Rural folk driving own economy

Mumbai: Indian villages are powering their own economy, but contrary to conventional belief, it's not government largesses which are the drivers, but their own self-sustaining models. Growth at the bottom of the pyramid is at unprecedented level, and the transformation is stark. 

    The factors driving this transformation are dramatic improvements in rural roads, electrification, cell phones and water supply which are raising wages and increasing job opportunities for thousands living in villages. This, in turn, is fuelling demand for consumer goods, and for those companies which have a strong rural push. 
    Case studies from fieldtrips and research undertaken by Credit Suisse show that the growth in productivity is becoming sustainable as jobs in manufacturing drive services jobs in transportation and trade, enabled by mobile phones and roads. 
    Research over the last couple of years by independent sources has confirmed that use of cell phones benefited a diverse set of people—from fishermen to sari weavers. Most of the studies focused on price discovery in agriculture or on skilled artisans improving customer service or price realizations. 
    D K Joshi, chief economist at Crisil, says, "Overall, there has been a definite improvement in the rural economy. Villages have become self sustaining, providing a big push in manufacturing jobs. Roads are increasing demand for vehicles, while cell phones trigger more goods and services. However, a lot more is required; the success stories need to be replicated in a number of areas." 
CHANGING FACE OF INDIAN VILLAGES 
    Village textile stores now stock pre-stitched branded clothing 
    The second hottest-selling item in a rural grocery store is packaged 
gulab jamun instant mix 
    Rural areas have a higher penetration of direct-to-home 
devices for receiving TV content Two in every five mobile subscribers are now rural 
40% of demand for cement comes from rural housing 
Most surprisingly, poultry farming created more days of work per person than the jobs guarantee programme (between 2005 and 2010) Rising wages, land prices spur rural purchasing power 
Mumbai: The face of the rural Indian economy is changing for the better. Access to roads is helping landless people raise poultry (chicken) within limited floor space and sell their produce in nearby towns. In fact, poultry farming created 3.8 million jobs between 2005 and 2010: the 950 million person days of work thus created every year is the same as that by the government's NREGA in the same period. 
    Road access significantly improves land prices, labour mobility, wages and alternative employment avenues, says a study by Credit Suisse. 
    For example, production of mannequins has moved from Ulhasnagar outside Mumbai to villages in Rajasthan, while other examples like pottery (Orissa), saris (West Bengal), furniture (Himachal Pradesh), are all potential jobs difficult to carry out in remote villages previously, but are now made easy by road connectivity. 
    The study found a strong correlation between per-capita output and road networks (represented by vehicle penetration) both within and across states. 
    Since about 80% of the country's rural households own less than two acres of land, they are therefore wage dependent. Analysts point out that this wage growth is largely productivity-driven (and therefore sustainable to a large extent), providing a floor to India's cratering economic growth, and even in the absence of major infrastructure projects taking off, there are substantial changes in basic infrastructure that are taking place in areas other than big cities. 
    Over the last five years, rural wages have increased at an unprecedented 20% CAGR, with land prices appreciating sharply as well. Both have ended up putting more money in the hands of people, and generating purchasing power, experts say. Fast-moving consumer goods companies are enthused with the strong rural demand as it augments their sales. 
    In some cases like Emami with products, offered in 30 lakh rural outlets, including Navratna Oil, Fair and Handsome cream, Zandu Balm, BoroPlus cream, has nearly 50% of sales in some categories coming from rural markets.
    Says N Krishna Mohan, CEO, sales, supply chain & human capital, "We are going to focus on specific brands/stock keeping units and increased outlet coverage in villages/ towns in certain states where we have a strong direct coverage. In other markets, we would be working on ensuring that at least 80% of the villages with a population of 10,000 and above are put under the coverage map by the end of the next fiscal". 
    Another company, ITC, which offers Sunfeast biscuits, Vivel soaps, Superia soaps and shampoos, has been able to tap the rural segment through its e-choupal network. Says an ITC executive: "The divide between urban and rural markets has narrowed down and hence we have expanded our basket of offerings in rural India. Given the vast reach and penetration, ITC has devised mobility solutions for monitoring progress and instant information dissemination". 
    Sales of white goods like refrigerators, and consumer durables like LCD televisions have surged in villages. 
    Private banks have also realized that villages can be the next engine of growth. This is because the share of saving deposit for non-urban branches is high (42-50%) as against the 15-30% in metro/urban branches.