The Changing Face of Rural India

By Anuradha Ramachandran and Manasa Krishnan

The TCF team has been doing a few visits to the rural areas of different states in different contexts. Here are a few stories that come from those visits:

The Kirana King: A few dozen kilometres down the dusty highways of Pune, past a plethora of missal sellers, determined devotees, and fume-filled factories, lies the not-so-sleepy town of Shirur. While its quasi-cosmopolitan nature is nothing to scoff at, true magic can be found just 30 minutes away. In a 200-250 household village along the state highway is a popular high street that serves to disprove all our notions of what villages look like, with several beauty salons, a shoe bazaar, tailor shops, tea stalls, kirana stores, this high street is teeming with pedestrians. There is also a large department store, outside which stands the stylish young owner. ?In his impressively large store, nestled between the off-brand chips and face cream, innocuously lies the very symbol of Digital India – a UPI QR code – powering half the store’s transactions. Now while this is impressive, what’s more, is that this man owns not one, but two stores! With even greater pride, he points to a small shop across the street – now (wo)manned by his wife. This store owner – with no formal knowledge of financial management, no credit history, and armed with only a sense of aspiration – succeeded in formally financing his small business project, even doubling his income sources.

Digital Dairy: Driving further through the country we get to the estate of a dairy farmer –spotted standing under the scorching sun, tending to his large herd of 25-odd cows. A humble and shy fellow, who loves watching instructional YouTube videos, the farmer points to a thatched enclosure that houses an impressive array of dairy mechanisation tools. This is a cautious man – placing his bets on technology as opposed to human labour. We also see the small commercial vehicle he owns, a car, and a large-ish house adorned with tiles, in addition to his painstakingly selected herd. All this was paid for on credit and tended to by the farmer and his feisty family. He casually mentions that he earns roughly ?30 lakhs a year and wants to expand his herd, so he becomes the top supplier of milk in his village. All this is from supplying milk every morning to a dairy, which keeps an electronic record of his supplies (text/WhatsApp messages) and digitally transfers money to his account every 15 days.

The Loaded Trucker: Off another dusty highway in Chomu, Rajasthan, we meet a trucker and his five-brother business. Each brother owns a small commercial vehicle, which is conspicuously overloaded. He proudly shares that the family has expanded the business over the last 4-5 years, from owning one truck and many of the siblings working as loaders to a respectable small transporter. He says each truck does about 4-5 round trips of 40-50 kilometres, earning anywhere between ?2,500-5,000/trip (depending on the load). Even after the cost of running the vehicle, repairs, and EMI, each truck makes enough to feed a family and pay for education. He points to a very large and heavily overloaded vehicle a short way away and says, “That is a truck with cattle feed coming from Punjab. From that large truck, I can get ?1 lakh worth of feed (one load), sell it in the market and pay for my EMI. Earlier, I could do only one truck as I could not get credit from banks and I needed to get cash from the moneylender, pay in cash and pick up the goods. Even if the moneylender could give me more, I couldn’t take it as it was a lot of cash and I could get robbed or even killed for that kind of money. Now I get money from an NBFC, have a bank account, and use UPI to pay for the goods.”

The common thread running through all these stories is that of a formal, verifiable data trail of their income/inventory from their bank accounts, QR code or UPI payments. It also points to a picture that is very different from the completely agriculture-dependent, very informal, and very reticent rural India.

Here are a few more interesting facts:

• Incomes in rural India are becoming more predictable.

o??Dairy is one of the biggest contributors where there is a daily record (digital or physical) of transactions and a payment every 15 days into the bank account.

o??With the retail boom in small towns, factories that have moved out of urban areas, and large warehouses now service digital/physical commerce in agricultural commodities – employment opportunities have also increased. Further elucidating this a recent CMIE survey highlights a much higher proportion of rural workforce gained employment, compared to urban. In the month of April, 5.6 million people entered the rural labour force of which ~97% gained employment.

o??And there is the high street that we described above, which provides for retail income. Most shops have a QR code which was set up in the uncertain times of COVID-19 but whose convenience has now become ubiquitous.

• There is a large and growing middle-class household in rural areas.

o??Rural median per capita incomes are rising and now stand at nearly ?75,000 a year. The rural middle class has also been steadily expanding to now comprise nearly 70 million households. While rural consumption has been plagued with subdued demand in the past year, positive signs of growth have revealed themselves in the recent quarter; with over 35% of demand coming from rural markets, this segment shows immense potential for the future.

o??Rural populations are also moving away from traditional feature phones to now adopt smartphones, with smartphone penetration growing to nearly 75%. Tech-savviness is also on the rise, with a whopping 400 million internet users – which is even greater than the number of urban users!?

o??The rapid internet and data boom in rural areas is also altering the way people transact – today with over 60% of India’s UPI transactions flowing from rural and semi-urban areas.

• ?The very nature of rural financing is changing.

o??A once completely collateral-based based system of decisioning loans, has with the ready availability of rural incomes and cash flows now allowed lenders to shift to cash-flow based underwriting.

o??The steadily growing sanctions of loans to rural areas are driving the continued performance of NBFCs, with rural credit being the only category to demonstrate growth in the last quarter, as opposed to urban and semi-urban credit which have both declined from the previous year.

Improving connectivity, physical infrastructure like roads or electricity, and multiple incomes in the household moving away from an agriculture-dependent segment - a lot is going on for the rural consumption story. This is a segment that we will be taking a closer look at in the coming months. If you are an entrepreneur do reach out to us to share your story and vision.