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Rural demand stays in fine shape, India Inc rushes to boost logistics

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Corporate India is betting big on demand from hinterland on the back of a robust rural economy. Going forward, companies have lined up logistics push in these pockets to have a sound distribution network to cash in on the demand.

Not to miss out, players such as Mahindra and Mahindra Financial Services and Amul are steadily building their rural footprint. Talking about the action plan, Ramesh Iyer, MD, Mahindra and Mahindra Financial Services, told dna, “Our strategy is to go deeper in rural markets. This essentially means that from district level, we will have our presence in village level.” Iyer was speaking at the Rural Strategy Summit, Rural Renaissance – Back to the drawing board.

Iyer said the company has opened 20-25 branches in the last few months and efforts are on to open another 20-25 in the next 5-6 months. “This way, we will simply gain on aspects such as competitive landscape, and make us more attractive,” he added.

Amid the new opportunities, the company is eyeing farm loans. “We are trying to understand the nature of rural cash flows,” he added. He said markets such as Bihar and Madhya Pradesh stand out in their aggressive growth. The South, according to him, is lagging.

Rural prospects are taking on some extra shine especially due to good monsoon this year. “Monsoon is good, sowing is high and yield will be good. With good yield and good support price, the cash flow is expected to be strong,” added Iyer. 

Amul, meanwhile, is also bolstering its distribution networks across small towns. “Each state earlier had one depot. Now, we are planning to have two depots in each of these. We have added depos at Kharagpur, Srinagar, Jabalpur, Surat and Rajkot. Two depots in Jodhpur, Aurangabad and Mangalore are also coming up. These depots will specifically cater to the rural demand,” said R S Sodhi, managing director, Amul.

The fact of the matter is the rural economy has shown enough growth muscle over the last few years. According to NSSO data, between 2005 and 2010, the number of people living below the poverty line in rural areas has dropped to 21.72 crore from 32.58 crore.   

“There indeed is aspiration. The demand is increasing and will continue. The rural GDP is growing 16%. Our strategy is to maintain a lower price point, especially by keeping lower packaging in rural markets and have adequate infrastructure for cold chain products,” added Sodhi. 

There’s a twist though. Some companies have started investing in individuals rather than targeting rural areas for consumption of their products. Michael Andrale, head (agri business), HDFC Bank, said,  “Food inflation is a global scenario. Commercial farm in developed countries have reached their peak. So, they are focusing on the farmer as a sustainable supplier. They are developing  farmers, which is bringing more money into the account of the farmer. This is something which will pan out between now and 2020.”

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