3 Challenges Buckling Rural India and The Looming Opportunity

3 Challenges Buckling Rural India and The Looming Opportunity

Tuesday September 11, 2012,

3 min Read

Mr. Harish Manwani, Chairman, Hindustan Unilever Limited delivered a speech at the Annual General Meeting recently on Rural India and how it is emerging as a powerhouse. The speech was well documented and there were a few key areas where opportunities for entrepreneurs were identified.

India has seen a major transformation in the last 60 years. The Green Revolution propelled food grain production from a mere 50 million tonnes to 245 million tonnes in 2010-11. The GDP per agricultural worker is 75% higher in real terms. Today, as much as 40% of India's total consumption is accounted for by rural India. By 2025, the Indian rural market is expected to grow more than ten fold to become a USD100 billion opportunity for retail spending. But there are challenges that hamper the growth:

1) Agriculture

While agricultural production has gone up, India's agricultural productivity levels are amongst the lowest in the world. Small land holdings with limited mechanisation and limited access to affordable capital have contributed to low productivity levels. With 12 million less hectares under wheat and rice, China manages to produce much more. Its fields give six tons of rice a hectare, three times India's yield. Its wheat fields are twice as productive.

2) Rural Employment and Employability

Another challenge we must confront is slowing agricultural growth. The share of agriculture in real GDP has fallen from 30% in 1990-91 to 14.5% in 2011-12, while the number of people dependent on agriculture for their livelihoods has not come down proportionately. This clearly shows that the Indian growth story has not been inclusive for the millions who are dependent only on agriculture for their livelihood.Inadequate opportunities for employment beyond agriculture and lack of employability have resulted in over-dependence on agriculture which is not able to support the rising aspirations of the vast majority living in rural India.

3) Human Development

India lags behind its contemporaries in health, nutrition and education. Our Human Development Index is lower than that of many developing countries. Two million children under five years of age die – one every 15 seconds – each year in India, the highest anywhere in the world. The situation in the field of education is also not good. A recent study suggested that there are lakhs of unfilled teacher vacancies in rural primary schools. The 2011 India Census shows that only a small portion of rural households have easy access to basic amenities like drinking water, electricity and sanitation.

And the Opportunity

Despite these seemingly insurmountable challenges there is an incredible opportunity. Consider that the nation's agricultural growth can pick up to 4% as envisioned by the Planning Commission, the cascading impact that rural prosperity will have on the national economy will add up to an additional 2% to our national GDP growth and propel India into double digit growth.

The population of rural India is about 12% of the world population, which makes it bigger than the size of Europe. If the 800 million people living in rural India can be provided with the skills to be fully productive, this will unleash yet another force to create the emerging rural middle class that can transform India into the fastest growing economy in the world. It is not an impossible vision of rural India matching rural China in 10 years time. This could potentially create an incremental GDP of USD1.8 trillion, the size of the current Indian economy. The impact will be transformational not only for India but for the global economy and Indian entrepreneurs have a huge role to play here. New and innovative efforts will go a long way in helping the solution.

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