption story not just because it has 70% of India’s population, but because it already has 56% of India’s income, 64% of expenditure and 33% of India’s savings. The rural share of popular consumer goods and durables ranges from 30% to 60% and sales to rural India are steadily growing. Between 2005 and 2008, according to data from the Indian Revenue Service, colour television sets penetration increased by 7% and packaged biscuits by 10%, aggressive categories such as shampoo even increased penetration by 37%.

Table 1
India’s rural and urban population living below $1 and $2 per day, 2001** |Total |Pop. with income |% |Pop. with income |% below $2 | |Pop. |below $1/day |below $1 |below $2/day | | |(m) |(m) | |(m) | | |Rural |744 |311 |41.8 |658 |88.4 | |Urban |289 |56 |19.3 |175 |60.5 | |Total |1033 |367 |35.5 |833 |80.6 |

Table 2
Rural Share in Purchase of Selected Consumable
and Durable Products in India, 1993-94
|Consumables |Durables | | Product |Rural share (%) |Product |Rural share (%) | | Washing cake |71 |Portable radios |79 | | Casual footwear |69 |Bicycles |78 | | Cooking oil |67...
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