Why Indian Companies Prefer Rural Markets? (9 Important Reasons)

With urban market showing signs of saturation, companies are excited about the potential of rural India.

Some major companies that have focused in the rural sector are Philips, Parle, Proctor & Gamble, Colgate-Palmolive, Godrej, Bajaj Auto, TVS, Atlas Cycle HUL, and Dabur. But now every company feels that road to success passes through rural markets.

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Following reasons indicate the potential of rural markets:

1. Large Population:

According to 2011census rural population is 68.84% of total population and it is scattered over a wide range of geographical area.

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2. Rising Rural Prosperity:

Average income level has improved due to modern farming practices, contract farming, industrialisation, migration to urban areas and remittance of money by family members settled abroad. The urban-rural disparity ratio has declined greatly. The rich segment will treble from 50 million today to 150 million consumers by 2020. Rural India now accounts for 56% of the country’s income. It is a ‘one trilliondollar’ economy.

3. Growth in Consumption:

There is a growth in purchasing power of or rural consumers. The average per capita household expenditure has considerably increased.

4. Changing Lifestyle:


Lifestyle of rural consumer changed considerably. The brand awareness has also considerably increased.

5. Life Cycle Advantage:

The products, which have attained the maturity stage in urban market, are still in growth stage in rural market, e.g., popular soaps, skin cream, talcum powder, etc.

6. Market Growth Rate Higher than Urban:

As per the survey made by NCAER the growth rate of FMCG market and durables market is higher in rural areas. The rural market share is more than 50% for products like body talcum powder, toilet soaps cooking oil, hair oil etc.

7. Rural Marketing is not Expensive:

To promote consumer durables inside a state costs Rs one crore, while in urban areas it will costs in millions.

8. Infrastructure:


From the marketing perspective it includes, Mandhis, Agriculture Cooperatives, Haats and Melas, and shops. From the commercial point of view, there are Regional Rural Banks, Scheduled Commercial Banks, and Cooperative Banks working in rural India. . Under the financial inclusion policy of the Government of India, more and more villages shall be covered.

From the point of view of basic infrastructure, now all the 500+ population villages are connected by an all weather road. Every Panchayat village will have internet connectivity soon. Over 70% rural homes have electricity. Almost every rural home has a mobile phone. It is bound to explosion in demand the way it happened in 1990s in urban areas.

9. Government Policies:

The government is pumping billions of rupees in rural for uplifting rural masses. Policies like Mahatma Gandhi National Rural Employment Guarantee scheme is improving the lot of rural unemployed. Health is being taken care of by National Rural Health Mission 2005-12.

In the last few years the towns have become growth engines and their contribution to GDP is no less significant from urban areas. In case of Rudrapur in Uttaranchal, after launch of industrial estate and offer of concession in excise duty and tax holiday for seven years has become an engine of growth.

Tatas, Colgate, Unilever and many other companies have set up their manufacturing facilities. Its population has grown from 50,000 in 2003 to 1, 50,000 in 2011. The 100 kirana stores have increased to 1,200 branded showrooms including Nokia, Samsung, LG, Blackberry. Hotels like Radisson and Ginger have started operations.


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