RURAL MARKETING IN INDIA- A STRATEGY TO FIGHT GLOBAL
Faculty, PCTE Group of Institutes
The word „Recession‟ denotes a temporary period of economic decline during which trade and
individual activity are reduced. Till date, the world has witnessed a number of economic
recessions that brought the trade market to a standstill and left the economists and analysts with
valuable lessons to be learnt for future. This research paper will try to explain the term
„Recession‟ in a comprehensive manner and will bring to light the past recessions that affected
the world and created history. Globalization and liberalization have contributed a lot in making
the entire world a close knit economic unit. In an interconnected global economy, recession and
economic turbulence in one part of the world has the potential to disrupt the economies of other
countries in a major way. The economic slowdown in US economy in 2008 caused by the burst
of housing bubble engulfed the entire world in its grip. This research paper aims to give a
detailed account of US Recession-2008 and its impact on Indian Economy. Although, turbulence
is detrimental to economic progress but even during turbulent times, opportunities do exist.
Therefore, in tough times many Indian companies came out with innovative strategies to
generate business and expand their crippling market shares. In their bid to successfully survive
the brunt of economic turbulence, some Indian companies took Rural Marketing as a strategy to
escape the negative impact of recession. This research paper will try to throw light on the
evolving concept of Rural Marketing and how Indian companies used their resources to tap rural
markets and successfully sustained themselves during the economic slowdown.
KEYWORDS: Recession, Economic Turbulence, Strategy, Rural Marketing
Although Recession is a part of normal economic cycle, the consequences are always beyond
normal for economies and individuals. The economic slowdown that started in US in 2007 soon
spread into a global shock and turned out to be called „The Second Great Depression‟. It did hit
the Indian economy as well but an evolving business strategy called „Rural Marketing‟ came to
the rescue of Indian entrepreneurs who used their resources to tap the rural potential. As a result
the recession that shook the economic equilibrium of a major super power like US could not
cripple the Indian economy.
„Recession‟ can be defined as a period of general economic decline; typically defined as a
decline in GDP for two or more consecutive quarters. A recession is typically accompanied by a
drop in the stock market, an increase in unemployment, and a decline in the housing market. A
recession is generally considered less severe than a depression, and if a recession continues long
enough it is often then classified as a depression. Recessions are generally believed to be caused
by a widespread drop in spending. Governments usually respond to recessions by adopting
expansionary macroeconomic policies, such as increasing money supply, increasing government
spending and decreasing taxation.
WHAT CAUSES RECESSION?
An economy which grows over a period of time tends to slow down as a part of the normal
economic cycle. An economy typically expands for 6-10 years and tends to go into a recession
for about six months to 2 years. A recession normally takes place when consumers lose
confidence in the growth of the economy and spend less. This leads to a decreased demand for
goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in
unemployment. Investors spend less as they fear stock values will fall and thus stock markets fall
on negative sentiment.
IMPACT OF RECESSION
The full impact of a recession on employment may not be felt for several quarters. Generally
low-skilled, low-educated workers and the young are most vulnerable to unemployment in a
Productivity tends to fall in the early stages of a recession, and then rises again as weaker firms
close shop. The variation in profitability between firms rises sharply.
The living standard of people dependent on wages and salaries is more affected by recession than
those who rely on fixed income or welfare benefits. The loss of a job is known to have a negative
impact on the stability of families, and individuals‟ health and well-being.
HISTORY OF RECESSIONS
The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10
years. During what the IMF terms the past three global recessions of the last three decades,
global per capita output growth was zero or negative. Economists at the International Monetary
Fund (IMF) state that a global recession would take a slowdown in global growth to three
percent or less. By this measure, four periods since 1985 qualify: 1990-1993, 1998, 2001-2002
The Great Depression
The Great Depression was a severe worldwide economic slowdown, from 1930-1939. It was a
decade of high unemployment, low profits, low prices of goods and high poverty. The trade
market was brought to a standstill, which consequently affected the world markets in the 1930s.
Industries that suffered the most included agriculture, mining and logging. The timing of the
Great Depression varied across nations, but in most countries it started in about 1929 and lasted
until the late 1930s or early 1940s. It was the longest, most widespread, and deepest depression
of the 20th century, and is used in the 21st century as an example of how far the world‟s economy
The depression originated in the United States, starting with the stock market crash of October
29, 1929 (known as Black Tuesday), but quickly spread to almost every country in the world.
The Great Depression had devastating effects in virtually every country, rich and poor. Personal
income, tax revenue, profits and prices dropped, and international trade plunged by a half to two-
thirds. Unemployment in the United States rose to 25% and in some countries rose as high as
33%. Farming and rural areas suffered as crop prices fell by approximately 60 percent. Countries
started to recover by the mid-1930s, but in many countries the negative effects of the Great
Depression lasted until the start of World War II. The US economy has suffered 10 recessions
since the end of World War II.
The financial crisis of 2008–present is a crisis triggered by an insolvent United States banking
system. It has resulted in the collapse of large financial institutions, the bailout of banks by
national governments and downturns in stock markets around the world. In many areas, the
housing market has also suffered, resulting in numerous evictions, foreclosures and prolonged
vacancies. It is considered by many economists to be the worst financial crisis since the Great
Depression of the 1930s. It contributed to the failure of key businesses, declines in consumer
wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by
governments, and a significant decline in economic activity. The collapse of a global housing
bubble, which peaked in the U.S. in 2006, caused the values of securities tied to real estate
pricing to plummet thereafter, damaging financial institutions globally. Questions regarding bank
solvency, declines in credit availability, and damaged investor confidence had an impact on
global stock markets, where securities suffered large losses during late 2008 and early 2009.
Economies worldwide slowed during this period as credit tightened and international trade
The immediate cause or trigger of the crisis was the bursting of the United States housing bubble
which peaked in approximately 2005-2006. High default rates on “subprime” and adjustable rate
mortgages (ARM) began to increase quickly thereafter. An increase in loan packaging,
marketing and incentives such as easy initial terms and a long-term trend of rising housing prices
had encouraged borrowers to assume difficult mortgages in the belief they would be able to
quickly refinance at more favorable terms. However, once interest rates began to rise and
housing prices started to drop moderately in 2006-2007 in many parts of the U.S., refinancing
became more difficult. As housing prices declined, major global financial institutions that had
borrowed and invested heavily in subprime MBS reported significant losses. Falling prices also
resulted in homes worth less than the mortgage loan, providing a financial incentive to enter
foreclosure. Defaults and foreclosure activity increased dramatically as easy initial terms
expired, home prices failed to go up as anticipated, and ARM interest rates reset higher. The
ongoing foreclosure epidemic that began in late 2006 in the U.S. continued to drain wealth from
consumers and eroded the financial strength of banking institutions. Defaults and losses on other
loan types also increased significantly as the crisis expanded from the housing market to other
parts of the economy.
IMPACT ON INDIA
Since US is one of the major super powers, a recession–mild or deeper will have eventual global
consequences? The crisis rapidly developed and spread into a global economic shock, resulting
in a number of European bank failures, declines in various stock indices, and large reductions in
the market value of equities and commodities
A slowdown in the US economy was definitely a bad news for India because Indian companies
have major outsourcing deals from the US. India's exports to the US have also grown
substantially over the years. But inspite of all this India has successfully weathered the great
financial crisis of September 2008. Indian gross domestic product (GDP) has grown around 6%
in every quarter of the most difficult 12 months in recent history.
Why did India suffer so little in the Great Recession that laid low the biggest economies of the
There were many factors that saved the Indian economy from dire consequences of the global
recession. Indian banks and financial institutions had almost entirely avoided buying the
mortgage-backed securities and credit default swaps that turned toxic and felled western
financial institutions. India's merchandise exports were indeed hit by the Great Recession but
service exports did not fall - computer software and BPO exports held up well. Foreign direct
investment remained high in 2008-09 despite the global financial crisis. Financiers reversed
flows into India, but long-term investors in plant and factories completed their ongoing projects.
Monetary policy was accommodating in 2008. The RBI lowered interest rates and expanded
credit. The government cut excise duties to stoke demand. All these factors cushioned the shock
to the economy. Apart from these, one major reason that contributed to India‟s successful
survival of economic slowdown finds its roots in rural India. In tough times, many Indian
companies came out with an innovative strategy to generate business and expand their crippling
market shares. In their bid to successfully survive the brunt of economic turbulence, some Indian
companies took ‘Rural Marketing’ as a strategy to escape the negative impact of recession.
Typically, a rural market represents a community in a rural area. In recent years, rural markets
have acquired significance in countries like China and India, as the overall growth of the
economy has resulted into substantial increase in the purchasing power of the rural communities.
On account of the green revolution in India, the rural areas are consuming a large quantity of
industrial and urban manufactured products. In this context, a special marketing strategy,
namely, rural marketing has taken shape. Rural marketing involves delivering manufactured or
processed inputs or services to rural producers or consumers. Also rural marketing is getting
importance because of the saturation of the urban markets. So the marketers are looking for
extending their product categories to an unexplored market i.e. the rural market. This has also led
to the CSR activities being done by the corporates to help the poor people attain some wealth to
spend on their product categories. Project Shakti of HUL is not only helping their company attain
revenue but is also helping the poor women of the village to earn some money which is surely
going to increase their purchasing power. Similarly ITC E-Choupal, is helping the poor farmers
get all the information about the weather as well as the market price of the food grains they are
RURAL MARKETING AS A STRATEGY TO FIGHT GLOBAL RECESSION
Rural India, which accounts for more than 70 per cent of the country's one billion population
(according to the Census of India 2001), is not just witnessing an increase in its income but also
in consumption and production. The rural consumer market, grew 25 per cent in 2008 when
demand in urban areas slowed due to the global recession. The rural economy had not been
impacted by the global economic slowdown.
The global meltdown certainly hit the Indian car industry hard. The industry posted a growth rate
of 11 per cent from April to October 2007 which fell to just 3 per cent in 2008. The sale of small
cars (the entry-level segment) also decreased in the face of the credit squeeze. To compensate for
the loss, Maruti now planned to tap the rural market. Maruti appointed 2,000 sales executives to
target customers in the rural areas and started special schemes for village panchayats, rural
teachers and rural officers. A mobile van was put on standby to provide car servicing at the
villagers‟ doorstep. Also, the company offered discounts ranging from Rs 3,000 to 8,000 on
various models in the rural markets. The rural areas and middle class cities pushed the
company‟s sales during the period of recession thereafter.
Stock markets were plummeting to never seen before lows, real estate was plunging down,
Nasscom lowered its expectations for IT-BPO to 16-17%, economists slashed the overall
country‟s growth forecast, period, amid all this the mobile markets didn‟t seem get affected but
on the other hand reported a record growth, especially the rural mobile market in India. The
mobile operators added millions of subscribers every month. The industry‟s overall subscriber
base grew 48 per cent in 2008 to 347 million customers and of the 25 million new mobile
subscribers added during April 2008 to June 2008, 8 million were from the villages, that is more
than 30%.The mobile subscriber base is growing in leaps and bounds. Bharti Airtel saw its profit
in the three months to December 31 climb to 22 billion rupees , up 25 per cent from a year
earlier, as it drew in a record number of new subscribers.
During the time of recession Tata Tea also took the course to rural India and reported increased
sales. Tata Tea‟s unique rural marketing initiative “Gaon Chalo” in UP drove it‟s all India share
from 18 percent in January-March 2006 to 21.4 percent in January-March 2008. Tata Tea
realized that it was not selling in more than 1,00,000 villages in UP. So Tata Tea decided to tie
up with NGOs, the people with greatest reach among rural villages of UP to penetrate rural
markets. Tata Tea created a unique channel of distribution with NGOs acting as the first tier and
followed by 2 tiers from villages thus providing a means for funding to NGOs and as a source of
steady income to youths who became distributors at level 2 and 3. It is worth noticing that in the
same period, HUL lost its market share from 21.2 percent to 18.9 percent and Tata Tea
consolidated its market share from 18.1 percent to 26.6 percent.
POST RECESSION INITIATIVES
Major domestic retailers like AV Birla, ITC, Godrej, Reliance and many others have already set
up farm linkages. Hariyali Kisan Bazaars (DCM) and Aadhars (Pantaloon-Godrej JV), Choupal
Sagars (ITC), Kisan Sansars (Tata), Reliance Fresh, Project Shakti (Hindustan Unilever) and
Naya Yug Bazaar have established rural retail hubs.DCM Shriram Consolidated (DSCL) has
undertaken the process of improving the business model of the rural retail chain of the company,
in order to strengthen the company's system of product sourcing.Consumer durable companies,
meanwhile, such as LG India and Godrej, have increased their marketing efforts in rural areas.
'Rural melas' are being organised by Godrej in order to access potential rural consumers.
Recession is an unavoidable phenomenon. In today‟s economically unified world, its
consequences can be far reaching. The downturn caused largely by the financial crisis in the US
sharply decelerated the global economy. Despite the worsening climate in rich countries the
developing countries continued to be pioneers of the global economy and big developing
economies like China, India and Brazil grew at an impressive rate and will continue to do so.
4. Did India suffer so little in the Great Recession that laid low the biggest economies of the
West? By: Rashmi Chawla, Cust. Service Manager, Leading Bank
6. Mobile User Growth Not Affected by Recession – Rural Mobile Markets Still
Booming..By Pradeep Kumar • February 11, 2009 , www.watblog.com