Study Sponsor IMA (Associate of Economist Intelligence Unit) The EIU, through its Indian subsidiary International Market Assessment, and Indicus Analytics conducted a joint study on the attributes and potential of Indian rural markets (2002) Content Demographic Profile Population profile of India Family Sizes and Dependence in Rural Areas Distribution of Household Size Age and Sex Distribution in Rural India Progressively Fewer Children – Less than 10 years of Age Family Characteristics Literate people (Total Population) Sex Ratio across Demographic Segments in rural areas Educational Characteristics Occupation Percentage of people in the work force Primary Employment Characteristics of Head of Household Finer break-up of Rural Employment Characteristics(%) Percentage Of work force in a Wage Earning Job Error! Bookmark not defined. Land Cultivation: Size of Land and Number of Households Land ownership and expenditure profile of households Expenditure Characteristics Expenditures by All Households Occupations and Expenditures Land Owned by Self Employed in Agriculture and expenditures Expenditure Distribution of an average household Annual Expenditure per Household and Annual Market Size Defining Economic Classes Annual Expenditures by Rural Households Total Amount Spent by different categories of households Rural Market Size Of Different Commodities Rural Market Across Expenditure Classes- 1 Rural Market Across Expenditure Classes- 2 How to define Major Economic Classes Household’s Value of Purchases Across Economic Classes Expenditure Profile Rural Economic Classes -Expenditures per household Rural Economic Classes - Expenditure Characteristics Expenditure Profiles of Broad Economic Classes Expenditure Distribution across Broad Economic Classes Access To Media Seasonality in Expenditures Seasonality in Rural Consumption Expenditures Seasonality in Rural Consumption Expenditures: The Affluent and Middle Classes Seasonality in Rural Consumption Expenditures: The Marginally Non-poor and Poor Classes Seasonality Across Economic Classes: Comparing the Per household Monthly Expenditures The Geography of Rural Markets Where are the Better-off Households located? The states in terms of Rural Affluence The Affluence Rates in Rural sub-regions What determines Rural affluence? Consumption characteristics of the affluent. Similar types of affluence across India Trends Population Characteristics Number of households engaged in different types of work Number of rural households per every 1000 in different size class of land cultivated Literacy rate Number of persons in different education levels Section 5B: How will Rural Markets evolve? Close relationship between Agricultural Value Added and GDP What would the agricultural GDP be? Demand for Agricultural Inputs . Where would the future take Rural India? The Great Unknowns

1. Rural Markets in India
Submitted to:
IMA (Associate of Economist Intelligence
Unit)
Indicus Analytics
Indicus Analytics 1

2. Section 1: Demographic Profile
Contents
Population profile of India 3
Family Sizes and Dependence in Rural Areas 4
Distribution of Household Size 5
Age and Sex Distribution in Rural India 6
Progressively Fewer Children – Less than 10 years of Age 7
Family Characteristics 8
Literate people (Total Population) 9
Sex Ratio across Demographic Segments in rural areas 10
Educational Characteristics 11
Indicus Analytics 2

3. Population profile of India
Parts of Total population Percentage Total No. of households Average
India (in millions) (%) (in millions) household size
Rural 741.6 72.2 148.3 5.0
Urban 285.4 27.8 63.4 4.5
Total 1,027.0 100.0 211.7 4.9
Population
Urban
28%
Rural
72%
• Bulk of the population is rural – more than 740 million Indians reside in
rural areas.
• Average rural household has five members; slightly higher than in urban
areas
Whom and where should marketing efforts be targeted?
Indicus Analytics 3

4. Family Sizes and Dependence in Rural Areas
Population Characteristics Distribution by Economic Class
Poorest 5% Richest 5%
All
Households Households
Avg. Household Size 6.0 3.6 5.0
Avg. no of adults per Household 3.0 2.8 3.2
Avg. no of children per
3.0 0.7 1.9
Household (0 to 10 years)
Household Size
6
5
3.6
Top 5% Average Bottom 5%
Economic class
Poorer households have larger families, and more children
tribution of Household size per 1000 households
The better-off have smaller family sizes
Household size
Largely due to fewer children
Part
1 2 3 4 5 6 7 8 9 10+
Rural More available for 187 190 140in richer households
50 91 122 lesser people 87 52 30 50
Urban 106 83 131 225 179 118 65 39 20 35
S: page17
Indicus Analytics 4

5. Distribution of Household Size
Distribution of households as per household size
250
Rural Urban
200
Households per 1000
150
100
50
0
1 2 3 4 5 6 7 8 9 10+
Household size
By and large family sizes in rural areas are not highly different from
urban areas
Incidence of joint families is only marginally more in rural areas
Incidence of single person households largely due to migration
What are the age-sex characteristics?
Indicus Analytics 5

6. Age and Sex Distribution in Rural India
Population Age Profile
Male Female
> 90
80 to 90
70 to 80
60 to 70
50 to 60
40 to 50
30 to 40
20 to 30
10 to 20
< 10
100 80 60 40 20 0 20 40 60 80 100
Number in millions
• 63% of the rural population is below 30 years of age
• Half of the population is aged below 21 years
• For every 100 people in the 20 to 60 year age group there are 117
dependents (above 60 and less than 20 years).
A young market
Indicus Analytics 6

7. Progressively Fewer Children – Less than 10 years of
Age
Population Age Profile
8 to 10
6 to 8
Years
4 to 6
2 to 4
0 to 2
0
5
10
15
20
25
30
35
40
45
Numbers in millions
• Fewer children in the 0 to 2 and 2 to 4 age groups
• Reflects falling birth rates
Population growth will not forever lead market growth
Indicus Analytics 7

8. Family Characteristics
Family Category Percentage of All Average number of
. households individuals per household
Unitary
12.2 1.6
(Single person or with spouse)
Nuclear
50.8 4.7
(Couple with children)
Extended
28.2 6.1
(Parents with one married child)
Joint
4.3 10.3
(More than one married siblings)
Miscellaneous 4.5 8.7
• Most households contain individuals or couples.
• Nuclear households are the norm in rural India.
• Extended households include elders living with married children.
Nuclear households are the norm and Joint families are an
exception.
Indicus Analytics 8

9. Literate people
Rural Rural + Urban
Literates (millions) (millions)
Male 226.3 339.9
Female 140.4 226.8
Total 366.7 566.7
Sex Ratio of Literates
(per 1000 males) 620 667
Literates (All India)
340
350
300
227
Population in Millions
250
200
150
100
50
0
Male Female
• According to the Census 2001, 65.38% of the country’s population is
literate.
• Females have a much lower literacy rate than men in general.
• Rural women have an even lower likelihood of being literate.
Though there are more women than men in rural India,
literate women are significantly fewer
Indicus Analytics 9

10. Sex Ratio
Females per
Sex Ratio
1000 males
All Population 933
Rural 946
901
Urban
Sex Ratio in Rural and Urban areas
Urban
Rural
All Population
600 650 700 750 800 850 900 950 1000
Females per 1000 male
Rural India in general has more females per male than in urban India
This is due to two factors:
Poorer tend to have greater females per male, and rural population
tends to be poorer.
Migration of males to urban areas also contributes
Significantly larger proportion of females in the population
Indicus Analytics 10

11. Educational Characteristics
Education Category Rural male (%) Rural female (%)
Non-literate 40.1 61.1
Literate below primary 19.6 25.1
Literate up to primary 13.3 9.8
Literate up to middle 12.6 7.6
Literate up to secondary 6.7 3.2
Up to higher secondary 3.1 1.2
Graduate and above 2.1 0.6
Others 1.4 1.2
Education levels of usually employed
70
Rural male (%)
60
50 Rural female (%)
Percentages
40
30
20
10
0
Non-literate Literate below Literate up to Literate up to Literate up to Up to higher
primary primary middle secondary secondary
• About Every 2 in five males are literate; every 3 in five females are
illiterate in rural areas.
• Among the female employees around 74% in rural India are illiterate.
• The percentage of workers, who are graduates and above, is
comparatively much smaller.
Large increases in literacy have only generated basic ability to
read , but education levels continue to remain low
Indicus Analytics 11

12. Section 2: Occupation
Contents
Percentage of people in the work force 13
Primary Employment Characteristics of Head of Household 14
Finer break-up of Rural Employment Characteristics(%) 15
Percentage Of work force in a Wage Earning Job Error! Bookmark not defined.
Land Cultivation: Size of Land and Number of Households 18
Land ownership and expenditure profile of households 19
Indicus Analytics 12

13. Percentage of people in the work force
Part of India Male (%) Female (%)
Rural 54 30
Urban 54 15
People in labor force
60
Percentage of population
50
40
Rural
30
Urban
20
10
0
Male Female
The work force comprises of people willing and able to work
outside of home.
Both rural and urban male populations have broadly equal
proportions in the work force.
But rural females are significantly more likely to be in the labor
force than urban females
Indicus Analytics 13
Rural females are twice as likely to be working than urban females

14. Primary Employment Characteristics of Head of
Household
Rura Urba
Nature of work
l n
Self Employed 46.1 34.4
Wage/regular/salaried
40.2 55.7
workers
Others 13.7 9.7
Employment characteristics of head of household
60
50
40 Self Employed
Percentage
30 Wage/regular/salaried
workers
Others
20
10
0
Rural Urban
Indicus Analytics 14

15. Rural households have a much higher ratio of self owned
businesses (46%) .
Urban households are more likely to be dependent on being
employed by others.
41.7% of the urban salaried/wage worker households are employed
on a regular basis; 14% are on a casual basis.
Incomes less stable in rural areas due to lower regular wage employment
Finer break-up of Rural Employment Characteristics(%)
Households whose main occupation is:
Self- Self-
employe employe
Agricultu Other
d in d in non- Others Total
ral labor labor
agricultu agricultu
re re
32.7 13.4 32.2 8.0 13.7 100.0
Indicus Analytics 15

16. Others Self-employed in
agriculture
Other labor
Agricultural labor Self-employed in
non-agriculture
The bulk of the rural self-employed households are involved in
agriculture
This is also true of those who are employed by others
Maximum no. of households (around 64%)in rural India earn
their livelihood by agriculture related activities
Largely an agriculture based demography
Indicus Analytics 16

17. Age Distribution of Work Force
Employment rate (Male) Employment rate (Female)
Age groups
15 to 25 years
49.6 19.3
26 to 35 years
75.3 20.3
36 to 45 years 85.4 21.5
46 to 55 years
85.3 21.2
56 to 65 years 81.9 18.5
Employment rate calculated on the basis of those working for a
wage paying job or working in a family business out of the total
work force (those able and willing to work)
Those involved in household chores not included
Males in lower age groups much less likely to be working that those
in middle and higher age groups
Females employment rate though significantly lower is more stable
across age groups
Indicus Analytics 17

18. Land Cultivation: Size of Land and Number of
Households
Number of Households
Land Cultivated in Ha. (millions) Percent
0 to 1 115.9 78.1
1 to 2 16.4 11.1
2 to 3 7.5 5.1
3 to 4 3.0 2.0
4 to 5 2.2 1.5
>5 3.5 2.3
Total 148.5 100.0
Most households cultivate insignificant amount of land – close to
four fifths.
Barely 4 percent of the households (5.5 million) cultivate land greater
than 4 hectares
Only way farmers’ economic condition will improve is by greater use of fertilizers and better seeds.
Indicus Analytics 18

19. Land ownership and expenditure profile of households
Land Owned by Self Employed Average Monthly No. of Households
in Agriculture in Ha. Expenditure (Rs.) (millions)
0 to 1 2,256 22
1 to 2 2,635 12
2 to 3 2,828 6
3 to 4 3,401 3
4 to 5 3,537 2
>5 4,303 3
All Landowning households 2,689 49
Only about a third of the total households own agricultural land.
The topmost category in terms of land ownership makes less than
double monthly expenses the lowest category.
Indicates large numbers of poorer households
Indicus Analytics 19

20. Section 3: Expenditure Characteristics
Contents
Expenditures by All Households.................................................................................................... 21
Occupations and Expenditures...................................................................................................... 22
Land Owned by Self Employed in Agriculture and expenditures .................................................. 23
Expenditure Distribution of an average household........................................................................ 24
Annual Expenditure per Household and Annual Market Size ....................................................... 25
Defining Economic Classes........................................................................................................... 26
Annual Expenditures by Rural Households................................................................................... 27
Total Amount Spent by different categories of households........................................................... 28
Rural Market Size Of Different Commodities ................................................................................ 29
Rural Market Across Expenditure Classes- 1................................................................................ 30
Rural Market Across Expenditure Classes- 2................................................................................ 31
How to define Major Economic Classes........................................................................................ 32
Household’s Value of Purchases Across Economic Classes........................................................ 33
Expenditure Profile ........................................................................................................................ 34
Rural Economic Classes -Expenditures per household ............................................................... 35
Rural Economic Classes - Expenditure Characteristics ............................................................... 35
Expenditure Profiles of Broad Economic Classes ......................................................................... 36
Expenditure Distribution across Broad Economic Classes ........................................................... 37
Access To Media ........................................................................................................................... 38
Indicus Analytics 20

21. Expenditures by All Households
Annual Per
Capita Average no. of
Annual Total Expenditure in individuals per
Family Category Expenditure in Rs. Rs. household
Unitary (Single person or with spouse) 12,214 7,973 1.6
Nuclear (Couple with children) 24,617 5,541 4.7
Extended (Parents with one married child) 29,909 5,069 5.7
Joint (More than one married siblings) 51,551 5,078 10.2
Miscellaneous 42,003 4,916 8.2
• Larger households spend greater amounts in total than smaller
households
• Per capita expenditure falls with household size
• Economies of scale presumably play a strong role in household
expenditures
Do occupation play a strong role in determining expenditures?
Indicus Analytics 21

22. Occupations and Expenditures
Total Amount Spent in Rs.
Average Yearly Expenditure Households
Bill.
Type of Households per household(Rs.millions) (Rs. millions)
Agriculture Labour 20 47 935
Self Employed in Agriculture 32 49 1,575
Other Labour 25 12 291
Self Employed in Non Agriculture 29 20 577
Others 29 21 615
Total 135 149 3,993
Almost two-thirds of the households depend upon agriculture for
their main source of livelihood.
The self-employed tend to have much higher expenditures in rural
areas.
The self-employed agriculturalists are both greater in number and
have higher spending power than other broad categories
How does ownership of land impact expenditures?
Indicus Analytics 22

23. Land Owned by Self Employed in Agriculture and
expenditures
Average Monthly Total Amount Spent per Year
Land Owned (Hectares) No. of Households (Millions)
Expenditure (Rs.) by Households
0 to 1 2,256 22.2 60,232
1 to 2 2,635 11.9 37,888
2 to 3 2,828 6.3 21,425
3 to 4 3,401 2.5 10,507
4 to 5 3,537 2.1 9,163
>5 4,303 3.4 17,945
All 2,689 48.7 157,301
About 48 million households are self employed in agriculture
Land size directly linked with expenditures
Of these barely 30 percent have land greater than 2 hectares
Agriculture based households would tend to have lower expenditures
than those in other professions
Per Household expenditures rise sharply beyond 3 hectares, but
l k i f ll b ff b
Indicus Analytics 23

24. Expenditure Distribution of an average household
Percentage
Areas of expenditure
Allocation
Food and basic needs 59
Cereal 22
Fuel & light 8
Total non food, non
41
basic
Clothing & footwear 8
Medical 6
Toiletries and Misc. 10
Transport & services 12
Durables 3
Others 2
The major expenditure is in basic requirements that include cereals and
other food and fuel
Non basic expenditures that include everything else, are allocated only
two out of five rupees spent.
Clothing and footwear, and toiletries (e.g. cosmetics, detergents)
account for less than half the non basic expenditures.
Purely manufactured items (above plus durables) account for only one
in five rupee spent by a rural household
Per Household expenditures rise sharply beyond 3 hectares, but total
Indicus Analytics 24

25. Annual Expenditure per Household and Annual Market
Size
Total Market
Expenditure per household (Rs.)
Expenditure category (Rs. Billion)
Basics (food and fuel) 18,433 2,710
Of which, Fuel 1,925 283
Clothing 2,003 294
Medical 1,757 258
Of which, Non-institutional
1,365 201
Medicine
Toiletries 886 130
Commuting and Transport 654 96
Education related articles 413 61
Institutional Medicine 391 58
Footwear 331 49
Rent 117 17
Entertainment 62 9
Misc. Goods & Services 770 113
But these break-ups are likely to be different across
economic classes
Indicus Analytics 25

26. Defining Economic Classes
First rate households on the basis of its monthly total expenditures
Then see how various components of expenditures change as total expenditure of the
households increases
Obtain insights into the same
Use these insights to define broad economic classes
Study the expenditure profile of these economic classes
Answer questions of the type:
What are the higher economic classes?
Where are they located?
What are their other characteristics?
Indicus Analytics 26

27. Annual Expenditures by Rural Households
Annual Expenditute by Expenditure Ranked Households
200,000
180,000
160,000
140,000
Expenditure in Rs.
120,000
100,000
80,000
60,000
40,000
20,000
0
100 80 60 40 20 0
Lowest Spending Classes Highest Spending Classes
Most households spend more than Rs. 24,000 per year
Top 1% of the households (about 1.5 million) spend greater than Rs.
100,000 per year
Some possibility that high expenditure households are under-reporting
expenditures (dashed line represents this possibility)
Great potential for low priced commodities
A large but poor market
Indicus Analytics 27

28. Total Amount Spent by different categories of
households
140,000
120,000
100,000
Rs. Million
80,000
60,000
40,000
20,000
0
100 90 80 70 60 50 40 30 20 10 0
Lowest Spending Classes Highest Spending Classes
In total rural household spent about Rs. 4000 billion in the year 2000.
Of this the higher economic classes spent the largest amounts, despite
having significantly fewer households
The poorest sections of the rural population do not have high purchasing
power individually as well as in the aggregate.
The richest 10% of the households spent Rs. 670 billion, the next 10%
spent Rs. 583 billion, the next 10% Rs. 440 billion, a similar amount by
the next 10%.
Apart from the top and the bottom 10% rest of the households are similar
in terms of their spending characteristics
Indicus Analytics 28

29. Market Size Of Different Commodities
Total Market Size (Rs. Expenditure per
Expenditure Category
Bill.) Household (Rs.)
Food 2,452 16,508
Commuting, Travel & Misc. 326 2,194
Clothing 298 2,003
Fuel & Light 286 1,925
Medical 261 1,757
Non Institutional Medical 203 1,365
Durables 146 986
Toiletries & Cosmetics 132 886
Institutional Medical 58 391
Footwear 49 331
Food, Clothing, Fuel, and Medical expenditures are the highest household
expenditure categories.
Travel, commuting, and miscellaneous services are also a high
expenditure category
Manufactured items such as durables, toiletries, and footwear bring up the
rear.
How do these expenditures differ across expenditure classes?
Indicus Analytics 29

30. Market Size Across Expenditure Classes- 1
Total Expenditures of Rural Households across Economic Classes: Concave
Expenditures
10
9
8
7
6
Rs. Bill.
5
4
3
2
1
0
0 10 20 30 40 50 60 70 80 90 100
Expenditure Class of Households
Durables Non Institutional Medical
Institutional Medical Commuting,Travel & Misc
Commodities with concave expenditures shoot up across higher
expenditure classes.
With economic growth these expenditures should increase the most
Indicus Analytics 30

31. Market Size Across Expenditure Classes- 2
Total Expenditures of Rural Households across Economic Classes: Convex
Expenditures
7
6
5
4
Rs. Bill.
3
2
1
0
0 20 40 60 80 100
Fuel & Light Toileteries & Cosmetics Footwear Clothing
Expenditure Class of Households
Commodities with convex expenditures do not shoot up across higher
expenditure classes.
Minor fall in prices will greatly increase penetration among lower
expenditure classes
Indicus Analytics 31

32. How to define Major Economic Classes
The Broad Economic Classes: Division Based on Durable to Non-Durable
Expenditures
Affluent
Middle
Marginally non-poor Poor
0 20 40 60 80 100
Many ways of deciding the cut-off between broad economic classes
We use expenditure on durables
Among lowest expenditure classes, the ratio of expenditures on durables
to non-durables increase in a linear manner (Red and green lines)
There is however a slight non-linearity among the 22nd to 10th percentiles,
(the blue curve) this curvature is strongest in the topmost 9% of the
households (the mauve curve)
The curve implies that the proportional expenditure on durables increases
at a much higher rate.
This denotes the poor, marginally non-poor, the middle, and the affluent
classes respectively
Indicus Analytics 32

33. Household’s Value of Purchases Across Economic
Classes
Marginally
Affluent Middle Class Poor
Non-Poor
Top 9% 9 to 22% 22 to 52% 52 to 100%
Number of households
13 18 45 71
(in millions)
Number of people
113 123 255 271
(in millions)
Average yearly
expenditure per 5,790 3,355 2,296 1,228
household
All expenditures in Rs.
• The rural consumers can broadly be divided into four categories
The poor - Bottom 48% of the economic classes
The marginally poor – 22 to 52 percent
The rural middle class –9 to 22 percent
The rural affluent – Top 9 percent
• We find that there is homogeneity of expenditure profile within a category
• Caution: Rural affluent and middle classes have a very different profile
than urban affluent and middle classes
Indicus Analytics 33

34. Expenditure Profile
Basic Goods Non - Basic
(Food + fuel)
Non-basic Non-Durables Durables
(Clothing, footwear, toiletries,
etc.) (TV, automobiles, etc.)
• Broad hierarchy of expenditures
• Basic and non-basic expenditures
• How do the expenditures differ across economic classes?
• We would expect the poor to spend the bulk of their expenditures on
basic goods, and insignificant amounts on durables
Indicus Analytics 34

35. Rural Economic Classes -Expenditures per household
Affluent Middle Class Marginally Non-Poor Poor
Top 9% 9 to 22% 22 to 52% 52 to 100%
AYE on Basic commodities 39,983 27,079 19,759 11,183
AYE on non-basic non-durables 24,269 11,887 7,123 3,256
AYE on durables 5,223 1,303 679 287
All expenditures in Rs
Rural Economic Classes - Expenditure Characteristics
Affluent Middle Marginally Poor
Class Non-Poor
Top 9% 9 to 22% 22 to 52% 52 to 100%
Basic/Total 0.57 0.67 0.71 0.75
Toiletries/Other non-basic non-
durables 0.08 0.11 0.13 0.16
Durable/ Other non-basic non-
durables 0.21 0.10 0.09 0.08
Indicus Analytics 35

36. Expenditure Profiles of Broad Economic Classes
Annual Expenditure per Household ( in Rs.)
Expenditure
category
Affluent Middle Marginal Poor
Basics (food and fuel)
39,983 27,079 19,759 11,183
Of which, Fuel
3,910 2,746 2,060 1,245
Misc. Goods & Services
16,271 6,954 3,734 1,512
Toiletries
1,951 1,308 937 537
Medical
7,175 2,751 1,498 622
Commuting & Transport
2,392 1,109 590 242
Education related articles
1,709 727 371 110
Entertainment
175 108 60 29
Rent
285 251 117 49
Clothing
5,099 3,069 2,108 1,063
Footwear
939 554 338 151
Durables
5,223 1,303 679 287
Total
69,466 40,267 27,555 14,733
Food remains the main expenditure segment across economic classes
Unlike in urban areas rent is insignificant across various economic classes
How does the expenditure distribution vary across economic
classes?
Indicus Analytics 36

37. Expenditure Distribution across Broad Economic
Classes
Distribution of average yearly expenditure per household
Durables
100%
Footwear
90%
Percentage of total expenditure
Clothing
80%
70% Toiletries
60%
Misc.
Goods &
50% Services
Basics
40% (food and
Affluent Middle Marginal Poor fuel)
Expenditure on basic items like food and fuel increases as the household
becomes poorer .The poor households spend more than 70% of their total
expenditure on basic items.
On the contrary expenditures on miscellineous goods and durables
decreases as we move across richer to poorer households.
Indicus Analytics 37
The share of expenditure on clothing , footware and toiletries, almost
remain the same across all economic segments.

38. Access To Media
Affluent Middle Marginally Poor All
Class Non-Poor
Newspapers
1 17% 3% 1% 0% 3%
>1 1% 0% 0% 0% 0%
Television
Colour 14% 2% 0% 0% 3%
BW 44% 29% 13% 2% 16%
Cable
TV with Cable 14% 4% 2% 0% 3%
TV w/out Cable 44% 27% 11% 1% 15%
Radio 61% 44% 28% 14% 30%
Telephones 8% 1% 0% 0% 2%
Note: The figures above are estimates and may be biased downwards by about 10 percent.
Low access to media across economic classes.
The poor and the marginal classes have insignificant exposure to media
barring radio.
Access to cable TV is much higher than access to a telephone.
Radio has the highest penetration among mass media.
Low levels of access to all types of media
Indicus Analytics 38

39. Section 3B – Seasonality in Expenditures
Contents
Seasonality in Rural Consumption Expenditures 40
Seasonality in Rural Consumption Expenditures: The Affluent and Middle Classes 41
Seasonality in Rural Consumption Expenditures: The Marginally Non-poor and Poor Classes 42
Seasonality Across Economic Classes: Comparing the Per household Monthly Expenditures 43
Indicus Analytics 39

40. Seasonality in Rural Consumption Expenditures
Seasonality: Total Consumption Expenditures
35.00
30.00
25.00
Rs. Billion
20.00
15.00
10.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Rural household consumption expenditures show distinct seasonality
They tend to follow agriculture cycles
Rural seasonality differs highly from urban seasonality – Note the
trough in October and November
Is likely to be different across different geographical regions
Do consumption expenditures differ across economic classes?
Indicus Analytics 40

41. Seasonality in Rural Consumption Expenditures: The
Affluent and Middle Classes
Affluent
6,400
6,200
6,000
5,800
5,600
5,400
5,200
5,000
Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec
Affluent expenditures are concordant with major agriculture output selling
M iddle
3,600
3,400
3,200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Indicus Analytics 41

42. Seasonality in Rural Consumption Expenditures: The
Marginally Non-poor and Poor Classes
Marginal
2,400
2,200
Jan Feb M ar Apr May Jun Jul Aug Sep Oct Nov Dec
Poor
1,400
1,200
1,000
Jan Feb M ar Apr May Jun Jul Aug Sep Oct Nov Dec
The expenditures of the poor are concordant with the harvesting times
Indicus Analytics 42

43. Seasonality Across Economic Classes: Comparing the
Per household Monthly Expenditures
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Affluent Middle Marginal Poor
Affluent expenditures show the highest level of seasonality
The other economic classes show very low levels of seasonality in
rupee terms.
The Affluent spend about 20% higher in the highest expenditure
months than the lowest expenditure month.
The poorest spend about 9% higher in the highest expenditure months
than the lowest expenditure month. For the Marginal and Middle
classes this is only 2%.
Seasonality in rural areas is different from that in urban areas; it is highly
dependent on the agricultural seasons; and differs highly across economic
categories
Indicus Analytics 43

44. Section 4: The Geography of Rural Markets
Contents
Where are the Better-off Households located? .................................... 45
The states in terms of Rural Affluence ................................................. 46
The Affluence Rates in Rural sub-regions............................................ 47
What determines Rural affluence? ....................................................... 48
Consumption characteristics of the affluent.......................................... 49
Similar types of affluence across India ................................................. 50
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45. Where are the Better-off Households located?
Orissa
Assam
Haryana
Punjab
Tamil Nadu
Kerala
Karnataka
Gujarat
Madhya Pradesh
Rajasthan
Andhra Pradesh
West Bengal
Maharashtra
Bihar
Uttar Pradesh
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
Affluent Middle Marginal
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46. The states in terms of Rural Affluence
Affluent – Middle – Affluent Affluent + Middle
States (Only Rural Households in Households in in State Total in State Total
areas) ‘000s ‘000s (%) (%)
Rural Delhi 276 299 36.2 75.4
Haryana 837 642 30.9 54.6
Punjab 817 729 27.1 51.3
Goa 27 45 16.8 45.2
Kerala 1,004 1,075 20.6 42.7
Himachal Pradesh 208 258 18.5 41.5
Rajasthan 1,180 1,560 17.0 39.5
Gujarat 800 1,135 12.3 29.8
Uttar Pradesh 3,125 3,628 12.9 27.8
Karnataka 618 886 8.0 19.6
Maharashtra 882 1,412 7.0 18.2
Assam 154 492 3.9 16.4
West Bengal 584 1,270 4.8 15.4
Madhya Pradesh 745 1,062 6.2 15.0
Bihar 723 1,467 4.6 13.8
Tamil Nadu 529 668 5.2 11.8
Andhra Pradesh 449 933 3.2 9.7
Orissa 194 411 2.9 9.0
Sorted in descending order by Affluent + Middle in state total
The Haryana – Delhi – Punjab rural belt is the highest in terms of
affluence rates.
Southern India has the lowest rates of rural affluence
Uttar Pradesh, Kerala, and Rajasthan have the highest numbers of
the affluent
How are the affluent distributed within the states?
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47. The Affluence Rates in Rural sub-regions
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48. What determines Rural affluence?
Afluence and Agriculture Production (Logarithmic Scale)
100,000,000
.
No of Affluent Households
10,000,000
1,000,000
100,000
10,000
10,000 100,000 1,000,000 10,000,000
Foodgrain and Pulses Production
Close relationship between presence of affluence and agricultural
production.
However other factors are also important, such as handicrafts,
rural industry, trade, migration, etc.
The middle class also follows a similar same relationship.
The most important relationship of the presence of rural affluent, not surprisingly, is with
agricultural production.
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49. Consumption characteristics of the affluent
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50. Similar types of affluence across India
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51. Section 5 – Trends
Population Characteristics ..................................................................................52
Number of households engaged in different types of work ................................53
Number of rural households per every 1000 in different size class of land
cultivated.............................................................................................................54
Literacy rate ........................................................................................................55
Number of persons in different education levels ................................................56
Section 5B: How will Rural Markets evolve?.......................................................57
Close relationship between Agricultural Value Added and GDP.........................57
What would the agricultural GDP be? .................................................................58
Demand for Agricultural Inputs ...........................................................................60
Where would the future take Rural India?...........................................................61
The Great Unknowns ..........................................................................................62
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52. Population Characteristics
Year Household Size Sex Ratio (Females per 100 males)
1978 5.2 96
1983 5.1 96
1988 5.1 95
1994 4.9 94
2000 5.0 96
Minor fall in household size – expected to continue at similar
rates
Fall in females per male throughout the late seventies till mid
nineties
Has it been reversed? Inconclusive evidence
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53. Number of households engaged in different types of
work
Occupation Structure 1988 1994 2000
Self Employed Agriculture 37.7 37.8 32.7
Agriculture Labour 30.7 30.3 32.2
Agriculture 68.4 68.1 64.9
Self Employed non-Agriculture 12.3 12.7 13.4
Other Labour 9.0 8.0 8.0
Others 10.1 11.2 13.7
Total 100.0 100.0 100.0
Fall in farmers who cultivate their own land
Self employment in other activities on the increase
This may also be the result of absence of other employment
activities
Sustained fall in importance of agriculture as a main source of
employment
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54. Number of rural households per every 1000 in different
size class of land cultivated
Size of Land Cultivated by 1988 1994 2000
Household in Ha.
Less than 0.40 54.4 57.5 63.2
0.4 to 1.0 17.3 17.1 16.8
1.0 to 2.0 13.9 13.5 11.2
2.0 to 4.0 8.6 7.6 5.9
Greater than or equal to 4.0 5.8 4.3 3.0
Total 100 100 100
Sustained fall in size of land cultivated by each household
Will not be able to take the burden of a large number of rural youth
Expect a rapid increase in out-migration in the absence of rural
employment opportunities
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55. Literacy rate
Year Male Literacy Female Literacy
1983 44.9 21.9
1988 48.4 26.0
1994 54.5 32.1
2000 58.8 38.5
60
50
40
30
20
1983 1988 1994 2000
Male Literacy Female Literacy
Rapid advances in the eighties and nineties on the literacy front
The relative increase for females much higher
Expected to continue in the next few years
Population’s level of education increasing steadily, but still low by international standards
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56. Number of persons in different education levels
Educational attainment 1994 2000 1994 2000
Male Female Male Female
Not literate 45.5 41.2 67.9 61.5
Literate up to primary school 33.7 34.2 23.0 26.0
Middle school 10.9 12.6 5.6 7.5
Secondary School and above 9.8 11.7 3.4 5.0
All 100.0 100.0 100.0 100.0
Though literacy is increasing, the general of education is quite
low, and is likely to remain so.
Female education levels are abysmally low
Current growth rate indicates it will be a long time before a
significant chunk of the rural population will attain educational
standards above simple literacy
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57. Section 5B: How will Rural Markets
evolve?
Close relationship between Agricultural Value Added and GDP
Agriculture Value Added and GDP at Factor Cost
GDP at Factor Cost
Agri Value Added
Strong relation between GDP and Agricultural GDP
Other factors are not as important econometric analysis
But it is not clear what causes agriculture growth, they both feed
into each other.
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58. Our trend analysis is based on – GDP estimate Agriculture
Value Added estimate Value of Agriculture Inputs estimates
What would the agricultural GDP be?
Agriculture GDP and Overall GDP Trends
Rs. Billion (1995 Constant Rs.)
25000
20000
15000
10000
5000
0
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
Agriculture, value added (constant 1995 Rs. Bill)
GDP at factor cost (constant 1995 Rs. Bill)
In the year 2000 we estimate it to have been approximately Rs.
4300 billion
If 6% per annum growth in GDP is to continue through till 2010
then based on past relationships Agri GDP should be about Rs.
7000 Billion (at 2000 price levels)
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59. For every Rs. 1 growth in GDP we have observed a Rs. 0.21 paise
increase in Agriculture value added in the past. Estimates till 2010
are based on this finding
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60. Demand for Agricultural Inputs
What would be the growth in Agriculture inputs?
4500000 45000000
4000000 40000000
3500000 35000000
3000000 30000000
2500000 25000000
2000000 20000000
1500000 15000000
1000000 10000000
500000 5000000
0 0
1961 1971 1981 1991 2001
Agricultural machinery, tractors . Fertilizer consumption (metric tons) .
By 2010 the number of tractors in the country would have doubled
from about 2 million currently to 4 million.
Fertilizer growth would be marginally higher – from current levels
of about 20 million metric tones consumed annually, it would
reach about 42 million metric tons
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61. Where would the future take Rural India?
Positives
Large number of people will enter the workforce
They will be relatively better educated than their elders
Better information availability and greater opportunities for
commerce
Negatives
Falling size of land.
Over dependence on limited land.
Poor living conditions will continue for the bulk of the population
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62. The Great Unknowns
Unlike past growth estimates, these figures are not based on any
high assumptions of economic growth.
However changes in the structure of the economy could impact
them adversely or positively.
The Great unknowns for the future:
Political ups and downs
Dependence on rains
Impact of WTO
Large group of young people reaching adulthood – positive
if opportunities exist.
But what would happen if opportunities are absent?
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