Indian Rural Market, Scope

15/05/2020 1 By indiafreenotes

In the process of defining rural market, for the purpose of clarity, it has been attempted to firstly, deal these two terms ‘market’ and ‘rural’ separately and then combine them into one, later.

The term, ‘market’ is used in many contexts. For example, the urban market, the rural market, the agriculture market, the commodity market etc. Thus, market as a concept is most confusing. According to economist’s view, market is a physical place where buyers and sellers get together, and a transfer of title takes place as goods are exchanged.

Thus, markets include the people who sell the goods and services and also those who purchase them. Another view is that market refers to the people with buying power and willingness to buy. In the present study, both the views have been taken into account.

With regard to the term ‘rural area’ also there is no unanimity among the authorities. A few authorities defined a geographical place as a rural area with a population of 10,000 while few others defined, place with a population of 20,000 as rural area. But, for the present study, the criterion adopted by the census of India, 1981 for defining an urban area has been taken as the basis for defining the rural area.

Accordingly, rural area is defined as a place with human habitation of 5000 and below with agriculture as the main economic activity and with a density of population less than 400 sq. km. Some areas with a population more than 5000 are also classified as rural area in view of the agriculture being the main economic activity of a vast majority of population in that area.

On the basis of the definitions of the above two terms, the rural market may be defined as any market that exists in the rural area with a population less than 10,000 where the areal density of population at any population nucleation is low without any significant infrastructure.

In other words, total market of India excluding the urban markets can be called as rural market. These rural markets are mostly unintegrated, very small in size and rudimentary in nature.

According to the National Commission on Agriculture: “Rural Marketing is a process which starts with a decision to produce a saleable farm commodity and it involves all the aspects of market structure or system, both functional and institutional, based on technical and economic considerations, and includes pre and post-harvest operations, assembling, grading, storage, transportation and distribution.”

According to Thomsen: “The study of Rural Marketing comprises of all the operations, and the agencies conducting them, involved in the movement of farm produced food, raw materials and their derivatives, such as textiles, from the farms to the final consumers, and the effects of such operations on producers, middlemen and consumers.”

The above two definitions reflects only one side of the coin and are narrow in explanation, i.e., it explains only the movement of goods from rural to urban areas, whereas, the rural markets also need agricultural inputs like seeds, fertilizers, pesticides, cattle feed and agricultural machinery, as well as the rural population needs consumables, consumer durables and services also. That’s why the urban manufacturers have entered the rural markets with consumables, consumer durables and services.

Nature of Rural Marketing in India

The rural market is quite different from urban markets. Agriculture is the chief economic activity in rural areas, the entire village population is associated directly or indirectly to agriculture. In the process of development of civilization agriculture and pastoral life along river banks are the first form of settled life.

In the Bronze Age, major civilization evolved. Archaeological evidence reveals that bronze industry supplied tools and implements to agriculture. Textiles, paper, iron and furniture making developed to lid man in his economic activities.

Agriculture supplies inputs for fabrication into manufactures cotton, oil seeds spices etc. All food items had a marl origin. Villages were self-contained units, which traded their produce for gold, arm and precious stones. The rural society has high status persons and the poor ones.

The distribution of land was made by state, which belonged to the state- The British rule for more than three centuries was the worst blow to the rural society. The worst blow was to cottage and small scale industries, cultivation of indigo, tea and jute, development of timber trade and denudation of forests.

The terms of trade were not favourable to Indian farmers. In these circumstances farmers were forced to live in deprivation and poverty. British India was with the princely states under the administration of Rajas and Nawabs; the big states had all the powers except defence and foreign affairs.

Agriculture and industries based on raw-materials and local skills are identified for the development of the rural economy. An integrated approach was evolved to take care of projects ranging from milk and milk-products to horticultural products like fruits, vegetables, flowers, herbs, etc.

The processing of these is not widespread in rural areas. Modern technology is too accessible to enterprises there. It is beyond the financial capacity of an average entrepreneur. The low cost and labour based technologies have been the common mode of village industry. As a result, the rural products do not enjoy competitiveness in a wider market. Most of the products are consumed locally.

Rural Market in India Scope

  1. Rising Rural Prosperity

Average income level has unproved due to modern farming practices, contract farming industrialization, migration to urban areas etc. There has been an overall increase in economic activities because during the planned rural development heavy outlay of resources on irrigation, fertilizers, agricultural equipment’s and agro processing industry has been made. Saving habits in rural people also has increased. This too contributes in higher purchasing power.

  1. Population

According to 2011 Census rural population is 72% of total population and it is scattered over a wide range of geographic area. That is 12% of the world population which is not yet fully utilized.

  1. Change in life style and Demands

Life style of rural consumer changed considerably. There has been increase in demand for durables and non-durables like table fans, radios, mopeds, soaps, etc. by rural consumers. This provides a ready market for the producers. Rural market is expanding day after day.

  1. Growth in consumption

There is a growth in purchasing power of rural consumers. But, the average per capita house hold expenditure is still low compared to urban spending.

  1. Life cycle advantage

The products which have attained the maturity stage in urban market is still in growth stage in rural market.

  1. Market growth rate higher than urban:

The growth rate of fast-moving consumer goods [FMCG] market and durable market is high in rural areas. The rural market share is more than 50% for products like cooking oil, hair oil etc.

  1. Decision-making Units

Women in rural areas are beginning to make fast decisions for purchases. Studies reveal that 72.3% decisions are taken jointly in a family. With education and mass media, role of children in decision making is also changing

Types of Rural Markets

The rural marketing structure is not uniform in all parts of the country. The type of structure prevalent in a particular State or Region depends on various factors like the state of development of agriculture, condition of transport and communication facilities, purchasing power of population, etc.

In the North-Eastern region and far-flung areas of the country where the ‘agricultural production and levels of income are low and communication and transport facilities are not available the marketing structure comprises predominantly. Primary markets like hats and shandies which have sprung-up at convenient places to cater to the needs of the local population.

At the other end are areas in North-West like Punjab and Haryana where the agriculture and other facilities are developed. The market structure comprises a larger number of organized markets.

However, rural markets of India can be broadly categorized into three types.

They are:

  1. Periodic Markets

Periodic markets are the important characteristic feature of the rural marketing in India. In spite of urbanization and development of retail stores, periodic markets are also playing an important role in rural economy as well as in social life of the rural masses. The periodic marketing function is performed by two institutions, viz., fairs, and weekly markets.

A fair denotes a gathering of people who assemble at regular intervals in certain fixed places—generally around shrines or other religious institutions. Although, by far the largest number of fairs have a religious background, there are some which owe then origin to purely economic considerations.

A general concept regarding Inn is that they are simply an occasion for the recreation of rural folk. These fairs provide an opportunity for rural people for yearly and half-yearly, sometimes be-biennial or once in 12 years like that of Kumbha-Mela, Godavari Pushkarmas, etc.

The purchase and sale of goods, etc. The important fairs draw people not only from surround­ing tracts, but also from very distant places. There are about 1700 fairs organized in different parts of the country involving produce and also livestock. There are a few fairs which are attended by a few lakhs of population and there are others which are attended by a few thousands.

On an average, the attendance per fair works out at about 16,000. The periodicity of fair varies from one fair in one state with that of another in other States also from one region to another within the State. The time schedule of a fair may vary between 1 day to 7 days.

  1. Mobile Traders

There is another important agency known as mobile traders to fulfill the limited needs like vegetables, fruits, clothes, utensils, cosmetics, spices, toiletries etc. of rural consumers. The practice of mobile trading is not a new one, but even in ancient India this phenomenon was common.

The mobile traders are those merchants who move from one place to another, from one house to another in order to sell those commodities which are often required by rural masses. As it is rightly observed by Stine, important reason for the existence of mobile trader is that when the maximum range is smaller than the threshold requirement of the firm, the firm either ceases to function or else it becomes mobile.

Even in those villages where there are permanent shops and weekly markets, there is a phase for mobile traders because of behavioural pattern of rural masses. Mobile traders move from one village to another on foot or bicycle or buses, bullock carts, etc. They visit the villages once or twice in a week. Sometimes, they visit those villages which are on the way of weekly markets in return direction after attending these weekly markets.

While moving from one house to another within the village they loudly announce the name of the commodity which they sell such as chadar, (bed sheet), pandlu (fruits), gajulu (Bangles), palu, perugu (milk and curd), etc. There will be too such haggling in price fixation. The payment is made either in cash or in kind in the form of foodgrains. Sometimes these traders extend credit upto periods harvests.

Mobile traders move in groups or 3 to 5 persons carrying different types or similar types of articles. They move only in those parts of the village, they have decided at the time of the entry. Female mobile traders are also found significantly dealing in cosmetics, utensils, toiletries, plastic goods, spices, etc.

During harvesting season, the frequency of visits by mobile traders is more. Most of these traders belong to certain castes like Poosala in Andhra Pradesh. These mobile traders are an integral part of the rural marketing system.

  1. Permanent Retail Shops

Permanent retail shops are developed as the population of villages increased, their incomes improved, the demand for goods and that too on daily basis increased. The traditional fairs, weekly markets or peddlers were not able to meet the situation and this led to the emergence and growth of permanent shops.

Permanent shops were set up as a result of the demand of the rural inhabitants primarily of the same village. The number of shops, their various forms largely depends upon the size of the population of the village, their incomes, purchasing power, their preferences, etc.

In the Indian context, the most sophisticated types of retail outlets comparable to that of western countries are found in metropolitan cities, while in rural areas (with population less than 10,000), only the traditional independent general stores or small-scale retailing are prevailing.

In rural areas, only traditional methods of distribution, i.e., wholesaler and retailers are working as usual. The modern methods of distribution, such as chain stores, super markets and franchise shops are not existing in rural areas because of small size of villages and lower income of rural folk.