KOLKATA: Urban consumers may be back in the market, but the real action will continue to happen in the countryside where the market grew three times faster than in urban areas last year with the likes of Maruti Suzuki, Hero Honda and Bharti Airtel having a harvest feast.

The rural consumer market, which grew 25% in 2008 when demand in urban areas slowed due to global recession, is expected to reach $425 billion in 2010-11 with 720-790 million customers, says a white paper prepared by CII-Technopak. That will be double the 2004-05 market size of $220 billion.

The study attributed last year’s performance largely to a number of government initiatives including agriculture loan waiver, the rural job guarantee scheme and higher minimum support prices for crops.

Expert say the boom in rural demand will continue as the impact of poor monsoon rains this year will be minimal.

"Rural incomes may be down by only about 2% this year due to the less than normal rains," Prdaeep Kashyap founder & CEO of Mart, a rural marketing consultancy said.

Though official data on the impact of this year’s poor monsoon on rural economy, only rice crop in parts of north and west India was affected. Any deficiency in rice production will be compensated by a comfortable rabi harvest in wheat, he said

Also, about 50% of rural incomes are from non-farm sources like carpet weaving, handicrafts, handloom, leathercraft, gems & jewellery and agarbattis, Mr Kashyap said.

According to the Technopak study, rural demand for FMCG, pharma, auto and consumer durables industries is estimated to match sales generated in urban areas soon. While durables market shrunk in urban India, rural market is seeing a 15% growth rate. FMCG sales are up 23% and telecom is growing at 13%, it said.

The rural consumer is upgrading to branded products thanks to extensive media penetration in villages, Pratichee Kapoor, principal consultant at Technopak, said.

Tweaking the marketing mix in price conscious rural markets led to improved sales for companies like Adidas and Reebok, which saw sales go up 50% by reducing prices in rural areas. Philips launched a low-cost stove in rural markets and LG’s customised TV (to pick up low density signals) sold one lakh models in the first year.

“Increase in mobile penetration in villages has driven up aspiration levels,” said MG Parameswaran, executive director and CEO of Ulka Advertising. Wipro’s soap brand Santoor’s success in 45 gm packs at Rs 6 also demonstrated the importance of low-priced units in breaking into villages that house 75% of the country’s population.

Education is another important factor as there are more graduates in rural areas than in urban centres, Mr Kashyap said. “For marketers, a key target segment is the rural youth who has migrated to the nearest town. For him, brands are aspirational and he brings the experience back with him to his native village.”