The Rural Environment

The rural environment comprises demographic, physical, economic, social, cultural, political, and technological aspects of rural markets.

1. The Demographic Environment

In this section, we will discuss the rural population in terms of its size, age, gender, education, occupation, landholdings, and incomes.

a) Growth in the rural population

The rural population has grown by over 200 million over the last two decades (see table, The rural population in India). The proportion of rural households continues to be 70 per cent, and is expected to stabilize in the event that the rural thrust continues.

b) Change in the rural family structure

Traditionally, households in rural India were joint families. But with the rise in population, the resulting pressure on land, and several other socio-economic factors (education, separate sources of income, migration, etc.), joint families are now breaking apart. Families are now gradually moving towards the nuclear model in rural areas (see fig. A break-up of the Type of Households in India).

A new concept, that of 'individualized joint families', is emerging, in which families stay in the same house, but have separate kitchens in order to avoid conflicts, pursue individualized choices, and nurture their children better. With the increase in 'individualized joint' and nuclear families, the range and number of branded products entering the family is likely to increase.

c) Age

Thirty-five per cent of the rural population is in the consuming age group of 15-34 yrs (see table below). This is expected to grow further in the coming years.

d) Education

Twenty-one per cent of the rural population is SSC/HSC and higher pass out (see fig. The level of education in Rural India).

The literacy rate has gone up from 53 per cent in 2000 to 65 per cent in 2011 (see table , Literacy among individuals of Age 12 years and above). The literacy rate is higher in the southern region of the country as compared to the north.

e) Occupation

Agriculture was the principal occupation in rural India. It is now being replaced by non-traditional occupations, including shop/trade, skilled work, and salaried jobs. Rising literacy levels, improved and upgraded skill sets, and new technology have encouraged rural people to take up new occupations. As can be seen from Table 2.4, an increasing number of people have given up farming (decline from 63 to 50 per cent during 2000–2010) on account of land fragmentation, declining profitability in the farm sector, and increasing nuclearization of families. India is no longer an agrarian economy. There is an increasing incidence of supplementary occupation-an occupation pursued either in addition to the primary occupation, or on a seasonal basis to augment income. As per an Edelweiss-MART survey (2010), 30 per cent of rural households have a supplementary occupation. Out of these, 56 per cent stated self-employment in agriculture as their supplementary occupation.

f) Landownership

Land in rural India is more than a basic input for agriculture; it is also a symbol of security, power, prestige, and social standing. A strong attachment to land, which arises from the fact that land is scarce whereas people are not, has direct economic consequences. As can be seen from table below, although the total land area has remained nearly constant between 2000–01 and 2010-11, the number of landholdings has increased for smaller landholdings. This highlights the land fragmentation and the increasingly uneconomic nature of agriculture. Landownership in India is extremely fragmented small and marginal farmers, who constitute 95 per cent of the population, control only 68 per cent of the land. The average landholding size in India is just 1.2 hectares

g) Income

Rural income constitutes around 56 per cent share of the total incomes in India. The per capita income for rural India has increased from INR 4,860 in 1994–95 to INR 11,227 in 2004-05. In 2010, the per capita income was estimated at INR 15,173 (Edelweiss MART Survey, 2010). The urban-rural disparity ratio has declined from 2.41 in 1995 to 1.96 in 2005, narrowing down the income gap. According to the McKinsey Report, the middle class and above (seekers, strivers, and global) will grow six-fold from 32 million in 2005 to 208 million in 2025. Income growth per HH is expected to accelerate from the current 2.8 per cent to 3.6 per cent by 2025 (see figure, Share of Rural Population by Income Class). The Physical Environment The physical environment in rural areas comprises settlement size and rural housing structures.

2. The physical environment

The physical environment in rural areas comprises settlement size and rural housing structures.

a. Settlements (scattered and clustered)

Villages comprise homestead land (abadi) and cultivated land. The settlement pattern of households is either in a cluster or in individualized landholdings, or a combination of both. Farmers normally live in an abadi. In a village, it is quite common to find houses ordered according to kinship, caste, or religious groups. Sometimes entire villages are classified on the basis of dominant caste groups, or some other predominant characteristic.

Physical environment in rural areas entails the study of the settlement patterns of households and types of dwellings. Table (Spread of villages in Rural India) provides rich insights to a marketer:

• Villages with a population of less than 500 generally do not have any shop, but the number of such villages has decreased by 4 per cent over the last 10 years. Twenty-two thousand villages in the 'less than 500 population' category have upgraded to the 500+ population category.

•  Villages in the 2,000+ population strata are the most prosperous. The number of such villages is increasing very rapidly. Over the last 10 years, almost 21,000 villages have been upgraded to the 2,000+ population category. These villages have around 16 shops.

• As per the 2011 Census, the 20 per cent villages in the 2,000+ population category account for 50 per cent of the rural population and 60 per cent of rural wealth. A marketer going rural should target this category first.

b. The rural housing pattern

The types of houses in rural areas are very strong indicators of economic growth. Over the last 20 years, the trend in house type has changed dramatically, from less permanent, semi-pucca or kuccha, to more permanent pucca types.

A majority of low-income groups live in kuccha houses. However, as incomes increase, the number of kuccha houses comes down; low-income groups gradually move towards semi-kuccha houses and then finally, pucca houses.

Today, 63 per cent of rural houses are pucca as depicted in (Figure: Housing pattern in Rural Areas). Statistics indicate that the owners of such houses possess sufficient disposable income.

3. The Social and Cultural Environment

a. Socio-cultural regions

Society and polity across the country vary between regions and sub-regions, as well as between different religious, caste, and linguistic groups. Although there are no strict boundaries for identifying cultural differentials, common socio-cultural behavior has been mapped as distinct socio-cultural regions (SCRs).

A socio-cultural region (SCR) is a group of districts clubbed together, based on linguistic homogeneity combined with geographical contiguity, financial, economic and administrative homogeneity, and regionalization of culture and lifestyle.

India has been primarily divided into 56 SCRs. However, some larger SCRs were later divided into two regions to ensure that each SCR used for town\village selection is not too large, and that no SCR is spread across two states. This resulted in a total of 90 distinct regions. The National Readership Survey uses these 90 regions as the stratum for media survey across the country.

While the urban environment across SCRs reflects degrees of homogeneity, the rural environment is distinctly different, as reflected in Table 2.7. Marketers use SCRs as a yardstick for market segmentation and targeting. We discuss this in detail in Chapter 5. Within each SCR, there is a spectrum of rural and urban communities on the continuum of socio-economic variables.

b. The village community

Historically, villages have in many ways been self-sufficient and autonomous. While agricultural surplus contributed to the sustenance of economic infrastructure, caste-based occupations and trades collectively contributed to self-sufficiency. Earlier villages had a council of elders (panchayat), which used to decide disputes between villagers and discuss matters of common interest. Post-independence, the village administration has undergone changes under the democratic system of governance. The panchayat members are now elected, thereby ensuring a democratic structure for the institution. There is reservation for disadvantaged members, Scheduled Castes/Scheduled Tribes, and women. All villagers above the age of 18 are eligible to vote.

Gram panchayats today have a statutory base with a range of regulatory and developmental functions, as declared in the Constitution of India. They are part of the state administration in a three-tier Panchayati Raj structure: district, block, and village level.

Earlier, because of their experience and maturity, the elderly were considered more capable of advising and leading the village. Now, the role of the educated, informed youth, and knowledgeable persons (headmaster, teachers, retired military personnel, etc.) has increased within the community, as well as within the family. They play an important role in popularizing a brand.

Gender bias is declining, and hence, the female child's education is also being given equal importance. The status of women in villages is changing. Today, women in rural areas are not only taking care of household work, but are also contributing to the family income and ensuring the well-being of the family. Their role in decision-making has also increased.

c. The caste system

Indian society had a definite scheme of social gradation, with the Brahmins at the head of the hierarchy, followed by Kshatriyas (warriors) and Vaishyas (business class and traders), and then the Shudras (involved in low-skilled and odd jobs) at the bottom. Individual castes themselves are further divided into sub-castes, each claiming social supremacy over the other. Claims of social supremacy were usually exploitative, and accompanied the humiliation of social groups lower in the hierarchy, whose basic human rights were denied.

The Shudras suffer from social and economic disadvantages, and are even treated is untouchables. Access to certain public places like temples, parts of the village, and even drinking water from wells used by upper castes are denied to them. Settlements of the lower castes are located mostly on the outskirts of the village.

Post-independence, the development process in the social, economic, and political arenas have initiated changes in the traditional systems; however, caste hegemony continues to affect rural polity. The abolition of zamindari and other legislation related to land and labour have brought about changes to empower the deprived.

However, over the last few years the influence of the caste system appears to be reducing. Now we can see mixed hamlets, with Brahmins and Kshatriyas living at the same place in villages. Untouchability is also phasing out, except in a few states like Rajasthan, where it is highly prevalent.

As the impact of the caste system has diluted, it is no longer of much importance from a marketer's point of view.

4. The Political Environment

Historically, the panchayat and the village pradhan/sarpanch had represented rural India. Dominated largely by the upper castes, they lorded over the political scene until the panchayats became part of the administrative machinery of the Government of India. Under the Panchayati Raj system, all government departments (education, health, agriculture, rural development, social justice, livelihoods) form an integrated approach for the development of rural areas.

a) Panchayati raj institutions        

The salient features of Panchayati Raj under the 73rd Amendment are:

• To provide a three-tier system of Panchayati Raj for all states with a population of over two million.

• To hold panchayat elections regularly every five years.

• To provide reservation of seats for Scheduled Castes, Scheduled Tribes, and women (not less than 33 per cent).

• To appoint a State Finance Commission to make recommendations with regard to the financial powers of panchayats.

• To constitute a District Planning Committee to prepare draft development plans for the district.

• According to the Constitution, panchayats shall be given powers and authority to function as institutions of self-government.

• Preparation of a plan for economic development and social justice.

• Implementation of schemes for economic development and social justice in rela tion to the 29 subjects given in the Eleventh Schedule of the Constitution.

• To levy, collect, and appropriate taxes, duties, tolls, and fees.

b) Gram Sabha

A general assembly of villagers called the Gram Sabha has to be organized, involving people's participation and necessarily including the rural poor, women and marginalized communities in decisions on matters affecting their lives. The active functioning of the Gram Sabha will ensure participatory democracy with transparency, accountability, and achievement.

The Gram Sabha should meet at least once in each quarter, preferably on Republic Day, Labour Day, Independence Day, and Gandhi Jayanti. Role of the Gram Sabha:

• Decides the developmental work to be undertaken by panchayats, based on a needs assessment.

• Suggests remedial measures for economy and efficiency in the functioning of the panchayats.

• Questions and scrutinizes the decisions of panchayats in its meetings.

• Discusses the annual financial statement of gram panchayats.

The structure of the panchayat ensures the participation of villagers in electing their representatives to the panchayat as well as in its functioning, thereby making them politically aware and active.

Villages with a population of 5,000 or a cluster of smaller villages with a cumulative population of 5,000 form a panchayat. Villages are segmented to form wards, from where ward members are elected to the panchayat. The ward members select their leader, who becomes the sarpanch. The sarpanch represents the village at the tehsil/ taluka/block level.

5. The Technological Environment

The changes in the rural technological environment were triggered by rapid mechanization in farming after the Green Revolution (see Table, Rapid growth of Farm Mechanization), and the information and communication technology revolution in the last decade.

a) Rapid mechanization

There has been a sustained increase in the adoption of mechanization to ensure greater returns on investment (Rol) and sustainability of agriculture. Mechanization, primarily driven by the increased use of tractors, is replacing manual and animal labour.

As a consequence of the mechanization of agriculture, the share of animal power has declined from 16 to 7 per cent, and the share of tractor power has increased from 30 to 46 per cent between 1990-91 and 1995-96, as depicted in figure, (Increasing mechanism – source of power). India is the second largest manufacturer of tractors in the world, with annual sales of 342,000 tractors (2009-10). There are 16.7 tractors per 1,000 hectares at present.

All these factors have resulted in better productivity in agriculture.

b) The information and communication technology revolution

Information and communication technology is making inroads into, and changing the face of, rural India.

The evolution of the computer, Internet, and mobile phones has had a tremendous impact on the lives of rural people. It is connecting farmers to food retailers, enabling them to sell the produce at high farm gate prices without delay. They receive market information at the touch of the button.

Before ITC introduced e-Choupal, farmers were restricted to selling their produce to middlemen in the local mandi at low prices. Today they have formed a community of e-farmers who have access to the daily prices of a variety of crops, wider markets, weather forecasts, the latest farming techniques, crop insurance, etc. This is transforming the Indian farmer into a progressive, knowledge-seeking netizen.

The e-Choupal project is currently benefiting four million farmers in 40,000 villages through 6,500 e-choupals. This initiative is discussed in Chapter 10 in greater detail.

Today's rural children and youth will grow up in an environment where they have 'information access to education opportunities, exam results, career counselling, job opportunities, government schemes and services, health and legal advice, worldwide news and information, land records, mandi prices, weather forecasts, bank loans, and livelihood options.

6. The Rural Economic Environment

The rural economy has changed from a slow-growth, subsistence agriculture economy to a fast-growth economy. Economic liberalization and government-led infrastructure development have opened up the rural economy. Better access to goods, markets, and funds has kick started the more resilient non-farm sector. This, combined with better farm earnings due to a sharp minimum support price (MSP) increase for crops and crop diversification, has led to more money for rural pockets, which transformed the rural economy into a vibrant and growing economy with rapidly rising incomes. This has brought India's cities much closer to their hinterlands, more than people might imagine.

Today, the rural economy is undergoing a favorable transformation in terms of rising and stabilizing rural income, fuelling consumption growth at faster pace than in urban areas. The importance of the rural economy can be gauged from the fact that nearly 70 per cent of India's population, 56 per cent of its income, 64 per cent of its expenditure, and 33 per cent of its savings come from rural India, as evident from Table. (see table, The contribution of the Rural Economy)

The resilience of the rural economy during the recent economic recession suggests that rural India will be a significant contributor to this rapid rate of growth. In recent times, the Central government has made substantial progress in creating rural infrastructure in accordance with the commitment to faster social-sector development, in order to remove disparities under the Eleventh Five-Year Plan and numerous other initiatives. In addition, the private sector has played a significant role in providing greater access to information via telecommunications.

In the following section, we will discuss the changing face of rural development, changes in the rural economic structure, the phenomenon of migration, and the impact of these changes on rural income and the consumption pattern.

  a. The Changing Face of Rural Development

Over the past two decades, the rural economy in India has graduated from being a 'barter economy' to a cash-rich economy. In the recent global meltdown, the rural economy acted as the saviour for the Indian economy, and helped India to stamp its mark on the global economy.

Due to a host of favorable cyclical factors, growth in nominal rural GDP has increased to over 19 per cent p.a. in the last few years, the highest for the last three decades, even higher than urban, (see figure, Percentage increase in monthly per capita expenditure, In the figure, the per capita consumption has been used as a proxy for nominal rural per capita GDP since the split of rural-urban GDP is unavailable.) This is forcing corporate India to focus its strategies on rural India, in part also to beat the slowdown in urban India. While cyclical factors could turn adverse, the political environment is extremely favourable for prorural policies. Rural India has moved to the core of both the government's policies and corporate India's strategies.

Rapid increase in rural literacy levels, improvement in health indicators, increase in per capita expenditure, improvement in housing, decline in poverty levels, and increase in life expectancy are factors that have resulted in the improvement of human development indicators in rural India.

Persons living below the poverty line have declined both in terms of percentage (27 per cent to 22 per cent) and absolute number (193 mn to 170 mn) between 1999-20 and 2004–05.

b. The development exercise: the five year plans

To improve the quality of life in rural areas, allocations for rural development and agriculture have been increased substantially over consecutive Five-Year Plans. The increase in budget allocation has been multi-fold, both for agriculture and rural development sectors between the Eighth and Eleventh Plans, as shown in Table

The rural economy has undergone a structural shift, from predominantly farm based5 to a mix of farm, off-farm, and services economy, a change that is reflected in the decreasing contribution of the primary sector, whose GDP share halved in the last two decades as demonstrated in Table (see table, Table: Percentage of different sectors in GDP). On the other hand, the GDP share of the services sector increased (it employs 34 per cent of the workforce) during the same period.

While the direct contribution of agriculture is limited and declining, its influence on the overall economic growth has been immense. Most non-farm activities are dependent on agricultural income.

c. The transition of the rural economy

The transition of the rural economy has occurred at three levels (see figure, The transition of the Rural Economy). The transition at all three levels were linked to the high opportunity for value addition, resulting in high rural incomes. The farm sector now contributes only 40 per cent of the rural income, whereas the non-farm sector contributes 60 percent of the total rural income. This transition has important positive implications for employment and productivity, both within the farm and non-farm sectors, which have grown substantially.

References

• Pradeep Kashyap, Rural Marketing, Pearson Publication, Third Edition