India’s great rural market story is a myth
AROUND 24 years ago, my editor asked me to do a story on the expanding rural market in India for a business show that we used to produce for the BBC. This was the end of the most tumultuous decade for India’s economy. We were less than a decade into the economic reforms unleashed by the Rao-Manmohan duo. And it was widely believed that liberalisation, globalisation and privatisation would finally take prosperity to village India.
I was an absolute rookie, but, thankfully, the camera was being wielded by an ace storyteller, Natasha Badhwar. The two of us made our way to an affluent village outside Delhi, and knocked on the first freshly-painted and plastered house that we saw. We had hit pay dirt — the family had a refrigerator in the drawing room, and switched on an air-cooler for us. Natasha made the elder daughter of the household repeatedly open the fridge door and take out a bottle of water from myriad angles, till her cinematic nose was satisfied.
But herein also lay the trouble. There was nothing in that refrigerator except for a few water bottles that were being cooled. No trace of any butter, eggs, vegetables or cooked food. Natasha looked at me to indicate that this was less of a goldmine that we had initially expected. After thanking the family profusely, we moved on to look for another affluent home. Remember, this was more than two decades ago, and we didn’t expect the less well-off to own any gadget.
This time, we found a house with a washing machine. By now, Natasha was positively glowing, and in her somewhat gentle-but-firm manner, she cajoled the lady of the house to show us how she used the washing machine. The lady brought a bucket of water and poured it into the machine, dunked some detergent and clothes into it, and then began washing the clothes by hand, inside the machine’s drum. This was delightful, but also disappointing.
Our pink paper-inspired belief that the light of ‘India Shining’ had penetrated the countryside was proving to be entirely unfounded. If the ‘richest’ in a village so close to the Capital were not using the durables they had bought, there was very little chance that the others were going to buy them any time soon.
I had already shot a somewhat neutral ‘piece-to-camera’ — where the reporter speaks directly to the camera — in the local shop which sold white goods, such as TV sets, refrigerators and washing machines. Natasha, the perfectionist, had made me do it some 16 times, and I was in no mood to change it to reflect the reality on the ground. She wasn’t happy, but gave in, and my story ended up being less dismissive of the rural market myth than it should have been.
Have things changed two decades later?
Here is what the data says: The National Family Health Survey (NFHS) of 2019-20 tells us that only one in four rural families own a refrigerator and just 9 per cent own washing machines. According to the NFHS, a little over 16 per cent of the rural households own air-coolers or air-conditioners. An overwhelming chunk of this would be air-coolers because NABARD’s All India Financial Inclusion Survey (NAFIS) 2016-17 found that only 2 per cent of the families in villages owned air-conditioners, and that proportion is unlikely to have changed significantly in two years.
The two durables that rural consumers have purchased the most over the past two decades are mobile phones and TV sets. Both the NAFIS and NFHS suggest that about 58 per cent of the families in India’s villages own television sets. This is similar to the TV-ownership projections used by the television rating agency, the Broadcast Audience Research Council (BARC), which says that about 119 million households in rural areas owned TV sets in 2020. That works out to be 58-60 per cent of all rural households.
The game-changer here has been the Free Dish DTH platform owned by the state-run Prasar Bharati where viewers do not have to pay any monthly charges. The Free Dish penetration has been increasing since 2014-15 and from mid-2016, several general entertainment channels have gone free-to-air to tap the ‘rural market’. Free Dish is effectively a subsidy to the TV viewers in villages, an incentive for them to purchase TV sets without incurring the monthly cost of watching private channels. Despite this, the BARC’s figures suggest that the number of TV-owning families in rural India has grown at a measly 3.4 per cent per year between 2016 and 2020.
What about mobile phones? This is the biggest consumer success story in rural India. The NAFIS says that 87 per cent of the rural homes own mobile phones, while the NFHS, done three years later, pegs that number at 91 per cent. As is well-known, the big jump here came after the launch of Reliance Jio, which initially provided free services to customers for the first few months. It also changed the data consumption pattern by giving one GB of free data every day.
Other telecom service providers had to follow suit and slash data and call rates. The average revenue per user (ARPU) almost halved between 2016 and 2019, and then rose after the tariff hikes. It is clear that the rural consumers came in because the price wars made mobile phones affordable. This is evident from the fact that the subscriber base in India has fallen in the last few months of 2022, as the tariff plans have risen.
It would be a mistake to see mobile phones as a sign of prosperity. Mobile phones have now become mobile offices, the only point of contact for itinerant non-professional service providers like plumbers, electricians, house painters, carpenters, domestic help and others. They are also a lifeline between migrant labourers and their families back home in the village. The mobile-phone economy has replaced the money-order economy of the old.
The lesson is clear: India’s rural consumers cannot afford to buy things unless they come with inbuilt subsidies. Every now and then, we are sold the story of the great potential of India’s rural market. That is nothing short of a myth.
The author is a senior economic analyst
