Why India is the America of the 60's/70's/80's and why it will be the fastest rising market in the coming future?

As strange as it may sound but going into rural villages across India is the new strategy to ever increasing growth amongst the 1.3 billion population of India. Many companies have started retooling their sales forces, redsigning successful products (backed by strong marketing brands) and relaunching them differently in the rural context. Rural is defined differently by various people. Some may define rural as a "mindset", others as based on "lifestyle needs" and some as "agri dominated" or even by "location denominated". However, anyway you define it, one thing is for sure, that this market in India offers an exciting opportunity for existing and new companies in India to benefit from India's rapidly changing dynamics. If you think of it, even America a few decades ago, had many "rural areas" and still does. Once these "rural" areas got "urbanized" growth continued dramatically over the last few decades. However, once this was successfully completed, the great American giant corporations moved to generate lot of their growth/revenues from abroad instead of from within USA. This is what will define the next generation of global companies from whom we can make good profits if invested carefully in the high growth industries/stocks around the world.

India has a large amount of population estimated to be over 80% of its population living outside of the few major metro cities. Many of these people earn decent income, watch same global TV channels and aspire for higher education and aspire to joining the larger middle class which today is estimated to be between 250m-350m at the minimum. They offer a tremendous opportunity in the coming years for companies that can penetrate this segment and much more companies are doing it in a focused manner now.

Many local and international companies have formulated different policies to attract this "rural' consumer whose growth in income, needs and spending power (partly due to no taxation in India on farm income) is a major shift not only due to insulation of this portion of the population from the global financial crisis in general but any setback in the "urban" centres across India. The good farm prices with good monsoons have only enhanced the lucre of this segment of the population which has the purchasing power equal to or better than an "urban" Indian or "urban" dweller of any major city around the world.

The numbers are there to speak for themselves. India's GDP grew by a healthy 5.8% in Q12009 despite the global calamity. "Rural" centres did offer some contribution to this growth. The stock markets grew not only because of the growth but due to the return of political stability and a whiff of further liberalisation and divestment of state owned assets which will continue to benefit the rapid infrastructure development and further growth of India.

Excerpts:

"Several factors have led to an increase in rural purchasing power," says Pankaj Gupta, practice head, consumer & retail, Tata Strategic Management Group. "The increase in procurement prices [the government sets the minimum support price -- MSP -- for many farm products] has contributed to a rise in rural demand. A series of good harvests on the back of several good monsoons boosted rural employment in agricultural and allied activities. Government schemes like NREGS [National Rural Employment Guarantee Scheme, which guarantees 100 days of employment to one member of every rural household] reduced rural underemployment and raised wages. Also, farmers benefited from loan waivers [introduced in the last Union Budget]. The increase in rural purchasing power is reflected in rural growth across a number of categories. For example, in the financial year 2009 [April-March], FMCG [fast moving consumer goods] rural volume growth is estimated to be 5% to 12% higher than urban growth across a number of categories."

International companies from as diverse backgrounds such as Coke, LG, Philips, Adidas/Reebok aside from Indian giants are making huge strides and continue to generate ever increasing revenue growth from the emerging markets:

* Affordability -- Godrej introduced three brands of Cinthol, Fair Glow and Godrej (soap) in 50-gram packs, priced at 10 cents; Adidas and Reebok increased their sales by 50% in rural markets by reducing prices.

* Size and design changes -- Videocon introduced a washing machine without a drier for US$60; Philips launched a low-cost smokeless chulha (stove); DCM Shriram developed a low-cost water purifier especially for rural areas.

* Improving product acceptance -- LG Electronics developed a customized TV (cheap and capable of picking up low-intensity signals) for the rural markets and christened it Sampoorna. It sold 100,000 sets in the first year; Coca-Cola provided low-cost iceboxes as regular power outages meant families could not depend on refrigerators.

Perhaps the ultimate sign that rural India has arrived is in the allocation of talent. "In the old days, the weakest people in organizations, the ones without a star career path, held the reins of the rural marketing divisions," says Bijoor. "Today, things have changed. Sharper and sharper brains from within the organization are being diverted to rural strategy formulation." When the whiz kids go to villages, you know the cows have come home. (emphasis added)

Great article by Wharton with concise analysis (which I like)

Why Companies See Bright Prospects in Rural India
Published: June 18, 2009 in India Knowledge@Wharton