Rural infra development needs to pick up speed

Written by Corporate Bureau | New Delhi, Sep 27 | Updated: Sep 28 2007, 05:39am hrs
Infrastructure development in rural India needs to be put on a fast track in order to tap the rural retail opportunity currently estimated at $34 billion, which according to a Confederation of India Industry (CII) and Yes Bank study is expected to touch the $58 billion-mark by 2015. The study focuses only on FMCG, durables, agricultural inputs (including tractors) and two and four wheelers.

The study titled The Next Phase in Retailing, released on Thursday underlines infrastructure bottlenecks, high price elasticity of demand as some peculiar factors affecting rural retail in the country, which are different from the urban trends and need to be closely studied.

Presently rural India accounts for over $100 billion in consumer spending, which is quite high. The report says that once the sector grows there would be a slew of positive implications. Though the rural sector is at a nascent stage, retail will directly impact infrastructure, employment, tax generation, increase revenue and check rural migration, said Kalyan Chakravarthy, country head of food and agribusiness strategic, Yes Bank.

The total number of rural households is expected to rise from 135 million in 2001-02 to 153 million in 2009-10. At present, 85% of organised retailing takes place in Indias urban areas. But corporate houses are increasingly realising the vast opportunity in rural retail and as income levels keep raising, it will only become more attractive to invest in rural areas.

Technopak estimates that the size of the Indian retail market is at present around $300 billion with the rural-urban split in the ratio 55: 45.