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August 19, 2006

Marketing to Rural India

Business Today has an article on the dynamics of marketing to India rural and small town India.

According to the census of India, villages 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 per cent of the male working population engaged in agriculture and allied activities would quality as rural. According to this definition, there are 585,764 villages in the country. Of these, only 0.5 per cent have a population above 10,000, and 2 per cent have population between 5,000 and 10,000. Around 50 per cent of the villages have population between 200 and 1,000, and another 18 per cent has a population less than 200.

Interestingly, for FMCG and consumer durable companies, any territory that has more than 20,000 and 50,000 population, respectively, is rural market. So, for them, it is not rural India which is rural. According to them, it is the Class-II and III towns that are rural. According to the Census of India 2001, there are more than 4,000 towns in the country. It has classified them into six categories-around 400 Class-I towns with one lakh and above population (these are further classified into 35 metros and rest non-metros), 498 Class-II towns with 50,000-99,999 population, 1,368 Class-III towns with 20,000-50,000 population, 1,560 Class-IV towns with 10,000-19,999 population. It is mainly the Class-II and III towns that marketers term as rural and that partly explains their enthusiasm about the so-called "immense potential" of rural India.

Arun Natarajan is the Founder of Venture Intelligence, which tracks private equity and venture capital in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.