‘Rural India is full of opportunities’

Vijay Mahajan holds the John P Harbin Centennial Chair in Business at the McCombs School of Business, University of Texas at Austin. He is the author of 12 books including Africa Rising , The 86% Solution , and The Arab World Unbound . Businessline recently had a chat with him about his new book — Rise of Rural Consumers in Developing Countries: Harvesting 3 Billion Aspirations (Sage India) — and more. Excerpts:

You’re saying rural incomes are rising across the globe. But some economists have been warning us about disappearing rural incomes. What’s the reality?

My market visits to several countries have showed me that a growing class of emerging rural consumers who are globally connected have seen their incomes rise and have the same aspirations as anyone anywhere. This is what I reported in the book. Several factors are adding to this emerging middle class. Some examples include government interventions, remittances (both from within the country and outside the country), NGOs and social organisations.

Social organisations?

Yes, many such organisations are offering better tools to farmers to, say, manage farming. Entities such as IDE India, Gates Foundation, Tata Trusts are good examples. These organisations also provide farmers and the rural population with sustainable living by teaching them to use natural resources (PRADAN in India with Tasar silk is an example), or train them in various crafts to produce commercial products ( example, Aarong BRAC in Bangladesh). There are also private sector initiatives such as Olam, which works with small-scale farmers to improve supply chain for their crops. All these initiatives help.

You say larger opportunities reside in the up-and-coming rural populations of Asia and Africa. But these are also regions with volatile and unstable regimes. Why would companies take the risk?

Companies do take risks that they can manage. Operations of P&G, Unilever and Coca-Cola in West Asia are examples. At the end, there is the size of the market: there are more than three billion rural consumers in Africa and Asia. That’s almost half of the total population. One-third or one billion of them live in South Asia (India, Pakistan and Bangladesh). Unilever South Asia based in Mumbai have been catering to the needs of these consumers for decades. These companies, what I call, have a rural DNA.

Granted, but there are reports of mass exodus from villages to urban centres.

Rural migration is happening in every developing country I visited. But many of these migrants are still connected with their villages. They send money back home to improve the livelihood of their families and leave cities during the harvest time and attend marriages and religious celebrations in their villages (example: Chinese urban migration during the Chinese new year and Indonesia’s migration called ‘mudik’ or ‘going home’ at the end of Ramadan). The fact remains that in terms of urbanisation, India is where the US was in the 1880s and China is where the US was in the 1920s. So rural population in developing countries is not going south anytime soon.

You observe that religion plays a vital part in political economy. This is interesting especially in the context of countries such as India.

Religious and other cultural/social festivals (such as Chinese and Vietnamese New Year) form the fabric of several developing countries. I just came back from India after celebrating Diwali and Bhai Dhuj in Jammu. I saw that some entrepreneurs have made special sweets for these occasions. Ad budget is the highest in India during Diwali, as I have explained in the book. Similarly, in the US, Christmas season plays a big role in economy. So is in the Philippines.

But India lags some of India’s Asian neighbours in enhancing the rural economy.

There is no secret that the Chinese have a done an incredible job in improving their rural economy and making substantial progress on extreme poverty. Same trend is visible in Vietnam. As a matter of fact, this is happening in almost all the countries I visited including India. To sustain high growth rates, you need an inclusive growth strategy that includes both urban and rural consumers. This is the key message of my book.

How is the advent of new trends such as social media, messaging platforms, online commerce influencing rural consumers?

I have devoted an entire chapter on this question in the book. Technologies such as internet, mobile phones and satellite TV are the game changers. You can see this in almost all the countries I visited. They impact the way people do banking, receive information and entertainment, and education and healthcare. Developing countries are leapfrogging and in some instances are ahead of the developed countries, challenging the notion of digital divide.

Has entrepreneurship become a very urban activity of late? Not many entrepreneurs are coming up from rural areas.

There is a clearly an awareness that we need to focus on rural innovations. Companies understand this. At Unilever, Unilever South Asia is a hub for rural innovations. Working with the IC2 Institute at the University of Texas at Austin and other partners, FICCI in India is catalysing rural innovations and entrepreneurs. But much more needs to be done. Among the developing countries India has the largest rural population. Among the developed world, the US has the largest rural population (9th highest in the world).

I have suggested several initiatives that can help here. For example, formation of a global entity called Rural 10 like BRICS. This entity of the ten countries with the largest rural populations should focus on the needs of more than 2.2 billion consumers, almost two thirds of the total rural population of the world. They have common problems such as issues in healthcare, education and infrastructure.

Can you name a few trends that are going to shape Rural India in the immediate future…

Through mobile phones, internet and satellite TV, rural consumers are very well connected and aware. They are aware of what is available for them and their children. Their aspirations are not any different from urban consumers. Rural migrants are also a big source of information and choices for products and services. Urban markets are saturated and competitive.

Rural markets offer an opportunity for expansion and sustainable growth. Companies are developing an inclusive strategy to include both urban and rural consumers.

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