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RURAL RETAILING

Rural retailing:At a glance

Rural retailing consists of the sale of goods or commodities in small quantities directly to
consumers in rural/semi urban markets. The Indian rural market with its vast size and demand base
offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and
almost half of the national income is generated here. Our nation is classified in around 450
districts, and approximately 630000 villages, which can be sorted in different parameters such as
literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc.

India, like Britain, is also a nation of shopkeepers. With over 12 mn retail outlets, India has one of
the highest densities of retail outlets in the world with one retail outlet for ~90 persons. Retailers
inspired by the Walmart story of growth in small town America are tempted to focus on smaller
towns and villages in India. However, a careful analysis of the town strata-wise population,
population growth, migration trends and consumer spend analysis reveals a very different picture
for India.

Few Facts about Rural India

70 % of India's population lives in 627000 villages in rural areas. According to the NCAER study,
there are almost twice as many 'lower middle income' households in rural areas as in the urban
areas. At the highest income level there are 2.3 million urban households as against 1.6 million
households in rural areas. Middle and high-income households in rural India are expected to grow
from 80 million to 111 million by 2007. In urban India, the same is expected to grow from 46
million to 59 million. Thus, the absolute size of rural India is expected to be double that of urban
India.

Opportunity To The Marketers

The above figures are a clear indication that the rural markets offer the great potential to help the
India Inc which has reached the plateau of their business curve in urban India to bank upon the
volume-driven growth.The Indian rural market with its vast size and demand base offers a huge
opportunity that MNC’S cannot afford to ignore. With 128 million households, the rural
population is nearly three times the urban.As a result of the growing affluence, fuelled by good
monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in
1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per
cent of the total disposable income.

The importance of the rural market for some FMCG and durable marketers is underlined by the
fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all
two-wheeler purchased. The rural market accounts for half the total market for TV sets, fans,
pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the
rural market for FMCG products is growing much faster than the urban counterpart.

The Rural Bazar

• Large and Scattered market:


The rural market of India is large and scattered in the sense that it consists of over 63 crore
consumers from 5,70,000 villages spread throughout the country.
• Major income from agriculture:
Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with
agricultural prosperity.
• Low standard of living:
The consumer in the village area do have a low standard of living because of low literacy,
low per capita income, social backwardness, low savings, etc.
• Traditional Outlook:
The rural consumer values old customs and tradition. They do not prefer changes.
• Diverse socio-economic backwardness:
Rural consumers have diverse socio-economic backwardness. This is different in different
parts of the country.
• Infrastructure Facilities:
The Infrastructure Facilities like roads, warehouses, communication system, financial
facilities are inadequate in rural areas. Hence physical distribution becomes costly due to
inadequate Infrastructure facilities.

The rural bazaar is booming beyond everyone's expectation. This has been primarily attributed to a
spurt in the purchasing capacity of farmers now enjoying an increasing marketable surplus of farm
produce. In addition, an estimated induction of Rs 140 billion in the rural sector through the
government's rural development schemes in the Seventh Plan and about Rs 300 billion in the
Eighth Plan is also believed to have significantly contributed to the rapid growth in demand. The
high incomes combined with low cost of living in the villages have meant more money to spend.
And with the market providing them options, tastes are also changing.

Apart from urban retail one can see a lot of activity on the rural front too. A host of companies
have started their rural retail/procurement initiatives in the last few years. ITC's E-choupal
initiative is one which has received a lot of media coverage and recognition. E-choupal was
initially conceptualized as a procurement model, but with the addition of Choupal Sagars (Rural
Malls) they are also planned to be used as a reverse supply chain to supply back to villages.

Rural Retailing : The benefits


Food and grocery retailing - A recent study on the Indian retail sector by Crisil Research, a
Standard and Poor’s company, shows how much both the rural masses as well as the economy as
a whole can benefit from greater organization in the food and grocery (F&G) retail segment. The
study showed that organized retail could double farm incomes in India by enhancing farmers’
returns on food items from the current low level of 30-35 percent of the retail price to the
international norm of over 50 percent. This enhancement would come from cost savings that
would result from improving the presently underdeveloped supply chain for unprocessed food
items.

Enhance the GDP growth rate-Higher farm incomes would benefit the vast majority of the
population that is dependent on an agricultural income. Moreover, this additional purchasing
power in the hands of farmers could add more than three percentage points to the nation’s annual
gross domestic product (GDP) growth rate.India’s retail industry accounted for almost a third of
the country’s GDP at an estimated Rs 10 lakh crore in 2006. F&G items account for more than
70 percent of all retail sales. The F&G segment consists of fresh fruits and vegetables, milk and
milk products, fast-moving consumer goods and food grains. About half of the total F&G retail
comes from food grains and unprocessed fruits and vegetables. All these are items that are
purchased from farmers. crisil estimates the retail value of these unprocessed items at
approximately Rs 3.8 lakh crore. crisil’s study found that supply chain infirmities cause farmers’
realizations to be lower than international norms.

Improved supply chain-The supply chain for unprocessed food items in India has many layers
leading to high wastages and a high cost of distribution. The price paid to farmers for food grains
and fresh grocery is currently about 30-35 percent of retail prices as compared to the
international norm of over 50 percent.The increased penetration of organized retail into the F&G
segment could improve the supply chain and boost farm incomes. Crisil believes that increasing
the penetration of organized retail into the F&G segment could bring about improvements to the
supply chain for unprocessed food items. The current farm realizations for unprocessed items are
estimated at around Rs 1.2 lakh crore. If this segment shifts entirely to organized retailing and the
realizations of farmers are at levels comparable to developed countries, which happen to be
around 60-65 percent, associated farm incomes could double to Rs 2.5 lakh crore.

Significantly, crisil’s study found that higher farm incomes boost the purchasing power of 60
percent of the population, adding to GDP growth. Around 60 percent of the country’s population is
employed in agriculture. If income levels within this group increase, it could add significantly to
economic activity. If farmers spend 80 percent of their incremental income, the economy would
witness an incremental spending of around Rs 1 lakh crore.

The crisil study provides food for thought regarding how the country’s retail boom could be
harnessed to benefit even rural India, and not just a handful of metros, as is perceived.

Problems in the Booming Rural Retailing

Although the rural market does offer a vast untapped potential, it should also be recognized that it
is not that easy to operate in rural market because of several problems. Rural retailing is thus a
time consuming affair and requires considerable investments in terms of evolving appropriate
strategies with a view to tackle the problems.

The major problems faced are:

• Underdeveloped People and Underdeveloped Markets:


The number of people below poverty line has not decreased in any appreciable manner.
Thus underdeveloped people and consequently underdeveloped market by and large
characterize the rural markets. Vast majorities of the rural people are tradition bound,
fatalistic and believe in old customs, traditions, habits, taboos and practices.
• Lack of Proper Physical Communication Facilities:
Nearly fifty percent of the villages in the country do not have all weather roads. Physical
communication of these villages is highly expensive. Even today most villages in the
eastern parts of the country are inaccessible during the monsoon.
• Media for Rural Communication:
Among the mass media at some point of time in the late 50's and 60's radio was considered
to be a potential medium for communication to the rural people. Another mass media is
television and cinemas. Statistics indicate that the rural areas account for hardly 2000 to
3500 mobile theatres, which is far less when compared to the number of villages.
• Many Languages and Dialects:
The number of languages and dialects vary widely from state to state, region to region and
probably from district to district. The messages have to be delivered in the local languages
and dialects. Even though the number of recognized languages are only 16, the dialects are
estimated to be around 850.
• Dispersed Market:
Rural areas are scattered and it is next to impossible to ensure the availability of a brand all
over the country. Seven Indian states account for 76% of the country's rural retail outlets,
the total number of which is placed at around 3.7 million. Advertising in such a highly
heterogeneous market, which is widely spread, is very expensive.
• Low Per Capita Income:
Even though about 33-35% of gross domestic product is generated in the rural areas it is
shared by 74% of the population. Hence the per capita incomes are low compared to the
urban areas.
• Low Levels of Literacy:
The literacy rate is low in rural areas as compared to urban areas. This again leads to
problem of communication for promotion purposes. Print medium becomes ineffective and
to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy.
• Prevalence of spurious brands and seasonal demand:
For any branded product there are a multitude of 'local variants', which are cheaper, and,
therefore, more desirable to villagers.
• Different way of thinking:
There is a vast difference in the lifestyles of the people. The kind of choices of brands that
an urban customer enjoys is different from the choices available to the rural customer. The
rural customer usually has 2 or 3 brands to choose from whereas the urban one has multiple
choices. The difference is also in the way of thinking. The rural customer has a fairly
simple thinking as compared to the urban counterpart.
Suggestions to overcome the problems of rural retailing

• The rural retail can be successful only when integration between the profit and social
motive is apparent.
• Empowerment in terms of economic power, purchasing power, knowledge and information
dissemination is crucial for rural retail ventures to succeed. The model should empower the
rural consumer and at the same time take advantage of this empowerment through creation
of demand for its own products and that of its partners.
• The level of penetration except for certain products has been negligible so far. However, so
far as the rural share in consumer expendables like cooking oil, tea, electric bulbs, hair oil,
shampoo, toilet soap, toothpaste, washing cakes and washing powder is concerned, their
share on an average is much higher than consumer durables. Though the rural-urban
differentials are not so pronounced in the case of durables, the rural market penetration is
low with respect to urban areas. However, in case of health beverages and cosmetics like
shampoos, nail polish and lipsticks, large gaps exist. Hence these products provide
substantial opportunity to enter the rural markets.
• Definitely there is lot of money in rural India. But there are hindrances at the same time.
The greatest hindrance is that the rural market is still evolving and there is no set format to
understand consumer behavior. Lot of study is still to be conducted in order to understand
the rural consumer. Only FMCGs with deeper pockets, unwavering rural commitment and
staying power will be able to stay longer on this rural race and hence should venture into
this territory.

Broadband and E-commerce : A new world of opportunity for Rural Retail Sales

Broadband Internet access presents a world of opportunities for rural residents. Because of its
ability to transfer large amounts of data almost instantaneously, rural individuals can now work,
learn, and find entertainment right at home in their small towns rather than have to commute to
larger cities. More and more rural citizens are taking advantage of broadband access to do a
multitude of tasks online, including earning advanced degrees, reaching new markets for their
business, gathering pertinent information about their job (such as weather predictions for farmers),
staying in touch with relatives or friends, or even creating their own information-based job or
business. This fact sheet describes one of these rural broadband success stories in detail – an
Oklahoma retail business based outside of Oklahoma City that uses the Internet to pull in
customers from the nearby metropolitan area. This business takes their website experience to the
next level by selling their products online in an e-commerce environment. By using broadband to
both advertise to the closest metropolitan area and enable another way for their products to be
sold, they are taking advantage of many of the benefits the Internet can offer to rural businesses.

Other Broadband Opportunities for Rural Citizens

While this fact sheet tells the story of how one rural business used broadband access to extend
their reach and create a larger market presence, there are a number of other ways in which
broadband access can enhance the lives of rural individuals. These include:

• Help desk/customer service

• Virtual personal assistant

• Website development

• Writing/editing

• Software development

• Medical transcription reaching new markets

• Market rural products to previously unserved areas

• Attract urban customers to rural locations Continuing education

• GED/Bachelors/Graduate degrees available online Communicating with friends/family


• Voice over Internet Protocol (VOIP)

• Email

Established Companies entering in Rural Retailing

Retail and Petroleum Companies

Apart from various corporate houses which have ventured into the rural retail scenario, some of the
oil Private Sector Units has also started their retail ventures in villages. In the urban areas many oil
companies eg. IBP, IOC, HP, SHELL, RELANCE has started leveraging their real estate
advantage to set-up rural retail outlets.
Kisan Seva Kendra
IOC the fortune 500 oil PSU has started a rural retail venture in 2005. They have started their rural
petrol pump cum retail stores in many villages. The idea is to become a one-stop shop for the
needs of a villager, and provide him with quality products including fuel. Earlier the consumers in
villages had to rely on either the unauthorized petrol diesel dealer in the village or travel for 10-15
Kms to buy fuel for his tractors or the pump sets. With the setting up of pumps in villages you are
able to reach the customer at his door-step.

Today there are more than 2000 of these rural retail outlets in rural areas across the country and a
lot of recognition has also come for the initiative. In September 2007 the initiative was awarded
the ‘Most Admired Retailer of the Year’ Award in the category of Rural Retailing, by the India
Retail Forum (IRF), and the ‘Retailer of the year- Rural Impact Award’ given by the Asia Retail
Congress.

The model has been rolled out rapidly across the country.

Ring consists of the sale of goods or merchandise from a fixed location, such as a department store or kiosk, or
by post, in small or individual lots for direct consumption by the purchaser.[1] Retailing may include
subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a retailer
buys goods or products in large quantities from manufacturers or importers, either directly or through a
wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or
stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategy

Rural Mobile Market.

India’s telecommunication sector is witnessing an explosive growth, as falling tariffs and rising
incomes are bringing mobile phones within the reach of millions of new customers, according to
Emerging Rural Mobile Market in India.

Mobile industry players like Airtel, Idea, Vodafone, BSNL,Reliance etc. are eyeing rural India as
their new area of opportunity. The companies are encouraged by the fact that mobile users are
expected to cross 230 million by 2007 end and 500 million by 2010.

Rural areas are expected to drive the next wave of telecom growth in the country, and they have a
potential of adding at least 150 million new subscribers, says the report.

Cellular service providers seem to be answering the call of the wild as they are entering the so far
ignored rural market. Although a huge market in the urban segment remains tapped, most of the
cellular operators have turned towards rural India to broaden their base and reach.

Rural banking

The services offered by Banks in rural areas is known as Rural Banking. These banks are offering
services like e-mail, Internet chat, and tips for health and education and so on. Banks have woken
up to the potential in the rural sector. Specialised and innovative schemes to improve rural
penetration are the new mantra. Rural credit cards and ATMs, a franchisee network, supply chain
financing for agriculture; investments in rural infrastructure and cross-selling of products are only
some of the schemes directed at the village folk. Building a specialised cadre for rural banking and
improving awareness can help reduce default and make these schemes effective.

An automated teller machine that flashes the local language, Tamil, on its screen is being set up
next door. In some time, the Internet kiosk and the ATM duo could well be a proxy bank for rural
India.

The kiosk has been set up by ICICI Bank in partnership with network owner n-Logue
Communications, which is promoted by Ashok Jhunjhunwala, a professor at the Indian Institute of
Technology, Chennai.

The kiosk works on wireless in local loop technology using fibre optic cables. By mid-2004, over
10,000 such kiosks may dot Tamil Nadu and serve as a new vehicle for banking in rural India.

The number is significant. Statistically speaking, out of the total 67,897 bank branches in the
country (in 2002), 32,443 or 47.7 per cent are in rural India.

The average population served by a bank branch is 15,000. If one includes the rural cooperative
banks, the average could be lower still -- 12,800. The numbers compare favorably with Indonesia
and Mexico.

However, numbers do not tell the truth. Fifty-eight per cent of the rural households do not have a
bank account and only 21 per cent have access to credit from a formal source. Over 70 per cent of
marginal farmers have no deposit account and 87 per cent have no formal credit.

Only a little over 1 per cent of rural households can rely on a loan from a financial intermediary to
finance unforeseen expenses. Approval for such loans takes between 24 and 33 weeks. Often,
consumers need to bribe officials to get loans, with the bribe varying between 10 and 20 per cent
of the loan amount.
In 2002, the number of rural deposits was 30.2 per cent of the total deposits in the banking system
(Rs 13.30 crore out of Rs 43.99 crore). However, the amount of deposits mopped up in rural India
is only 14 per cent of the total deposit liability of the system (Rs 1,59,423 crore of Rs 11,23,393
crore).

Similarly, there are 2.51 crore rural advance accounts, which is 44.5 per cent of the total number of
advance accounts. However, the share of rural pockets in the total credit kitty is only 14 per cent
(Rs 92,789 crore of Rs 6,55,993 crore). Overall, 18 per cent of the rural population has bank
accounts. The comparative figure in urban India is 103 per cent.

It is clear that the supply of formal finance is biased against the rural population. The per capita
deposit in rural areas stood at Rs 2,150 or around 10 per cent of the national per capita income in
2001.

In contrast, in urban India, it is Rs 33,780 or around 160 per cent of per capita GDP. Credit per
person in rural India is Rs 900 or around 4 per cent of national per capita GDP compared to Rs
20,600 for urban centres, which is 100 per cent of national per capita GDP.

The number of credit accounts in rural areas relative to the total rural population is only 3.4 per
cent against around 10 per cent in urban areas.

ICICI Bank's Internet kiosk scheme can mean financial empowerment for rural people. In a way, it
can be described as a backdoor entry into banking.

But, given the circumstances, this is a welcome initiative, if we want to reduce rural India's
dependence on non-formal financial sources like local money lenders, chit funds, and so on. A
1997 PricewaterhouseCoopers study said that the dependence of low-income households on
informal sources is as high as 78 per cent.

Branch banking in rural India is a loss-making proposition and existing regulations prevent the
entry of agents mobilizing deposits or selling loans.
In this context, the combination of the Internet kiosk and a local language ATM can revolutionize
the landscape of rural banking without violating the letter of the law. They can do what 196
regional rural banks and four local area banks have been unable to achieve.

ICICI Bank has initiated talks with the Grameen Bank of Bangladesh, a pioneer in micro-
financing, to float a company for giving credit guarantee to such papers. Grameen USA, a trust of
the Grameen Bank, is slated to hold a majority stake in the proposed non-banking finance
company.

Reserve Bank of India's norm of priority sector landings that stipulates that 40 per cent of loans
should be lent to priority sector and 18 per cent of this to the agricultural sector.

The last one, a relatively new product in India, can eventually replace the government's age-old
crop insurance policy, which takes long to settle claims and is expensive both for the government
as well as the beneficiaries.

Weather insurance products provide cover against deviation from the normal expected rainfall,
wind speed or other weather phenomenon, and not just against drought and flood.

The pilot programme of India's first rainfall insurance programme was conducted in July 2003, in
Mahabubnagar, Andhra Pradesh, when a local area bank bought a bulk insurance policy from
ICICI Lombard, the bank's general insurance arm, and sold around 200 individual policies for
groundnut and castor farmers. Since then, the cover has been extended to 50 Soya farmers in
Madhya Pradesh and 600 acres of paddy crop in Aligarh in Uttar Pradesh.

The message is quite clear. An innovative approach to rural lending can do what the government's
continuous pressure on the banking system for expanding the base of kisan credit cards and good
old guidelines for agricultural lending cannot.

- Pension fund industry in India grew at a CAGR of 122.44% from 1999-00 to 2006-07.
- In terms of ownership, debit cards are more in number than credit cards but in terms of
transactions, use of credit cards is more prevalent than debit cards.
- The ATM outlets in India increased at a rate of 28.09% from March 2006 to March 2007.
- Outstanding Education loan segment is expected to grow at 36.41% till March 2009 from
March 2007 onwards to cross Rs. 27000 Crore Mark.
- Two-wheeler finance industry is projected to forge ahead at a CAGR of 14.21% till 2009-
10 from 2005-06.
- Indian Mutual Fund industry witnessed a growth of 49.88% from May 2006 to May 2007,
and a higher 215.61% growth was recorded in closed ended schemes.
- Increasing number of millionaires in India is increasing the scope of Wealth Management
Services.
- Bankable households in India are estimated to move up at a CAGR of 28.10% during
2007-2011.

KeY Players

This section covers the key facts about the major players (including Public, Private, and
Foreign sector) in the Indian Banking Industry, including Bank of Baroda, State Bank of
India, Canara Bank, Punjab National Bank, HDFC Bank, ICICI Bank, Kotak Mahindra
Bank, Citibank, Standard Chartered Bank, HSBC Bank, ABN AMRO Bank, American
Express,etc.

- HEALTH SCENARIO IN RURAL INDIA

India is the second most populous country of the world and has changing socio-political
demographic and morbidity patterns that have been drawing global attention in recent years.
Despite several growths orientated policies adopted by the government, the widening economic,
regional and gender disparities are posing challenges for the health sector. About 75% of health
infrastructure, medical man power and other health resources are concentrated in urban areas
where 27% of the population lives. Contagious, infectious and waterborne diseases such as
diarrhea, amoebiasis, typhoid, infectious hepatitis, worm infestations, measles, malaria,
tuberculosis, whooping cough, respiratory infections, pneumonia and reproductive tract infections
dominate the morbidity pattern, especially in rural areas. However, non-communicable diseases
such as cancer, blindness, mental illness, hypertension, diabetes, HIV/AIDS, accidents and injuries
are also on the rise. The health status of Indians, is still a cause for grave concern, especially that
of the rural population. This is reflected in the life expectancy (63 years), infant mortality rate
(80/1000 live births), maternal mortality rate (438/100 000 live births); however, over a period of
time some progress has been made. To improve the prevailing situation, the problem of rural
health is to be addressed both at macro (national and state) and micro (district and regional) levels.
This is to be done in a holistic way, with a genuine effort to bring the poorest of the population to
the centre of the fiscal policies. A paradigm shift from the current ‘biomedical model’ to a
‘sociocultural model’, which should bridge the gaps and improve quality of rural life, is the current
need. A revised National Health Policy addressing the prevailing inequalities, and working
towards promoting a long-term perspective plan, mainly for rural health, is impe

India is drawing the world’s attention, not only because of its population explosion but also
because of its prevailing as well as emerging health profile and profound political, economic and
social transformations. After 54 years of independence, a number of urban and growth-orientated
developmental programs having been implemented, nearly 716 million rural people (72%of the
total population), half of which are below the poverty line (BPL) continue to fight a hopeless and
constantly losing battle for survival and health. The policies implemented so far, which
concentrate only on growth of economy not on equity and equality, have widened the gap between
‘urban and rural’ and ‘haves and have-nots’. Nearly 70% of all deaths, and 92% of deaths from
communicable diseases, occurred among the poorest 20% of the population. However, some
progress has been made since independence in the health status of the population; this is reflected
in the improvement in some health indicators.

HEALTH PRACTICES AND PROBLEMS IN RURAL INDIA

Rural people in India in general and tribal populations in particular, have their own beliefs and
practices regarding health. Some tribal groups still believe that a disease is always caused by
hostile spirits or by the breach of some taboo. They therefore seek remedies through magic
religious practices. On the other hand, some rural people have continued to follow rich,
undocumented, traditionalmedicine systems, in addition to the recognized cultural systems of
medicine such Ayurveda, unani, siddha and naturopathy, to maintain positive health and to prevent
disease. However, the socioeconomic, cultural and political onslaughts, arising partly from the
erratic exploitation of human and material resources, have endangered the naturally healthy
environment (e.g. access to healthy and nutritious food, clean air and water, nutritious vegetation,
healthy life styles, and advantageous value systems and community harmony). The basic nature of
rural health problems is attributed also to lack of health literature and health consciousness, poor
maternal and child health services and occupational hazards. The majority of rural deaths, which
are preventable, are due to infections and communicable, parasitic and respiratory diseases.
Infectious diseases dominate the morbidity pattern in rural areas (40% rural: 23.5% urban).
Waterborne infections, which account for about80% of sickness in India, make every fourth person
dying of such diseases in the world, an Indian. Annually,1.5 million deaths and loss of 73 million
workdays are attributed to waterborne diseases.2 Three groups of infections are widespread in
rural areas, as follows.

1. Diseases that are carried in the gastrointestinal tract, such as diarrhea, amoebiasis, typhoid fever,
infectious hepatitis, worm infestations and poliomyelitis.About 100 million suffer from diarrhea
and cholera every year.3

2. Diseases that are carried in the air through coughing, sneezing or even breathing, such as
measles, tuberculosis (TB), whooping cough and pneumonia. Today there are 12 million TB cases
(an average of 70%).Over 1.2 million cases are added every year and 37 000 cases of measles are
reported every year.3

3. Infections, which are more difficult to deal with, include malaria, filariasis and kala-azar. These
are often the result of development. Irrigation brings with it malaria and filariasis, pesticide use has
produced a resistant strain of malaria, the ditches, gutters and culverts dug during the construction
of roads, and expansion of cattle ranches, for example, are breeding places for snails and
mosquitoes. About 2.3 million episodes and over 1000 malarial deaths occur every year in India.3
An estimated 45 million are carriers of microfilaria, 19 million of which are active cases and 500
million people are at risk of developing filaria.3
Every third person in the world suffering from leprosy is an Indian. (Nearly 1.2 million cases of
leprosy, with 500 000 cases being added to this figure every year.4) Malnutrition is one of the
most dominant health related problems in rural areas. There is widespread prevalence of protein
energy malnutrition (PEM), anemia, vitamin A deficiency and iodine deficiency. Nearly 100
million children do not get two meals a day. More than 85% of rural children are undernourished
(150 000 die every year).1 A recent survey by the Rural Medical College, Loni (unpublished data),
in the villages of Maharashtra State, which is one of the progressive states, has revealed some
alarming facts. Illness and deaths related to pregnancy and childbirth are predominant in the rural
areas, due to the following.

1. Very early marriage: 72.5% of women aged 25–49 years marry before 18, where the literacy
rate is 80%.

2. Very early pregnancy: 75% married women had their first pregnancy below 18 years of age.

3. All women invariably do hard physical work until late into their pregnancy.

4. Fifty-one per cent of deliveries are conducted at home by an untrained traditional birth
attendant.

5. Only 28% of pregnant women had their antenatal checkup before 16 weeks of pregnancy.

6. Only 67% of pregnant women had complete antenatal checks (minimum of three checkups).

7. Only 30% of women had postnatal checkups. In addition, agricultural- and environment-related
injuries and diseases are all quite common in rural areas, for example: mechanical accidents,
pesticide poisoning, snake, dog and insect bites, zoonotic diseases, skin and respiratory diseases;
oral health problems; sociopsychological problems of the female, geriatric and adolescent
population; and diseases due to addictions. The alarming rate of population growth in rural areas
nullifies all developmental efforts. The rural population, which was 299 million in 1951, passed
750 million in May 2001. Since 1951, the government has been attempting through vertical and
imported programs to combat the problems, but to no avail. However, the new National Population
Policy 20005 gave emphasis to an holistic approach; for example, improvement in ‘quality of life’
for all, no gender bias in education, employment, child survival rates, sound social security,
promotion of culturally and socially acceptable family welfare methods.

Case Study

A team from Harvard came to India to extensively study the model and turn it into a case study,
and this month it was also presented at their international agri-business seminar at the school.

Earlier, Harvard had studied the e-choupal model of ITC.

“Prof David Bell (of Harvard) contacted us after hearing about the initiative from a participant
during a World Bank meeting. He was excited and wanted to study how it was making a difference
in the lives of farmers in the country, besides being an example of inclusive growth that the
country is advocating,” said Mr Rajesh Gupta, President and Business Head of DSCL’s Hariyali
venture.

Catalyst for social change

The study, in fact, has highlighted the model as a catalyst of social change and traces its
beginnings to DCM’s deep-seated interests in agri-business and its involvement with the sugar
business as early as the 1930s and later its entry into the fertiliser sector in 1966.

The genesis of the retail venture goes back to 1997 when DSCL initiated an agricultural extension
programme, Shriram Krishi Vikas Guides, in northern India where the guides were trained
agronomists posted in rural areas to address the needs of farmers and solve agri-based problems
such as seed quality, irrigation techniques, fertilizer usage and crop yields.
It was at this point that the company found farmers asking for a host of quality agri-products at
reasonable prices.

The study quotes Chairman and Managing Director Mr Ajay Shriram recounting how the company
found in this a business initiative “which could leverage the agri-value chain, have a
transformational impact and improve the quality of life in rural India.”

Today Hariyali has 125 rural centers spread over the north, west and south of the country. Its one-
stop shops provide farmers with a range of agri and non-agri products, latest farm technology,
farm fuels, and output buyback of farmers’ produce. The centers are also IT-enabled and provide
farmers critical data relevant to them, inputs and access to weather forecasts, market prices and
other technical knowledge.

Going forward, the company wants to experiment retail on the output and input side. Mr Rajesh
Gupta is exploring Hariyali’s potential as a bulk buyer, which would serve as a conduit to rural
India for companies who want to sell their products and services there. Motorola is already using
the Hariyali route for its handsets. On the output side Hariyali is mulling being an “instrumental
link” in the retail value chain, to supply large urban retailers with fresh fruits, vegetables and
grains procured directly from the farming community.

The major challenge faced by Hariyali in meeting the expectations of the brand, and cited in the
Harvard study, is the logistics of having employees in so many different locations and providing
for the economic nuances, attitudes and practices of different regions of the country.

Future prospects

India's rural retail market is expected to grow by 29 percent to 1.8 trillion rupees ($45.34 billion)
by 2010 helped by rising incomes and changing consumption patterns, an industry body report
said. But poor infrastructure, supply chain inefficiency, and product pricing must be addressed if
its full potential is to be realized, the report released by the Confederation of Indian Industry and
Yes Bank. Rural retail includes fast moving consumer goods, durables, agricultural inputs and
autos like tractors. The report said rural per capita income would double to 14,000 rupees ($350)
by 2012 as more families switch to commercial from subsistence farming, a big enough jump to
spur demand for a wider range of products.

Village households are expected to rise to 153 million in 2009-10 from 135 million in 2001-02,
probably making rural India the largest potential market in the world, the report said. However,
there is no organized marketing and distribution in 87 percent of India's villages, home to 50
percent of the rural population, the report said. Corporate are increasingly eyeing rural areas as
drivers of future growth. The Godrej group's retail venture, Adhar, which has 31 rural stores, is
planning to have 1,000 in the next five years. Triveni Khushali Bazaar, a retail chain of Triveni
Engineering and Industries Ltd. plans to almost double its stores to 80 by 2008, and reach 200 by
2009; the report said Indian Oil Corp. plans to have 3,000 rural retail units alongside its fuel
stations by 2012 from 1,400 now. Firms hoping to grab a larger part of the rural market though
will be battling infrastructure problems for some years. They need to view it as a long-term
commitment, and must be continuously innovative as rural consumers are often more price than
quality conscious, the report said. The development and growth of organized rural retail will result
in job creation, check rural migration, rise tax generation and improve efficiencies in agriculture, it
added.

Upcoming:Godrej may tie up with Future Group for rural retail

It is courtship time for Kishore Biyani and A Mahendran of Godrej before they tie the final
partnership knot for rural retailing and the king of Indian retail, Kishore Biyani is making sure that
even Godrej's partner Hershey's gets to touch and feel what he has to offer.

NDTV has learnt that the joint venture (JV) between the Future Group and Godrej could be
announced within a month and here is how the JV will work.

Godrej will spin off its rural retail arm primarily Godrej Aadhar into a separate company and
Biyani’s venture arm Future Ventures India, which is expected to list soon will pick up a majority
stake in it.Godrej Aadhar has plans to expand aggressively.Godrej Aadhar is planning to scale up
its outlets to 1250 in next 2 years from current 70 and expects to clock over Rs 1200 crore in
revenues from current about Rs 75 crore once the expansion is in place.

Conclusion

The rural retailing has wide opportunities and scope for the entrepreneurs to enter in. as organized
retail in rural India awaits the arrival of Reliance Retail, current majors like ITC, Godrej are
expanding their retail operations by setting up more stores, entering new states and offering newer
product categories. A shift from selling agri-inputs will help these stores target the non-farming
segments. It offers an opportunity for a large player to build a Rs. 40,000 Cr retail business
spanning multiple categories by 2015 (at current prices). It is a little known fact that, while 25% of
the rural population is not engaged in agriculture, it earns 50% of the rural income. The retail
market is the next growth frontier for corporate India. However, to capitalize on the opportunity, a
player needs to be aggressive in its outlook and build scale quickly.

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