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 Rural markets in emerging nations- A hidden treasure

Published 6/19/2008 11:34:00 PM - General

Today, emerging markets represent the fastest growing economies in the world. Growing industry consolidation and slowing growth abroad has drawn focus from multinational companies on emerging countries such as India and China that offer significant untapped growth opportunities. The institutions that operate within emerging markets—governments, education, health and private enterprise—are beginning to recognize that without rural sector development they would not be able to grow significantly or improve the standard of living of their people.

Rural India accounts for more than 50% of the GDP and the rural consumption expenditure registers around 60% of the total consumption expenditure in the country. On the other side, the Chinese economy is experiencing unprecedented growth, largely in urban areas, but the need is growing for rural populations to have the same advantages and access to technology as those people living in cities.

In order to tap the rural phenomenon more efficiently, initiatives such as Unlimited Potential by Microsoft, One Laptop Per Child concept by MIT Media Labs, World Ahead program from Intel and 50x15 program from AMD are already been in place. The aim of these companies is at providing the low-cost computing/ PCs to emerging nations to create a win-win situation for all. Recently, One Laptop per Child (OLPC) program unveiled the second version of its XO laptop, while Intel announced its next-generation Classmate PC for developing countries.

However, low-cost PCs may not be the relevant technology to reach rural people in emerging nations. A sustainable rural mobile development program can create all-round growth in under-developed areas of emerging countries as cellular technology is far more reachable than PC penetration.

The rural areas in China and India are experiencing explosive growth in mobile communications, as falling tariffs and rising incomes are bringing mobile phones within the reach of millions of new customers. The Ministry of Information Industry, China announced that the number of mobile phone users had reached 501.64 million by the end of June 2007 and the higher growth came from the rural areas. On the other side, India has emerged as the fastest growing telecom market in the world. The number of rural mobile phone users is around 40 million, accounting more than 22% of the total mobile subscriber base in India. This figure is expected to go up to 35-40% by 2010 in the country.

Although I am of the opinion that rural markets in emerging nations will trigger new types of competition in the years to come, there will be a number of issues to face due to a lack of infrastructure, poor coordination among government bodies, funding and technical support in countries such as India and China.

The active efforts from companies are just getting started, and we believe it will be early to comment that a particular technology will have a solid impact on rural areas growth. As seen in any emerging country, the cost will play a key attribute based on demand, feasibility, and user needs. It will be interesting to see how the business model of various companies evolves to target the big and untapped opportunity in the rural segment.  

By Manish Bahl

Image courtesy mckaysavage

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