Sunil Narula
Guest Article

Rural markets have emerged as significant growth drivers for electrical brands in recent years

The guest author explains how electrification of India's rural areas is directly linked to an upgrade of lifestyle.

The Indian economy is marked by its diversity, with the rural sector contributing significantly to its growth. With a population of 1.4 billion, India has become one of the biggest and most important markets in the world, with 65% of the market still being in rural areas. 

The Indian consumer market will quadruple by 2031, growing from $2.3 trillion in 2022 to $5.2 trillion. The major cause of this expansion is seen to be a rise in household earnings and greater expenditure on food and other products. India anticipates significant growth in the electrical area, with a significant rural market contribution.

In rural India, the electrical sector has expanded rapidly and continues to present businesses with plenty of opportunities. Over time, the customer has undergone significant transformation and now desires goods that are available to an urban consumer.

Electrification has provided consumers with access to the latest innovations resulting in an upgrade of lifestyle. Overall this increases the demand for such products.

India's rural market is expanding swiftly, allowing businesses to establish a following among rural consumers. Small towns and villages are experiencing quicker growth in consumer goods demand than cities, from everyday necessities to high-tech devices.

In fact, it is anticipated that rural commerce in India will grow at a CAGR of almost 20%. Numerous factors, such as rising income levels, an improved standard of living, greater interaction between urban and rural regions, and increasing mobile phone connectivity among rural populations, can be attributed to this remarkable development. Below are some major points which have proved to be growth drivers for FMEG brands:

Changing Consumer Behavior: Rural consumers are becoming more aware and conscious of their needs and are willing to spend on products that improve their quality of life. With the increasing exposure to urban lifestyles and aspirations, rural consumers are also demanding more premium FMEG products.

Improvement and increase in electrification have created a significant opportunity for brands in the FMEG space. Effective distribution has also been greatly aided by supply networks giving them access to the latest innovation. As electrification penetrates further the consumers there is going to be a rapid shift in customer behaviour that prioritises safety, and products are becoming more affordable.

Access to new customers: Rural areas provide access to new customers who are not yet familiar with the products and services offered by FMEG brands. These markets are largely untapped, providing an opportunity for FMEG brands to reach new customers. So, while the rural market presents immense growth opportunities, brands need actionable strategies to crack the rural retail code and effectively reach this consumer base. To open the floor to such heights, brands, use channel partners to take advantage of their local knowledge and expertise to better understand the needs of customers in rural areas.

Large and Growing Market: As the fastest-growing markets, rural areas are just unlocking their untapped potential. The increasing penetration of mobile phones and internet connectivity in these areas has increased exposure, resulting in a demand for FMEG products, while setting a base for e-commerce sales as well. As people in rural areas become more affluent, there is an increasing demand for products and services. These include electronic products, which are becoming increasingly important for work, education, and entertainment.

Rising Incomes: With several initiatives and efforts of the government, the per capita income in rural areas has been steadily rising, resulting in increased spending power among rural consumers. This has led to a growing demand for FMEG products in these areas, especially in the household appliances and personal care segments for the brands' rural market. For example, cash crops often generate higher incomes for farmers which improves the livelihoods of farmers, leading to economic development in rural areas. The increased income generated from cash crops is also a key factor for increased spending.

Government Initiatives: The Indian government has launched several initiatives to promote rural development and increase the standard of living in these areas. Initiatives such as the Pradhan Mantri Ujjwala Yojana (PMUY) and the Pradhan Mantri Awas Yojana (PMAY) have led to an increase in demand for LPG cylinders and household appliances, respectively.

The Government of India launched Pradhan Mantri Sahaj Bijli Har Ghar Yojana – SAUBHAGYA in October 2017 intending to achieve universal household electrification, by providing electricity connections to all un-electrified households in rural areas and all poor households in urban areas in the country.

In recent years, there has been a growing trend of rural tourism in India, which has created employment opportunities and income for rural communities. Similarly, investments in healthcare and education can improve the quality of life and human capital in rural areas, leading to long-term economic growth.

Exports of goods and services also play an important role in the economic development of rural areas. income generated from these exports can help improve the livelihoods of farmers and rural communities resulting in a shift in rural markets.

Overall, FMEG brands have a huge opportunity to tap into the growing demand in rural areas. By focusing on innovation, affordability, and marketing strategies tailored to these markets, FMEG brands can successfully expand their reach and increase their market share in India.

The author is senior vice president, sales & marketing, Panasonic Life Solutions India.

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