Module-2

Rural Market Environment

Rural Market Environment is characterized by 15 major factors
1. Population
2. Occupation pattern
3. Income generation
4. Location of rural population
5. Expenditure pattern
6. Literacy level
7. Land distribution
8. Land usage pattern
9. Irrigation
10.Development programmes
11.Infrastructural facilities
12.Rural credit institutions
13.Rural retail outlets
14.Print media in rural areas and
15.Rural area requirements
Population
Year Rural
population in
millions
Proportion to
total population
(%)
Urban
population in
millions
Proportion to
total
population (%)

Total
population
in millions
1951 295.0 82.6 62.0 17.4 357.0
1961 360.0 82.0 79.0 18.0 439.0
1971 439.0 80.1 109.0 19.9 548.0
1981 508.0 76.0 160.0 24.0 668.0
1991 621.0 74.3 215.0 25.7 836.0
2001 742.0 72.2 285.0 27.8 1027.0
Source: Census of India Report
Occupation Pattern
Sl.No Occupation Proportion to total
rural population (%)
1 Agriculture 50
2 Agricultural labour 27
3 Business 10
4 Non-agri. labour 9
5 Salary earners 2
6 Not gainfully employed 2
Total rural population 100
Income generation
Sl.No Sources of Income Proportion to total
rural Income (%)
1 Agriculture 59
2 Agricultural wages 16
3 Business & craft 9
4 Non-agri. wages 7
5 Salaries 3
6 Current transfers 2
7 Others 4
Total rural income 100
Location of rural population

Location & concentration of rural population
Sl. No. Population range
(no. of persons)
No.of villages Proportion to
total (%)
Population in
millions
Proportion to
total (%)
1 Less than 200 1,03,952 17.9 10.53 1.7
2 200-499 1,41,143 24.3 48.46 7.8
3 500-999 1,11,998 25.0 104.36 16.8
4 1000-1999 1,14,395 19.7 160.29 25.7
5 2000-4999 62,915 10.8 185.57 29.8
6 5000-9999 10,597 1.8 69.84 11.2
7 Above 10000 2,779 0.5 42.76 7.0
Total 5,80,779 100.00 622.81 100.0
Source: Census of India
Location & concentration of urban population
Sl. No. Population range
(no. of persons)
No.of towns Proportion to
total (%)
Population in
millions
Proportion to
total (%)
1 Above 1 million 23 0.6 71.00 32.9
2 500000-1million 31 0.8 21.45 9.9
3 100000-499999 246 6.7 47.62 22.1
4 50000-99999 345 9.4 23.62 11.0
5 20000-49999 944 25.5 28.70 13.3
6 10000-19999 1170 31.6 17.07 7.9
7 5000-9999 740 20.0 5.65 2.6
8 Less than 5000 198 5.4 0.66 0.3
Total 3697 100.0 215.77 100.0
Source: Census of India
Literacy level


Sl.
No


Sex
Literacy Level in percentage
1971 1981 1991 2001
R U R U R U R U
1 Male 34 61 41 66 58 81 71 87
2 Female 13 42 18 48 31 64 47 73
Total 24 52 30 57 45 73 59 80
Source: Census of India Reports
Expenditure pattern
The National Sample Survey organization(NSSO) has
conducted survey in the country on the expenditure pattern of
urban and rural consumers.

Expenditure is studied under 2 heading, food items and non-
food items.

As per the survey, total expenditure per year on food items is of
the order or Rs.11,96,791 million in rural areas as opposed to
Rs. 5,77,146 million in urban areas.

Expenditure incurred in rural is approximately double that of
urban areas.

Similarly for non-food items, in rural areas it is about 1.4 times
the expenditure in urban areas.
Land Distribution
Sl.No. Size
(in hectares)
Proportion of
holding (%)
Proportion of area
cultivated (%)
1 Marginal
(up to 1)
56.5 12.2
2 Small
(1 to 2)
18.0 14.1
3 Semi Medium
(2 to 4)
14.0 21.2
4 Medium
(4 to 10)
9.1 29.7
5 Large
(Above 10)
2.4 22.8
Total 100.0 100.0
Land Use Pattern
Land usage is more for food crops rather
than non-food commercial crops.
Nearly 70% of area under cultivation is
occupied by food crops and only 30% under
non-food crops.

Irrigation
Irrigation plays major role in increasing potential of
rural market.

Irrigation is important force for adoption of new
technology in agriculture.

If % of irrigation is more, then the income
generation also increases.

Many major, medium and minor irrigation schemes
have come from the central and state governments
to increase the irrigation area in the country.
Development Programmes
Five year plans have witnessed investment by
central and state governments in rural areas for
development programmes.
The programmes contributed to rural development
are:
1. Intensive Agricultural District Programme [IADP]
2. Intensive Agricultural Area Programme [IAAP]
3. High Yielding Variety Programme [HYVP]
4. Drought-Prone Areas Programme [DPAP]
5. Small Farmers Development Agency [SFDA]
6. Marginal Farmers & Agricultural Labourers Development
Programme [MFALDP]
7. Integrated Tribal Development Programme [ITDP]
Cont.
8. Hill Area Development Programme
9. Operation Flood I,II and III
10. Sericulture Development
11. Fisheries Development
12. Integrated Rural Development Programme [IRDP]
13. Sampoorna Grameena Rozgar Yojana [SGRY]
14. Desert Development Programme
15. Integrated wasteland Development Programme and several
others.

Infrastructure Facilities
Major Infrastructure facilities for rural area
includes:
1. Rural Electrification
2. Rural Communication:
-Road Network
-Rail Network
-Cinema Houses
-Television
-Postal System and Telephone

Rural Credit Institutions
Co-operative Societies
State Agricultural and Rural Development
Banks
Nationalized and Non-nationalized Banks

Rural Retail Outlets
Co-operative outlets
Fairprice Shops
Retail outlets
Print Media in Rural Areas
Rural Areas Requirements
Classified under 7 heading:
1. Household Consumables
2. Household Durables
3. Construction Materials
4. Consumable Agricultural Inputs
5. Capital Agricultural Inputs
6. Transportation Equipments
7. Services
Household Consumables
More & Better Food
Clothing
Medicines
Toiletries & Cosmetics
Educational Supplies
Wines & Sprits
Beverages
Cigarettes, Beedis, Etc..
Household Durables:
Furniture
Cooking Utensils
Electrical Appliances
Radio & TV sets
Clock & Watches
Sewing Machines
Ornaments & Jewellery
3. Construction Materials:
For Residence
For Infrastructural Facilities
Rural & Cottage Industries
Business Establishment
Society & Community
institutions
4. Consumable Agri Inputs:
Manure & Fertilizers
Seeds & Agro Chemicals
Insecticides/ Pesticides
Tools & Implements
Petrol, Diesel
Oil & Lubricants
Electricity
Capital Agri Inputs:
Tractors & Implements
Trailers
Harvesters, Threshers
Pump Sets
Transportation Equipments
Bullock Carts, Jeep/Car
Bicycle, Mopeds, Motor
Cycle
Light Commercial Vehicles


Services:
Banking, Health
Education, Electricity
Transport & Communication


Rural Demand and Rural Market Index
Hierarchy of Rural Markets
State
capitals,
metros and
cities
Terminal Markets
Secondary Wholesale Assembly
Markets
Primary Wholesale Assembly Markets
Shandies, Hatts, Jathras and Melas
Village Shops
Rural Demand (Diff B/W R&UD)
Features Rural Urban
Demand Pattern: Seasonal Uniform
Spread: Widely Concentrated
Literacy Level: Low High
Product Knowledge: Not Known Known
Common Facilities: poor Very Good
Awareness of needs: Not Known Known
After Sale Service: Inadequate Adequate
Sources of Info: Word of mouth Any Media
Guidance of Usage: Needed Not Needed
Thompson Rural Market Index
In the direction of assessing potential of rural markets
Hindustan Thompson Association Limited has
developed a guide to rural marketers called
Thompson Rural Index.
The first attempt was made in 1972.
The data were available at district level, they collected
data for 334 district & identified 11 factors.
Each factors were assigned with a weightage to each
of these factors to assess the potential.
Second attempt was made in 1986.
During this, 26 factors are considered for constructing
rural market index & published under the name
Thompson Rural Market Index.

Cont
They considered 355 districts out of 412 of the
county, others were not considered because of very
small population.
Data were collected on the following indicators for
the construction of the Index.

1. Area of the District in sq. km

Demographics:
2. Population
3. Males
4. Females
5. Density per sq. km
6. Percentage distribution of population by population strata.
7. No. of Villages
Cont
8. Percentage distribution of villages by population strata.
9. Literate
10. Percentage of literacy
11. Literate: Males
12. Literate: Females

Occupation Pattern:
13. Cultivators
14. Agricultural Labourers
15. Non-Agricultural Labourers

Agriculture Related Data:
16. Gross cropped area in hectares
17. Gross irrigated area in hectares
18. Area under non-food crops in hectares
19. Average size of operational holdings in hectares
Cont
Agricultural Inputs Data:
20. Pumpsets and tubewells
21. Fertilizer consumption in metric tones
22. No.of tractors

Rural Electrification Data:
23. Percentage of villages electrified

Commercial Bank Data:
24. No. of rural branches
25.Deposits in Rs. Lakh
26. Advances in Rs. lakh
To validate the data, correlation analysis is
conducted on 10 selected variables related to
agriculture with value of agricultural production.
Selected 10 variables are:
1. Agricultural labourers
2. Gross cropped area
3. Gross irrigated area
4. Area under non-food crops
5. Pumpsets
6. Fertilizer consumption
7. Tractors
8. Rural credit
9. Rural deposits and
10. Villages electrified

Based on the index, no. of districts have been classified as
A.B.C.D & E class markets
Class of
Markets
Index Range No. of Districts Percentage of
market
A 60.00 to 100.00 22 17.8
B 40.00 to 59.00 39 20.5
C 30.00 to 39.00 54 20.4
D 20.00 to 29.99 86 23.0
E Below 20.00 154 18.3
Total 355 100.0
Problems in Rural Marketing
1. Underdeveloped people and underdeveloped market
2. Lack of proper physical communication facilities
3. Media for rural communication
4. Many languages and Dialects
5. Vastness and uneven spread
6. Low per capita income
7. Logistics, storage, handing and transport
8. Market organization
9. Product Positioning
10. Hierarchy of markets
11. Low level of literacy
12. Seasonal Demand
The problems are grouped under 6 major
headings:
1. Consumer motivation & buying habits
2. Location & degree of concentration of
demand
3. Dealer availability, attitude and motivation
4. Mass communication media
5. Logistics, storage, handing and transport
6. Market organization