Page 161 - DMGT401Business Environment

Business Environment

Notes About 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.
1. At the highest income level there are 2.3 million urban households as against 1.6 million
households in rural areas.

2. Middle and high-income households in rural India is expected to grow from 80 million to
111 million by 2007.
3. 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.
The above figures are a clear indication that the rural markets offer the great potential. The
study on ownership of goods indicates the same trend. It segments durables under three
groups – (1) Necessary products – transistors, wristwatch and bicycle (2) Emerging products –
B&W TV and cassette recorder (3) Lifestyle products – CTV and refrigerators. Marketers have to
depend on rural India for the first two categories for growth and size. Even in lifestyle products,
rural India will be significant over the next five years.
7.4.1 Problems Need to be Addressed

Despite its a vast untapped potential, it should also be recognised that it is not that easy to
operate in rural markets because of several problems. Rural marketing is a time-consuming
affair and requires considerable investment in terms of evolving appropriate strategies with a
view to tackle the problems.
The major problems of marketing in rural India are:
1. Poverty: A large number of rural population still lives under the poverty line and even
those who are above poverty line are living hand-to-mouth. Only a small segment of each
village can afford anything beyond basic necessities. Thus underdeveloped people and
consequently underdeveloped markets by and large characterise the rural markets. 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. Vast majorities of the rural people are tradition bound, fatalistic and believe in old
customs, traditions, habits, taboos and practices.
2. Lack of Proper Roads: Nearly 50% 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.
3. The Unevenly Scattered Population: India's rural population is scattered in more than six
lakh villages. Of these only 6,300 villages have a population of more than 500. This makes
the work of a marketer very cumbersome.
4. Many Languages and Dialects: Even though the number of recognised languages are only
16, more than 850 dialects thrives in the country. The number of languages and dialects
vary from state to state, region to region and probably from district to district and even
from village to village. Communication is thus a tough task, forcing rural markets to
concentrate more on images than words.
5. Low Levels of Literacy: The literacy rate is low in rural areas as compared to urban areas.
The print medium becomes ineffective and to an extent irrelevant in rural areas since its
reach is poor.
6. Spurious Brands: Spurious brands are a serious problem faced by marketers. Local
organizations take advantage of illiteracy among villagers and launch a multitude of

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