rural markets in india

Indicus Analytics 1

Rural Markets in India

Submitted to:

IMA (Associate of Economist Intelligence Unit)

Indicus Analytics

Indicus Analytics 2

Section 1: Demographic Profile

Contents Population profile of India 3

Family Sizes and Dependence in Rural Areas 4

Distribution of Household Size 5

Age and Sex Distribution in Rural India 6

Progressively Fewer Children – Less than 10 years of Age 7

Family Characteristics 8

Literate people (Total Population) 9

Sex Ratio across Demographic Segments in rural areas 10

Educational Characteristics 11

Indicus Analytics 3

Population profile of India

Parts of India

Total population (in millions)

Percentage (%)

Total No. of households (in millions)

Average household size

Rural 741.6 72.2 148.3 5.0

Urban 285.4 27.8 63.4 4.5

Total 1,027.0 100.0 211.7 4.9

Population

Rural72%

Urban28%

• Bulk of the population is rural – more than 740 million Indians reside in

rural areas.

• Average rural household has five members; slightly higher than in urban

areas

Whom and where should marketing efforts be targeted?

Indicus Analytics 4

Family Sizes and Dependence in Rural Areas

Population Characteristics Distribution by Economic Class

Poorest 5% Households

Richest 5% Households All

Avg. Household Size 6.0 3.6 5.0

Avg. no of adults per Household 3.0 2.8 3.2

Avg. no of children per Household (0 to 10 years) 3.0 0.7 1.9

3.6

5

6

Top 5% Average Bottom 5%Economic class

Household Size

tribution of Household size per 1000 households

Household size Part 1 2 3 4 5 6 7 8 9 10+

Rural 50 91 122 187 190 140 87 52 30 50 Urban 106 83 131 225 179 118 65 39 20 35 S: page17

Poorer households have larger families, and more children

The better-off have smaller family sizes

Largely due to fewer children

More available for lesser people in richer households

Indicus Analytics 5

Distribution of Household Size

0

50

100

150

200

250

Hous

ehol

ds p

er 10

00

1 2 3 4 5 6 7 8 9 10+Household size

Distribution of households as per household size

Rural Urban

By and large family sizes in rural areas are not highly different from

urban areas

Incidence of joint families is only marginally more in rural areas

Incidence of single person households largely due to migration

What are the age-sex characteristics?

Indicus Analytics 6

Age and Sex Distribution in Rural India

Population Age Profile

100 80 60 40 20 0 20 40 60 80 100

< 10

10 to 20

20 to 30

30 to 40

40 to 50

50 to 60

60 to 70

70 to 80

80 to 90

> 90

Number in millions

Male Female

• 63% of the rural population is below 30 years of age

• Half of the population is aged below 21 years

• For every 100 people in the 20 to 60 year age group there are 117

dependents (above 60 and less than 20 years).

A young market

Indicus Analytics 7

Progressively Fewer Children – Less than 10 years of Age

Population Age Profile0 5 10 15 20 25 30 35 40 45

0 to 2

2 to 4

4 to 6

6 to 8

8 to 10

Year

s

Numbers in millions

• Fewer children in the 0 to 2 and 2 to 4 age groups

• Reflects falling birth rates

Population growth will not forever lead market growth

Indicus Analytics 8

Family Characteristics

Family Category .

Percentage of All households

Average number of individuals per household

Unitary (Single person or with spouse)

12.2 1.6

Nuclear (Couple with children)

50.8 4.7

Extended (Parents with one married child)

28.2 6.1

Joint (More than one married siblings)

4.3 10.3

Miscellaneous 4.5 8.7

• Most households contain individuals or couples.

• Nuclear households are the norm in rural India.

• Extended households include elders living with married children.

Nuclear households are the norm and Joint families are an

exception.

Indicus Analytics 9

Literate people

Literates Rural (millions)

Rural + Urban (millions)

Male 226.3 339.9 Female 140.4 226.8 Total 366.7 566.7 Sex Ratio of Literates (per 1000 males) 620 667

340

227

050

100150200250300350

Popu

latio

n in

Milli

ons

Male Female

Literates (All India)

• According to the Census 2001, 65.38% of the country’s population is

literate.

• Females have a much lower literacy rate than men in general.

• Rural women have an even lower likelihood of being literate.

Though there are more women than men in rural India,

literate women are significantly fewer

Indicus Analytics 10

Sex Ratio

Sex Ratio Females per 1000 males

All Population 933

Rural 946

Urban 901

Sex Ratio in Rural and Urban areas

All Population

Urban

Rural

600 650 700 750 800 850 900 950 1000Females per 1000 male

Rural India in general has more females per male than in urban India This is due to two factors:

Poorer tend to have greater females per male, and rural population

tends to be poorer.

Migration of males to urban areas also contributes

Significantly larger proportion of females in the population


Educational Characteristics Education Category Rural male (%) Rural female (%)

Non-literate 40.1 61.1 Literate below primary 19.6 25.1 Literate up to primary 13.3 9.8 Literate up to middle 12.6 7.6 Literate up to secondary 6.7 3.2 Up to higher secondary 3.1 1.2 Graduate and above 2.1 0.6 Others 1.4 1.2

010203040506070

Perc

enta

ges

Non-literate Literate belowprimary

Literate up toprimary

Literate up tomiddle

Literate up tosecondary

Up to highersecondary

Education levels of usually employed

Rural male (%)

Rural female (%)

• About Every 2 in five males are literate; every 3 in five females are

illiterate in rural areas.

• Among the female employees around 74% in rural India are illiterate.

• The percentage of workers, who are graduates and above, is

comparatively much smaller.

Large increases in literacy have only generated basic ability to

read , but education levels continue to remain low


Section 2: Occupation

Contents

Percentage of people in the work force 13

Primary Employment Characteristics of Head of Household 14

Finer break-up of Rural Employment Characteristics(%) 15

Percentage Of work force in a Wage Earning Job Error! Bookmark not defined. Land Cultivation: Size of Land and Number of Households 18

Land ownership and expenditure profile of households 19


Percentage of people in the work force

Part of India Male (%)

Female (%)

Rural 54 30

Urban 54 15

The work force comprises of people willing and able to work outside of home.

Both rural and urban male populations have broadly equal

proportions in the work force.

But rural females are significantly more likely to be in the labor force than urban females

Rural females are twice as likely to be working than urban females

0

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30

40

50

60

Perc

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Male Female

People in labor force

RuralUrban


Primary Employment Characteristics of Head of Household

Nature of work Rural

Urban

Self Employed 46.1 34.4

Wage/regular/salaried workers

40.2 55.7

Others 13.7 9.7

Employment characteristics of head of household

0102030405060

Rural Urban

Perc

enta

ge

Self Employed

Wage/regular/salariedworkersOthers


Finer break-up of Rural Employment Characteristics(%)

Households whose main occupation is: Self-employed in agriculture

Self-employed in non-agriculture

Agricultural labor

Other labor

Others Total

32.7 13.4 32.2 8.0 13.7 100.0

Rural households have a much higher ratio of self owned businesses (46%) .

Urban households are more likely to be dependent on being

employed by others.

41.7% of the urban salaried/wage worker households are employed on a regular basis; 14% are on a casual basis.

Incomes less stable in rural areas due to lower regular wage employment


Others Self-employed in agriculture

Self-employed in non-agriculture

Other labor

Agricultural labor

The bulk of the rural self-employed households are involved in

agriculture

This is also true of those who are employed by others

Maximum no. of households (around 64%)in rural India earn

their livelihood by agriculture related activities

Largely an agriculture based demography


Age Distribution of Work Force

Age groups

Employment rate (Male)

Employment rate (Female)

15 to 25 years 49.6 19.3 26 to 35 years 75.3 20.3 36 to 45 years 85.4 21.5 46 to 55 years 85.3 21.2 56 to 65 years 81.9 18.5

Employment rate calculated on the basis of those working for a wage paying job or working in a family business out of the total work force (those able and willing to work)

Those involved in household chores not included

Males in lower age groups much less likely to be working that those

in middle and higher age groups

Females employment rate though significantly lower is more stable across age groups


Land Cultivation: Size of Land and Number of Households

Land Cultivated in Ha. Number of Households

(millions) Percent

0 to 1 115.9 78.1

1 to 2 16.4 11.1

2 to 3 7.5 5.1

3 to 4 3.0 2.0

4 to 5 2.2 1.5 > 5 3.5 2.3

Total 148.5 100.0

Most households cultivate insignificant amount of land – close to

four fifths. Barely 4 percent of the households (5.5 million) cultivate land greater

than 4 hectares

Only way farmers’ economic condition will improve is by greater use of fertilizers and better seeds.


Land ownership and expenditure profile of households

Land Owned by Self Employed

in Agriculture in Ha. Average MonthlyExpenditure (Rs.)

No. of Households(millions)

0 to 1 2,256 22

1 to 2 2,635 12

2 to 3 2,828 6

3 to 4 3,401 3

4 to 5 3,537 2

> 5 4,303 3

All Landowning households 2,689 49

Only about a third of the total households own agricultural land.

The topmost category in terms of land ownership makes less than

double monthly expenses the lowest category.

Indicates large numbers of poorer households


Section 3: Expenditure Characteristics

Contents

Expenditures by All Households.................................................................................................... 21

Occupations and Expenditures...................................................................................................... 22

Land Owned by Self Employed in Agriculture and expenditures .................................................. 23

Expenditure Distribution of an average household........................................................................ 24

Annual Expenditure per Household and Annual Market Size ....................................................... 25

Defining Economic Classes........................................................................................................... 26

Annual Expenditures by Rural Households................................................................................... 27

Total Amount Spent by different categories of households........................................................... 28

Rural Market Size Of Different Commodities ................................................................................ 29

Rural Market Across Expenditure Classes- 1................................................................................ 30

Rural Market Across Expenditure Classes- 2................................................................................ 31

How to define Major Economic Classes........................................................................................ 32

Household’s Value of Purchases Across Economic Classes........................................................ 33

Expenditure Profile ........................................................................................................................ 34

Rural Economic Classes -Expenditures per household ............................................................... 35

Rural Economic Classes - Expenditure Characteristics............................................................... 35

Expenditure Profiles of Broad Economic Classes ......................................................................... 36

Expenditure Distribution across Broad Economic Classes ........................................................... 37

Access To Media ........................................................................................................................... 38


Expenditures by All Households

Family Category Annual Total

Expenditure in Rs.

Annual PerCapita

Expenditure inRs.

Average no. ofindividuals per

household

Unitary (Single person or with spouse) 12,214 7,973 1.6

Nuclear (Couple with children) 24,617 5,541 4.7

Extended (Parents with one married child) 29,909 5,069 5.7

Joint (More than one married siblings) 51,551 5,078 10.2

Miscellaneous 42,003 4,916 8.2

• Larger households spend greater amounts in total than smaller

households • Per capita expenditure falls with household size • Economies of scale presumably play a strong role in household

expenditures

Do occupation play a strong role in determining expenditures?


Occupations and Expenditures

Type of Households Average Yearly Expenditure per household(Rs.millions)

Households (Rs. millions)

Total Amount Spent in Rs. Bill.

Agriculture Labour 20 47 935

Self Employed in Agriculture 32 49 1,575

Other Labour 25 12 291

Self Employed in Non Agriculture 29 20 577

Others 29 21 615

Total 135 149 3,993

Almost two-thirds of the households depend upon agriculture for

their main source of livelihood. The self-employed tend to have much higher expenditures in rural

areas. The self-employed agriculturalists are both greater in number and

have higher spending power than other broad categories

How does ownership of land impact expenditures?


Land Owned by Self Employed in Agriculture and

expenditures

Land Owned (Hectares) Average Monthly Expenditure (Rs.) No. of Households (Millions) Total Amount Spent per Year

by Households

0 to 1 2,256 22.2 60,232

1 to 2 2,635 11.9 37,888

2 to 3 2,828 6.3 21,425

3 to 4 3,401 2.5 10,507

4 to 5 3,537 2.1 9,163

> 5 4,303 3.4 17,945

All 2,689 48.7 157,301

About 48 million households are self employed in agriculture Land size directly linked with expenditures

Of these barely 30 percent have land greater than 2 hectares

Agriculture based households would tend to have lower expenditures

than those in other professions Per Household expenditures rise sharply beyond 3 hectares, but

l k i f ll b f f b


Expenditure Distribution of an average household

Areas of expenditure Percentage Allocation

Food and basic needs 59

Cereal 22

Fuel & light 8

Total non food, non basic 41

Clothing & footwear 8

Medical 6

Toiletries and Misc. 10

Transport & services 12

Durables 3

Others 2

The major expenditure is in basic requirements that include cereals and other food and fuel

Non basic expenditures that include everything else, are allocated only

two out of five rupees spent. Clothing and footwear, and toiletries (e.g. cosmetics, detergents)

account for less than half the non basic expenditures. Purely manufactured items (above plus durables) account for only one

in five rupee spent by a rural household Per Household expenditures rise sharply beyond 3 hectares, but total


Annual Expenditure per Household and Annual Market Size

Expenditure category Expenditure per household (Rs.) Total Market

(Rs. Billion)

Basics (food and fuel) 18,433 2,710

Of which, Fuel 1,925 283

Clothing 2,003 294

Medical 1,757 258

Of which, Non-institutionalMedicine 1,365 201

Toiletries 886 130

Commuting and Transport 654 96

Education related articles 413 61

Institutional Medicine 391 58

Footwear 331 49

Rent 117 17

Entertainment 62 9

Misc. Goods & Services 770 113

But these break-ups are likely to be different across economic classes


Defining Economic Classes

First rate households on the basis of its monthly total expenditures Then see how various components of expenditures change as total expenditure of the households increases Obtain insights into the same Use these insights to define broad economic classes Study the expenditure profile of these economic classes Answer questions of the type:

What are the higher economic classes?

Where are they located?

What are their other characteristics?


Annual Expenditures by Rural Households

Annual Expenditute by Expenditure Ranked Households

020,00040,00060,00080,000100,000120,000140,000160,000180,000200,000

020406080100

Lowest Spending Classes Highest Spending Classes

Expe

nditu

re in

Rs.

Most households spend more than Rs. 24,000 per year

Top 1% of the households (about 1.5 million) spend greater than Rs.

100,000 per year Some possibility that high expenditure households are under-reporting

expenditures (dashed line represents this possibility) Great potential for low priced commodities

A large but poor market


Total Amount Spent by different categories of households

020,00040,00060,00080,000100,000120,000140,000

0102030405060708090100Lowest Spending Classes Highest Spending Classes

Rs. M

illion

In total rural household spent about Rs. 4000 billion in the year 2000. Of this the higher economic classes spent the largest amounts, despite

having significantly fewer households The poorest sections of the rural population do not have high purchasing

power individually as well as in the aggregate. The richest 10% of the households spent Rs. 670 billion, the next 10%

spent Rs. 583 billion, the next 10% Rs. 440 billion, a similar amount by the next 10%.

Apart from the top and the bottom 10% rest of the households are similar

in terms of their spending characteristics


Market Size Of Different Commodities

Institutional Medical 58 391

Footwear 49 331

Expenditure Category Total Market Size (Rs. Bill.)

Expenditure per Household (Rs.)

Food 2,452 16,508

Commuting, Travel & Misc. 326 2,194

Clothing 298 2,003

Fuel & Light 286 1,925

Medical 261 1,757

Non Institutional Medical 203 1,365

Durables 146 986

Toiletries & Cosmetics 132 886

Food, Clothing, Fuel, and Medical expenditures are the highest household

expenditure categories. Travel, commuting, and miscellaneous services are also a high

expenditure category Manufactured items such as durables, toiletries, and footwear bring up the

rear.

How do these expenditures differ across expenditure classes?


Market Size Across Expenditure Classes- 1

Total Expenditures of Rural Households across Economic Classes: Concave Expenditures

0

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5

6

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8

9

10

0 10 20 30 40 50 60 70 80 90 100Expenditure Class of Households

Rs. B

ill.

Durables Non Institutional MedicalInstitutional Medical Commuting,Travel & Misc

Commodities with concave expenditures shoot up across higher

expenditure classes. With economic growth these expenditures should increase the most


Market Size Across Expenditure Classes- 2

Total Expenditures of Rural Households across Economic Classes: Convex Expenditures

0

1

2

3

4

5

6

7

0 20 40 60 80 100

Expenditure Class of Households

Rs. B

ill.

Fuel & Light Toileteries & Cosmetics Footwear Clothing

Commodities with convex expenditures do not shoot up across higher

expenditure classes. Minor fall in prices will greatly increase penetration among lower

expenditure classes


How to define Major Economic Classes

The Broad Economic Classes: Division Based on Durable to Non-Durable Expenditures

0 20 40 60 80 100

Affluent

Middle

Marginally non-poor Poor

Many ways of deciding the cut-off between broad economic classes

We use expenditure on durables

Among lowest expenditure classes, the ratio of expenditures on durables

to non-durables increase in a linear manner (Red and green lines) There is however a slight non-linearity among the 22nd to 10th percentiles,

(the blue curve) this curvature is strongest in the topmost 9% of the households (the mauve curve)

The curve implies that the proportional expenditure on durables increases

at a much higher rate. This denotes the poor, marginally non-poor, the middle, and the affluent

classes respectively


Household’s Value of Purchases Across Economic Classes

Affluent Middle Class Marginally Non-Poor Poor

Top 9% 9 to 22% 22 to 52% 52 to 100%

Number of households (in millions)

13

18 45 71

Number of people (in millions) 113 123 255 271

Average yearly expenditure per household

5,790 3,355 2,296

1,228

All expenditures in Rs.

• The rural consumers can broadly be divided into four categories

The poor - Bottom 48% of the economic classes

The marginally poor – 22 to 52 percent

The rural middle class –9 to 22 percent

The rural affluent – Top 9 percent

• We find that there is homogeneity of expenditure profile within a category

• Caution: Rural affluent and middle classes have a very different profile

than urban affluent and middle classes


Expenditure Profile

Basic Goods (Food + fuel)

Non - Basic

Durables (TV, automobiles, etc.)

Non-basic Non-Durables (Clothing, footwear, toiletries, etc.)

• Broad hierarchy of expenditures

• Basic and non-basic expenditures

• How do the expenditures differ across economic classes?

• We would expect the poor to spend the bulk of their expenditures on

basic goods, and insignificant amounts on durables


Rural Economic Classes -Expenditures per household

Affluent Middle Class Marginally Non-Poor Poor

Top 9% 9 to 22% 22 to 52% 52 to 100%

AYE on Basic commodities 39,983 27,079 19,759 11,183

AYE on non-basic non-durables 24,269 11,887 7,123 3,256

AYE on durables 5,223 1,303 679 287All expenditures in Rs

Rural Economic Classes - Expenditure Characteristics

Affluent Middle Class

Marginally Non-Poor

Poor

Top 9% 9 to 22% 22 to 52% 52 to 100%

Basic/Total 0.57 0.67 0.71 0.75

Toiletries/Other non-basic non-durables 0.08 0.11 0.13 0.16

Durable/ Other non-basic non-durables 0.21 0.10 0.09 0.08


Expenditure Profiles of Broad Economic Classes

Expenditure category

Annual Expenditure per Household ( in Rs.)

Affluent Middle Marginal Poor

Basics (food and fuel) 39,983 27,079 19,759 11,183

Of which, Fuel 3,910 2,746 2,060 1,245

Misc. Goods & Services 16,271 6,954 3,734 1,512

Toiletries 1,951 1,308 937 537

Medical 7,175 2,751 1,498 622

Commuting & Transport 2,392 1,109 590 242

Education related articles 1,709 727 371 110

Entertainment 175 108 60 29

Rent 285 251 117 49 Clothing

5,099 3,069 2,108 1,063

Footwear 939 554 338 151

Durables 5,223

1,303 679 287

Total 69,466 40,267 27,555 14,733

Food remains the main expenditure segment across economic classes

Unlike in urban areas rent is insignificant across various economic classes

How does the expenditure distribution vary across economic

classes?


Expenditure Distribution across Broad Economic Classes

Expenditure on basic items like food and fuel increases as the household

becomes poorer .The poor households spend more than 70% of their total

expenditure on basic items.

On the contrary expenditures on miscellineous goods and durables

decreases as we move across richer to poorer households.

The share of expenditure on clothing , footware and toiletries, almost

remain the same across all economic segments.

40%

50%

60%

70%

80%

90%

100%

Perc

enta

ge o

f tot

al ex

pend

iture


Distribution of average yearly expenditure per household

Durables

Footwear

Clothing

Toiletries

Misc.Goods &ServicesBasics(food andfuel)


Access To Media

Affluent Middle Class

Marginally Non-Poor

Poor All

Newspapers

1 17% 3% 1% 0% 3%

>1 1% 0% 0% 0% 0%

Television

Colour 14% 2% 0% 0% 3%

BW 44% 29% 13% 2% 16%

Cable

TV with Cable 14% 4% 2% 0% 3%

TV w/out Cable 44% 27% 11% 1% 15%

Radio 61% 44% 28% 14% 30%

Telephones 8% 1% 0% 0% 2% Note: The figures above are estimates and may be biased downwards by about 10 percent.

Low access to media across economic classes.

The poor and the marginal classes have insignificant exposure to media

barring radio.

Access to cable TV is much higher than access to a telephone.

Radio has the highest penetration among mass media.

Low levels of access to all types of media


Section 3B – Seasonality in Expenditures

Contents

Seasonality in Rural Consumption Expenditures 40

Seasonality in Rural Consumption Expenditures: The Affluent and Middle Classes 41

Seasonality in Rural Consumption Expenditures: The Marginally Non-poor and Poor Classes 42

Seasonality Across Economic Classes: Comparing the Per household Monthly Expenditures 43


Seasonality in Rural Consumption Expenditures

Seasonality: Total Consumption Expenditures

10.00

15.00

20.00

25.00

30.00

35.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Rs. B

illion

Rural household consumption expenditures show distinct seasonality

They tend to follow agriculture cycles

Rural seasonality differs highly from urban seasonality – Note the

trough in October and November Is likely to be different across different geographical regions

Do consumption expenditures differ across economic classes?


Seasonality in Rural Consumption Expenditures: The Affluent and Middle Classes

Affluent expenditures are concordant with major agriculture output selling

Middle

3,200

3,400

3,600


Affluent

5,000

5,200

5,400

5,600

5,800

6,000

6,200

6,400



Seasonality in Rural Consumption Expenditures: The Marginally Non-poor and Poor Classes

Marginal

2,200

2,400


Poor

1,000

1,200

1,400


The expenditures of the poor are concordant with the harvesting times


Seasonality Across Economic Classes: Comparing the Per household Monthly Expenditures

1,000

2,000

3,000

4,000

5,000

6,000

7,000



Affluent expenditures show the highest level of seasonality

The other economic classes show very low levels of seasonality in

rupee terms. The Affluent spend about 20% higher in the highest expenditure

months than the lowest expenditure month. The poorest spend about 9% higher in the highest expenditure months

than the lowest expenditure month. For the Marginal and Middle classes this is only 2%.

Seasonality in rural areas is different from that in urban areas; it is highly

dependent on the agricultural seasons; and differs highly across economic categories


Section 4: The Geography of Rural Markets Contents Where are the Better-off Households located? ....................................45

The states in terms of Rural Affluence .................................................46

The Affluence Rates in Rural sub-regions............................................47

What determines Rural affluence? .......................................................48

Consumption characteristics of the affluent..........................................49

Similar types of affluence across India .................................................50


Where are the Better-off Households located?

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

Uttar Pradesh

Bihar

Maharashtra

West Bengal

Andhra Pradesh

Rajasthan

Madhya Pradesh

Gujarat

Karnataka

Kerala

Tamil Nadu

Punjab

Haryana

Assam

Orissa

Affluent Middle Marginal


The states in terms of Rural Affluence

States (Only Rural areas)

Affluent – Households in

‘000s

Middle – Households in

‘000s

Affluent in State Total

(%)

Affluent + Middlein State Total

(%) Rural Delhi 276 299 36.2 75.4 Haryana 837 642 30.9 54.6 Punjab 817 729 27.1 51.3 Goa 27 45 16.8 45.2 Kerala 1,004 1,075 20.6 42.7 Himachal Pradesh 208 258 18.5 41.5 Rajasthan 1,180 1,560 17.0 39.5 Gujarat 800 1,135 12.3 29.8 Uttar Pradesh 3,125 3,628 12.9 27.8 Karnataka 618 886 8.0 19.6 Maharashtra 882 1,412 7.0 18.2 Assam 154 492 3.9 16.4 West Bengal 584 1,270 4.8 15.4 Madhya Pradesh 745 1,062 6.2 15.0 Bihar 723 1,467 4.6 13.8 Tamil Nadu 529 668 5.2 11.8 Andhra Pradesh 449 933 3.2 9.7 Orissa 194 411 2.9 9.0

Sorted in descending order by Affluent + Middle in state total

The Haryana – Delhi – Punjab rural belt is the highest in terms of affluence rates.

Southern India has the lowest rates of rural affluence

Uttar Pradesh, Kerala, and Rajasthan have the highest numbers of

the affluent

How are the affluent distributed within the states?


The Affluence Rates in Rural sub-regions


What determines Rural affluence?

Afluence and Agriculture Production (Logarithmic Scale)

10,000

100,000

1,000,000

10,000,000

100,000,000

10,000 100,000 1,000,000 10,000,000Foodgrain and Pulses Production

No o

f Affl

uent

Hou

seho

lds

.

Close relationship between presence of affluence and agricultural

production.

However other factors are also important, such as handicrafts, rural industry, trade, migration, etc.

The middle class also follows a similar same relationship.

The most important relationship of the presence of rural affluent, not surprisingly, is with

agricultural production.


Consumption characteristics of the affluent


Similar types of affluence across India


Section 5 – Trends

Population Characteristics ..................................................................................52 Number of households engaged in different types of work ................................53 Number of rural households per every 1000 in different size class of land cultivated.............................................................................................................54 Literacy rate ........................................................................................................55 Number of persons in different education levels ................................................56 Section 5B: How will Rural Markets evolve?.......................................................57 Close relationship between Agricultural Value Added and GDP.........................57 What would the agricultural GDP be? .................................................................58 Demand for Agricultural Inputs ...........................................................................60 Where would the future take Rural India?...........................................................61 The Great Unknowns ..........................................................................................62


Population Characteristics

Year Household Size Sex Ratio (Females per 100 males)

1978 5.2 96

1983 5.1 96

1988 5.1 95

1994 4.9 94

2000 5.0 96

Minor fall in household size – expected to continue at similar rates

Fall in females per male throughout the late seventies till mid nineties

Has it been reversed? Inconclusive evidence


Number of households engaged in different types of

work

Occupation Structure 1988 1994 2000

Self Employed Agriculture 37.7 37.8 32.7

Agriculture Labour 30.7 30.3 32.2

Agriculture 68.4 68.1 64.9

Self Employed non-Agriculture 12.3 12.7 13.4

Other Labour 9.0 8.0 8.0

Others 10.1 11.2 13.7

Total 100.0 100.0 100.0

Fall in farmers who cultivate their own land

Self employment in other activities on the increase

This may also be the result of absence of other employment activities

Sustained fall in importance of agriculture as a main source of employment


Number of rural households per every 1000 in different

size class of land cultivated

Size of Land Cultivated by Household in Ha.

1988 1994 2000

Less than 0.40 54.4 57.5 63.2

0.4 to 1.0 17.3 17.1 16.8

1.0 to 2.0 13.9 13.5 11.2

2.0 to 4.0 8.6 7.6 5.9

Greater than or equal to 4.0 5.8 4.3 3.0

Total 100 100 100

Sustained fall in size of land cultivated by each household

Will not be able to take the burden of a large number of rural youth

Expect a rapid increase in out-migration in the absence of rural employment opportunities


Literacy rate

Year Male Literacy Female Literacy

1983 44.9 21.9

1988 48.4 26.0

1994 54.5 32.1

2000 58.8 38.5

20

30

40

50

60

1983 1988 1994 2000

Male Literacy Female Literacy

Rapid advances in the eighties and nineties on the literacy front

The relative increase for females much higher

Expected to continue in the next few years

Population’s level of education increasing steadily, but still low by international standards


Number of persons in different education levels

Educational attainment 1994 2000 1994 2000 Male Female Male Female

Not literate 45.5 41.2 67.9 61.5

Literate up to primary school 33.7 34.2 23.0 26.0

Middle school 10.9 12.6 5.6 7.5

Secondary School and above 9.8 11.7 3.4 5.0

All 100.0 100.0 100.0 100.0

Though literacy is increasing, the general of education is quite low, and is likely to remain so.

Female education levels are abysmally low

Current growth rate indicates it will be a long time before a significant chunk of the rural population will attain educational standards above simple literacy


Section 5B: How will Rural Markets evolve?

Close relationship between Agricultural Value Added and GDP

Agriculture Value Added and GDP at Factor Cost

Agri Value Added

GDP

at F

acto

r Cos

t

Strong relation between GDP and Agricultural GDP

Other factors are not as important econometric analysis

But it is not clear what causes agriculture growth, they both feed into each other.


Our trend analysis is based on – GDP estimate Agriculture

Value Added estimate Value of Agriculture Inputs estimates

What would the agricultural GDP be?

Agriculture GDP and Overall GDP Trends

0

5000

10000

15000

20000

25000

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

Rs. B

illion

(199

5 Con

stan

t Rs.)

Agriculture, value added (constant 1995 Rs. Bill)GDP at factor cost (constant 1995 Rs. Bill)

In the year 2000 we estimate it to have been approximately Rs. 4300 billion

If 6% per annum growth in GDP is to continue through till 2010 then based on past relationships Agri GDP should be about Rs. 7000 Billion (at 2000 price levels)


For every Rs. 1 growth in GDP we have observed a Rs. 0.21 paise increase in Agriculture value added in the past. Estimates till 2010 are based on this finding


Demand for Agricultural Inputs

What would be the growth in Agriculture inputs?

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

1961 1971 1981 1991 20010

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

45000000

Agricultural machinery, tractors . Fertilizer consumption (metric tons) .

By 2010 the number of tractors in the country would have doubled from about 2 million currently to 4 million.

Fertilizer growth would be marginally higher – from current levels of about 20 million metric tones consumed annually, it would reach about 42 million metric tons


Where would the future take Rural India?

Positives

Large number of people will enter the workforce

They will be relatively better educated than their elders

Better information availability and greater opportunities for commerce

Negatives

Falling size of land.

Over dependence on limited land.

Poor living conditions will continue for the bulk of the population


The Great Unknowns

Unlike past growth estimates, these figures are not based on any high assumptions of economic growth.

However changes in the structure of the economy could impact them adversely or positively.

The Great unknowns for the future:

Political ups and downs

Dependence on rains

Impact of WTO

Large group of young people reaching adulthood – positive if opportunities exist.

But what would happen if opportunities are absent?

rural markets in india

Business

lowest expenditure month

broad economic classes

determines rural affluence

rural employment characteristics

rural consumption expenditures

higher expenditure classes

economic classes

urban areas