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Rural urbanization is gaining ground
Wed, 25 Apr Pre-Open

Urbanization conventionally is known as mass movement of rural folk into urban India. This is also one of the key themes that companies have in mind while designing strategies for future operations. Over the years, the Indian economy has dramatically evolved from being an agrarian economy to a service economy. However, this has not undermined the role of rural India as the same has undergone face uplift in the meantime. So much so, that now urbanization needs to be redefined as modernization of rural India, that is, town culture making its way into the rural economy. The landscape that was once characterized by fields and bullock carts, now reverberates with cell phones and factory machines.

This means that the fortunes of a significant chunk of Indian population will not depend upon the vagaries of monsoon, but will move in line with the broad economic cycle. And we have statistics to back this. Agriculture, that constituted half of GDP around a decade back now accounts for just one fourth. The number of rural people opting for agricultural jobs as primary employment has consistently been declining (81% in 1978 to 55% in 2010). In the last decade, more than 70% of the manufacturing jobs, especially in construction, service and trade has been created in rural India. No wonder that the same contributes to around 55% of the country's GDP from manufacturing. Infact, per capita GDP in rural India has been surpassing that in urban India every year since more than a decade now.

It is in this trend that a massive opportunity in the form of untapped markets lies. Now that urban segments are getting saturated, it is time for companies from diverse industries like auto, paints, media, tobacco, healthcare and FMCG products to flock to rural markets. While the market opportunity is huge, what companies need to keep in mind is price sensitivity and other peculiarities of this segment of population. Once the demand meets the right strategy, the fortune at the bottom of the pyramid will be unveiled.

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