It is no secret that for the marketing chief of any FMCG or consumer facing firm, cracking the rural market has become a key consideration of their strategic plans these days. Since liberalisation was introduced, resulting in eventual ushering in of consumer boom, the focus in the initial years was to crack the six big metros and other major urban centers since they were considered to be the hubs where you had consumers with higher per capita income and expenditure capabilities.
While it remains debatable as to how much of trickle-down theory has really worked in the country, it is quite evident today the rural markets have emerged as a significant dynamo in their own rights in the last
10-15 years. And, with metro markets becoming saturated in terms of demand impetus, marketing chiefs are now increasingly looking at penetrating rural markets on a wider basis.
For the full-fledged pan Indian companies, having equal emphasis on rural market and connecting with rural consumers (in tailor-made packages that works better in hinterland) is a must now.
Cyclical blips notwithstanding, there is no denying that rural consumption has emerged as a strong pillar of consumer product businesses across the board in the recent decades.
According to the latest Household Consumption Expenditure Survey (HCES), released by the statistics ministry recently, rural India’s monthly per capita household consumption has shot up by over 40 per cent during the course of the last decade (from 2011-12 to 2022-23).
In precise statistical terms, the survey revealed that monthly per capita consumption expenditure of rural households has jumped to Rs2,008 in 2022-23 from Rs1,403 at the beginning of the last decade. During the same period, the urban per capita household consumption had shot up to Rs3,500 in 2022-23, from Rs2,360 in 2011-12 (adjusted against the inflationary equations during the stated period).
If you take it out of the equation and just look at gross numbers, the actual urban household consumption expenditure was estimated at Rs6,459 and, for rural pockets, it was close to Rs3,800 in the fiscal 2022-23. Whether it’s urban or rural expenditure calculation, the accounting mainly comprises spending on food and items like energy, medical services, education and other activities. In the expenditure basket, food-related consumption has a lion’s share. And, for the rural households, it is as high as 46 per cent, while it is close to 39 per cent for urban consumers.
It is no secret to anybody that, in the post Corona Phase, the rural market trend had somewhat taken a subdued course. But, now, there are signs of a strong revival in the consumption pattern of the rural pockets. According to a recent report of a leading consumption tracking agency, in the first quarter of the current fiscal, the rural consumption of FMCG sector has outpaced urban consumption, for the first time after a gap of five quarters.
In Q1, the rural consumption increased by 7.6 per cent, which was higher than the urban consumption growth of 5.7 per cent. The increase has been notified in volume terms and, in the last quarter of the previous financial year, the rural volume growth, at 5.8 per cent, was modestly lower than the urban figure of 6.9 per cent.
Another highlight is a modest increase in the consumption of non-food items in the rural areas. On an overall basis, the growth in rural consumption of non-food items has grown by 12.8 per cent, which is led by personal care and home care categories.
The revival signs in the rural consumption is also being witnessed in the automobile sector. The first quarter sales figure of the automobile industry reflects a low key growth trajectory of 3 per cent. But out of this, the two-wheeler segment recorded a staggering 20 per cent plus growth, mostly on the basis of robust rural demand.
And there are clear signals of rural demand and consumption providing a cushion to India’s GDP growth in the current fiscal. Agencies like the International Monetary Fund (IMF) and others have broadly projected about 7 per cent growth for the Indian economy this fiscal and most of them have cited private consumption, especially in rural pockets, being the key driver of a possible good show this year.