Friday August 11, 2023

Executive Briefings Business & Management: AI And The Work Place

The Frontier Market

Analysts suggest that private consumption in India will touch USD 6 trillion by 2030. Perhaps, this might seem optimistic but the reality remains that the growth anticipated over the coming 5 to 7 years would certainly be brisker than that demonstrated over the last decade. There are many reasons why this is so. Leading them is the remarkable investment in the creation of physical infrastructure, together with the Digital India stack. Both of these promise to enable a game-changing environment.

As strategists work through their outlook for 2030, they must recognise the fact that India’s rural market opportunity is poised to undergo alluring changes. These will make it attractive for consumer goods companies to seek prospects, which may have previously appeared uninspiring. The transitions taking place are hastening rural market transformation and leading the charge is the growing acceptance of digital technology, e-commerce and online banking. Everything in business begins with connectivity. If you can reach customers, then you have a market. On this score India’s performance over the last 7 years is unprecedented. Metalled roads, specifically in rural areas, have more than doubled from 350,000 kilometres 7 years ago, to 780,000 kilometres at the time of writing this paper. This network, coupled with electrification, would facilitate the movement of goods and services with a ripple effect on productivity, through improved logistics, and most importantly the encouragement of entrepreneurship.

There are silent changes taking place in the basic structure of agriculture. Modernisation of farming procedures, such as the use of drones and crop diversification, are now becoming more common. This is largely because of contractual arrangements that several farmers have signed with large companies on the purchase of their output. These companies have been providing technical knowledge to farmers together with financial support.

Another important facet, frequently not recognised, is the shift in consumer preferences and behaviour. The rural youth are now aspirational and discerning in their inclinations, leading to a consequent demand for branded goods that are of better quality and value for money. The cheap and cheerful is being replaced by the reliable. Marketeers, especially those in the FMCG segment, have already recognised this fact. This shift in behaviour can clearly be attributed to access to the internet. Finally, the issue of the India Stack, especially financial inclusion that provides access to formal banking is, and will continue to be, a very important driver. In rural areas, cash is being replaced by digital payments and mobile transfers. Three years ago, on a visit to a high-altitude village – 15,300 ft in the Kinnaur Valley in the Himalayas, I chanced upon a small kiosk selling ‘Maggi Noodles’. The vendor preferred a digital money transfer and, on further questioning, explained that 80% of his transactions specifically to his own suppliers were digital. As a start, it saved the burden of carrying cash and secondly, worked efficiently in times of heavy customer rush. There was no fussing about with counting money and returning change. This is now a common occurrence across the country, but clearly more visible in tourist-frequented rural areas.

The rural market opportunity, just as the India potential, has been spoken about for two decades. But, this time around, it seems real.