What do you get when you combine rising disposable income, stronger purchasing power, internet connectivity and lifestyle aspirations? A hungry consumer. In this case, the rural Indian consumer who’s ushering in the next wave of growth.
The skylines of urban cities are typically dotted with blinding billboards and swanky malls with enticing mannequins in their windows. These marketing gimmicks are not found in the rural landscape, but make no mistake, consumers there are hungry to spend.
The recent Rural Barometer Report from Kantar and Group M, points out that the average fast moving consumer goods (FMCG) basket size of rural households has increased by 60 percent in the last two years – from 5.88 products in 2022 to 9.3 products in 2024. In fact, FMCG growth in rural India this year has outpaced urban growth both in terms of value as well as volumes.
Interestingly, in contrast to popular perception, most of this growth is coming from non-food categories of home care and personal care products. This category is driven by popularity of large pack sizes and is outpacing habit-forming food categories such as biscuits and noodles in consumption growth, according to a recent FMCG Snapshot by NielsenIQ.
The report attributes the trend primarily to a growing preference for convenience products, evolving lifestyles, growing rural incomes and rising purchasing power in rural areas. The trend extends even to automobiles. While the sales of four-wheelers in rural India grew by about 5 percent in the first half of this fiscal year, the sales in urban areas fell by almost 3 percent.
“We’ve seen deep changes in rural India. Aspirations are no longer modest – they are on par with urban Indians. And, slowly but surely, we are seeing more chances for not just work but profitable livelihoods in rural India, meaning there is growing spending power,” says Neeraj Ahuja, Associate Director – Bending Markets for Flourishing Localities in Transform Rural India, a development design company specialising in rural growth.
If the uptick continues, predictions will certainly hold true of the FMCG sector in rural and semi-urban India crossing $100 billion by 2025.
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There is also a marked shift towards a hybrid of traditional and digital formats of the marketplace. With smart phones and mobile data both becoming cheaper, rural India has been expanding digitally. Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) has significantly boosted digital literacy in rural areas. 99.5 percent of population in rural areas is now covered by 4G and the government’s ‘5G Intelligent Village Initiative’ is further bridging connectivity gaps and empowering rural communities. Currently, 95.7 percent of people aged 15-24 years use mobile phones in rural India, with 82.1 percent of them capable of accessing the internet.
This growing digital adoption is unlocking new consumer aspirations in rural India, which is also becoming comfortable with the idea of using digital payments. More than a third of digital payment users in India come from rural areas driven by innovations such as UPI 123PAY, designed for users with feature phones and users with limited or no internet connectivity.
In one of the recent RBI bulletins, rural India was referred to as a “gold mine for e-commerce companies.” The analogy could not have been more precise.
A 57.6 percent increase in the average monthly income of rural households between 2016-17 to 2021-2022, was followed by a corresponding rise in the average monthly expenditure of the households. In fact, it nearly doubled from Rs. 6,646 to Rs. 11,262 over the same period. With the Rabi and Kharif crop prospects looking bullish, the rural incomes and expenditure can only be expected to maintain the rising trend.
Interestingly, diversity in income sources is one of the key factors fueling consumption in rural India. Reportedly, rural individuals with only agricultural incomes comprise just 19 percent of the population. The remaining 81 percent have multiple sources of income.
Rama Bijapurkar, business advisor, offers some interesting insights in her book Lilliput Land – How Small is Driving India’s Mega Consumption Story as she points at the narrowing gap between rural and urban India. “Ignore rural India and about half of India’s household consumption is ignored. It’s the usual math we see in India – a larger number of relatively poorer households collectively adding up to more income and consumption than a smaller number of more affluent people,” she writes.
The purse strings have moved too. Marking the highest shift in the last decade, five million Indians returned from cities to rural parts of India, according to the latest Periodic Labour Force Survey. This reverse migration carried with it the need for products one was used to in cities.
Like 22-year-old Sabina who returned to her village Simdega, near Torpa in Jharkhand after working as a live-in maid in Delhi for five-odd years. “I used to buy good quality cream and shampoo while I lived in the city, but those are not available in the shop here in my village. I have to request and pay the shopkeeper in advance to specially get those for me,” says Sabina.
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It explains why quick-commerce platforms such as Amazon and Flipkart have been focusing on rural hinterlands. The move is being hailed as ‘democratisation of e-commerce’ because e-commerce sites like these are giving rural India access to the same bouquet of products as the cities.
They are ironing out the logistical and technological challenges to tap into the opportunity.
For instance, Amazon carved a niche space called the Kisan store with more than 8000 products to serve the 1.8 crore farmers in the country with seeds, farming equipment, pest control products and more. Through its tie-up with Indian government’s Department of Posts, Amazon is delivering across all serviceable pin-codes in India, reaching locations as remote as Nubra Valley in Leh and South Garo Hills in the state of Meghalaya. Amazon even introduced end-to-end integrated cash-on-delivery with India Post and nearly tripled its volume of parcels being delivered through the tie-up in the past 18 months.
With the shift in India’s consumption landscape, FMCG brands are making new inroads in rural India. FMCG major Dabur, for instance, is expanding its rural footprints by 22,000 villages, taking it to 1,22,000 villages with new packs that are affordable and ‘rural-specific.’
Reportedly, other FMCG giants such as HUL, Marico, Tata Consumer Products, Godrej Consumer Products and Britannia are also bullish on rural demand and focusing on enhancing their semi-urban and rural distribution networks.
Rural India does represent a huge opportunity for brands in terms of untapped territory. Currently, 69 percent of India’s population lives in villages. According to projections even in 2045, share of rural population will account for more than half of the country’s total population.
The masses are there. And the government is implementing scores of infrastructure and welfare projects in India’s rural areas. There is potential for further digital penetration too. It’s no wonder many are placing their bets on rural India.
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The lead photo shows a woman waiting to welcome customers at her village shop. FMCG growth in rural India this year has outpaced urban growth. (Photo courtesy of Wikimedia Commons)
Kiran Yadav is a Delhi-based freelance journalist.
