The India vs. Bharat debate is old, traditional, trite and very popular.
The phrase has been used in the socio-political context for many decades. It has also been a key consideration in policy-making exercise. It has also prominently entered the popular corporate lexicon in the past couple of decades.
In the past decade, the 'rural market' or so-called 'Bharat' has also been a prominent sub-text in most India-focused investment strategies and thematic research. Almost all companies catering to end-users have devised rural market strategies. Pure consumer companies like Hindustan Unilever have an extensive rural strategy and workforce; whereas, primarily urban-focused McDonald and Jubilant Foods, etc. have also started working seriously on 'rural consumers'.
A preliminary inquiry with various stakeholders suggests that there is material variation in the perception of people as to what constitutes 'Bharat' or 'Rural Market'.
Originally, perhaps the phrase was coined to denote the divide between the small, modern, urbanised, industrialised and economically progressive part of the country and the large, poor, inaccessible, primitive, tribal and economically backward part of the country. In recent times, many commentators and politicians have used this phrase mechanically to highlight socio-economic inequalities between large cities and the rest of India.
In the socio-political context, recently it has also been often used to emphasise the adherence to traditional Indian ethos vs. degeneration under the influence of western culture. In this sense, both parts are assumed to co-exist in all geographies of the country.
The government authorities and development agencies use the phrase to demarcate rural and urban populations for the purpose of differentiated policy intervention.
Bharat does not necessarily live in villages
Various agencies and people hold the concept of 'Bharat' in varying lights. Even various organs of the government define it on different parameters.
For example, consider the following:
Census of India
The Census of India divides rural and urban areas on multiple parameters, viz., population, occupation and administration.
As per the Census of India, an urban area is defined to include-
(a) All places with a Municipality, Corporation or Cantonment or Notified Town Area.
(b) All other places which satisfied the following criteria:
(i) A minimum population of 5,000.
(ii) At least 75 percent of the male working population is non-agricultural.
(iii) A density of population of at least 400 sq. km. (i.e. 1,000 per sq. mile)
Planning Commission (now defunct)
The erstwhile Planning Commission of India demarcated the rural and urban areas purely on the basis of population. According to the definition used by the Planning Commission, a town with a maximum population of 15,000 was considered rural in nature.
Reserve Bank of India
The Reserve Bank of India (RBI) also uses population as the sole criteria for determining rural and urban divide. It defines rural areas as those areas with a population of less than 49,000 (tier-3 to tier-6 cities).
National Sample Survey Organisation (NSSO)
For determining rural areas, NSSO uses a similar definition as adopted by the Census of India. It, however, does not follow the minimum 5,000 population criteria.
Income tax law
As per income tax laws, rural area means any area which is at least eight kilometre outside the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than 10,000 according to the last preceding census.
Various public and private institutions adopt different definitions of rural India -- mostly lopsided and ignoring one or the other important criteria. Private companies, such as FMCG majors, define rural markets to suit their convenience. For example, rural market means different for ITC, HUL, Hero Motocorp and M&M.
The rural market as an investment theme
In the past couple of decades, the Urban vs. Rural demarcation has become an integral part of Indian corporate strategies; especially for the producers of consumer goods.
The material rise in rural income consequent to (a) the substantial rise in budget allocation to the schemes focused on rural development and poverty alleviation since 1996: (b) higher productivity due to better infrastructure and input availability; and (c) better realisations for agro products have led to phenomenal rise in per capita consumption expense in rural areas.
Besides, better connectivity (road, telecom, mobility) and awareness have also led to material changes in consumption patterns (both food and non-food). The rising level of financial inclusions has improved the credit availability and changes in saving habits.
The businesses, consumer staples, durables and financial services, have recognised this trend and materially increased their focus on the 'Rural Market'.
It is alright for companies to have rural strategies and themes. Because, these companies know very well the geography, demography and markets. But the problem arises for financial investors.
When an investor reads a research report about the impact of monsoon on rural market and demand and the changes required in investment strategy and portfolio -- it is difficult to decipher what market and what people the research is talking about.
For example, consider the following example —Hapur is a medium-size town with a population of about 3 lakh people in Uttar Pradesh. By all definitions, it will qualify as an urban area. However, the entire economy of the town is dependent on agriculture. It is a prominent market for agriculture produce, especially sugar and allied products. There are some milk processing plants and a sugar mill. Most people derive their income from sources related to agriculture and allied activities. A poor crop impacts the economy of this substantially. The consumption demand (gold, cars,
two-wheelers, marriage spending) is hit instantaneously.
On the other hand, Gajraula, 52 km east of Hapur, is a small place of approximately 40,000 population spread across a number of small hamlets. The population here is more dependent on chemical industry (majorly Jubilant Life Sciences and sugar mill), tourism (Ganga pilgrimage like Haridwar), and exports. A poor crop does not impact the economy of this town materially.
Similar circumstances also exist in many places in Maharashtra, Goa, Gujarat, Rajasthan, Madhya Pradesh and Tamil Nadu.
In my view, the present method of rural and urban market divide may not be completely appropriate for investment strategy purposes. A better alternative would be to follow a simple agriculture and allied industries economy and the rest of the economy categorisation.
Vijay Kumar Gaba explores the treasure you know as India, and shares his experiences and observations about social, economic and cultural events and conditions. He contributes his pennies to the society as Director, Equal India Foundation. Read his columns