IMS ENGINEERING COLLEGE FORMATS II- Sessional Question Paper, 2012-13 Prepared by: MR Subject Name Roll No.

of Student Rural Management

IMSEC/QF/49 Page 1 of 1 Issue No: 02 Issue Date: 1, May 2010 Approved by: Director Subject Code Max Marks Max Time MBA OP-04 100 Marks 3 Hours

This Question Paper contains three parts:Part A: - 10 Questions each of two marks. All Questions are compulsory. Part B: - The candidate has to answer 3 out of 5 questions. Each Question carries 10 marks. Part C: - This section contains 5 questions with internal choice. Each question is of 10 marks.

PART A
Q1. Rural Answer: A Rural area is one, which fulfills the following criteria: a) Does not have municipality, corporation, and cantonment board or notified town area. b) All other places, which fulfill the following criteria: i. population of less than 5,000; ii. More than 25% of males population is engaged in agricultural activities; iii. Density of population is less than 400 sq. km. Q2. Pradhan Mantri Gramodaya Yojana (PMGY): Answer: This scheme was launched to make provisions for providing shelter to the rural poor. It is similar to IAY, and is supposed to assist in speedy construction of houses for the rural people living below poverty line.

Q3. National Old Age Pension Scheme (NOAPS) Answer: National Old Age Pension Scheme (NOAPS) is a national Old Age Pension Scheme in India. It was launched by Ministry of Rural Development. All persons of 65 years (and above) and belonging to below the poverty line category according to the criteria prescribed by the Government of India time to time, are eligible to be a beneficiary of the scheme. The pension amount, as in Union Budget 2012-13 is INR 400 per month per person and states are supposed to contribute an equal amount vis-a-vis the scheme. Q4. Mid-Day Meals Answer: It is a school-meal scheme in India, under which school going children are given free lunch on all school days. Besides providing nutrition to the school children, this programme aims at increasing admissions and lifting the daily attendance. Other benefits of this scheme include enhanced inter-caste interaction between children, and more employment opportunities for rural women. Q5. Haats & Mandis Answer: Haats-better known as the mobile supermarket of rural India-is the oldest marketing channel in the country. It is a place for exchanging rural surplus for buying daily necessities as well as farm supplies and equipment, and a place for socio-political and cultural contact. Mandis: Mandis are oftern considered as a communication platform for the marketers. These provide an opportunity to interact with about 200 farmers a day during harvest season. Q6. Thompson Rural Market index Answer: The first real and highly successful attempt at assessing the potential of Indian rural markets was made by Hindustan Thompson Associate (HTA) Pvt. Ltd. in the year 1972. The Thompson Rural Market Index, which it came up with, was the first guide to the market index. HTA collected data for 334 districts of the country. For establishing accurate market potential, 11 most important factors were identified. Q7. E-chaupals Answer: E-Choupal is an initiative of ITC Limited, a large multi business conglomerate in India, to link directly with rural farmers via the Internet for procurement of agricultural and aquaculture products like soybeans, wheat, coffee, and prawns. E-Choupal was conceived to tackle the

challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries. The programme involves the installation of computers with Internet access in rural areas of India to offer farmers up-to-date marketing and agricultural information. Q8. Agricultural Input Answer: It refers to all those products and services that directly or indirectly assist in the conversion process, resulting in some kind of agricultural output. Some major input are seeds, fertilizers, pesticides, farm implements, veterinary products, medicines, transportation equipments, farm animals, human labor, credit etc. Q9. Village Adoption Scheme Answer: To improve the condition of the countrys rural population, the bank has come up with the Village Development Plans (VDPs). Under this plan/scheme, villages are selected and their holistic development (economy, education, healthcare, infrastructure, communication, credit access) is taken care of. For this purpose, bank can appoint any Government Organization, NGO, Village development committee, Corporative Societies, Post Offices etc as Nodal Agencies. These agencies are responsible for the implementation of development plans for the adopted villages. Q10. NABCONS Answer: NABARD Consultancy Services (Nabcons) is a wholly owned subsidiary promoted by National Bank for Agriculture and Rural Development (NABARD) and is engaged in providing consultancy in all spheres of agriculture, rural development and allied areas. Nabcons leverages on the core competence of the NABARD in the areas of agricultural and rural development, especially multidisciplinary projects, banking, institutional development, infrastructure, training, etc., internalized for more than two decades. The Company is registered under the Company's Act, 1956, with an authorized capital of Rs 250 million (US $5.75 million) and paid up capital of Rs 50 million (US $1.15 million). In tune with NABARD's mission to bring about rural prosperity, Nabcons has more than just commercial interest in the assignments it undertakes.

PART B.
Q1. Is the future of rural India bright? According to the census of India village with clear surveyed boundaries not having a municipality, corporation or board, with density of population not more than 400 Sq.km and with at least 75% of the male working population engaged in agriculture activities would quality as rural. According to this definition there are 6,38,000 villages in the country of these 0.5% has a population about 10,000 and 2% have population between 5,000 and 10,000 around 50% has a population less than 200. Interestingly, the FMCG and consumer durable companies, any territory that has more than 20,000 &50,000 population respectively in rural market so for them it is not rural India which is rural. According to the census of India 2001, there are more than 4000 towns in the country. It has classified them into 6 categories around 400 class-I to towns with 1,00,000 and above population, 498 class-II towns with 50,000-99,999 population, 1368 class-III towns with 20,000-50,000 population, 1560 class IV towns with 10,000-19,999 population. It is mainly the class-II & class-III towns that markets term as rural. The problems of rural marketing are continuing in spite of efforts to improve in a 9th five year plan. The position is improving but slowly the rural marketer has many challenges. But the vast & expanding markets call for good marketing strangers to create win situations to all parties in the chain of rural marketing. The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc. Rural marketing and urban marketing are identical as regards basic marketing structure. However, rural markets and rural marketing have special features and dilemmas as compared to urban markets. The rural markets offer a great scope for a concentrated marketing effort because of the recent increase in the rural incomes and the likelihood that such incomes will increase faster because of better production and higher prices for agricultural commodities. The rural markets dominate Indian marketing scene and need special attention for the expansion of marketing activities and also for providing better life and welfare to the rural people. Given the development, which has taken place in the rural areas under the five- year plans and

other special programmes, today the rural market offers a vast untapped potential. Development programs in the field of agriculture and allied activities, health education, communication, rural electrification, etc have improved the lifestyles of poor and the illiterate and some market agencies forecast the rural demand will supercede the urban demand in the near future. Profile of Rural Marketing 1. Fast changing pattern and demand During the last decade the rural consumers were in need for low end products which would meet their basic demands and necesities. But of lately due to change in technology rather advancement in technology the demand for people have also changed and the buying pattern which initially comprised of basic products have now shifted to luxiorous products. 2. Large and scattered market In the 1st place, in terms of number of consumers, the rural market of India is a very large market; it consists of more the 600 million consumers. The second aspect is that geographically, it is a vast market. Practically the role of India, barring the metropolitan cities and towns constitute the market. It is also highly scattered market: the consumers are scattered over 5,70,000 villages spread through the length and breadth of the country. In terms of business generated too, it is a big market; 22000 crore rupees worth of non-food consumer goods are being sold per year in the market at present. 3. Heterogeneous market It is not as if the whole of rural India can be taken as one homogenous entity. There is a great deal of difference among the various states in this regard. A study conducted by IMRB provides some clue to the relative status of the rural areas of different states. The study provides development index points for each state in the country collected village level data on various parameters such as availability of health and education facilities, the nature of facilities, availability of public transport, electricity transmission, banks, post offices, water supply and so on. A weight was decided upon for each facility, by type, based on the relative importance of that facility in industry to the extent of development reached by that village. The study has demonstrated that while the average village in India has 33 development index points, Keralas average 88; Bihars is just 22; MP, Rajasthan and UP are close to Bihar; and states like Maharashtra, Haryana, Karnataka range between 40 and 50. 4. Demand, Seasonal and Agriculture Dependent Regarding the nature of demand for various products, it can be seen that the demand is heavily

dependent on agriculture. And as a natural corollary, it is seasonal in character. It is irregular as well, since agriculture in many parts of India still depends on the vagaries of the monsoon. Rural demand is not only harvest linked but also festival linked the festivals often coinciding with the harvest. Characterised by Great Diversity The rural consumer of India is also vastly diverse in terms of religious social, cultural and linguistic factors. Steady Growth Despite Inhibiting Factors Despite several inhibiting factors, the rural market of India has grown steadily through the years. This is evident from the data presented earlier. Not only has the market grown in quantitative terms, but qualitatively too, it has undergone a significant change. Many new products have made their entry in to their rural market basket. The upper segment in particular have started buying and using a variety consumer products which were till recently unknown in the rural. In fact the impression that the rural market is confined to certain traditional consumer product and agri-inputs have totally lost its validity in todays context.

Q2. Discuss the fundamentals of pricing in rural markets: Economists defines price as the exchange value of a product or service always expressed in terms of money. In simple terms price is the amount charged for the product or service. To the buyer price is a package of expectations and satisfaction. To the seller price is a source of revenue and main determinant of profit. Kinds of pricing:A firm may choose various kinds of pricing for their products:1) Odd pricing: - odd price may be a price ending in odd number or a price just under a round number. Such a pricing is adopted generally by the seller of specialty or convenience goods. E.g. Bata shoes are priced at 399.95. Odd price may bring more sales. Under odd pricing, buyers may feel that it is a mark down price. 2) Psychological pricing: - it is stated that there are certain critical points at prices such as 1,2,4,5,10 are psychologically appearing to consumers. E.g.. Products such as shampoo, chocolates and biscuits are sold at certain price to attract customers.

3) Prestige pricing: - Prestige pricing is one that is fixed at a higher price, when the producers near perfect substitute. Prestige pricing is adopted because many customers feel that high price means high quality. Moreover the customer heels a high status at a high price. 4) Consumers expectations: - Such prices are fixed by consumers. Consumers are familiar with the rates and market condition and expect a particular price to be charged for certain products. 5) Geographical pricing: - the distance between the seller and the buyer is considered on Geographical pricing. When there is lot of distance between production center and consumption centre, the producer or marketer can adopt different prices in each area without creating any ill/will among customers. There are two ways of charging transit cost. a) F.O.B pricing (free on board): - F.O.B may be of two types i) F.O.B origin and F.O.B destination: - In the first case, the buyers will have to incur the cost of transit a part from the price quoted and in the latter the price quoted is inclusive of transit charges. 6) Zone pricing: - Price is equal in the same zone. Market for a product is divided into various zones. South zone, north zone etc. In other words price are uniform with in a zone. 7) Price lining: - price lining is formed more commonly among retailers than among wholesaler or producers. This system consists of selecting a limited number of prices at which the store will sell it goods. E.g. A buyer of shirt can go into a shop where shirts are retailed between 250/- t 500/-, it also helps the shopkeeper to plan his purchases. 8) Dual pricing: - when a manufacturer sells the same product at two different prices, it is dual pricing. Under the dual pricing a producer is required compulsory to sell a part of production to the govt or its authorized agency at substantially low price. The rest of the product may be sold in the open market at a price fixed by the producers. Eg. Sugar. 9) Negotiated pricing: - it is also known as variable pricing. This method is invaluably adopted by industrial suppliers. In certain cases, the product may be prepared on the basis of specification or designed by the buyer. In such cases the pricing has to be negotiated and then fixed.

Q3. Explain in detail the rural retail environment Today Indian consumers are becoming very unpredictable. The consumer today, is richer, younger, eager to accept changes and more aspiration in his/her needs than ever before. This Statement is not confined to urban India but also applicable to rural India. A range of modern retailers are attempting to cater to the needs of the new Indian consumer. The last few years have witnessed an explosion of organized retail formats like supermarkets and hypermarkets in an otherwise fragmented retail market in India. At present 85% of the organized retailing takes place in Indias urban areas. A very little part of rural market is covered by organised retailers like Hindustan Uni Levers Shakti, Indian Tobacco Companys e-Choupal and DCM Shriram Consolidated Ltd.s Hariyali. During the boom years, as the urban middle class was growing, marketers spared little thought for the rural consumers. Now, when the urban market is near saturation in the face of stiff competition from global players, the marketers are targeting the rural markets as this seems to be the only way to maintain their market share. Now the focus is at bottom of the pyramid, what Prof. C.K. Prahalad has called tier III of Indian societythe bottomdown, 600 million people living in 6 million odd villages comprising 12% of worlds population, which is now attracting not only Indian corporate houses but also global retail leaders. Overall, there is a huge market which is waiting to be served, ready to splurge, willing to explore new products, brands and services. Organised retailers can tap on their wallets given they do their homework well. According to India Retail Report 2009 by Images, - India's rural markets offer a sea of opportunity for the retail sector. The urban-retail split in consumer spending stands at 9:11, with rural India accounting for 55 percent of private retail consumption. Now the questions arise, what is the model of retailing in rural India? Is the present model being used in rural India sufficient or do we need some different models? What are the preferences of rural customers? What are the factors affecting the purchase decisions of rural customers? What is the satisfaction level of rural customers with the existing retail market? In this paper we have attempted to explore the above mentioned issues. India like most other countries has a very large network of local stores spread all across India. It is not really a network since each store is individual or family owned and has no connection with the other. It does however represent a network since large consumer product companies like Unilever, Procter & Gamble, Colgate-Palmolive, Cadbury, Coca-Cola, Pepsi and ITC uses them as their final point of retail to the consumer. These small stores are very personal and

have built strong relationship with the local population. They are points of news and connection. They offer credit to the local population and help out in times of crisis. They also have a very good understanding of requirement of the local population and have very low overheads enabling them to offer the best price for their products. However, it is believed that the new retail chains will drive these small stores out of business (Gill 2007).

Demographic profile of rural Indian market No. of Villages 638,691 Rural Population 741 Million

There are total 3,697,527 retail outlets in rural India Rural literacy rate( 7 year and above) is 45% The no of middle income and higher income household expected to grow up to 111 million Rural market is growing up to 5 times than urban market Investment in formal saving instruments: 6.6 million household in rural 6.7 million in urban 145,98 villages with population less than 200 and 13,113 Villages with population over 5000 7271 Villages with railway station 1,38,000 villages with post offices 15039 Villages with hospital 12 million rediff signup out of total 20 million are from rural area FMCG segment with an estimated annual size of 50,000 cr. 32000 rural bank branches # Sources census of India 2001 Global Retail development index 2010 Major Retailers In Rural India Now we analyze the existing rural retail penetrations in India. There are many players which are directly or indirectly involved in rural markets. Some big ones are ITC, HUL, DSCL and Gillette. Almost all telecom companies have penetration and retailing in rural markets. ITC e-Choupal & Chaupal Sagar e-Choupal is termed as one of the most innovative concepts of independent INDIA. eChoupal is an initiative of ITC Limited, a large multi business conglomerate in India, to link directly with rural farmers via the Internet for procurement of agricultural and aquaculture products. Following the success of the e-Choupal, the Company launched Choupal Saagar, a physical

infrastructure hub that comprises collection and storage facilities and a unique rural hypermarket that offers multiple services under one roof. This landmark infrastructure, which has set new benchmarks for rural consumers also incorporates farmer facilitation centres with services such as sourcing, training, soil testing, health clinic, cafeteria, banking, investment services, fuel station etc. 24 'Choupal Saagars' have commenced operations in the states of Madhya Pradesh, Maharashtra and Uttar Pradesh. ITC is engaged in scaling up the rural retailing initiative to establish a chain of 100 Choupal Saagars in the near future. Hindustan Unilever Limited (HUL) - Shakti Shakti was initiated to reach the massive un-served and under-served markets that cannot be economically and effectively serviced through traditional methods. HUL identifies underprivileged women in villages and these women are trained to become Shakti Entrepreneurs (SEs) i.e. distributors of HUL products in villages to earn a sustainable income through this business. HUL invests resources in training these village women to become entrepreneurs by helping them become confident and independent. They are also a source of inspiration for the other women in the community. Hence, besides being a sale, distribution and communication initiative, Shakti is a micro-enterprise initiative that creates livelihoods and improves the standard of life. The Shakti initiative also enables rural consumers to access world class products, thereby reducing the menace of spurious products. Today, it benefits business by significantly enhancing HUL's direct rural reach and enabling communication of HUL's brands effectively in media-dark regions. The products distributed through project Shakti are some of the country's most trusted brands of consumer goods which are specifically relevant to rural consumers. From 17 SEs in 1 state in 2001 to more than 45,000 SEs in 2008, Shakti has indeed come a long way in impacting lives in rural India. For HLL greater penetration in rural areas is also an imperative presently over 50 per cent of its incomes for several of its product categories like soaps and detergents come from rural India. The challenge for HLL now is to take its products to towns with a smaller population - under 2,000 people. As Sehgal points out, HLL's conventional hub-andspoke distribution model which it uses to great effect in both urban and semi-urban markets wouldn't be cost-effective in penetrating the smaller villages. Now, with this new distribution model, the smaller markets are now being referred to as `Shakti markets'. DSCL-Hariyali Kisaan Bazaar "Hariyali Kisaan Bazaar" - a rural business centre, is a pioneering micro level effort, which is creating a far-reaching positive impact in bringing a qualitative change and revolutionizing the

farming sector in India. It is also an example of how well meaning corporate can contribute to development of agriculture by building sustainable business models. Each "Hariyali Kisaan Bazaar" centre operates in a catchment of about 20 kms. A typical centre caters to agricultural land of about 50000-70000 acres and impacts the life of approx. 15000 farmers. Q4. Discuss the process of developing the effective rural communication. Rural communication is an interactive process in which information, knowledge and skills, relevant for development are exchanged between farmers, extension/advisory services, information providers and research either personally or through media such as radio, print and more recently the new Information and Communication Technologies (ICTs). In this process all actors may be innovators, intermediaries and receivers of information and knowledge. The aim is to put rural people in a position to have the necessary information for informed decision-making and the relevant skills to improve their livelihoods. Communication in this context is therefore a non-linear process with the content of data or information. The situation concerning communication in rural areas of developing countries is characterized by: 1 A dearth of information (absence of providers and of local communication content); 2 Conflicting messages (difficult to know what is relevant/correct information); 3 A fragmented market for information with many individual clients or client groups; 4 Relatively few clients scattered over a large area; 5 Structural transformations leading to constantly changing channels and content and a lack of the necessary skills for communication; and 6 A lack of well developed ICT infrastructure and low levels of ICT skills. In rural areas, communication needs and available channels are facing tremendous changes through structural transformations: subsistence oriented farming remains the basis for food security especially in disadvantaged areas, while there is a general shift to move intermediate farmers into market-oriented production. Market-oriented farmers need to stay competitive in an increasingly global business environment. While agriculture remains the mainstay for rural people, information and skills for alternative livelihoods gain in importance, not only as an exit strategy, but also for the increasing division of labour. Each of these groups of farmers has specific communication needs and capacities for innovation, management and finance. However, client/demand-oriented service provision for innovation, information, qualification and local

organizational development remains the key driver. Ongoing decentralisation of government functions and services improve the prospects of local political decision making. These reform processes and their opportunities and consequences need to be communicated properly to rural people. Lobbying by organized groups, as a form of communication to politicians, becomes a necessary activity to voice rural interests. On the other side, efforts to close the information gap and, in particular, the digital divide in rural areas, have been supported by the wider availability and accessibility of communication technologies and infrastructures, like internet, rural radio and mobile 3. phones. Monitoring & Evaluation
Systematic learning from experiences in communication approaches 2 Capacities Service providers are skilled in communication and have a positive attitude to communicate with clients

1 Policy Policies enabling effective communication between research, advisory services, and farmers organizations in rural areas

4. Farmers Organization Representative organizations as communication Farmers partners in

5. Participatory Methods
Use of participatory methods for active involvement of all partners in communication 6 Media Strategy Integration of a media-mix to achieve the desired communication objectives

Q5. Elaborate the rural financing institutions.

Co-operatives In post-independence India, the foundation for building a broad base for the agricultural credit structure was laid by the Report of the All-India Rural Credit Survey (AIRCS) of 1954. As

noted above, the provision of cultivator credit through cooperatives remained meagre, at just over three per cent in 1951/52, and less than one per cent for the commercial banks. Furthermore, in the Committees view, funds supplied by moneylenders were subject to usurious interest rates and other malpractices. The Committee observed that agricultural credit fell short of the right quantity, was not of the right type, did not fit the right purpose and often failed to go to the right people. It was observed that the performance of the cooperatives was deficient in many ways but, given their spatial spread, their vital role in channeling credit to farmers was recognised. This was summed up in the Committees famous dictum that: cooperation has failed but it must succeed . Much debate occurred regarding the optimum size of cooperatives, the services to be provided, relations with government schemes, their role in poverty reduction, and their viability. The partnership with the State to enhance cooperatives lending capacity through provision of equity capital soon resulted in increased State involvement in the running and control of these organizations. With the Reserve Bank of India (RBI) providing re-finance capital, little attempt was made to look at cooperatives as financial intermediaries, and instead, they largely became windows through which re-finance was channeled. By the mid-1960s, disenchantment with the cooperatives had set in. Successive committees identified problems of mounting overdues, politicisation, weak governance and management, and failure to achieve effective lending to the poor. Attention therefore shifted to the commercial banks as an additional, and later the primary, institutional channel for the provision of rural credit. Commercial Banks In 1954, The All-India Rural Credit Survey Committee, in addition to conceiving of the cooperatives as the main agency for providing credit to agriculture, had also urged a well defined role for the commercial banks in delivering credit to this sector in specialized areas such as marketing, processing, storage and warehousing. Towards achieving bank involvement in rural credit provision, it recommended the establishment of the State Bank of India (SBI), through the nationalization of the then Imperial Bank of India, and, through the SBI, extension of commercial bank facilities to rural and semi-urban areas. Against this

background, weaknesses in the cooperative system became increasingly apparent; the pressures to find institutions complementary to the cooperatives became greater. In 1969 the major commercial banks were nationalized, beginning a huge expansion of the rural banking infrastructure and the second phase of institutional rural credit provision. The focus shifted from cooperatives as the sole providers of rural credit to a multi-agency approach. The Lead Bank Scheme was devised, under which a lead bank in each district took responsibility to plan, monitor and coordinate credit provision, identifying development needs and how these could be shared by the banks. The aggregation of district plans led to the State Credit Plan which was monitored by the State Level Banking Committee. During the 1980s, problems became apparent with this top-down planning mechanism. Little credit was flowing to the agricultural sector and the banking system had yet to adjust itself to the rural sector. In contradistinction to the top-down planning process under the lead bank scheme, it was felt necessary by the RBI in 1989 to design a bottom-up planning approach, termed the Service Area Approach. Under this approach specific geographical areas were defined for each bank branch. The branch was required to conduct village-level surveys, to identify credit requirements, to conduct inventories of assets held, and to make plans to meet any resource gaps. The village level plans were then aggregated into block, district and State plans. The rural branch manager was to be the friend, philosopher and guide to the rural population. However, once again, the suitability and capacity of a particular institutional form to reach the rural poor came to be questioned. Regional Rural Banks Even after nationalization of the major commercial banks, and the development of the lead bank and service area approaches, a large proportion of the rural population still remained outside the banking fold. In the mid-1970s it was recognized that, though the commercial banks had done well in terms of branch expansion, they were tending to reach only the middle-income and rich farmers. Moreover, as a group of institutions, banks were felt to be out of touch with local requirements. The cooperatives continued to be dogged by insufficient resources, and organizational and governance weaknesses. A Committee was appointed in

1975, chaired by M. Narsimham, to examine whether another type of institution could target the unbanked - one that combined the local knowledge and feel of cooperatives with the professionalism and resources of the banks. This resulted in the establishment of a new kind of bank, the Regional Rural Bank (RRB), mandated to reach the poorest in credit-deficient areas of the country. The number of RRBs expanded rapidly: from just five in 1975, to 121 in 1980 (with 5,400 branches) to 196 in 2003 (with 14,522 branches). The RRBs were sponsored by commercial banks which held 35 per cent of the equity, the balance being held by the Government of India (50%) and the respective State Government (15%). The RRBs were to be low cost institutions, at least compared to the commercial banks, and staff salaries were to be on par with those pertaining in state governments. The sponsor commercial banks were to provide management and training, in addition to credit support. However, the design structure of the RRBs was flawed. They had high co-variance of risk and were specially mandated only to lend to weaker sections of society at concessional rates of interest. Furthermore, the staff soon gained pay-scale parity with their commercial bank counterparts, thus defeating the objective of developing a low-cost alternative to the commercial banks. With weaknesses steadily developing in the system, the RRBs made substantial losses, which on the eve of the reform process aggregated toRs10 million per day. PART C
Question 1. Define rural India and rural markets also identify few common rural myths Profile of Rural Consumer 1. Size of rural consumer population: Now 76% of Indias total population is rural. If we consider the state level picture, in several states like Uttar Pradesh, Madhya Pradesh, Rajasthan and Kerela, the rural population constitutes more than 80% of the total population. And there are also states like Bihar and Orissa where as much as 90% of the total population is rural. 2. Significant Aspects of Rural Consumer Profile Coming to consumer characteristics, it can be seen that in general sense, low purchasing power,

low standard of living, low per capita income, low literacy level and overall low economic and social position are the traits of the rural consumers. By and large, the rural consumers of India are a tradition bound community; religion, culture and even superstition strongly influence their consumption habits. Colgate Herbals priced at Rs.12 for a 50 gm, Rs.22 for a 100gm and Rs.41 for a 200gms tube is an attempt to sell value added toothpaste at the lower end, where the Indian brands are hoping to shut the multinationals. This is a variant for the boring white Colgate cream, which is used over the years by the rural people. Also, since the literacy level is low its advertising campaign never gave emphasis to the same old calcium content rather this time more over giving importance to the latest technology and the natural qualities that are well defined by the character Billoo in the advertisement. 3. Location Pattern of Rural Consumers

Whereas the urban population of India is concentrated in 3,200 cities and towns, the rural population is scattered over 5,70,000 villages. Statistics show that out of 5, 70,000 villages only 6,300 have a population of more than 5,000 people each. More than 3 lakh villages or more than 55% of the total number of villages are in the category of 500 people or less and more than 1.5 lakh villages or 25% of the total are in the category of 200 people or less. The inference is clear; rural demand is scattered over a large area, unlike the urban demand, which is highly concentrated. Take the case of Colgate again. Why is it the leader in the dental care products? It did not even leave the rural area with minimal of 200 people per village as compared to the heavily populated area with an average population of 5000 people per village. Now, it has established itself in such a way that people accept Colgate as the tube with red and white box. Hence, they havent changed the color of the box for say a decade and a half. 4. Literacy level It is estimated that rural India has a 23% literacy rate compared with 36% of the total country. The adult literacy program launched by the government in the rural areas are bound to enhance the rural literacy rate in the years to come. Two aspects need to be specially emphasized: (1) In absolute numbers, there are 11.5 crore of literate people in rural India compared with 12 crore in urban India, and (2). Every year 60 lakh is getting added to the literate population of Rural India. Looking at the second point theres something for the company for the taking. Coco Care had a brilliant strategy to market itself in different Indian villages, depending on the most spoken

language over there. Say in Maharashtra it had flyer distribution done in Marathi as a medium of communication. 5. Rural Income An analysis of the rural income pattern reveals that nearly 60% of the rural income is from agriculture. Evidently, rural prosperity and the discretionary income with the rural consumer is directly tied up with agricultural prosperity. Anything that contributes to agricultural prosperity will directly result in increase income for the rural population and the consequent increase in their spending capacity. The pre dominance of agriculture in the income pattern has one more significance ie- rural demand is more seasonal. 6. Rural Savings

Statistics reveal that in recent years, rural consumers have been drawn into the saving habit in a big way. The commercial banks and the co-operative have been marketing the saving habits in rural areas for quite some years. Today, as much as 70% of the rural house hold are saving a part of their income. The habit is particularly widespread among salary owners and self employed non-farmers. Since the major income in the rural areas is from agriculture the demands turns out to be seasonal. Take the example of Hero Honda Splendor; it had a major promotion done in the crop-cutting season, as this being that golden season for the farmers. Potential and Changing Pattern of Rural Marketing Consumer products where rural consumption is more than urban consumption are Bicycles Safety razor blades Silk Clothing Books & Stationery Woolen Clothing Other Consumables Generators 80% Rural 67% Rural 59% Rural 55% Rural 53% Rural 53% Rural 95% Rural 20% Urban 33% Urban 41% Urban 45% Urban 47% Urban 47% Urban 05% Urban

Products where rural consumption growth rates are higher as compared to urban markets are as follows:

Packed Tea Alcoholic Beverages Tobacco Products Medicines Detergent Powder Soap Cake/Bar Detergent Cake/Bar

Due to television the rural consumer is aware of international products. Literacy has brought about a change with respect to the rural outlook. New employment

opportunities due to change in government policies has resulted in round the year income for at least a certain section of the rural population. Green Revolution and after the Indian farmer has become prosperous. The savings pattern of rural India has resulted in better buying power for the rural consumer.

OR Understand the rural infrastructure, government support and its relevance for marketing. The infrastructure facilities like roads, rural electrification, public distribution system, cinema, television coverage and the like have also received considerable attention in rural areas. Rural electrification Rural electrification has gone on in a big way. The main aim is to provide electricity for agricultural operations and for rural and cottage industries, in addition to lighting. The central government created an organization called Rural Electrification Corporation with the sole objective of financing the rural electrification projects. Due to these efforts, the number of villages with electricity supply stood at about 4.92 lakh in 1993-94, which accounts for a coverage of nearly 85 per cent of the villages. Probably by the end of ninth five year plan almost all the villages would have got electricity. This apart, the electricity tariff charged in rural areas is very low, compared to urban areas. In some states like Tamil Nadu, Andhra Pradesh, Punjab and Karnataka the supply of electricity is almost free for agricultural purposes. In certain other states, a fixed charge is levied, which is

irrespective of the quantum of consumption. These factors have increased the demand for electric motors and pump sets and also for other electrically operated agricultural machinery like threshers and winnowers. RURAL COMMUNICATION Efforts have been made to connect the villages with all weather proof roads, so that they are accessible throughout the year. It has been estimated that about 46 per cent of the villages were connected with all weather roads, while 54 per cent remained inaccessible during rainy seasons. There are states where all the villages are connected by roads and also a public transport system, which touches the village at least once a day. The railways network runs through rural areas, connecting atleast a few thousands of villages. It has been estimated that during 1992-93, the total rail length was 62,500 kilometers. This means that there was 19.01 km rail length per 1000 sq. km. Area or 7.39 km rail length per lakh population. At least a part of this should be running through the rural areas. The increase in rail length has not been significant in the recent years and hence the possibility of all the villages getting rail transport is remote. The road length position appears to be more encouraging when compared to railways. The total road length in the country was about 1.491 million kms in 198081, which increased to 2.037 million kms in 1990-91. The surfaced roads proportion also increased from 46 per cent to 49 per cent during the corresponding period. In other words, the road length which was 218 km per one lakh population in 1980-81 increased to 241 km per one lakh population in 1990-91. Now golden quadrangle road scheme is under progress which will connect entire India from east to west and from north to south. It would be another feather in the cap of the rural development and the rural economy and development will be on fast track. Cinema houses The number of cinema houses have been increasing moderately. It is hoped that most of the cinema houses will come up in semi-urban and rural areas, since the urban areas are covered not only by Television but also by Cable TV and VCRs. The access to TV in rural areas being unsatisfactory, the cinema houses will have better prospects of surviving in rural areas than urban areas. The cinema viewing habit in rural areas is quite encouraging also. Television The television broadcast covers 93 per cent of the population, accounting for 26 per cent urban population, who are totally covered by telecast, the balance 67 per cent should be the rural populace. In fact, in any area, the rural population covered by broadcasting kendras, is more than the urban

population covered. As per a survey conducted by IMRB (Indian Market Research Bureau), 77 per cent of villages are covered by TV network. The percentage of villages covered in South India is about 83 per cent, which is more than the other regions. It is also interesting to note that among the villages covered by TV transmission, 94 per cent had electricity supply. In such villages, a single community television set can work wonders. This medium may prove to be a boon for marketing personnel for promotion and communication, if effectively used. The country is well linked by postal network. Presently there is a move to see that every village has atleast one telephone for communication with the outside world. Rural credit institutions For a long time, the cooperative societies were the only organized agencies for disbursing credit in rural areas, apart from a host of private sources like money lenders, traders, commission agents and others. After nationalization of banks in 1969, a number of branches have been opened in rural areas to provide credit for agricultural operations. While the number of Primary Agricultural Credit Cooperative Societies (PACS) in the country is about one lakh, nearly 70 to 75 per cent of the 60,000 odd branches of commercial banks are located in rural areas. In addition, there are also 196 regional rural banks, which function with one or two districts as their jurisdiction. These agencies have enabled the farmers to obtain credit at affordable interest rates, for purchases of all agricultural inputs. In fact, nearly 90 per cent of tractor purchases in rural areas are out of the loans provided by Land Development Banks and nationalized and non-nationalised commercial banks refinanced through NABARD. Coupled with technology diffusion in rural areas, the improvement in infrastructure facilities has created demand for not only agricultural inputs in rural areas, but also for other products like mopeds, electrical goods, toilet soaps, washing soaps, services like banking, education, health, etc. Thus, today the rural areas also demand a number of products which can be classified under various categories. The requirement of rural areas have considerably expanded both in width and depth. In fact the rural market demand outstrips the urban demand in states like Punjab, Haryana, Western Uttar Pradesh, Tamil Nadu, Andhra Pradesh and Maharashtra. With the various development programmes under implementation, the rural demand is likely to be equal to urban demand.

Question 2. Describe the customer buying behavior model in rural India in terms of cultural, social, personal and psychological factors. Consumer behavior in the rural market is even more perplexing because of a singular lack of consistency in groups which are homogeneous in parameters of demographics- Age, occupation, education and income. Most marketers realize that India is on the cusp of momentous change. The economy is vibrant, incomes are rising & the habits, preferences & attitude are changing rapidly. But no where is it more evident than in rural India. There is, thus an emerging need to build expertise in rural marketing. There are three challenges that rural marketers must overcome. The first of this is the challenges of reach-markets in the rural India that are small & scattered making them inaccessible & unreliable or both. But this problem is not new & many companies let it hamper them unduly even as others overcome it with innovation. The next challenge is to ensure that the consumers are aware of your brand and want it. The third challenge in RM is influence. It is an old saying that customer is the king because he is the person whose decision have affect on the demand of any product or service. The attitude of consumer or buyer decides how demand will emerge for a new product & service & how existing goods and services would survive in future and in which manner. Consumers pass through five stages while making a purchases decision. In low involvement rural and urban consumers may skip some of these stages. A woman buying her regular brands of daily use, groceries will identify the need and purchases from the shop, skipping two stages. It is in the purchase of high-involvement products that a rural consumer display different motives relating to the problem recognition, source of information, Evaluation procedures, collective decision and different post purchase behavior. This creates need to treat each stage of the marketing process differently for rural and urban consumers. Stages in the buying process

Problem Recognition Information search Evaluation of alternatives

Purchase decision Post-purchase behavior

In competitive environment one cannot thrust a product on consumer. He has to produce what is demanded or what can be demanded. Some of the advantage of study of consumer behavior is as under Saves from disaster. Helps in formulating right marketing strategy. Helps in sales promotion. Helps in development of new products. Helps in product orientation. Helps consumer to study their behavior.

UNDERSTANDING RURAL CONSUMER In the initial years the focus was on the easily accessible well developed urban market. Soon there was proliferation of brands and intense competition resulting in the near saturation of the urban market. This forced companies to go for greener a pasture that is new markets. All eyes turned to the world most promising potential market of 742 million rural consumers, who had yet to taste the fruit of modernity. A promise that seemed ready to be fulfilled because of explosion in the buying capacity in the rural sector.

SEVERAL MYTH ABOUT THE RURAL SECTOR The belief that rural people do not buy brands. The belief that rural customer buy cheap products. In reality they seek value for money. The belief that the rural market is homogenous mass. In fact it is fascinatingly heterogeneous.

The census of India defines rural as any habitation with a population density of less than 400 per square kilometers where at least 75% of male working population is engaged in agriculture & where there exists no municipality or board leaning aside Hindustan Uniliver Limited & ITC, most companies in the FMCG sector would define rural as any place with the population up to 20,000. Rural consumers are fundamentally different from their urban counterparts & different rural geographies display considerable heterogeneity calling for rural specific & region specific strategies e.g. a farmer in rural Punjab is much more progressive than his counterpart in Bihar. A farmer in Karnataka is far more educated than one in

Rajasthan & so on. An urban individual is free to take independent purchase decision. In a village, because of strong social structure, including caste consideration and low literacy level, community decision making is quite common. Companies face many challenges in tackling the rural markets. Marketing is all about Getting to know your customer. But having largely ignored this cardinal principle, most corporate in rural markets find that success has eluded them. The rural market account for market worth of 27$ billion. About 285 millions live in urban India whereas 792 million resides in rural areas. 72% of Indias population resides in its 600000 villages. Many companies like Colgate-Palmolive, HCL & Godrej etc. have already furrows into rural households but still capturing the market is a different dream. For quite sometime now, the life of the rural India has been the subject of animated discussions in the corporate suites, with the urban markets getting saturated for several categories of consumer goods and with rising rural income. For example, Tata chemicals ran a chain called Tata Kisan Kendra which offered services ranging from agriculture input to financing to advisory services. Hindustan Levers is offering deals to farmers to cover operation from the pre harvest to post harvest stage. Mahindra & Mahindra limited, Indias largest farm equipment company & its subsidiary Mahindra Shubhlabh service has operated in eleven states with 7 lacs strong Mahindra tractor customer base& 400+ dealers provide a complete range of products and services to improve farm productivity and establish market linkages to the commodity market chain. The objective of this article is therefore threefold. The first objective is to develop a framework used to study consumer behavior in rural market. The second objective is to apply this frame work to examine and understand consumer behavior in rural areas. The last objective is to prefer generalization and recommendation to those wishing to market their product\services in the rural market. OR Discuss the marketing research process and its application in rural areas.

Answer: The rural marketing research process consists broadly of eight stepsdefining business
and research objectives, determining the research budget, designing the research (decision on research approachexploratory, descriptive/causal qualitative/quantitative; primary/secondary research), sampling method and size, designing the research instrument

(questionnaire/discussion guide), collecting Information from the field, collating and analysing the data, presenting the findings to make the right decision. After the business and research objectives have been clearly defined and the budget finalized for the same, the researcher must decide on the research approach. Based on the nature of the data

to be captured, the researcher can decide whether they want to go with the qualitative (PRA, focus group discussion, in-depth interview, dyads, slice of life observation, photo ethnography) or quantitative (face-to-face survey using structured questionnaires) approach. Most often in rural areas the research starts with the qualitative approach, and is followed by the quantitative approach to validate the findings and capture variations among respondents. Further, the sampling plan is designed. Generally, in rural qualitative research purposive and snowball sampling methods are used, and the sample size is dynamic rather than static, that is, the researcher continues to collect data from the field till they are saturated with information. In the case of quantitative sampling, more exhaustive techniques are used. Some of the sampling methods used are multi-stage area sampling, probability proportion to size method for village selection, household selection through the listing exercise, respondent selection through the Kish grid, etc. Data collection in rural areas is generally done through face- to-face interviews with the respondent in their natural setting, that Is, home or workplace. The researcher should be wellversed in the pros and cons of conducting research in rural areas, and should be comfortable with the same. Briefing, training and handholding sessions are crucial in quantitative data collection. Lastly, data collation, analysis and report writing are done to complete the process. Special tools used in rural marketing research: Participatory rural appraisal Scaling tools for rural quantitative research Satisfaction scale Agreement scale Ranking Ladder

Defining Business and research objectives

Deterining the Research Budget

Designing the research

Sampling Research and size

Designing the research instruement

Fieldwork

Data Collection

Reporting the findings

Question 3. Describe the concepts of segmentation, target marketing and market positioning, stressing the need to recognize heterogeneity amongst rural consumers. The practice of marketing one undifferentiated product to an undifferentiated rural market died long ago. Marketers today have realized that the rural markets are heterogeneous and need to be segmented thoughtfully. Segmenting markets and attracting customers involves three key decisionssegmentation, targeting and positioning.

Segmentation involves the identification of various bases for segmenting markets, and then developing profiles of market segments by dividing the heterogeneous market into several submarkets. However, the degree of segmentation varies from mass marketing to micro marketing. Further, the consumer segments are evaluated for their attractiveness, and suitable coverage strategy for targeting is chosen. The third key decision involves indentifying, selecting and communicating the right USP that provides a competitive advantage to the rural brand. Rural markets are heterogenous in nature. There are number of factors indicative of heterogeneity of rural markets: Social-cultural differences across regions (caste-based hamlets) Variations in population size and population density of villages Differences in the levels of infrastructural development (developed versus developing states) Media exposure levels (media dark, media grey, & media green regions) Variations in literacy level (Bihar versus Kerala) Differences in income level and patterns of income flow (Farmers versus daily wage earners) Family structure (Large joint families, individualized joint families, and nuclear families) As there can be various parameters for positioning the product, the marketer has to select the best and most effective alternatives. A marketer has to select a positioning concept that serves as a bridge between the products and the target market. Some of the critical factors that should be considered while positioning a brand are: Attractive. Does it provide value to the customer? Distinctive. Is it different from the products of its competitors? Pre-emptive. Is it very difficult for competitors to copy it? Affordable. Can buyers pay for it? Communicable. Can the difference be clearly expressed? Is it visible? Is it understandable? Attributes that can offer a competitive advantage should be identified (for example, quality service, and technology). Once the positioning strategy has been selected, the marketer needs to develop the concept in an effective manner so that it can be properly addressed to the target market. Then he has to select the appropriate media vehicle to reach the target market

effectively. Marketers should strive towards linking the positioning platform closer to the target customer to ensure that it appeals to them. Communicating the Concept An effective communication is one that clarifies the target market, value proposition, and the supporting product differentiation. How many ideas? Differences to promote? There could be one idea, two ideas, or three ideas that could be promoted. Positioning two to three ideas would be better, as rural people would think that they were getting better value for money. The statements positioned should be consistent (should not be changed frequently). Otherwise, in the case of multiple statements positioning, there is a risk of buyers having a confused Image of the brand, resulting from companies making too many claims. Which positioning to promote? For rural areas, the positioning statement should be the generic benefit of the product. Sprite Bujhaye Only Pyaas Baki Sab Bakwas and Thanda Matlab Coca-Cola are some of the suitable lines for rural markets.

OR Discuss the concept, levels and classification of products in rural markets. The product is the most vital element in the market offering. The acceptance of a product in rural markets is determined not only by consumer needs and wants, but also by the physical and social environment. The product has to satisfy rural needs and should offer value for money a marketer, while taking his products to rural markets, must keep in mind that the product should be appropriate for the rural environment, be simple to operate, visually identifiable and affordable. Based on the value proposition, marketers need to think about the five levels of product offering, namely core benefit, basic product, expected product, augmented product, and finally, potential product. Each of these levels adds more customer value. The real competition today in the rural market is at the product augmentation level. This leads marketers to look at the physic al and socio-economic environment of consumers and understand their consumption pattern and the way they use the product. At the same time, rural marketers have to ensure that augmentation doesnt increase the cost significantly. Rural products can be classified into four broad categories FMCGs (fast moving consumer goods), consumer durables, services and agricultural goods. Rural markets account for more than

50 per cent of the total FMCG and durables, and 100 per cent of the agricultural goods consumption in the country. Rural Products

FMCGs

Durables

Services

Agricultural Goods

Based on the value proposition, marketers need to think of five levels of product offering core benefit, basic product, expected product, augmented product and finally potential product. Each level adds more customer value and five levels constitute a customer value hierarchy. For example the core benefit of connectivity or the experience of being in touch is translated into a mobile phone as a basic product. At the third level marketer prepares an expected product, a set of attributes, a condition buyer normally expects when he purposes a product. Product differentiation starts appearing for this level onwards. A mobile buyer in rural India expects voice clarity, good battery life, ease of operation and durability. At the fourth level marketer prepared an augmented product that meets customers desires beyond expectation and fulfills their latent needs such as mobile phones with built-in radios, camera, flash lights etc. Finally the potent product comes at the fifth level, which encompasses all augmentations and transformation that the product might ultimately undergo in the future.

Question 4. Understand the marketing of financial services in rural India, including the banking and insurance sector. RBT was established in the year 1935, under the Reserve Bank of India, Act, 1934. it is the apex body that supervises the financial functions of the country, especially regulating the working of the banking sector. Its contribution to the cause of rural development has been commendable. It refinances the rural development schemes of the Cooperative societies, and the incentive to these societies is the lower

lending rate as compared to the bank rate. The bank was mainly set up to regulate the issuance of currency notes in the country. Following are some of the important agriculture related functions carried out by it: D.I.I Provisions for Finance: It does not directly provide credit to farmers. However, it helps them through the refinance that it provides to the Commercial Banks, Cooperatives and Regional Rural Banks. It acts as the bankers bank. Being at the top of the banking system, it ensures smooth functioning of inter -bank operations. Even state governments are entitled to long-term loans, provided they use the loan amount to contribute towards the share capital of the Cooperatives. There are a number of departments in RiM, which are responsible for carrying out the supervisory and regulatory functions of the bank. For instance, Rural Planning and Credit Department (RPCD) is responsible for regulating the working of Regional Rural banks (RRBs) and Rural Cooperative Banks. As the lender of last resort, it can rescue a bank that is on the verge of collapse due to some temporary liquidity problems. This kind of arrangement ensures the security of depositors money. It is for this reason that people have immense faith in National Banks. D.l.2 Developmental Activities: RBI has been actively involved in a large number of diverse developmental activities in the country. It ensures a continuous financial support to the productive sectors. It also makes available a variety of financial services throughout the country, including rural areas.

Features It has given a new thrust to the concept of better customer service in the banking sector. Ensuring timely and sufficient credit to the rural people has been one of the important functions of the bank. Since the year 1967, it has been involved in Priority Sector Lending, whereby, it makes provisions for easy and uninterrupted supply of funds to the small and neglected sectors of the economy.

D.13 Regulatory Functions: RHI has full authority to monitor and control the working of Commercial Banks and Cooperatives. It exercises its control in the following ways: In order to provide credit beyond the limit laid down as per the Credit Authorisation Scheme, 1976, Cooperatives have to seek permission from RBI. Credit limits are fixed by RBI.

 Setting up of the Cash Liquidity Ratio (CLR) and Cash Reserve Ratio (CRR) for the Cooperatives, RRBs and ARDBs, is done by RB1. But it always keeps these limits at a lower level than it sets up for the Commercial Banks. RBI allows them to pay one and a half per cent more interest on their deposits. D.2 Cooperatives The cooperative movement started in India way back in 1904. It could be divided into two distinct phases; Pre-independence era and Post-independence era. Pre-independence Era: During the early parts of the twentieth century, Indian farmers arid peasants were exploited by the wealthy moneylenders and zamindars, who used to charge hefty interest on the borrowed sum. This led to a large scale unrest and revolt in many parts of the country. To help improve the credit structure, and get rid of LIC existing exploitative system, the Cooperative Societies Act was formulated in 1904. A significant feature of the Act was the demarcation between rural and urban societies. But still, there were many issues that had to be addressed. To get rid of the existing lacunas of the Act, The Cooperative Societies Act of 1912 was formulated. There was a provision in the Act to grant legal protection to all the Cooperatives, financing institutionS, and unions. But there was a discrepancy; in the sense that liability was unlimited for central societies, but limited for primary societies. This act gave a free hand to all the Cooperative Societies to get registered. leading to an emergence of a large number of such societies of both credit and non credit type. But theii uneven growth led to an enquiry into their performance. The Mac Lagan Committee formed for this purpose submitted its report in 1915. The Cooperative Societies Act, 1912, and the Mac Lagan Committee Report initiated the Cooperative planning process in India. Between 1919-1929, the Cooperative movement developed at a pretty fast pace. The Montague-Chelmsford Act, 1919, which stressed on the need for cooperation, gave impetus to the movement. Land Mortgage Banks were set up in Punjab. Madras and Mumbai. The Cooperative movement was almost destroyed during early thirties, due to the economic recession and the sudden fall in the prices of agricultural commodities. To identify ways to restructure the Cooperative Societies, various committees were set up. This low phase lasted until the Second World War. Thereafter, agricultural commodities prices went high, leading to cash inflow because now the societies could recover their dues from those who had earlier borrowed money.

Post-independence Era: The first five year plan that was chalked out in the year 1951, laid a lot of emphasis on the development of Cooperatives. It was proposed that they be involved in the rural

development pmgramme, and their domain extended to other areas like marketing, housing, industry, etc. Various committees were set up for reorganising the Cooperative system.

Following are the various types of Cooperative Societies working at various levels:

D.2.1 State Cooperathe Banks (SCBs): These represent the Cooperative credit organisarions at the state level. They keep a watch on the activities of the member banks, and judiciously distribute financial resources among them. They act as important links between the RBI and Primary Agriculture Coops (PACS). Kisson Zone 14.2 swnrnarises sonic important functions of SCBs:

0.2.2 District Central Cooperative Banks (DCCBs): They act as important links between the State Cooperative Banks and PACS. Any credit requirement on the part of PACS is looked after by DCCBs. They mostly operate at the taluk level, and also perform normal banking activities like accepting cash deposits, bill payment, preparing drafts, cheques, etc. Kissan Zone 14.3 summarises some important functions of the DCCBs. D.2.3 Primary Agricultural Co-operative Societies (PACS): These were formed after the enactment of the Cooperative Societies Act of 1904. The best thing about PACS is that being at the village level, these Societies look after the short and mid-term credit needs of the farmers. Kissan Zone 14.4 summarises some important functions of the PACS. D.2.4 Central Land Development Banks (CLDBs): The major task of CLDBs is to provide long-term finance to the Primary land Development Banks (PLDBs), and to their associated branches that are operating at the state level. 256 I Rural MANAGEMENT PLDBs are provided all the necessary guidance and supervision by CLDBs. Members are granted loans for activities like purchasing farm machinery, developing their land, paying off old debts, etc. CLDBs motivate people to save and mobilise their savings for Construction purposes. D.2.5 Primary Land Development Banks (PLDBs): These were established to provide long- term loans to farmers, so that they could increase the prductivjty of their land, and their overaJj agricultural production. Their objective is to promote

agricu1tura activities, thereby resulting in increased production. They provide loans for minor irrigation purposes, purchase of land, and paying off old debts. Even if farmers need finance for buying tractors,

equipments, etc., they can rake help from PLDBs. Just like CLDB5, they also motivate people to save and mobiise their savings for construction purposes, Besides, there aiso exist some more societies that are engaged in similar activities, as discussed below: D.3 Large Sized Adivasi Multipurpose Cooperative Societies (LAMPS) The Bawa committee appointed by the Government of India, made certain recommendations, based on which, LAMPS were introduced in December, 1971. LAMPS are supposed to provide all types of credit to the tribal societies. The main aim of these societies is to modernjse the tribal agriculruraj system, and improve the marketuig of commodities in these areas. The membership of LAMPS is voluntary for all the tribes. Generally, the area covered by a single society falling under LAMPS is a block or raluk. Their capital is formed through a variety of sources like deposits collected from members, share capital of government and members, entrance fee, loans taken by Cooperatives and governmen, etc. These societies are managed by a Board of Directors, comprising 11 members. CLDBs projects are refinanced by NABARD. D.4 Farmers Service Societies (FSS) As compared to other societies, FSS are very well organised and focused on the objective of development through mutual cooperation. Because Cooperatives were somehow ignoring the credit needs of the weaker sections of the society, NationaL Commission on Agriculture recommended the formation of societies that would focus on the needs of weaker sections of the rural society. FSS are supposed to provide all types of loans to economically weak individuals so that t hey can take care of various activities like buying agricultural input, machines, equipments, etc. Just Like CLDBs and PLDBs, they mobilise savings from rural areas. They take necessary steps in improving the conditions of the rural markets. They encourage non-farm activities like fishery, agro-forestiy, poultry, etc. D.5 Regional Rural Banks (RRBs) The history of RRBs is almost as old as the establishment of a proper banking sector in India. Brought in to the mainstream banking in the year 1975, these banks were established with the main objective of ensuriiig sufficient financial assistance to the rural sector, especially agriculture. They are provided various kinds of concessions by the RBI, like lower interest rates, lower statutory liquidity ratio, lower cash ratio, etc. As a matter of rule, an RRB is sponsored by a Nationalised Bank. All the important aspects of the RRB, right from recruitment, selection and Training, to subscribing to their share capital, are

handled by these National Banks. RRBs are managed by a Board of Directors, consisting of eight members, headed by a chairman. SBI has thirty RRBs spread across thirteen states. Some of the major objectives of setting up these RRBs are: Assist other financial institutions/agencics in the cause of rural development. Identil those fronts where Commercial Banks and Cooperative Societies are lagging behind, and try to get rid of such loopholes. Assist mainly the small and middle level farmers, artisans, landless labourers, peasants, small entrepreneurs, etc. To extend forward banking services to the illiterate people residing in rural India. To provide loan at a low and affordable rate of interest, so that people can easiiy repay their borrowings. To make the loan disbursement process easy and free of hassles. To save the poor from the clutches of money-lenders. By providing cheaper loans, even the poorest sections of the society are encouraged to apply for bank loans rather than approaching the landlords and money lenders who charge heavy rate of interest. To motivate small entrepreneurs to come up with new ventures. To generate new employment opportunities in the rural sector. D.6 Commercial Banks They have proved to be the biggest failure among the institutions that were established for the sustained growth and development of the rural sector. It was clearly stated that at least 40 per cent of their total lending would go to the priority sector activities, with 18 per cent going to the agriculture sector. But they have fallen well short of that target, and are always unwilling to lend credit to the rural sector. Uncertainty is a part of the rural sector, and most of the financing institutions are willing to take only calculated risks. Commercial Banks are mostly interested in financing cultivation activities that involve a Low and predictable level of risk. More than direct financing, they finance rural activities indirectly through money lenders, merchants, banks, traders, etc. They also lend a small portion of their finances to Cooperative Banks and Societies. They help finance marketing activities related to agricultural products; transporting, selling, etc. They are also involved in collecting deposits from the rural population. In fact, collecting deposits has turned Out to be more important for them than financing rural activities.

 Kissan Credit cards have helped in lending further credit to the farmers. D.6.1 Reasons for the failure of Commercial Banks i. Reluctance to Lend: Despite the fact that these banks were established mainly for the development of rural sector, they contribute only a small amount of credit to this sector, with the majority of it going to the urban areas. Even the benefits coming out of the collections made from the rural population fail to reach them. ii. Defasdiers: In the absence of good credit recovery machinery, there are numerous cases of defaulting individuals, most of whom are willful defaulters, taking advantage of the loopholes, to avoid repayment. iii. Branches: When it comes to opening banks branches in the urban and rural sectors, there has been a lack of proper coordination. iv. High Administrative Costs: The problem with rural loans is that there are a large number of cases involving very smaU loans. But the administrative cost is high for both small and large loans. This results in total administrative costs being higher for the overall loan, thereby making it expensive for the banks. v. Lack of Good Staff:- To ensure that credit reaches only to those who really deserve it, and that profitable ventures are funded, skilled personnel are required, Banks lack such people who have a sound knowledge of the banking sector, coupled with a thorough understanding of the rural sector. Commercial Banks have been bit hard in the past with untrained people taking wrong financing decisions. OR How does the government exercise legislative control over the agricultural sector? India is a federal state, and legislative powers and jurisdiction between the Central and State Governments are demarcated under the Constitution of India. Agriculture is a state subject (i.e., the jurisdiction to enact laws and regulations in relation to agriculture has been vested with the state government). Laws and regulations at the level of each state play a key role in the regulation of this sector. Marketing of agricultural products in India is governed by the state level statutory bodies the Agricultural Produce Marketing Committees (APMC) established under the Agricultural Produce Marketing Acts (hereinafter referred to as APMA) which has been enacted by a majority of states in India. Agricultural procurement systems in India is governed under the framework of the Food Corporation of India (FCI) which was established in 1965 under the FCI Act as the public-sector agency responsible for implementing government price policy through procurement and public distribution operations. The FCI is the sole agent of the Central Government in food-grain procurement. It uses the services of state government agencies and cooperatives in its operations. This paper seeks to examine competition issues in agricultural markets in India at two levels: (i) at the stage of sale and purchase of agricultural produce (broadly called as agricultural marketing), which is governed by the state level APMCs ; and (ii) at the stage of procurement of food-grains by the FCI.

The Competition Commission of India Act in India was enacted in 2002, but after several legal and legislative hurdles, it was finally notified and has been effective since May 2009. It seeks to put in place a framework that largely draws on competition law principles from advanced jurisdictions such as the U.S., EU, Canada and Australia. The CCI which has been established under the Act has as its objectives preventing practices having adverse effect on competition, promoting and sustaining competition in markets, protecting the interests of consumers and ensuring freedom of trade carried on by other participants in markets in India. The APMA vests the state government with the authority to notify areas within which the purchase and sale of agricultural produce, livestock or products of livestock can occur. Most states have notified either the entire state or all the main agriculture areas within a state. The APMA provides for the constitution of the Agriculture Produce Marketing Committee. An APMC usually comprises of about 12-14 members. In some states all of the members of the APMC are nominated by the State Government2 while in some of the states a majority of the members are elected from the notified market areas3, with the remaining members being nominated by the state government.

2.2 Powers and Functions of the APMC

APMCs are vested with wide powers and functions to regulate the sale, storage and marketing of agricultural produce within the state. The general scope of powers and functions vested with APMCs include the following: a) to construct, maintain and manage the market yards and sub-market yards and promote development of bazaars/markets in the notified areas; b) provide the necessary facilities for the marketing of agricultural produce in the market yard; c) grant or refuse licences to the market functionaries and renew, suspend or cancel such licences; d) supervise the conduct of the market functionaries; e) regulate the opening, closing and suspending of trading in the market yards; f) enforce the conditions of the licences; g) regulate the making, carrying, out and enforcement or cancellation of agreement of sales, the weighment, delivery, payment and all other matters relating to the marketing of notified agricultural produce; h) provide for the settlement of all disputes between the seller and the buyer arising out of any kind of transaction connected with the marketing of notified agricultural produce and all matters ancillary thereto. i) power to levy market fees at such rates as may be approved by the State Government - (i) on the sale of notified agricultural produce whether brought from within the State or from outside the State into the market area; and (ii) on the notified agricultural produce whether brought from within the State or from outside the State into the market areas and used for processing; j) power to order production of accounts and powers of entry, inspection and seizure; k) power to remove encroachment in market yard and the expenses of such removal shall be paid by the person who has caused the said encroachment; l) power to stop vehicles: it has power to seize any notified agricultural produce brought into or taken out or proposed to be taken out of the market area in any vehicle, vessel or other conveyance, if such

person has reason to believe that any fee or other amount due under this Act or the value payable to the seller in respect of such produce has not been paid; m) power to borrow: A market committee with the previous sanction of the state government, borrow money from the Board or Bank or any other public financial institution, required for carrying out the purposes of the Act.

Anti-Competitive Practices of APMCs

To understand the impact of competition in the agricultural marketing sector, it would first be useful to have an overview of which aspects in the agricultural chain are currently regulated by state control under the APMC Act and which are not. The chain in the marketing of agricultural produce that exists is as follows: Farmer (unregulated) Pre-Harvest Contractor (unregulated) Commission Agent/Broker (APMC regulated) Wholesaler (APMC regulated) Retailer (unregulated) Consumer. As seen in the outline of the APMCs powers and functions above, they have been statutorily vested with the power to regulate both the creation of markets as well as the entities that can participate in such markets for agricultural produce. This range of exercise of powers by APMCs has resulted in a hardening of the existing chain of agricultural marketing and closed any venues for the farmer to other means of selling his/her produce. APMCs have therefore become bottlenecks as they regulate who the farmer can sell to and who can participate in the market and even where markets can be established. In the process, a natural fall-out has also been the limited access of consumers and retailers. Although the APMCs are statutory authorities with sufficient powers to regulate, they have effectively been captured by the very interests that they set out to regulate and have become the major cause of the price discrepancy in the procurement, storage, release, marketing and sale of agricultural produce. Instead of acting as effective regulators in the procurement and marketing of agricultural produce, the APMC system has been captured by the people it is was created to regulate. In fact it is a well known fact that the chain of middlemen in the agricultural marketing is so large that the share of farmers has reduced substantially. For instance, it has been estimated that farmers obtain only about 53% of any increase in prices of agricultural commodities, with 31% being the share of middlemen and the remaining 16% being market cost.4 In case of vegetables and fruits the share of the farmer was even less: only 39% for vegetables and 34% for fruits. The share of the middlemen in the case of vegetables was 29.5% and in the case of fruits was 46.5%.5 Some of the intermediaries or the middle-men in the agricultural marketing system are village traders, kutcha arhatiyas, arhatiays, brokers, wholesalers, money lenders etc. The presence of middlemen is essentially supported by the lack of marketing facilities and supporting infrastructure that prevent the farmer from accessing viable purchasers. There is a lack of proper warehousing, a lack of grading and standardization, lack of information, malpractices and inadequate transport facilities. The APMCs were established with a view to develop such facilities and provide the required facilities to farmers for marketing their produce. The hardening of walls around agricultural production and marketing created under the APMC framework is also becoming a significant bottleneck in the development of structured retail chains and major food product chains that are fast restructuring other retail markets in India. Structured retail chains have the ability to procure, store, transport large quantities of agricultural produce without the requirement for the agricultural markets created by APMCs and threaten the existence of the established middle men in the agricultural market. A significant pre-condition for such chains to flourish is to have direct access to farmers. This is not possible within the existing framework. To operate within the existing framework, structured retail chains can be established only with required licenses from the APMCs in order to have the permission to procure, store, transport and market the agricultural products. However, as will be explained below, other than a handful of states

where the APMC laws have been amended to allow private markets and long term authorizations to be granted, the APMCs of various states are effectively preventing any reasonable access to the private retail chains and are also effectively preventing the farmer from obtaining access to creditworthy bulk purchasers and more end-consumers.
Question 5. Write a detailed note on rural financing RBT was established in the year 1935, under the Reserve Bank of India, Act, 1934. it is the apex body that supervises the financial functions of the country, especially regulating the working of the banking sector. Its contribution to the cause of rural development has been commendable. It refinances the rural development schemes of the Cooperative societies, and the incentive to these societies is the lower lending rate as compared to the bank rate. The bank was mainly set up to regulate the issuance of currency notes in the country. Following are some of the important agriculture related functions carried out by it: D.I.I Provisions for Finance: It does not directly provide credit to farmers. However, it helps them through the refinance that it provides to the Commercial Banks, Cooperatives and Regional Rural Banks. It acts as the bankers bank. Being at the top of the banking system, it ensures smooth functioning of inter-bank operations. Even state governments are entitled to long-term loans, provided they use the loan amount to contribute towards the share capital of the Cooperatives. There are a number of departments in RiM, which are responsible for carrying out the supervisory and regulatory functions of the bank. For instance, Rural Planning and Credit Department (RPCD) is responsible for regulating the working of Regional Rural banks (RRBs) and Rural Cooperative Banks. As the lender of last resort, it can rescue a bank that is on the verge of collapse due to some temporary liquidity problems. This kind of arrangement ensures the security of depositors money. It is for this reason that people have immense faith in National Banks. D.l.2 Developmental Activities: RBI has been actively involved in a large number of diverse developmental activities in the country. It ensures a continuous financial support to the productive sectors. It also makes available a variety of financial services throughout the country, including rural areas.

Features It has given a new thrust to the concept of better customer service in the banking sector.

 Ensuring timely and sufficient credit to the rural people has been one of the important functions of the bank. Since the year 1967, it has been involved in Priority Sector Lending, whereby, it makes provisions for easy and uninterrupted supply of funds to the small and neglected sectors of the economy.

D.13 Regulatory Functions: RHI has full authority to monitor and control the working of Commercial Banks and Cooperatives. It exercises its control in the following ways: In order to provide credit beyond the limit laid down as per the Credit Authorisation Scheme, 1976, Cooperatives have to seek permission from RBI. Credit limits are fixed by RBI. Setting up of the Cash Liquidity Ratio (CLR) and Cash Reserve Ratio (CRR) for the Cooperatives, RRBs and ARDBs, is done by RB1. But it always keeps these limits at a lower level than it sets up for the Commercial Banks. RBI allows them to pay one and a half per cent more interest on their deposits. D.2 Cooperatives The cooperative movement started in India way back in 1904. It could be divided into two distinct phases; Pre-independence era and Post-independence era. Pre-independence Era: During the early parts of the twentieth century, Indian farmers arid peasants were exploited by the wealthy moneylenders and zamindars, who used to charge hefty interest on the borrowed sum. This led to a large scale unrest and revolt in many parts of the country. To help improve the credit structure, and get rid of LIC existing exploitative system, the Cooperative Societies Act was formulated in 1904. A significant feature of the Act was the demarcation between rural and urban societies. But still, there were many issues that had to be addressed. To get rid of the existing lacunas of the Act, The Cooperative Societies Act of 1912 was formulated. There was a provision in the Act to grant legal protection to all the Cooperatives, financing institutionS, and unions. But there was a discrepancy; in the sense that liability was unlimited for central societies, but limited for primary societies. This act gave a free hand to all the Cooperative Societies to get registered. leading to an emergence of a large number of such societies of both credit and non credit type. But theii uneven growth led to an enquiry into their performance. The Mac Lagan Committee formed for this purpose submitted its report in 1915. The Cooperative Societies Act, 1912, and the Mac Lagan Committee Report initiated the Cooperative planning process in India. Between 1919-1929, the Cooperative movement developed at a pretty fast pace. The Montague-Chelmsford Act, 1919, which

stressed on the need for cooperation, gave impetus to the movement. Land Mortgage Banks were set up in Punjab. Madras and Mumbai. The Cooperative movement was almost destroyed during early thirties, due to the economic recession and the sudden fall in the prices of agricultural commodities. To identify ways to restructure the Cooperative Societies, various committees were set up. This low phase lasted until the Second World War. Thereafter, agricultural commodities prices went high, leading to cash inflow because now the societies could recover their dues from those who had earlier borrowed money.

Post-independence Era: The first five year plan that was chalked out in the year 1951, laid a lot of emphasis on the development of Cooperatives. It was proposed that they be involved in the rural development pmgramme, and their domain extended to other areas like marketing, housing, industry, etc. Various committees were set up for reorganising the Cooperative system.

Following are the various types of Cooperative Societies working at various levels:

D.2.1 State Cooperathe Banks (SCBs): These represent the Cooperative credit organisarions at the state level. They keep a watch on the activities of the member banks, and judiciously distribute financial resources among them. They act as important links between the RBI and Primary Agriculture Coops (PACS). Kisson Zone 14.2 swnrnarises sonic important functions of SCBs:

0.2.2 District Central Cooperative Banks (DCCBs): They act as important links between the State Cooperative Banks and PACS. Any credit requirement on the part of PACS is looked after by DCCBs. They mostly operate at the taluk level, and also perform normal banking activities like accepting cash deposits, bill payment, preparing drafts, cheques, etc. Kissan Zone 14.3 summarises some important functions of the DCCBs. D.2.3 Primary Agricultural Co-operative Societies (PACS): These were formed after the enactment of the Cooperative Societies Act of 1904. The best thing about PACS is that being at the village level, these Societies look after the short and mid-term credit needs of the farmers. Kissan Zone 14.4 summarises some important functions of the PACS. D.2.4 Central Land Development Banks (CLDBs): The major task of CLDBs is to provide long-term finance to the Primary land Development Banks (PLDBs), and to their associated branches that are operating at the state level. 256 I Rural MANAGEMENT

 PLDBs are provided all the necessary guidance and supervision by CLDBs. Members are granted loans for activities like purchasing farm machinery, developing their land, paying off old debts, etc. CLDBs motivate people to save and mobilise their savings for Construction purposes. D.2.5 Primary Land Development Banks (PLDBs): These were established to provide long- term loans to farmers, so that they could increase the prductivjty of their land, and their overaJj agricultural production. Their objective is to promote

agricu1tura activities, thereby resulting in increased production. They provide loans for minor irrigation purposes, purchase of land, and paying off old debts. Even if farmers need finance for buying tractors, equipments, etc., they can rake help from PLDBs. Just like CLDB5, they also motivate people to save and mobiise their savings for construction purposes, Besides, there aiso exist some more societies that are engaged in similar activities, as discussed below: D.3 Large Sized Adivasi Multipurpose Cooperative Societies (LAMPS) The Bawa committee appointed by the Government of India, made certain recommendations, based on which, LAMPS were introduced in December, 1971. LAMPS are supposed to provide all types of credit to the tribal societies. The main aim of these societies is to modernjse the tribal agriculruraj system, and improve the marketuig of commodities in these areas. The membership of LAMPS is voluntary for all the tribes. Generally, the area covered by a single society falling under LAMPS is a block or raluk. Their capital is formed through a variety of sources like deposits collected from members, share capital of government and members, entrance fee, loans taken by Cooperatives and governmen, etc. These societies are managed by a Board of Directors, comprising 11 members. CLDBs projects are refinanced by NABARD. D.4 Farmers Service Societies (FSS) As compared to other societies, FSS are very well organised and focused on the objective of development through mutual cooperation. Because Cooperatives were somehow ignoring the credit needs of the weaker sections of the society, NationaL Commission on Agriculture recommended the formation of societies that would focus on the needs of weaker sections of the rural society. FSS are supposed to provide all types of loans to economically weak individuals so that they can take care of various activities like buying agricultural input, machines, equipments, etc. Just Like CLDBs and PLDBs, they mobilise savings from rural areas.

 They take necessary steps in improving the conditions of the rural markets. They encourage non-farm activities like fishery, agro-forestiy, poultry, etc. D.5 Regional Rural Banks (RRBs) The history of RRBs is almost as old as the establishment of a proper banking sector in India. Brought in to the mainstream banking in the year 1975, these banks were established with the main objective of ensuriiig sufficient financial assistance to the rural sector, especially agriculture. They are provided various kinds of concessions by the RBI, like lower interest rates, lower statutory liquidity ratio, lower cash ratio, etc. As a matter of rule, an RRB is sponsored by a Nationalised Bank. All the important aspects of the RRB, right from recruitment, selection and Training, to subscribing to their share capital, are handled by these National Banks. RRBs are managed by a Board of Directors, consisting of eight members, headed by a chairman. SBI has thirty RRBs spread across thirteen states. Some of the major objectives of setting up these RRBs are: Assist other financial institutions/agencics in the cause of rural development. Identil those fronts where Commercial Banks and Cooperative Societies are lagging behind, and try to get rid of such loopholes. Assist mainly the small and middle level farmers, artisans, landless labourers, peasants, small entrepreneurs, etc. To extend forward banking services to the illiterate people residing in rural India. To provide loan at a low and affordable rate of interest, so that people can easiiy re pay their borrowings. To make the loan disbursement process easy and free of hassles. To save the poor from the clutches of money-lenders. By providing cheaper loans, even the poorest sections of the society are encouraged to apply for bank loans rather than approaching the landlords and money lenders who charge heavy rate of interest. To motivate small entrepreneurs to come up with new ventures. To generate new employment opportunities in the rural sector. D.6 Commercial Banks They have proved to be the biggest failure among the institutions that were established for the sustained growth and development of the rural sector. It was clearly stated that at least 40 per cent of their total lending would go to the priority sector activities, with 18 per cent going to the agriculture sector. But they have fallen well short of that target, and are always unwilling to lend credit to the rural sector.

Uncertainty is a part of the rural sector, and most of the financing institutions are willing to take only calculated risks. Commercial Banks are mostly interested in financing cultivation activities that involve a Low and predictable level of risk. More than direct financing, they finance rural activities indirectly through money lenders, merchants, banks, traders, etc. They also lend a small portion of their finances to Cooperative Banks and Societies. They help finance marketing activities related to agricultural products; transporting, selling, etc. They are also involved in collecting deposits from the rural population. In fact, collecting deposits has turned Out to be more important for them than financing rural activities. Kissan Credit cards have helped in lending further credit to the farmers. D.6.1 Reasons for the failure of Commercial Banks i. Reluctance to Lend: Despite the fact that these banks were established mainly for the development of rural sector, they contribute only a small amount of credit to this sector, with the majority of it going to the urban areas. Even the benefits coming out of the collections made from the rural population fail to reach them. ii. Defasdiers: In the absence of good credit recovery machinery, there are numerous cases of defaulting individuals, most of whom are willful defaulters, taking advantage of the loopholes, to avoid repayment. iii. Branches: When it comes to opening banks branches in the urban and rural sectors, there has been a lack of proper coordination. iv. High Administrative Costs: The problem with rural loans is that there are a large number of cases involving very smaU loans. But the administrative cost is high for both small and large loans. This results in total administrative costs being higher for the overall loan, thereby making it expensive for the banks. v. Lack of Good Staff:- To ensure that credit reaches only to those who really deserve it, and that profitable ventures are funded, skilled personnel are required, Banks lack such people who have a sound knowledge of the banking sector, coupled with a thorough understanding of the rural sector. Commercial Banks have been bit hard in the past with untrained people taking wrong financing decisions. OR Elaborate the social and physical structure of Indian rural markets. In rural India, village is the most common form of settlement. People are concentrated in a specific area, comprising houses, land. f.rms, water bodies, shops and others pictures like school, dispensary, etc. The

kind of houses and amenities depend mainly on the population size. Big villages with population above 5,000. Generally have large number of houses, physical infrastructures, baste amenities, etc. According to census 2001, number of villages in India is approximately 6.3 lakh, while the number of towns is 5,161. With about 72 per cent of the countrys population living in these rural areas, it is a market that offers huge potential. But owing to its vastness and scattered nature, managing it is quite a difficult task. Following are some physical elements of the rural society: Settlement Patterns Settlement refers to the clusters of human dwellings, which consist of various types of houses, and other structures for providing support services. For ages, human population has been nurturing a tendency to settle around in groups. Staying together helps them assist each other. There is a kind of symbiotic relation and a sense of security when others are close by. Some important types of settlements are discussed below: Clustered Settlements: These settlements are marked by densely compact and closely constructed houses. The housing structures are quite distinct from other geographical features like farms, pastures, barns. etc., which generally surround the built area. The settlement resembles a bee-hive, with distinctly visible structures clustered together. Structures are properly constructed with roads and passages. Seen from above, these settlements resemble some kind of geometric pattern like radial, circular, linear, etc. Such settlements provide better securtv to the residents, and are mostly found in northe astern states, and large pans of Bundelkhand and Rajasthan. Semi-clustered Settlements: Such settlements look like many small clusters of houses and other structures, which are close by, yet distinctly identifiable as separate groups. Mostly, such patterns arise when small groups break away from a large cluster due to socio-culrural or economic reasons. When seen from above, these structures look like patches of construction, separated by geographical features like farm, barns, water bodies, etc. Such settlements are mostly found in parts of Rajasthan and Gujarat. Dispersed Settlements: These are isolated settlements owned by individuals who construct their houses/structures in remote areas, on hills, in jungles, etc.. away from the main population. People choose those areas that are near pastures, or where they can do some kind of farming. Many parts of Kerala, Himachai Pradesh and Meghalaya have this kind of dispersed settlement. Even big farms are also found scattered at some places. They have the necessary arrangement o keep the agricultural produce, animals, larm equipments. etc.. and are mostly situated a few kilometen away from the neighbourhood population.

Hamletted Settlements: These are very small villages consisting of groups of uses near each other. Generally, large villages are segmented into smaller units on the s of social and ethnic factors. Hamlets differ from villages mainly on the basis of their a1l size, and the absence of proper services like potable water, medical care, ucationa1 facilities, etc. People have to travel to nearby villages and towns to access se services. Such settlements are mostly found in Chattisgarh, middle and lower Ganga plain, and lower valleys of the Himalayas. Housing Rural areas, three major types of houses are found; kuchcha, pucca and semi-pucca. kcha houses have walls and roof made of mud, straw, bamboo. grass. tin, etc. Pucca ises have walls made of red bricks, cement, stones, etc., and roof of concrete, asbestos, Ieinforced Cement Concrete (RCC), etc. In semipucca constructions. walls are made of ca material, and roof is kuchcha. The following table shows percentage distribution of rwal households living in pucca. semi-pucca and kuchcha houses. Salient Features Percentage of households living in pucca houses has been increasing, as percentage Of households living in kuchcha houses is decreasing. In the year 2002, among the states, Assani had the highest percentage of kuchcha I houses (52.7 per cent), closely followed by Onssa (49.7 per cent). Punjab and Haryana had the least percentage of kuchclw houses at 5 and 6.6 per cent respectively. Punjab had the highest percentage of pucca houses (87.1 per cent), followed by I Haryana (86.1 per cent). Assam had the nunimum percernage of pucca houses at 14.6 per cent. SOCIAL STRUCTURE OF RURAL SOCIETY The meaning of social structure is twofold: at the macro level, it refers to the socioo mic stratification, social institutions, or other kind of relations between larges and at the micro level, it is related to the relationships between individuals and pnisations. To understand the social structure of rural India, both macro and micro are significant. Also, for understanding the rural market, it is important to prehend its important social elements like religion, caste, institutions, language, etc., iiscussed below. Hinduism is rain religion in most parts of the country, followed by about 80 per cent population. rns are the largest minority, followed by Sikh and Christian communities. Only in th. Sikhs are in majority. Each religion has its own set of beliefs and faiths, which arc ioniouslv followed by the people. For rural societies, religion is a way of life. wever, in the changing social and economic environment, festivals, marriages. rmonjes, etc. are celebrated together by peo-ile of diverse faiths. For years. they have

participating in each others celebrations and functions. Festivals Like Diwali, Holi. Baisakhi, Christmas, etc. are celebrated with joy and gaiety by people from all munities. The following table shows percentage distribution of households on the major source olliveliliood across different religions in rural area. Caste In India caste system has a long histoncal root along whose line people are divided. In rural India. it is much stronger. With more than 300 castes in each linguistic area, it is quite a complex social system. Following are some of the important features of caste system in rural areas: Hereditary: One belongs to a particular caste by virtue of birth. For instance, a child born in Brahmin family is a Brahmin. Transition from one caste to another is not possible. Occupation in rural India is also largely decided on the basis of the caste that one belongs to. Brahmins are supposed to perform rituals, and Vaishyas are mostly involved in business and cattle farming, etc. Similarly, people from Shudra community are mostly acting as labourers, craftsmen. etc.. who provide support services to other castes. Hierarchical system: In the caste hierarchy, a lot of respect is given to the Brahmins. who are considered to be at the top. They are supposed to perform a number of rituals and other ceremonies during festivals and other rural functions. Ks.harrya.s and Vaishvas lie in the second and third levels of the hierarchy. Shudras are at the bottom. Besides, there are a large number of sub-castes within each of these four major categories. Unlike in urban areas, people in rural parts of the country are much more divided on these Lines. However, with the increasing development of rural sector, people are becoming more liberal on caste lines, and adopting others work as well. Restrictions on Social Interaction: Guided by their centuries old belief of supremacy, people belonging to higher castes stay away from any kind of social interaction like touching, sitting and eating together with the socially downtrodden, in many parts of rural India. Dali: people are often prohibited from drawing water from wells belonging to upper castes. visiting their temples. etc. Inter-caste marriages are still a taboo. In years 2009 and 2010. there was a spate of honour killings in rural areas due to inter-caste and within-.gotra marriages. Despite reservations about certain kind of social interaction among members belonging to lower castes. there exists a symbiotic relationship among them. They cannot survive without the help of one another. It is identified as a means for social stratification in industrialised societies. Social classes are economic or cultural arrangements of groups in a society. Class is an essential object of analysis for sociologists, political scientists. economists, anthropologists and social historians.2 Rural sector too is characterised by a class structure. based on the social status of individuals. Some of its features are as follows:

 Unlike the caste system. membership for a social class is not by birth. Based on performance and achievement, an individual qualifies for the appropriate class. Also, depending on the kind of education, occupation, wealth, etc. that one occupies during his/her lifetime, social class can also change. What it implies is that transition from one class to ?nother is possible. Hierarchy in class system motivates individuals to perform better. so that they can move to a higher level.