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Companies eye the purchasing power of rural youth

25 Jul 2010, 0008 hrs IST,Monica Behura,ET Bureau

NEW DELHI: Last month, when a group of eight top global investors met in London to ponder over their
next India strategy, all they wanted to know

was how to go ‘rural’. They had been advised by experts that the country’s hinterland was no more the
challenge that it was two decades ago, when the economy was first opened up. Prosperity in the villages
was slowly starting to outdo the scope of urban India—Bharat was blossoming into the next big

Deutsche Bank, which facilitated the London meeting, invited Pradeep Kashyap of MART, an Indian
consultancy specializing in emerging and rural markets, to make a presentation. Kashyap told the
eclectic group that all they needed to do was to tap the village youth.

The same man had years ago helped FMCG major Hindustan Lever (now Hindustan Unilever) co-create
Project Shakti to appoint women micro entrepreneurs among village self help groups as the company’s
salespersons. He was a strong believer in the concept of opinion makers such as the village headman or
the quintessential postman to influence the villagers’ buying decision. So, why was he now talking about
the power of India’s rural youth?

Part of the reason is the success of the government’s National Rural Employment Guarantee Scheme,
which promised 100 days of guaranteed employment with an income of `100 a day. With 43 mn new
jobs (1.82 billion new mandays), the village economy became a big draw for the village youth. Young
people not only decided against migration, those who had already migrated began returning home. At
the same time, better power scenario, good connectivity with the cities and access to communication
facilities such as mobiles and satellite televisions improved not only the standard of life in far flung
villages, but also increased awareness and enhanced aspiration levels. As a result, rural spending in the
last three years quadrupled to a whopping `40,000 cr.

“The nature of the spending shows that the biggest driver of the economy is the youth. Young people
are earning money, spending on their daily chores and are still left with enough disposable incomes. All
that money is going, or will go, into buying vehicles, TVs, mobiles, FMCG products, clothes and a decent
education for the next generation,” says Sujit Nair, chief executive officer of Linterland, a rural
marketing agency of Lowe Worldwide.

Take a look at the facts. The rural market already contributes more than half of FMCG and durables
sales, 100% of agri-products sales, and nearly 40% of automobile sales. In the last few years, the biggest
push to India’s mobile telephony story has come from the hinterland where 175 million connections
have been sold—and this is expected to rise to 440 million by 2012. Half of life insurance policies are
also sold in India’s villages.

Companies that are operating in India have already latched onto this boom. In village Shahjahanpur, 30
km off the highway from Meerut in UP, a group of young HUL executives and rural marketing experts
last week made a sales pitch to the villagers who huddled amid thatched houses to watch a promotional
video in a campaign called ‘Khusiyon ki Doli’ (palanquin of happiness). As the women giggled, watching
the films and demos, 20-year old Jyoti Saudan stepped aside to take a call from her husband on her
mobile phone.

“A high degree of awareness facilitated by communication devices has empowered the youth in the
villages. Gone are the days when the company would approach the village headman or the postman or
other opinion makers to influence buying-decisions in the village. Now, we are creating campaigns that
directly influence the youth,” says Raj Kumar Jha, national creative direcor of Ogilvy Action, a rural
marketing agency. “The money is now with the village youth and it is he/she who does the spending,”
adds Sudhanshu Vats, vice-president for home & personal care category of Hindustan Unilever.

That explains why Nokia’s campaign for the rural market says ‘Dikhao Apna Standard (show your
worth)’, Bharti Airtel says ‘Aaj Koi Akele Nahin’ (no one is alone) and Max New York Life Insurance calls
its rural policies ‘Vijay’. “More than 50% of rural youth in the age group of 25-35 years have contributed
to `2.5 million value top-ups of our policies through their mobile phones,” says Anisha Motwani, chief
marketing officer of the insurance firm which has sold 93,000 ‘Vijay’ policies in the rural market.

Companies are also branding Internet café’s, movies halls and youth clubs in villages, where youth
participation in local functions especially during festivals goes up.

“At every function, we demonstrate our mobikes and register at least two sales,” says Anil Dua, chief
marketing officer at Hero Honda. Hero Honda gets 42% sales from the rural market. Seventy percent of
the consumers are in the age group 25-35.

Indeed, it was this youth-led demand that helped the Indian economy post a healthy near 7% GDP
growth even when the world had slipped into the worst recession in several decades. And so, in the eyes
of the investors, India’s rural youth emerged as the Knights in shining armour. “It is an opportunity no
corporate can overlook. India’s rural market is already a $0.5 trillion market today, and it is expected to
double to $1 trillion by 2020,” adds Kashyap.