08pgdm061 Aditya Jcb09

JCB INDIA LTD 2009

JCB INDIA LTD Rural Market of India

Market Study and Potential States

2009

Aditya Bikram Shah Summer Trainee, Student of PGDM (2008-10) International Management Institute New Delhi

JCB INDIA LTD 2009

Aditya Bikram Shah – International Management Institute Page 2

Summer Project Report JCB INDIA LTD. (Corporate Office) 23/7, Mathura Road Ballabgarh – 121004 Haryana Tel: +91 129 4299000 Extn : 4030 Author of the Report: Aditya Bikram Shah PGDM 2008-10 International Management Institute, New Delhi Project Coordinator: Mr. Puneet K Vidyarthi Dy. General Manager - Marketing Project Objectives:

1. To understand the Rural markets of India.

2. Identify potential States for JCB to foray into.

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ACKNOWLEDGEMENT

With much gratitude and respect, I extend a sincere acknowledgment to Joseph C Bamford India Ltd.

for letting me become a part of the Summer Training Program, for giving me the opportunity to work

with their esteemed organization and for offering a project that allowed me to grow in the most

holistic manner.

I am grateful towards my project mentor Mr. Puneet Kumar Vidyarthi Dy. General Manager –

Marketing without whom this project would not have been even close to the level at which it is

today.

I really appreciate his involvement in the project and his regular advices that helped me refine the

project as I went along and also inculcate all the points that help significantly with the growth in my

learning.

It has been an absolute honour to have been acquainted with him and to have had the opportunity to

work and learn from him.

Last but not the least; I would like to thank the HR team at JCB India Ltd for having made my tenure

with the company enlightening, growth enriched, comfortable and memorable.

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Table of Contents 1.ACKNOWLEDGEMENT ……………………………………………………………………..…………..................3 2.EXECUTIVE SUMMARY ……………………………………………………………………..……………………7 3.ORGANIZATIONAL PROFILE. ………………………………………………………………..……………………8 3.1.PROMOTERS…………………………………………………………………………………………………..10 3.2. MISSION……………………………………………………………………………………………………...11 4. REASEARCH METHODOLOGY………………………………………………………………………..................13 5. CONSTRUCTION MARKET OF INDIA…………………………………………………………………………….13 5.1. SWOT ANALYSIS…………………………………………………………………………….....................13 5.2. SECTOR BREAKUP…………………………………………………………………………………………….14 5.3. MAJOR PLAYERS AND MARKET SHARE 2008……………………………………………………….................15 5.4. EARTHMOVING SECTOR… ………………………………………………………………………...................17 5.5. GOVERNMENT INITIATIVES…………………………………………………………………………………..19 6. INDIA – AN OVERVIEW ………………………………………………………………………………………..20 6.1. RURAL SEGMENT…………………………………………………………………………………………….20 6.2.POPULATION……………………………………………………………………………………….................21 6.3. OCCUPATION………………………………………………………………..………………………………..22 6.4. RURAL CONSUMPTION GROWTH …………………………………………………………………………….22 6,5, POVERTY : AN AREA OF CONCERN…………………………………………………………………................24 6.6. DIVERSIFICATION OF THE RURAL ECONOMY……………………………………………………….................24 6.7. RURAL ASPIRERS : THE FUTURE GROWTH DRIVERS ………………………………………………………….25 6.8. PARAMETERS FOR CONSUMPTION CAPABILITIES……………………………………….................26 6.8.1 TRACTOR OWNERSHIP…………………………………………………………………………..…………..26 6.8.2 ELECTRICITY CONSUMPTION…………………………………………………………………..…................27 6.8.3 ELECTRIC PUMPS, DISEAL ENGINES AND GENERATORS……………………………………………………..29 6.8.4 IN HOUSE BATHING FACILITY………………………………………………………………………………30 6.8.5 OCCUPATION WISE………………………………………………………………………………………….30 6.8.5.1 OWNER FARMER ……………………………………………………………………………..…………...31 6.8.5.2 LEASED FARMER………………………………………………………………………………………….32

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6.8.5.3 AGRICULTURAL WOKERS…………………………………………………………………………………33 6.8.6. INCOME WISE ……………………………………………………………………………………………..34 6.8.6.1 INCOME RANGE RS. 501 -600 ……………………………………………….……………………………34 6.8.6.2 INCOME RANGE RS. 5001 -6000 ………………………………………………………………………….35 6.8.6.3 INCOMR RANGE RS. 40001 – RS. 60000…………………………………………………………………..36 7. STATEWISE HUMAN DEVELOPMENT INDEX……………………………………………………..…...................36 8. AGRICULTURE – AN OVERVIEW………………………………………………………….………......................38 8.1 AGRICULTURE EVOLUTION……………………………………………………………………….…………...40 8.2 AGRICULTURE GROWTH………………………………………………………………….……………...41 8.3AGRICULTURAL DIVERSIFICATION TO HIGH VALUE ADDED FARM ACTIVITIES.....................42 8.4 IRRIGATION……………………………………………………………………………………...................43 8.5CROP COVARAGE……………………………………………………………………………..……………44 8.6 AGRICULTURE PROSPECTS…………………………………………………………………….……................46 . 8.7 GOVERNMENT INITIATIVES……………………………………………………………...……………............47 9. THE RURAL CREDIT SYSTEM……………………………………………………………………..............48 9.1 CREDIT CONSTRAINTS…………………………………………………………………………………...........48 9.2 MICRO FINANCE : A RURAL INITIATIVE……………………………………..……………...................49 9.3 THE KISAN CREDIT CARD……………………………………………………………..…………...................50 9.4 BORROWING AND SAVING HABITS OF THE RURAL CONSUMER………………..……...................50 9.5 VARIOUS SOURCES OF SAVINGS………………………………………………………..……………………...51 9.6 SAVINGS ON THE BASIS OF MONTHLY HOUSEHOLD INCOME AND OCCUPATION….................51 10. MARKETING AND DISTRIBUTION……………………………………………………………………………..52 10.1. FEATURES OF INDIAN RURAL MARKETS………………………………………….…………………….......52 10.2 PROFILE OF A RURAL CONSUMERS…………………………………………………………………………..53 10.3 4A’S OF THE RURAL MARKET……………………………………………………………………………….54 10.4 MARKETING CONSTRAINTS……………………………………………………...……...…………………...54 10.5 MARKET ACCESSIBILITY………………………………………………..…………………………………...55 10. 6 THE CONCEPT OF HAATS AND MANDIS………………..………………………...………………..............56 11. THE BUYING BEHAVIOUR OF THE RURAL CONSUMER…………………………………….........................58 11.1CONSUMPTION INFLUENCES ………………………………………….………………………………….......59

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11.2 ROLE OF OPINION LEADERS………………………………………………………………………………….60 12. INDIAN AGRICULTURAL EQUIPMENT INDUSTRY……………………………………………………62 12.1 AN OVERVIEW……………………………………………………………………………………….............62 12.2 SWOT ANALYSIS…………………………………………………………………………………………63 12.3 EVOLUTION IN FARM PRACTICES……………………………………………………………………..64 12.4 MECHANISATION – AN ESSENCE………………………………………………………………...........64 12.5 STATUS OF FARM MECHANISATION IN INDIA…………………………………………..…………………….66 12.6 BENEFITS OF MECHANISATION……………………………………………………………..…………66 12.7 AVAILABILITY OF TOOLS……………………………………………………………………...……….67 12.8 AGRICULTURAL EQUIPMENT………………………………………………………….………………68 12.8.1 TRACTORS………………………………………………………………………………………………68 12.8.2 FACTORS FOR PURCHASING A TRACTOR…………………………………………………………………...70 12.8.3 THE ECONOMIC IMPACT OF A TRACTOR ……………………………………………………………...........71 12.8.4 MAJOR PLAYERS……………………………………………………..…………………………...........71 12.8.5 OTHER AGRICULTURAL EQUIPMENT……………………………………………………….……..……….73 12.9 GOVERNMENT SUBSIDIES……………………………………………………………………………………74 13. GOVERNMENT PROGRAMS FOR RURAL UPLIFTMENT………...…………………………...……….78 13.1 BHARAT NIRMAN………………………………………………………….………………………..……….78 13.2 PRADHAN MANTRI GRAM SADAK YOJANA……………………………………………………….................78 13.3 NATIONAL RURAL EMPLOYMENT GUARANTEE ACT (NREGA)……………………………………….........79 13.4 SWARNJAYANTI GRAM SWAROZGAR YOJANA (SGSY)………………………………...…………………...79 13.5 INDIRA AWAAS YOJANA (IAY)…………………………………………………….…………………..........79 14. RECOMMENDED STATES…………………………………………………….…………………………...........82 14.1 ANDHRA PRADESH……………………………………………………………………………………..........82 14.2 SWAT ANALYSIS………………………………………………….………………………………….............82 14. 3 GUJARAT………………………………………………...……………………...…………………..............85

14.4 SWOT ANALYSIS…………………………………………………………………………….……………………………..………….85 14.5 TAMIL NADU……………………………………………………...………………………………………87 14.6 SWOT ANALYSIS…………………………………………..……………………………………………..87

15. BIBLOGRAPHY……………………………………………………………………………………………...…92

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2.EXECUTIVE SUMMARY

The report was prepared with the prime motive of understanding the rural sector of India and the feasibility of

JCB to foray into this untapped market

Objective: To understand the feasibility of JCB to foraay into the rural markets of India.

The Indian Construction Equipment sector has an estimated market size of US$ 2.4 – 2.6 billion for the year

2007. The construction sector in India has been growing at a scorching pace of over 30 per cent annually, driven

by the huge investments being made by the government and the private sector in infrastructure development.

With Prime Minister Manmohan Singh projecting investments of $320 billion in the infrastructure sector over

the next few years, prospects for the construction equipment industry appear to be dazzling. This sector is

primarily driven b investments made by the government, through internal accruals and external borrowings, or

by private enterprises through the PPP (public-private partnership) model and/or as an investment (in power,

ports, bridges, toll ways, etc.).

A secondary marketing research has been performed to understand the evolving needs of thr rural sector of India

keeping in mind JCB INDIA LTD intentions of finding a potential market to seel their new product. The

research has been conducted by referring to websites, books, journals and other research reports. Further a trip

to a town – Biwadi in the district of Alwar, Rajasthan was made to understand the changing needs of the rural

consumers on account fo rapid development activities undertaken by the government in areas of housing, roads

and industries. There has been a rapid change in terms of occupation as many farmers are converting into

contractors and demanding construction equipments so as to partipate in the development process and earn

better income.

The conclusions drawn during the research helps in devising recommendations for the company in terms of

entering the potential States of India.

JCB INDIA LTD 2009


3.ORGANIZATIONAL PROFILE

Joseph C Bamford (JCB)

In every corner of the world you'll find a JCB machine. JCB is one of the world's top three manufacturers of

construction equipment. They employ around 7000 people on 4 continents and sell products in 150 countries

through 1,500 dealer depot locations.

Throughout 64 year history, they have always invested heavily in research and development, keeping JCB at the

cutting edge of innovation.

Today, JCB has some of the finest engineering facilities across the globe, produces a range of over 300

machines and maintains a reputation for unrivalled customer service.

JCB setup a presence in India in 1979 with a 80:20 JV with Escorts, and has invested US$ 125 million in the

country. They are one of the largest construction equipment manufacturers in India. JCB India is a part of the

world renowned and legendary company J C Bamford Excavators Limited (JCB), one of the prominent players

in the construction equipment industry and amongst the 3 largest players in the world, producing over 300

different models, which are sold in over 150 countries.

The company has a turnover of US$ 335 million. The company is growing by between 25-30 per cent annually.

JCB India is a subsidiary of prominent global player – J C Bamford Excavators Ltd. (JCB). The product ranges

from Backhoe loaders, wheeled loaders to excavators and skid steer loaders.

They have 70 per cent market share in the backhoe loader segment and around 13 per cent market share in

overall Indian construction equipment industry. JCB’s customers are mostly hirers and large and small

contractors. They have facilities at Ballabgarh in Haryana & Pune in Maharastra.

They have a very good distribution network. They have 48 dealers and 300 outlets. They have dedicated parts

center in Ballabgarh and parts distribution depots in Chennai, Pune and Kolkatta.

They are setting up a new facility in Pune with a capacity of 8000 units. The company has plans of going

aggressive on excavators and compactors. They shall achieve the same with their new excavator production unit

with an installed capacity of 6000 units. The company wants to make India an export hub to cater to the Middle

JCB INDIA LTD 2009


East & South East Asian regions. It has sold more than 75,000 machines in India, with one out of every two

construction machines sold in the country being made by JCB. JCB is the pioneer in this field and has been

recording excellent growth rates. From nine dealers and 12 outlets in 1987 to 48 dealers and over 300 outlets in

2008, throughout the country along with a world-class customer service network support, JCB has come a long

way. In 2007, JCB India achieved the landmark by being the first construction equipment manufacturer in India

to cross the 50,000 machine sales mark. JCB India has got a wide range that includes, excavators loaders, front-

end loaders, articulated loading shovels, tracked excavators, tele-handlers, vibratory compactors and skid steers.

In all, JCB India has got 21 models. JCB machines are of best standards and also meet Bharat Stage II

requirements.

The company is all set to tap the new market with its new offferings the identity of which is still not disclosed.

The report provides a brief of the rural India with some parameters taken into consideration to arrive at a

conclusion about the poetntiality of the sector. A secondary reseach has been followed so as to provide insights

of the overall prospects of Rural India.

Product Range: Backhoe Looaders, Excavators, Wheeled Loaders, Vibratory Single drum Compactors, Skid

steer Loaders, Telescopic Handlers, Generators.

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3.1.PROMOTERS The founder Late Mr. Joseph C Bamford believed in delivering innovative, strong and high performance

products and solutions to customers. He felt that the needd to initiate anything requires a need for urgency to do something from within.

The company is managed by Mr. Anthony C Bamford who is the

chairman.

The Indian operations are managed by MD Mr. Vipin Sondhi.

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3.2. MISSION The mission is to grow the company by providing innovative, strong and high performance products and solutions to meet our global customers' needs

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PART B

RESEARCH METHODOLOGY

The objective of the study was to study the rural segment of India and the feasibility of JCB India to foryay into

this segment. In this highly fragmented market with increasing competition form rivals such as BEML, L&T -

Komatsu,Caterpillar, Telcon it has become essential for the company to look for new areas to tap the otherwise

untapped potential markets of India. India has become a favorable destionation for such players owing to the

amount of investment the government had proposed towards the infrasture development. Further the rural

segment is the hot destinations owing to the rising income levels and governments continued initiatives for

development.

METHOD OF DATA COLLECTION

The secondary data was collected from books, journals, magazines, websites realted to rural India. Further

reasearch reports of FICCI, MGI Consumer Demand Model and MART were used as references.

Further visits to sample towns such as Biwadi, Alwar - Rajasthan; Alwar – places of mass development in terms

of industires and housing gave a good understanding as to how farmers whos land values have risen owing to

development are diversifying into the construction business as contractors owing to which demand for

construction equipment is increasing.

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5. INDIAN CONSTRUCTION EQUIPMENT

The Indian Construction Equipment sector has an estimated market size of US$ 2.4 – 2.6 billion for the year

2007. The industry has been growing due to the large investments made by the Government and the private

sector infrastructure developments. The prospects of the construction equipment industry look attractive with a

projected investment of US$ 320 billion in the infrastructure sector over the next few years.

Though the Indian construction equipment industry is a fraction of the global market, whose size is over US$ 75

billion, it has been growing at an average of 30 per cent annually compared to the global growth of 5 per cent.

5.1 SWOT ANALYSIS

Strength:

Construction Equipment sector is estimated at USD$ 2.25 billion in 2006 and is growing at 25% per annum

against 5% per annum of global market. Indian market is estimated to be USD$ 4 billon by 2010. The vast talent

pool gives India a comparative advantage, with high quality of engineering, software and IT talent. India’s labor

cost per hour is amongst lowest compare to other developing countries.

Weakness:

Weak organized market currently. It is necessary to have a strong organized market for the industry to grow fast,

because it offers substantial benefits. It will allow customers to upgrade to newer, more sophisticated equipment

faster, and also help players to retain customers. To develop India as a major manufacturing hub it is necessary

to focus on R & D. But in the case of construction equipment the focus on R & D is less compare to the global

counter parts. With few exceptions, technology is imported from global partner or parent companies, rather than

developing it indigenously here.

Opportunities:

Many global companies have brought in world-class technology, processes and systems. Few big name s like

JCB, Ingersoll Rand, Komastu, Caterpillar have there presence in India. With India’s talent pool of skilled labor,

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adequate R & D, low cost of labor India has the potential to manufacture similar equipments at a much lower

cost.

Threats:

Unorganized segment is estimated to be at 16-18% which varies across different equipment categories. High end

equipments are manufactured by organized players with large R & D facilities. Hence, unorganized sector does

not pose a big threat. Government have drawn robust plan for infrastructure development but still poor quality

of existing infrastructure acts as a bottle neck as significant resource is utilized for its repairs and maintenance.

This acts as a hurdle for implementation of new projects, which also hampers the overall economic development

of the economy and the sector. The following is the sector breakup of the construction equipment industry in

India as of 2004. Product consumption constitutes the bulk of the segment with around 56 per cent while the

unorganised sector contributes to around 15 per cent. Unorganised players are more prevalent in the relatively

less technology intensive material handling, material preparation and concrete equipment segments.

Spare parts revenues range anywhere from 20–29 per cent of the total sales for representative companies and are

predominant in tunneling and drilling equipments. Services revenues have been higher for global players at

around 11–20 per cent in comparison to 2–8 per cent of Indian players.

56%

21%

15%

6%

2%

Sector Break Up

Products

Spare Parts

Unorganized Sector

Services

Exports

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5.3 MAJOR PLAYERS AND MARKET SHARE 2007: The construction equipment industry in India has more than 200 players; however, the top 6 players occupy

about 60 per cent of the market. The following are players and their contribution to the Indian construction

equipment industry

Company Revenue Market Share

JCB India 329 13.2%

BEML 307 12.3%

TELCON 283 11.3%

L&T – Komatsu 156 6.3%

Caterpillar 143 5.7%

Ingersol Rand 105 4.2%

Volvo 99 3.9%

ECEL 61 2.4%

Greaves Cotton 37 1.5%

ACE Ltd 36 1.5%

Others 944 37.7%

Total Market 2500 100.0%

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The construction equipment industry is primarily driven by three key sectors:

• Construction : Clocked a growth of 10.1% in the year 2008 but owing to a slowdown it has been

reported a growth of 6.1% in Q3FY09.

• Mining and Quarrying: Grew at a rate of 3.3% in 2008 and currently has a GDP growth rate of 5.3% in

Q3FY09.

• Manufacturing: Reported a GDP growth rate of 10.1% in the year 2008 and has reported a negative

growth rate of -0.2% in Q3FY09.

Further the consruction equipment industry is further divided into :

• Earthmoving equipment

• Road construction equipment

• Material handling equipment

• Tunneling and Drilling equipment

• Construction vehicles

The report takes part of the Earthmoving segment market.

Sector Contribution

Earth Moving Equipment 51%

Material Handling 13%

Tunneling & Drilling for Mining 12%

Road Construction Equipment 7%

Concrete Equipment 6%

Concrete Preparation 5%

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5.4 EARTHMOVING SECTOR

The earthmoving equipment market in India is estimated at about US$ 1.4 billion. The predominant sub-

segment in this is excavators, which account for just over half the market. Backhoes account for 26 per cent and

loaders for another 5 per cent share.

EXCAVATORS:

• The excavator market in India was around US$ 733 million in FY’06 with a total of about 4455 units

being sold.

• Sizeable market for used equipment as well.

• Excavators have registered a 30 per cent CAGR. Projected growth by 2012 is a whopping 40,000 units.

• High end excavators incorporating modern technology are witnessing faster growth compared to the

traditional low end excavators

• 6–18 tonne excavators have grown at a CAGR of 9 per cent while 18–22 tonne excavators have

registered a growth of 23 per cent CAGR during the period of FY’01-06.

• 22-50 tonnes excavators have seen a CAGR of 35 per cent and over 50 tonnes have registered 19 per

cent CAGR in the same period.

• Key players in this sector are Telcon, L&T - Komatsu, Volvo, CAT and JCB. Telcon is the market

leader with about 50 per cent of the market

Total Market Size - US $ 1.4 BillionExcavators

Backhoes

Loaders

Others

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BACKHOE LOADER:

• India is the second largest market for backhoe loaders in the world with a market size of approximately

US$ 358 million.

• The market has been growing at a rate of close to 37 per cent CAGR over last four years.

• JCB India is the leader in this segment with a share of over 70 per cent.

• Key drivers for this market have been the housing and urban construction.

• Other players include Telcon, L&T, Caterpillar and Terex

•

37254300

6303

9590

0

2000

4000

6000

8000

10000

12000

2002 -03 2003 -04 2004 -05 2005 -06

Sales (Units)

CAGR 37%

0

200

400

600

800

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1200

1400

1600

2002- 03 2003 -04 2004 -05 2005 -06

Sales (Units)

Sales (Units)

Poly. (Sales (Units))

CAGR 41%

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Backhoe loader application:

• Used for uploading materials into trucks, laying pipes, clearing rubble, and digging.

• The total market for wheeled loaders was approximately US$ 64 million in FY’06 with a total of about

1321 units being sold.

• Growing at a CAGR of about 41 per cent over the last 4 years. The growth is expected to continue at10

per cent CAGR over the next few years.

• Key players in the Loaders market are Caterpillar (~50 per cent share), JCB and Telcon with L&T

Komatsu and Volvo being players with a relatively smaller presence.

5.5 GOVERNMENT POLICY:

The Government of India’s focus on infrastructure development is the single biggest driver for the construction

equipment industry. Policies that encourage manufacturing and retail activity also have a positive impact on the

equipment market. Apart from these, some of the policies that are aimed at attracting investment in the sector

include the following:

• All agencies and ministries of union and state government will work united with a shared vision for

success.

• 100 per cent FDI is allowed for manufacturing purposes.

• Exemption from obtaining an industrial license to manufacture.

• Manufacturers are free to select the location of the project.

• Import duties reduced to encourage imports.

• Encourage exports from Export Oriented Units (EOUs), Special Economic Zones and Export

Processing Units (EPUs).

• Locations with high growth potential to be supported by Government to bridge technology and

productivity gaps. skill up-gradation, physical infrastructure, environmental mitigations facilities to be

provided by Government in selected areas of intervention.

• Schemes similar to SEZs can be developed for export oriented units with capital investment in plant and machinery over US$ 6 million.

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6. INDIA - A GENERAL OVERVIEW:

INDIA is one of the oldest civilisations in the world with a kaleidoscopic variety and rich cultural heritage. It

has achieved all-round socio-economic progress during the last 61 years of its Independence. India has become

self-sufficient in agricultural production and is now the tenth industrialised country in the world and the sixth

nation to have gone into outer space to conquer nature for the benefit of the people. It covers an area of

32,87,2631 sq km, extending from the snow-covered Himalayan heights to the tropical rain forests of the south.

As the 7th largest country in the world, India stands apart from the rest of Asia, marked off as it is by mountains

and the sea, which give the country a distinct geographical entity. Bounded by the Great Himalayas in the north,

it stretches southwards and at the Tropic of Cancer, tapers off into the Indian Ocean between the Bay of Bengal

on the east and the Arabian Sea on the west.

Lying entirely in the northern hemisphere, the mainland extends between latitudes 8°4' and 37°6' north,

longitudes 68°7' and 97°25' east and measures about 3,214 km from north to south between the extreme

latitudes and about 2,933 km from east to west between the extreme longitudes. It has a land frontier of about

15,200 km. The total length of the coastline of the mainland, Lakshadweep Islands and Andaman & Nicobar

Islands is 7,516.6 km.

6.1 THE RURAL SEGMENT

The Census defines urban India as - "All the places that fall within the administrative limits of a municipal

corporation, municipality, cantonment board etc or have a population of at least 5,000 and have at least 75 per

cent male working population in outside the primary sector and have a population density of at least 400 per

square kilometer.

India is a land of diversity and about 70% of the Indian population lives in villages. These villages contribute in

the economic development of the nation through the production of food grains, vegetables, fruits, etc. Export of

these agricultural commodities result in the generation of capital and earnings of foreign exchange.

There are 600,000 villages in India. 25% of all villages account for 65% of the total rural population. So we can

contact 65% of 680 million or 700 million population by simply contacting 150000 villages – which shows the

huge potential of this market. The overall population in rural India is highly scatterd with about 25% of the rural

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population residing in cvillages which have 501 -1000 population size. This creates problems for major

companies to foray into such areas as cost of logistices and the market does not allow them to. Further villages

with population above 1000 comprises of about 30% which again is highly scattered and owing ttto which major

FMCG comapines have to resort to innovative ways to reach such areas. One of the most prominent examples

being HUL –Project Shakti and ITC e choupal.

Inhabited villages classified by population size, 1991 and 2001

Villages in size group (1991) Villages in size group (2001)

Number Per Cent Number Per Cent

Less than 200 103952 17.9 92541 15.6

201 -500 141143 24.3 127054 21.4

501 – 1000 144998 25 144817 24.4

1001 – 2000 114395 19.7 129662 21.9

2001 – 5000 62915 10.8 80313 13.5

5000+ 13376 2.3 18758 3.2

Total 580779 100.0 593154 100.0

Source: Census 1991 & 2001

6.2. POPULATION: With the rate of urbansiation superseding the rural growth it is predicted that rural population will constitue

33.67% and rural 66 % and will continue to be vital for the overall eonomy. Sex ratio, defined as the number of

females per thousand males is an important social indicator to measure the extent of prevailing equality between

males and females in a society at a given point of time. The sex ratio in the country had always remained

unfavourable to females. However with the increase of literacy rate and the concept of nuclear families in the

rural segment, the women have been equal partners in overall decision making process.

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Year Projected Population

(in thousands)

Urban

Population%

%Rural

Population

Persons Males Females

1996 934218 484859 449360 22.73 72.27

2001 1012386 523780 488606 28.77 71.23

2006 1094126 564498 529628 30.35 69.65

2011 1178889 606744 572145 31.99 68.01

2016 1263543 648886 614657 33.67 66.33

Source: Census of India 2001

6.3 OCCUPATION:

By further segmenting the rural population by occupation , it was found as per the NCAER 2002 that

Cultivators and wage earners comprised the largest segment with figures such as 40.86% and 35.28%. The

demographic profile in this segment naturally affects the buying behaviour. The wage earner and salary earner

cannot behave in the same manner. The cultivators income is seasonal with more disposal income available fater

the harvesting season. A shift in occuptaion pattern is seen during the off season times when majority of the

working class - labourers will shift to urban places or governments works in their villages to earn additioanl

income.

6.4 RURAL CONSUMPTION GROWTH The rural consumption rate will continue to lag behind the urban counterparts but will accelerate from a

compounded rate of 3.9% to 5.1% during the next two decades. By the end of the forecast the rural consumption

Distribution of Households by occupation of the Heads, 1999 -2000

Head’s Occupation Distribution of Households (%) Urban Rural All Housewife 0.84 1.01 0.96 Cultivators 3.45 40.86 29.99 Wage Earners 20.93 35.28 31.12 Salary Earners 40.72 11.28 19.84 Professional 3.59 0.73 1.56 Artisans 6.90 3.41 4.42 Petty Shopkeers 16.05 4.47 8.19 Businessman 3.68 0.46 1.40 Others 3.85 1.98 2.52 Total 100 100 100 Source: NCAER 2002

JCB INDIA LTD 2009


rate would have nearly trebled and will have created a large potential market of about 26 trillion Indian rupees

($577 billion). In comparision, Indian rural markets will be larger than the total consumer markets in South

Korea or Canada today and almost the four time size of Indian urban Market.

Rural India will see a growth in the consumption rate on a per –household basis and at present the consumption

rate lag behind that of the urban consumption rate. However as per MGI prediction the rural consumption rate

will reach equilavent to that of the urban by the year 2017 provided the consumption rate grows at a constant

rate of 5.1% and Indian GDP continues yto grow at rate of 8% per annum

The World Bank estimates that 456 million Indians (42% of the total Indian population) now live under the

global poverty line of $1.25 per day (PPP). This means that a third of the global poor now reside in India.

However, this also represents a significant decline in poverty from 60 percent in 1981 to 42 percent in 2005,

although the rupee has decreased in value since then, while the official standard of 538/356 rupees per month

has remained the same.

JCB INDIA LTD 2009


6.5 POVERTY – AN AREA OF CONCERN

India’s national definition for poverty is based on calorific consumption, which sets at 2400 calories per capita

per day for rural inhabitants. In 2001 29 percent of the population was considered living below the

poverty line and a risk of malnourishment. However owing to Indian economy overall progressment and an

increase in the income of the rural population and also from owing to diversification from agro to non agro

services, it is predicted that the size of the deprived class who earn a minimal, will decline from 65 percent of

the population to 29% of the rural population.

With the population growing at the rate of 116 million over the next twenty years and is predicted that there will

be 325 million fewer rural poor by 2025 which means a masive increase in overall consuption power of the rural

class.

6.6 DIVERSIFICATION OF RURAL INDIA

As per the data of NSSO, the overall proportion of male population employed in the agricultural sector has

dcreased from 75% to 69% . There has been a substantial increase in the workforce of the service sector such as

construction, trade, hotels, transport, storage and communication. The manufacturing sector in rual araes such as

food processing companies and other agri processing manufacturers have also taken a large chunk of rural

agricultural labourers for their day to day working. This has been a good factor for such people as their disposal

income has increased owing to good salaries and provison provided by their employers.

JCB INDIA LTD 2009


6.7 RURAL ASPIRERS: THE FUTURE GROWTH DRIVERS

The overall average income of the rural household as predicted by the NSSO will increase by 3.65 over the next

20 years, 0.8 percent faster than the previous 20 years. The pace of growth will be sufficient enough to trigger a

shft from the Deprived to the aspirers as shown below in the diagram. The aspirers will constitute 47% of the

population by the year 2015 and will constitute 55% of the overall spending. By the year 2025, the seekers

which will constitue the lower – middle class will constitue a fifth of the rural pupulation which will spend a

substantial amount of their income on discretionary product and services.

As the income increase, the businesses will still face the problem of extremely low per household income

spending. Also the fact that the aspirers and seekers will be higy dispersed all across the nation which will

require thorough understanding of the highly fragmented market and varied household and product needs.

JCB INDIA LTD 2009


6.8 PARAMETERS FOR CONSUMPTION CAPABILITIES:

The obejective here was to determine the statewise potetntial in terms of rural segment for JCB to foray into

with its new product yet to be disclosed by the company. The research concept is based on Marketing White

Book 2007 - 2008 findings. The parameters here determine the income, housing and occupation of the targeted

segment and eventually their consumption pattern which will also help in understanding the profile of the all the

parameters is 55,41,35,000 which cover all the states of India. targeted rural consumers and the possibility to

lauch the product in such a market.

6.8.1 TRACTOR OWNERSHIP:

Established individuals: 55,41,35,000

Individuals: 1,10,90,000

Higher Availability:

Punjab: 12.4%

UP: 3.4%

Haryana : 6.8%

Rajasthan: 3.8%

The Indian tractor industry is the largest in the world accountuing for one third of the world production. In the

long term the industry is expected to grow at a rate of 5to 7 percent largely due to the thrust by the government

5.3%4.6%

7.2%

6.5%

5.2%

14.5%11.2%

2.8%

29.2%

2.9%

Tractor OwnershipAPAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisaPunjabRajastahnTamil NaduUP

Source: Marketing Whitebook 2007 -08.

Rajasthan

U.P.

Punjab

JCB INDIA LTD 2009


to increase agriculture GDP. 93 percent of the tractor industry is concentrated in twelve states namely Andhra

Pradesh, Bihar, Gujarat, Haryana, Punjab, Orissa, Tamil Nadu, Karnataka, Maharsahtra, Uttar Pradesh, Madhya

Pradesh and Rajsathan. Uttar Pradesh is the largest tractor market with 44, 308 units sold in 2006-07. Tractor

sales in Maharashtra, Karnataka, Tamil Nadu and Gujarat have shown a tremendous growth in the 2005 -06

percent of about 63 %, 54%, 47 %. A high level of tractor ownership was observed in Uttar pradesh, Rajasthan

Punjab and Maharashtra. However owing to heavy subsidies and encouragement to the farmers the government

of Andhra Pradesh has been encouraging farmeres to improve their agricultural output by using agricultural

machines like tractors, cultivators, etc.

6.8.2 ELECTRICITY CONSUMPTION:

Established Individuals: 55,41,35,000


Higher availability of electricity:

AP: 85%

Maharashtra: 72%

Tamil Nadu: 88.2%

UP: 32.7%

Uttaranchal : 77.7%

Rajasthan: 51%

11.8%

6.6%

7.8%

5.3%7.1%

10.1%

5.1%

8.1%

9.8%6.2%

Electricty AvailabilityAPAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisaPunjabRajastahnTamil Nadu

Maharashtra

U.P.

A.P.


JCB INDIA LTD 2009


The National Electricity Policy envisages that the per capita availability of electricity will be increased to over

1000 units by 2012. The per capita consumption of power in the country in 2005-06 as calculated by the

Central Electricity Authority has been about 631 Kilowatt Hours.

Some of the states identified wherein per capita consumption of electricity was hich were:

Haryana – 1090

Punajb – 1436

Gujarat – 1283

Goa - 1970

Andhra Pradesh – 723

Uttar Pradesh – 311

Rajasthan – 572

Maharasthra – 934

However electricity availability in rural sector was prevalent on the higher side in states like Maharashtra,

Karnataka, Andhra Pradesh, Tamil Nadu and Uttar pradesh as per the MGI India consumer demand survey. The

usage of electricity in households and farms are signs of progressment and better standard of living .

JCB INDIA LTD 2009


6.8.3 DISEAL, ELECTRIC AND GENERATORS SETS

The usage of generator sets and pumpsets –diseal engines and electric pumps again shows the level of

mechanisation in the rural sector of India. Electric Motors and Diesel Engines are the primary sources of

stationary power for irrigation, threshing and various post-harvest agro-processing operations. Diesel Engine

population, which was 1.443 million in 1971-72 increased to 5.528 in 1995-96, and, crossed 7.4 million in

2005-06.

Electric Motor population has increased from 1.535 million in 1971-72 to 7.464 million in 1995-96, and, was 12

million 2005-06. The usage of diseal pumps was highly prevalent in states like U.P, Rajsathan, Bihar and Tamil

Nadu as shown below.

1178

62144244

2670

10904255

1156

2480

8403

2284

27641

5633

Diseal Pump Availability - Units - 2003 Andhra PradeshBiharChattisgarhGujaratHaryanaJharkhandKarnatakaKerelaMPMaharashtraOrrisaPunjabRajasthanTamil NaduUttar PradeshWest Bengal

U.P

Rajasthan

TN Bihar

U.P

Rajasthan

TN Bihar

www.indiastat.com

JCB INDIA LTD 2009


6.8.4 IN HOUSE BATHING FACILITY:



Highest availability:

Haryana: 48%

Punjab: 55%

Tamil Nadu: 45%

Karnataka: 86%

The prevalence of ingouse bathing facility in rural areas is again a sign of progressement a large section of the

poulation in this deprived of it. As per the MGI Consumer Demand Model states like Andhra Pradesh,

Karnataka, and Maharashtra had large households with provisions of inhouse bathing facility. The prosperity

factor seems to be on ahigher side in such states but can owing to a highly fragmented rural population and

diverse cultures and beliefs this parameter may not be that useful.

6.8.5 OCCUPTAION WISE:

The rural segement of India is highly involved in agricultural activity but is supplemented with animal

husbandry and rearing livestock. India ranks second worldwide in farm output. Agriculture and allied sectors

like forestry, logging and fishing accounted for 16.6% of the GDP in 2007, employed 60% of the total

12.6% 5.8%

5.1%

3.7%15.8%5.7%

10.4%4.8%

3.9%

8.8%

9.4%

In House Bathing FacilityAPAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisa

Karnataka

A.P.

Maharashtra


JCB INDIA LTD 2009


workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a

significant role in the overall socio-economic development of India. The highest paid occupation for men in

rural India is masonry among seven non-agricultural occupations.

6.8.5.1 OWNER FARMERS:



Highest numbers:

Rajasthan: 27%

Maharashtra: 23%

M.P. : 39.9%

UP: 18.9%

As per the MGI India Consumer Demand Model Uttar Pradesh, Maharashtra and Madhya Pradesh have a huge

number of farmers who own and till their own land and this also explains the high sale of tractors and

agricultural equipment in theses states. Uttar Pradesh has around 18.8% of farmers who own lands ranging from

1 acre to about 18 acres as per the ceiling limit.

5.5%

8.8% 3.4%

4.2%

13.8%

4.8%10.6%

3.8%

9.0%

3.4%

18.8%

4.3%

Owner FarmerAPAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisaPunjabRajastahnTamil NaduUP

M.P.Maharashtra

Rajasthan

Source: Marketing Whitebook 2008 - 09

U.P

Orissa

JCB INDIA LTD 2009


6.8.5.2 LEASED FARMERS:


Individuals: 10344000

Highest Numbers:

Bihar: 7.1%

Orissa: 4.2%

UP: 1.8%

The concept of leased farming is highly prevalent in Bihar with about 37% of the farmers engaged in this

business. The lease period may range from 1 year to over 5 years wherein the tenant tills and harvest the land

and gives the lease payment depending upo the going rate per acre in advance. This gives the leased farmer an

incentive to invest in agricultyural tools and implements owing to the security of managing the land for a fixed

duration of time. The concept is catching up in Uttar Pradesh with over 16.8% of the farmers resorting to takin

lands on lease.

37.2%

3.7%

4.8%

3.5%

10.0%3.5%

16.8%

8.7%

Leased FarmersAPAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisaPunjabRajastahnTamil NaduUPUttranchalSource: Marketing Whitebook 2008 - 09.

U.P

Orissa

Bihar

JCB INDIA LTD 2009


6.8.5.3. AGRICULTURAL WORKERS:



Highest Numbers:

Bihar: 7.1%

Orissa: 4.2%

UP: 1.8%

Agricultural labourers are the most important assets for the farmers as the overall survival of the farm depends

upon them. They are the bread and butter for the owners and the overall productivity of the farmland depends is

connected with them. However owing to better avenues offered in nearby towns and metro cities a huge number

of these flock to such places to earn a better standard of living which is a major concern for today’s farmers. As

per the MGI India Consumer Demand Model Andhra Praesh has a highest number of agricultural workers

employed with the figure being 16.9 % followed by Karnataka -11.2%, Maharashtra - 12.1%, Bihar – 10.8%.

16.9%

10.8%

1.9%

5.9%

11.2%10.2%

2.9%

12.1%

8.1%

7.7%7.2%

Agricultural WorkerAPAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisaPunjabRajastahnTamil NaduUPUttranchalWest BengalSource: MGI India Consumer Demand Model.

M.P.

Karnataka

A.P.

Maharashtra


JCB INDIA LTD 2009


6.8.6 INCOME BASIS:

INCOME RANGE: RS. 500 – 1000



Highest Numbers:

AP: 6%

Bihar: 4%

Maharashtra: 8%

Rajasthan: 2%

UP: 4%

Punjab: 0.6%

The income level of the rural population was highly inconsistent depending upom the kind of profession these

people are into. It was observed that Uttar Pradesh and Andhra Pradesh has a large number of rural population

who live below the poverty line with their yearly income ranging from a mere Rs. 6000 to 12000. This number

also include a high prevalance of child labour who get under paid for the same amount of work done by them

either in agricultural or in other non agricultural allied serives

10.0%1.2%

9.4%

4.3%

2.7%

1.4%

3.7%

6.9%

2.8%

8.7%6.5%

6.7%

5.5%

20.1%

6.7%

Rs. 500 - 1001APAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisaPunjabRajastahnTamil NaduUPUttranchalWest Bengal

Source: MGI India Consumer Demand Model.

Karnataka

JCB INDIA LTD 2009


6.8.6.1 INCOME RANGE RS. 5001 – 6000 P.M.:



Highest Numbers:

Bihar: 5.8%

Maharashtra: 1.7%

Punjab: 6%

UP: 2%

Rajasthan: 2%

States like Uttar Pradesh, Punjab, Bihar showed people earning an income of Rs. 60000 to Rs. 72000 per year

which showed that a large number of people owned small size holdings and were also involved in other

agricultural and non agricultural allied services. The average going rate in the states for an agricultural labourer

ranges between Rs. 80 to Rs. 150 per day which comes to about Rs. 4500 per month. The figures below quote a

higher amount which shows that the probality of an individual involved in other areas is high.

3.9%

8.3%9.8%

7.3%

3.2%

4.6%

5.8%6.1%

5.9%

2.9%

15.0%

3.1%

7.5%

Rs. 5001 - 6000 APAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisaPunjabRajastahnTamil NaduUPUttranchal

Punjab

U.P Bihar


JCB INDIA LTD 2009


6.8.5.3 INCOME RANGE RS. 40001 - 60000

Established Individuals: 55, 41, 35000

Individuals: 77,000

This set of people are either large farm holders or are self employed dealing with agricultural and non

agricultural services such as food processing, trading, contractors, shop keepers. Uttar Pradesh, Maharsahtra,

Punjab, Rajsathan are some key states where there is a section of rural poputaion which are affluent and have a

high disposal income. These are considered to be in the top income bracket and are the affluent lot.

7. STATEWISE HUMAN DEVELPOMENT INDEX:

The HDI combines normalized measures of life expectancy, literacy, educational attainment, and GDP per

capita for countries worldwide. It is claimed as a standard means of measuring human development—a concept

that, according to the United Nations Development Program (UNDP), refers to the process of widening the

options of persons, giving them greater opportunities for education, health care, income, employment, etc. The

basic use of HDI is to measure a country's development.

As per the www.indiastat.com Kerela, Punajb, Maharasthtra, Gujarat, Harayana, Karnataka, Tamil Nadu are

among the top seven states when it comes to eductaion, life expectancy and GDP per capita and Bihar, Uttar

Pradesh and Madhya Pradesh ranked the lowest owing to large no of families and rural population living below

11.7%7.8%

9.1%

10.4%

10.4%9.1%

15.6%

24.7%

1.3%

Rs. 40001 - 60000APAssamBiharJharkhandGoaGujaratHaryanaHPKarnatakakeralaMPChattisgarhMaharasthtraOrrisaPunjabRajastahnTamil NaduUP

Source: MGI India Consumer Demand Model.

Bihar

Maharashtra

Orissa

U.P

Rajasthan

JCB INDIA LTD 2009


the poverty line. The medical provision, health care facilities, eductaion, are on the path of improvement owing

to government initiatives but still way behind other states.

(1981, 1991 & 2001)

States/UTs 1981 1991 2001

Value Rank Value Rank Value Rank

Andhra Pradesh 0.298 9 0.377 9 0.416 10

Assam 0.272 10 0.348 10 0.386 14

Bihar 0.237 15 0.308 15 0.367 15

Gujarat 0.36 4 0.431 6 0.479 6

Haryana 0.36 5 0.443 5 0.509 5

Karnataka 0.346 6 0.412 7 0.478 7

Kerala 0.5 1 0.591 1 0.638 1

Madhya Pradesh 0.245 14 0.328 13 0.394 12

Maharashtra 0.363 3 0.452 4 0.523 4

Orissa 0.267 11 0.345 12 0.404 11

Punjab 0.411 2 0.475 2 0.537 2

Rajasthan 0.256 12 0.347 11 0.424 9

Tamil Nadu 0.343 7 0.466 3 0.531 3

Uttar Pradesh 0.255 13 0.314 14 0.388 13

West Bengal 0.305 8 0.404 8 0.472 8

India 0.302 0.381 0.472

JCB INDIA LTD 2009


8. AGRICULTURE SECTOR OVERVIEW

As per statistical abstract India 2004, the overall land expanse of India is estimated to be around 32,87,2631 sq

km with total net sown area of about 46%. Further fallow lands and permanent pastures constitute 7% and

potetntial culturalable wasteland constitue 4% of the area. The overall forect coverage is 23% .

Agriculture is the backbone of Indian Economy. About 65% of Indian population depends directly on

agriculture and it accounts for around 22% of GDP. Agriculture derives its importance from the fact that it has

vital supply and demand links with the manufacturing sector. During the past five years agriculture sector has

witnessed spectacular advances in the production and productivity of food grains, oilseeds, commercial crops,

fruits, vegetables, food grains, poultry and dairy. India has emerged as the second largest producer of fruits and

vegetables in the world in addition to being the largest overseas exporter of cashews and spices. Further, India is

the highest producer of milk in the world.

Today, India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and

fishing accounted for 16.6% of the GDP in 2007, employed 60% of the total workforce and despite a steady

decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall

socio-economic development of India.

46%

3%

4%

1%

4%14%

14%

23%

Total Area coverageNet Sown Area

Fallow land

Culturable Waste Land

Land Under Misc Tree

Permanent Pastures

Un Cultivable

Current Fallows

Foreststatistical abstract india 2004

Total area expanse: 32,87,2631 sqkm

JCB INDIA LTD 2009


Dairy: India ranks first in the world in milk production, which was around 100 million tones in 2006-07.Strong

networks of Milk Cooperatives, have been instrumental in this phenomenal performance of dairy sector in India.

Presently, 1.13 lakh village level cooperative societies spread over 265 districts in the country form part of the

national Milk Grid. This Grid links milk producers throughout India and consumers in 700 towns and cities. De-

licensing of dairy sector in 1991 has directed considerable amount of private funds both from inside and outside

country in this sector especially in manufacturing facilities while investment in cooperative sector are

concentrated largely in procurement and processing of milk.

Livestock: Livestock sector contributes about 27% of the G.D.P. from agriculture and allied activities. This

sector has excellent forward and backward linkages, which p-promote many industries and increase the incomes

of vulnerable groups of the society such as agricultural labourers and small and marginal farmers. India

possesses the second largest livestock population in the world. Production and export of poultry products have

shown considerable growth in the recent decades. Export of such products to countries including Bangladesh,

Srilanka, Middle East, Japan, Denmark, USA, and Angola augers well for this industry.

Fishery: Fishing, aquaculture and a host of allied activities are a source of livelihood to over 14 million people

and a major source of foreign exchange earner. In 2005-06, this sector contributed about 1% of G.D.P. and 5.3%

Farm Sector

Forestry

Fishing

HorticultureAnimal

Husbandry

Agriculture

JCB INDIA LTD 2009


of G.D.P from agricultural sector.8,118 k.m. of coastline gives geographical basis for the development of marine

fishery sector and cultural factor boosts the inland fishery sector in India.

According to a monthly review by the Centre for Monitoring Indian Economy (CMIE), agricultural production

is likely to increase significantly and has projected a growth of 3.2 per cent during fiscal year 2009, for the GDP

of agriculture and allied sectors. The allied sectors comprising livestock, forestry and logging, and fishing are

likely to see a growth of 4.8 per cent during fiscal year 2009.

India is the second largest producer of both fruits and vegetables in the world and the National Horticulture

Mission (NHM) aims at doubling horticulture production by 2012. Under the NHM, US$ 220.66 million has

been earmarked for horticulture development during this year. The Indian state of Gujarat is striving to become

a horticulture hub. With a two-fold increase in the land already allotted to horticulture, the state government

now plans to bring in another 20 million hectares.

8.1. THE AGRICULTURE EVOLUTION SINCE 1891:

As ahown below agriculture sectors agriculture pre independence was a much neglected area with large holdings

onk in the hands of preveleged few. Further the peope who did own small holding were subject to harsh tax

regime by the Britishers. The British used India as a source of growing cotton and exporting the raw material to

JCB INDIA LTD 2009


Englad for processing and importing back for sale. The food grain growth rate was dismall which was as low as

0.1% per year. India went through a huge transformation after independence between 1947 – 1968 which saw

the abolition of zamindari Act. Agriculture sector was the biggest employer with close to 70% of the population

and contributed a close to 50% to the GDP. On the event of Green revolution and financing for agriculture

purpose approved by the Central Government India achieved self sufficiency in food grains between the era

1968 -1988. However with passage of time the overall contribution of agriculture to the GDP went down with

other sectors such as manufacturing and services coming up.

8.2 AGRICULTURE GROWTH

Despite the stimulus to the rural income provided by the government programmes and a steady shift towards

industries and services, agriculture will continue to be a primary source of income and employement for a

majority of the rural indians into the foreseeable future. The agricultural sector will see continued modest

productivity gains and that value added by the agriculture sector will pick from 2.4% growth rate of the past

decade to 3.1% over the next two decades.

1891 – 1946

•Stagnation

•Few improvement in seeds, machines and fertilisers

•Food grain growth rate at 0.1% per year

1947 -1968

•Land Reforms –Abolition of Zamindari Act

•Agriculture had 70% of country’s employment

•Contributed 50% to GNP

•Central Govt provided financing for agriculture programs

1968 -1988

•Green Revolution

•Self sufficiency in food grains

•Better seeds, irrigation and fertilizers

•Buffer stock

1988 -2006

•Expanding cereal production

•Increase in commercial crop production

•Major MNCs entering Indian Market.

•Easy availability of finance.

•Aim to sustain growth of 4 -5%

JCB INDIA LTD 2009


8.3 AGRICULTURAL DIVERSIFICATION TO HIGH VALUE ADDED FARM ACTIVITIES

There is a continued shift from towards value added farm activities – i.e moving from traditionalcereals and

pulse crops to higher value horticulture products, dairy, and products such a honey, and even silk. India’s output

of fruit and vegetables saw a rapid growth of more than 13% during 1993 to 2003with its share of total

agricultural output increasing from 14 to 21 percent.

Further a shift down towards agri processing value chain have brought benefits to rural areas. This can be seen

in the case of Sula Vines in Nashik, Northern Maharashtra. Based on Mckinsy study about 90% of the villagers

were unemployed or were subsistence farmers. With the comiong of the company about 150 of the people are

employed directly, around 100 of them are into contract farming and this has also spawned ancillary industries

in the surrounding villages. Average income per farm has risen by 40 %and the secondary impact has been more

drammatic where 30% of the workforce are women, Local schools have been renovated and about 90% of the

villages have electricity.

Further with private companies making grounds in ruraol areas like ITC with their e choupal concep have made

farmers better off owing to fair price for their produce which has made them better off in terms of standard of

living. Further technological innovation and government initiatives such as Planning Commission ‘s setting up

JCB INDIA LTD 2009


of research institutes for seeds, irrigation have helped farmers tremendoulsy across the terrain. In the long term

this will lead to better yeilds and lesser dependance on the monsoons.

8.4 IRRIGATION:

Agriculture sector is the higehest consumer of water. The average annual water availability of the country is

assessed as 1869 billion cubic metres (BCM). Of this, total utilizable water resource is assessed as 1123 BCM,

surface water 690 BCM and ground water as 433 BCM. The irrigation potential through major, medium and

minor irrigation projects has increased from 22.6 million hectares (mha) in 1951 when the process of planning

began in India to about 102.77 mha at the end of tenth plan.As per the indiastat.com Punjab, UP and Haryana

are better placed when it came to statewise percent coverage of irrigated area under principal crops.

State-wise Percent Coverage of Irrigated Area under Principal Crops during 2005-06 (Provisional)

44.957.0

23.9

38.0

83.7

18.8

41.6

30.018.823.024.919.427.4

30.8

96.636.0

56.3

35.044.2

73.1 57.5

Percent (%)ANDHRA PRADESHARUNACHAL PRADESH**ASSAM**BIHAR**CHHATTISGARHGOAGUJARAT**HARYANAHIMACHAL PRADESH**JAMMU & KASHMIR**JHARKHAND**KARNATAKAKERALAMADHYA PRADESHMAHARASHTRAMANIPURMEGHALAYAMIZORAMNAGALANDORISSA**

U.P

Haryana

Punjab

www.indiastat.com

JCB INDIA LTD 2009


8.5 CROP COVERAGE:

The major crops taken here in my analysis are cash crops which are grown all acorss the Indian sun continent.

These are mainly cotton, coffee, sugar cane jute, rice and wheat.

Cotton:

As pet the indiastat gujarat, Maharashtra and Andhra pradesh constitute about 70% of the total cotton grown in

the country. The total are of production as per 2008 data was around 9.114 millim hectares. Cotton is the staple

crop in these regions and constitutes a major source of livlihoods of millions of farmers in this region. India,

which was having one of the lowest cotton yields in the world, has become a net cotton exporter, potentially five

million bales in 2007-08, the study said. Bt cton was a major factor contributing to higher rate of production

from 15.8 million bales in 2001-02 to 31 million bales in 2007-08. The income of growers in India has also

increased up to Rs 10,000 or more per hectare. The studies have shown strong farmer confidence in the crops

with nine of 10 Indian farmers replanting biotech cotton year on year.

Coffee:

The leading states in coffee plantation and harvesting are Karnataka and Kerela which constitute abouttt 70% of

the overall area utilised. The overall area covered is 0.38 million hectares.

The production of coffee has not yet come out of the stagnation phase notwithstanding a marginal increase from

2.7 lakh tonnes in 2005-06 to 2.9 lakh tonnes in 2006-07. Although India contributes only 4 per cent of total

world production, Indian coffee has created a niche for itself in the international market, particularly Indian

robustas, which are highly preferred for their blending quality. Arabica coffee from India is also well received in

the international market

Sugarcane:

Sugarcane is one of the most imporatnt cash crop and is generally concentrated in regions of Uttar Pradesh and

Maharasthra. The overall area utilised for the same in india comes to 0.38 million hectares and constitutes a

mjor source of income for the farmers in Uttar Pradeeesh. It is a eleven month crop with the capability of being

harvested three times with the same roots. This saves the farmers a lot in terms of seeds and tillering and is

usually preferred over other crops in terms of cost savings. Owing to low sugar prices and the inability of the

JCB INDIA LTD 2009


factories to pay farmers for their produce , sugarcane planting has come down to 4.28 million tonnes, down from

5.17 million tonnes a year ago.

Jute:

Jute is the principle crop for farmers in the region of West Bengal which constitutes about 75% of the toal area

of 0.8 million hectares. It is a staple crop for people in West bengal and Orrisa and a source of employment to a

large number of rural popultaion in industries which use jute as a raw material.

www.indiastat.com

Food Grains:

The total area coverage under food grains in 2007-08 has been reported as 124.10 million hectares against

123.71 million hectares in 2006-07. Food grain production in 2007-08, estimated at 219.32 million tonnes-an all

time record. Rice production at 94.08 million tonnes, maize at 16.78 million tonnes, soya bean at 9.45 million

tonnes, cotton at 23.38 million bales each, an all time record.

26.1

34.0

6.7

10.6

5.87.0

3.8 4.2 1.1 0.7

CottonGujarat

Maharashtra

Punjab

Andhra PradeshHaryana

Madhya PradeshRajasthan

Karnataka9.14 mill. Hts

58.1%

21.8%

8.1%9.7%

Coffee Karnataka

Kerala

Tamil Nadu

Andhra PradeshOrissa

Arunachal Pradesh

0.38 mill hts

43.7

20.4

7.6

6.4

5.0

4.1 2.7

2.3

2.5 0.6

Sugarcane Uttar Pradesh

Maharashtra

Tamil Nadu

Karnataka

Andhra PradeshGujarat

Haryana

Uttarakhand

0.38 mill hts

7%

16%

75%

1%

JuteAssam

Bihar

Jharkhand

Meghalaya

Nagaland

Orissa

Tripura

West Bengal

0.8 mill hts.

JCB INDIA LTD 2009


Rice is a primary source of income and employment for the rural folks in the states of West Bengal, Orrisa,

Andhra Pradesh and Uttar Pradesh and Wheat is grown on a mass scale in states of Haryana, Uttar Pradesh,

Punjab and Madhya Pradesh.

8.6 AGRICULTURAL PROSPECTS:

• India is expected to spend around US$ 14.05 million for the development of organic spices by 2012,

particularly on turmeric, chilli, and ginger.

• Andhra Pradesh Jute Development Centre Ltd (APJDC) will be setting up a jute park spread over 150-

acre land in Visakhapatnam, with an investment of US$ 20.49 million. It plans to give up to a total of 5

per cent equity to jute farmers in the region.

• The West Bengal Financial Corporation (WBFC) is setting up of small and medium enterprises in

sectors such as agro-based businesses and floriculture. It has sanctioned about US$ 43.22 million for

2008–09.

• The Horticulture Department of Andhra Pradesh Government has announced an action plan for 2008–

09 with an investment of US$ 152.30 million for the development of nurseries in the public and private

sectors and increasing productivity of crops.

• The Andhra Pradesh government has sanctioned US$ 773.68 million) for the Pranahita-Chevella Lift

Irrigation Scheme. to irrigate an area of 1.22 million acres in the drought prone areas of the Telangana

region.

• Tata Chemicals has firmed up plans to set up a manufacturing plant for customised fertilisers at

Babrala in Uttar Pradesh. The company will invest close to US$ 10.02 million in this facility having a

production capacity of 20 tonne per hour.

9.0% 8.3%

8.6%

10.2%

13.0%

13.0%

RiceAndhra Pradesh

Assam

Bihar

Chattisgarh

Gujarat

Haryana

HP

J&K

Jharkhand

Karnataka

Kerela

Madhya Pradesh

Maharashtra

Orissa

Punjab

Rajasthan

Total Area: 4.37 mill htr

7.62% 8.79%

13.29%

12.41%

9.21%

32.38%

Wheat Andhra Pradesh

Arunachal Pradesh

Assam

Bihar

Chhattisgarh

Total Area: 2.8 mill htr

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8.7 GOVERNMENT INITIATIVE:

Government has been taking various progressive measures to accelerate the growth of this sector. Some of the

recent initiatives taken by the government include:

• In the 2008–09 budget, the government has given a US$ 12.23 billion waiver of farm loans.

• Giving a nod to the National Policy on Biofuels under which India will aim to raise blending of

biofuels with petrol and diesel to 20 per cent by 2017. This will provide a major boost to the bio-diesel

sector. It has also approved the setting up of National Bio-fuel Coordination Committee and Bio-Fuel

Steering Committee.

• Allowing private sector companies engaged in business of warehousing or transport of food grains in

procurement operations on behalf of the Food Corporation of India (FCI).

• A weather-based agricultural insurance scheme is rolled out across select districts in 12 states during

the Rabi season.

• Construction of seven Modern Terminal Markets with modern infrastructure facilities that will help

farmers realise maximum returns for their produce, remove middlemen and ensure lower prices for

end-consumer.

• The government has already approved 60 Agricultural Export Zones (AEZs). Besides, four zones have

been identified to provide US$ 12.1 million worth of funds under a scheme called Assistance to States

for Infrastructure Development of Exports.

• The Government will provide an additional US$ 6.17 billion for new farm initiatives launched by states

to double the growth rate in agriculture to 4 per cent over the 11th Plan period.

• The National Food Security Mission was launched in 2007, with an outlay of US$ 979.51 million over

the 11th Plan (2007–2012). It aims at enhancing the production of rice, wheat and pulses by 10 million

tonnes, 8 million tonnes and 2 million tonnes, respectively by the end of the 11th Plan.

• The Rashtriya Krishi Vikas Yojana was also launched in 2007. Under this the States are being provided

with US$ 5.01 billion over the 11th Plan period for investment in various projects based on local

requirements.

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9. THE RURAL CREDIT SYSTEM

Availability of adequate credit is vital for every sector and agriculture is not an exception. In India, Commercial

Banks, Cooperative Banks, and Regional Rural Banks ( RRBs) are responsible for smooth flow of credit to

agricultural sector. But a huge unorganized market exists for credit to agricultural sector in India, which provide

timely fund to this sector but at the exorbitant rate of interest. Among organized credit disbursement to

agriculture commercial banks play a vital role with a share of about 70% where as cooperative sector and RRBs

contribute 20% and 10 % respectively.Kisan Credit Card (KCC) scheme was introduced to provide adequate

and timely support from the banking system to the farmers for their cultivation needs. This scheme has made

rapid progress and more than645 lakh cards issued up to October 2006.

9.1 CREDIT CONSTRAINTS

A vast majority of India’s rural poor still does not have acces to formal finance. The World Bank (WB) National

Council of Applied Economic Research (NCAER) Rural Finance Access Survey (hereafter RFAS 2003)

prepared as a background to this report, indicates that rural banks serve primarily the needs of richer rural

borrowers: some 66 percent of large farmers have a deposit account; 44 percent have access to credit.

Meanwhile, the rural poor face severe difficulties accessing savings and credit from the formal sector Some 87

NABARD

ST Coop

41,813

SCBs

DCCBs

PACs

1,35,000

SCARDBs

PCARDBs

LT CoopRRBs

140

Branches

22227

RBI

Commercial Banks

Branches

30,750

JCB INDIA LTD 2009


percent of the poorest households surveyed (marginal farmers) do not have access to credit, and 71 percent do

not have access to savings from a formal source.

The quantum of credit flow to agriculture during the past five years, between 2003-04 to 2007-08. Total ground

level credit flow increased at 25 per cent annually during this period to peak at Rs 2,29,399 crore in 2006-07.

The credit flow from cooperative system grew at 13 per cent per annum, the lowest among the agencies. As a

result, the share of cooperatives in the total credit flow declined from about 31 per cent to a bit below 22 per

cent during the same period.

9.2 MICRO FINANCE : A RURAL INITIATIVE

Recent years have witnessed the growth of new microfinance approaches designed to serve poorer households.

These often involve partnerships between government, non-governmental organizations (NGOs), and banks.

Micro finance scheme has been introduced by National Bank for Agriculture and Rural Development

(NABARD), the apex bank for agriculture and rural development in India, to improve the access of the rural

poor to formal institutional credit and other financial products. In all 547 banks, which include 47 commercial

banks, 158 RRBs, 342 cooperative banks are now actively involved in the operation of Self Help Group (SHG)-

Bank Linkage Programme to spread the facility of micro finance to the needy small and marginal farmers and

tiny entrepreneurs. The programme has enabled nearly 329 lakh poor families in the country to gain access to

micro finance facilities from the formal banking system. They have an access to over 12 million families and a

total membership around 26 million people : 94% women averaging a growth of around 30% + per year.

About 1.6 million have been linked with 35,294 bank branches of 560 banks in 563 districts across 30 States.

JCB INDIA LTD 2009


They have so far accessed credit of Rs.6.86 billion. Other institutions like the Small Industries Development

Bank of India (SIDBI) have been the largest lender to these emerging MFIs, though Friends of Women’s World

Banking India (FWWB) as well as the National Women’s Fund (which translates in Hindi as Rashtriya Mahila

Kosh or RMK) have also played an important role.

9.3 THE KISAN CREDIT CARD

Another recent approach to providing agricultural credit, including to small farmers, is the Kisan Credit Card

(KCC), launched in 1998–99. By March 31, 2003 some 31.6 million KCCs had been issued by commercial

banks, RRBs, and cooperative banks. This system presents a number of advantages to borrowers and lenders,

namely by reducing both borrowers’ transaction costs as well as delays in

accessing and renewing crop loans.

9.4 BORROWING AND SAVING HABITS OF THE RURAL CONSUMER

Region Farmer Household (HHs) Farmers Households (HHs)

States Borrowing from both formal and

informal sources

Not accessing credit from either of

the sources

No. ( Lakhs) % of HHs Nos( Lakhs) % of HHs

Northern 56.26 51.4 53.2 48.6

North Eastern 7.04 19.9 28.36 80.10

Eastern 84.22 40 126.39 60

Central 113.04 41.66 158.29 58.34

Western 55.74 53.77 47.92 46.23

Southern 117.45 72.7 44.11 27.3

Groups of Uts 0.49 33.1 0.99 66.9

All - India 434.24 48.6 459.26 51.4

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The above table gives a fair idea about the borrowing habits of the rural masses spread across

various regions. It can be observed that rural masses borrow more from both formal and informal

sources than those in the North Eastern India. Further Access to capital in the form of loans was also

high in the Central region of Inida. These patterns are important indicators of progressment.

9.5 VARIOUS SOURCES OF SAVINGS:

The table below shows a increasing pattern of deposits and borrwoings by the farmers. This has been

posible through the government initiatives of establishing banking facilities at subsidised rates to the

rural folks. Further the need to have a better standard of life and and requirement to sustain farm and

other non agricultural activities have encoraged farmers to access these institutions.

Farmers reliance on banking system

Farmers deposits (In crores)

Farmers borrowings In crores

No. of farmers Assisted In lakhs

1992 26211 17835 273

2001 99812 43420 195

2002 108233 47430 197

Source: www.rbi.org.in

9.6 SAVINGS ON THE BASIS OF MONTHLY HOUSEHOLD INCOME AND OCCUPATION

The table below shows the savings pattern of thr rural masses based on thei monthly household income. Bbank

deposits is still the most common instrument of savings which can be seen across various hosehold income

patterns and professional prcatises. Post office schemes and NSS, NSC are also preferred mediums of savings

which the villagers use.

Categories (%) Bank Deposits RD’s P.O IVP, NSS, NSC

Monthly household income

Upto 2500 63.9 44 14.8

2501 – 5000 80.1 50.2 29.9

5001-10000 87.1 45.9 39.1

10001 -15000 90.2 43 51.8

Above 15000 96.3 47.6 46.3

Occupation

Professional Practise 88.5 57.6 35.5

Industry 60.7 50.2 18.7

Trade/Business 76.2 49.9 34.3

Agriculture 78.7 46.4 26.3

Others 62.9 45.3 22.5

Total 73.2 46.3 24.1

Source: Survey of Indian Investors, 2003

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10. MARKETING AND DISTRIBUTION IN THE RURAL SEGMENT: Till recently, the focus of marketers in India was the urban consumer and by large number specific efforts were

made to reach the rural markets. But now it is felt that with the tempo of development accelerating in rural

India, coupled with increase in purchasing power, because of scientific agriculture, the changing life style and

consumption pattern of villagers with increase in education, social mobility, improved means of transportations

and communication and other penetrations of mass media such as television and its various satellite channels

have exposed rural India to the outside world and hence their outlook to life has also changed. Because of all

these factors, rural India in now attracting more and more marketers.

Rural marketing has become the latest mantra of most corporates. Companies like Hindustan Lever, Colgate

Palmolive, Britannia and even Multinational Companies (MNCs) like Pepsi, Coca Cola, L.G., Philips, Cavin

Kare are all eyeing rural markets to capture the large Indian market.

10.1. FEATURES OF INDIAN RURAL MARKETS:

Large, Diverse and Scattered Market: Rural market in India is large, and scattered into a number of regions.

There may be less number of shops available to market products.

• Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied with agriculture

prosperity. In the event of a crop failure, the income of the rural masses is directly affected.

• Standard of Living and rising disposable income of the rural customers: It is known that majority of the

rural population lives below poverty line and has low literacy rate, low per capital income, societal

backwardness, low savings, etc. But the new tax structure, good monsoon, government regulation on

pricing has created disposable incomes. Today the rural customer spends money to get value and is

aware of the happening around him.

• Traditional Outlook: Villages develop slowly and have a traditional outlook. Change is a continuous

process but most rural people accept change gradually. This is gradually changing due to literacy

especially in the youth who have begun to change the outlook in the villages.

• Rising literacy levels: It is documented that approximately 45% of rural Indians are literate. Hence

awareness has increases and the farmers are well-informed about the world around them. They are also

educating themselves on the new technology around them and aspiring for a better lifestyle.

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• Diverse Socioeconomic background: Due to dispersion of geographical areas and uneven land fertility,

rural people have disparate socioeconomic background, which ultimately affects the rural market.

• Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses, communication

system, and financial facilities are inadequate in rural areas. Hence physical distribution is a challenge

to marketers who have found innovative ways to market their products.

10.2 PROFILE OF A RURAL CONSUMER:

Literacy: 23% of rural Indian population is literate and people are getting added to this list year after year.

There are still some villages which are underdeveloped. Maximum education is primary school or in some cases

high school. To this group the marketing promotional strategy to be adopted is demonstration of product

features and advantages. Print media and posters do not make any impact.

Income: An average rural consumer has a much lower income than his urban counterpart. The disposable

income has increased in the recent years to considerable extent. In spite of this, the common traits of rural

consumers are low purchasing power, low standard of living, low per capita income and low economic and

social positions.

Density: Rural population is scattered across 7 lakh villages. This implies that rural demand is scattered and

urban demand is concentrated.

Influencers: There are many reference groups in a village. These include teacher, doctor, panchayat members,

health workers, bank manager and co-operative board workers. These influencers need to be kept in mind when

a marketer decides on rural marketing.

Occupation: The main occupation is agriculture. The size and ownership of land determines the basis for

differentiation and consumption patterns.

Culture: Rural consumers are traditional in their outlook. They associate faster with messages that match their

cultural behavior.

Language: English is not a language of rural India. Hence a marketer should aim for communication in the

local language.

Media Habits: Television, radio, vedio and theatre are some of the traditional media that a rural consumer

identifies with.

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10.3. 4A’S OF THE RURAL MARKET

Affordability:

With low disposable incomes, products need to be affordable to the rural consumer, most of who are on

daily wages. Some companies have addressed the affordability problem by introducing small unit

packs and affordable equipment.

Accessibility:

To ensure availability of the product or service. India’s 627,000 villages are spread over 3.2 million sq

km. More than 40% of Indian villages still do not have access to all weather roads

Acceptability :

Need to offer tailor made products that suit the rural market. Rural people have different demands

when compared to their urban counterparts.

Awareness:

Usage of various medium to penetrate the potential rural markets. Companies have to trade off with

high cost to realize the full potential of the rural sector.

10.4 MARKETING CONSTRAINTS

The rural market may be attracting marketers but it is not without its problems:

• Poor Infrastructure- Kuccha roads inaccessible during monsoons.

• Lack of warehousing facility.

• Low occurrence of retail outlets.

• Myths and belief and Caste influence continue to prevail in the society

• Low per capita disposable incomes.

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• Seasonal consumption linked to harvests and festivals and special occasions

• 4,500,000 retail outlets; average 7.12 shops per village, 60000 do not have them at all

• Highly dispersed village settlements - 75% of village population spread over all over 6 lakh villages -

85% of villages less than 5000 people

• Insufficient Credit Accessibility. 80% of the people in the rural areas do not get access to organised

credit facility.

10.5 MARKET ACCESSIBILITY

Keeping in mind the marketing constraint and the behavior of the rural masses, companies have

adopted innovative ways to get an access to so called inaccessible markets. Some of the common ways

used by companies to reach the rural people have been shown below.

Direct Distribution

Direct distributor Low business turnover

Van Operators Co. owned and hired – sales and promotion

Dabur, BPCL, Reckitt , HLL, ITC, PARLE, GODREJ

Super and sub stockist 1-2 % margin , interior areas

HLL, Dabur, Reckitt, Coleman India Ltd, Marico

Indirect Distribution

Wholesalers Rural and Urban wholesalers -60% of sales

Retailers Major buying influencers

Haats 47000 haats, better coverage – annual sales 3500 crores

Melas 30000 melas held, average sales - Rs. 243 lakhs

Barefoot Salesman

Self Help Groups HLL –Project Shakti, major influencers

Mobile Traders

E – Distribution ITC – e-choupal, TARAHaat, ikisan.com

Postman

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Indirect Distribution cont..

Syndicated Distribution JK Diary

NGOs

Cooperative Socities 93% coverage –village; 70% rural population

Public Distribution System

HUBS ITC, DSCL, GODGREJ, RELAINCE,

This concept is very useful for village with a population of less than 2000 which are not very cost effective for

the companies to target directly. The Mobile traders deal with not very expensive items but are a very important

source of information providers to the housewives. The products sold by them are generally FMCG products,

accessories, utensils, etc.

Mobile Traders

Community Banjaras, Bisatis, Bajajis, and Kujras

Number of moile traders 400000

Estimated reach 8 crore villages

Population of villages 2000 or less

Products FMCG , Clothing, accessories, utensils, etc

Average sales Rs 250 – Rs. 700

Source: O&M

10.6 THE CONCEPT OF HAATS AND MANDIS

Haats and Mandis are known to attract a huge number of vllagers who gather there to socialise and buy goods

and services. There are over thousands of such events happening every week across the country and some of

them are linked to festive and religious occassions. Corporates have seized this opportunity to market their

products and services as this allows them the cost advantage of not having to reach all the villages. NCAER

estimates that around half of items sold in these melas are FMCG products and consumer durables.

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Haats

Facts and Figures

Total number of Haats 47,000

Average no of visitors 4580

Average no of villages catered 14

No. of stalls 314

Average sale at a haat Rs. 2.23 lakhs

Categories of outlet %

Agricultural Products 39.5%

Forest Products 2.1%

Handloom and handicraft 8.4%

Processed Food 13.2

Fish, meat and poultry 3.2

Manufactured Goods 24.3

Services 3.3

Others 6

100

MART Study

Melas

FACTS AND FIGURES

Number of melas held annually 30000 (out of which 500 are major ones)

Average no of visitors 7.6 lakhs

Average no of outlets 854

Average sales Rs. 243 lakhs

Source: MART Study

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Cont..

Categories of outlets (%)

Agricultural Products 5.6

Forest products 0.1

HANDLOOM AND HANDICRAFT 15.6

Processed Food 19.5

Entertainment 4.0

Manufactures goods 42.5

Services 4.2

Others 9.0

Total 100

Source: MART Study

11. THE BUYING BEHAVIOUR OF THE RURAL CONSUMER:

The buying behavior of the rural population has undergone a remarkable change as they are now consuming

everything right from a shampoo to a car. Decision making has become a joint effort and women are now

playing an increasing role as initiators, man as a financers and a child as an influencers. To understand rural

JCB INDIA LTD 2009


buying behavior, marketers must first find the factors that influence buying behavior and the variation in

behavior.The followings factors can be taken into consideration while segmenting the rural population:

SEGMENTATION

• Environment of the consumer

• Geographical Influences

• Influences of Occupation

• Socio economic consideration

ENVIRONMENTAL INFLUENCES:

A villagers needs are different from his urban counterpart. The environment is a critical influencer in shaping

the needs of the rural consumer. Products of urban specification may be impractical in rural settings. A common

example here is the usage of electronic gadgets of urban specifivcation which may not withstand constant

voltage fluctions as seen in rural areas. A rural consumer may not mind paying more for something which can

withstand such frequent voltage fluctuations.

GEOGRAPHICAL INFLUENCES:

The rura; market is hetregeneousin nature. Geographical variation in exposure to urban centres abd variations in

development hacve resulted in tremendous hetregeneity even within the state. There is an extreme difference

between parts of western and eastern UP. This can be seen in the language where in western UP , they speak

hindi and in Eastern they speak Bhojpuri. Further people down south are more receptive to scooters than their

Northern counterparts. They are more educated and brand conscious as there is a variation in buying pattern

when it comes to watches.

SOCIO ECONOMIC FACTORS

A common classification that is used by marketers to describe the Indian population is the Socio Economic

Classification ( SEC). SEC is the classification of Indian consumers on the basis of two parameters : Occupation

and Education of the chief wage earner (Head) of the households.

The Rural Indian Households are classified into SEC R1, R2, R3 and R4. This parameter is widely used by

marketers to assess and segment the rural market based on the products and services offered by them. As per

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statistical Abstract India 2004 the following are the classifications along with the Behavior, Aspirations and

Lifestyles of each group of rural masses. The R1 and R2 class consumers are considered to have a higher

disposal income and are educated having their own lands pucca houses and own agricultural equipments. . They

are classified as the landlords or the affluent lot. R3 are the middle class farmers who have small holdings and

minimum education. R4 are the poorest of the lot and live in kuccha houses and never had any formal education.

The consumption pattern of R1 and R2 varies to a large extent when compared to Class R3 and R4. The

statistical abstract India 2004 states that about 58% of the rural consumers belong to class R4 and only 7%

belong to R1 and R2. The rest are R3 class rural consumers. This can be shown as below:

11.2 ROLE OF OPINION LEADERS:

The role of the opinion leader plays a very important role when it comes to determining the purchasing decision

made by the rural consumers. Usually class R3 and R4 people use the help of opinion leaders to quite an extent

when it comes to buying something which may be little expensive. The opinion leader can be classified as

Sarpanch of the village, progressive farmers, college educated , bankers, Nurses and teachers. The table below

give a brief of hoe each plays a role in various product and services being avaled to the potential rural

consumers.

2 5.414.5

19.2

37.4

21.5

Distribution of household by SEC

SEC R1

SEC R2

SEC R3A

SEC R3B

SEC R4A

SEC R4B

Indiastatistical abstract india 2004

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Opinion Leaders Area of Influences

Sarpanch/Gram Pradhan Village administration, conflicts, Introducing new Ideas,

Agriculture equipment, Fertilizers, Seeds, Govt. policies.

Progressive Farmers Agricultural equipments, Fertilisers, Seeds, Credit Facility,

Methods of cultivation, etc.

College educated Purchase of durables, Apparels and Technology.

Teachers Education.

Nurse/ Midwife Family planning issues and medical

Film Stars Fashion and Styles

Bankers Loans, Agricultural equipment –Tractors, Insurance.

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12. INDIA AGRICULTURAL EQUIPMENT INDUSTRY

12. 1 AN OVERVIEW:

Agricultural Equipment industry plays a key role in supporting the performance of the agricultural sector in

India. Farming activities are increasingly getting mechanised, and the availability, quality and performance of

agricultural equipment has an increasing impact on improving the output and productivity of the agricultural

sector. The Indian Farm Equipment Market is expected to grow at a CAGR of ~5%.

• Indian Agriculture equipment contributes about 10% of the global equipment market.

• Global major players like John Deere, New Holland and Same Deutz have already made entry in Indian

Market

• Many factors affecting agriculture equipment sales in India include monsoons, govt MSP, commodity

prices, fuel, credit policy , labor movement.

• Share of animal power declined from 43.5% in 1971 -72 to 9.5% in 2000 - 01

30

34

24

3.2 8.8

World Agriculture Equipment Market -2006 , $66 USD Billion

North America Asia Pacific

Western Europe Africa/Middle East

Others

66 69 72 76 80

0

20

40

60

80

100

2006 2007 2008 2009 2010

World Agriculture Equipment Market (2006-2010) USD Billion

World Agriculture Equipment Market (2006-2010) USD …

WWW.IBEF.ORG

WWW.IBEF.ORG

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The manufacture of basic agricultural implements is largely by village artisans and tiny units, small scale

industries and the State Agro-Industrial Development Corporations.

Medium scale industries operate in their own premises with adequate infrastructure, sometimes forming a part

of an industrial estate. They also have manufacturing and marketing facilities and employ skilled manpower.

Products such as diesel engines, electric motors, irrigation pumps, sprayers and dusters are produced in this

sector.

Complex products such as land development machinery, tractors, power tillers, post harvest and processing

machinery and dairy equipment are manufactured by large players in the organised sector. These firms typically

have large manufacturing facilities, professional marketing network of dealers and provide effective after sales

service.

Mahindra & Mahindra’s Farm Equipment Sector (FES), which designs, develops, manufactures and markets

tractors for Indian and overseas markets, is the largest manufacturer of tractors in India. Other major players

include TAFE, New Holland, John Deere and Punjab Tractors.

12.2. SWOT ANALYSIS

Customer Power - Medium

• Wide variety of choice for customers

• Many customers do not have access to organised

finance

Supplier Power - Low

• Well developed supplier industry

• Most suppliers are small and lack of economies

Competitive Rivalry - High

• Number of well established players, with new players

entering

• Good technological capability

• Increased mechanisation presents new growth

opportunities

Threat of Substitutes -Low

• New innovations in semi-automated mechanisation

being tried out, in place of capital intensive equipment

Threat of New Entrants - Medium

• Current players well established

• New entrants will need to invest in Brand,

Distribution, Financing and Service Network

JCB INDIA LTD 2009


12.3 EVOLUTION IN FARM PRACTICES

Over the years, the share of human and animal power in agriculture has reduced drastically, paving the way for a

variety of equipment to emerge. Many of these are driven by tractors, diesel engines or tillers. Several of the

traditional processes agriculture have been transformed with the advent of mechanisation

PROCESSES Traditional Practices Current Practices

Development , Tillage and Seedbed

Preparation

Plough and blade harrow Tractors, Mould board plough, disc plough

Sowing and Planting Dibblers Modern seed drill and planters

Weeding and inter cultivation Hand hoes and animal driven weeding

tools, Human labor

Tractor operated implements

Plant protection Dusters Blower and power sprayer

Harvesting and threshing Manually using sickle Combine harvesters, tractor mounted

implements, threshers and reapers

12.4 MECHANISATION – AN ESSENCE One of the prominent cause of mechanisation is that there has been an increasing trend of migration of rural

population to urban areas, to seek better job opportunities and lifestyles. This is primarily due to improvement in

income levels and quality of life in cities, enabled by the boom in services and manufacturing sectors. As a

result, the number of agricultural workers has been declining, and it is expected that the percentage of

population involved in agriculture will come down from the present 60 per cent to close to 40 per cent by 2020.

The decrease in number of manual workers has necessitated the move towards increased mechanisation.

Further easy availability of financing has been a key driver of consumption across different sectors in India, and

agriculture is no exception. More than 90 per cent of tractor purchases in India are on credit.

Corporate farming is another area which has fuelled demand for mechanisation. There have been several

examples of successful contract farming ventures in India – companies like Pepsi Foods, Rallis and Appachi

Cotton have been involved in successful ventures. Contract farming enables the farmer to get the benefit of

JCB INDIA LTD 2009


technology, training and financing with the contractor’s support. This facilitates adoption of mechanised

farming practices.

Subsidies by the government is an encouragement for the farmers to increase productivity by using modern

machinery in their farms such as tractors, threshors, ploughs, machine sprayers, combine harvestors, etc.

Further, good monsoons means good yeilds which give the farmers a better income from their produce which

further enhances their capability to buy technology.

12.5 STATUS OF FARM MECHANISATION IN INDIA

Even though farm mechanisation shows an increasing trend, there are wide ranging disparities in the levels of

mechanisation across states.

Northern States such as Punjab, Haryana, Uttar Pradesh (particularly Western and Tarai belt) have achieved a

faster growth in mechanization over various Plans The sale of other implements and machines like combine

harvesters, threshers and other power-operated equipment have been increasing almost throughout the country

Improved Credit Facility:

Realization on the part of private commercial bank about the potential in the rural sector. More players foraying into the untapped market owing to saturation in urban areas

Emergence of Corporate Farming:

Tie up with MNCs and other food processing companies give assurity to farmers about their produce and encourages them to purchase equipment to boost productivity.

Migrating Labor force to Urban Areas:

One of the prominent problems that will plague Indian rural as large number of individual are migrating to urban areas for better standard of living.

Subsidy:

Government initiative to increase productivity and standard of living of the rural masses by providing subsidy so as to increase the purchasing power

Good Monsoons:

Good and poor monsoons have a direct impact on the purchasing intention.

JCB INDIA LTD 2009


The pace of mechanization in North-Eastern States has not been satisfactory due to constraints such as hilly

topography, socio-economic conditions, high cost of transport, lack of institutional financing and lack of farm

machinery manufacturing industries

Mechanization in Western and Southern states of the country viz., Gujarat, Maharashtra, Rajasthan and certain

areas of Tamil Nadu, Andhra Pradesh etc., has increased with the increase in area under irrigation and also with

the growing awareness among farmer.

12.6 BENEFITS OF MECHANISATION

Farm mechanization is regarded as sine-qua-non to reduce the human drudgery and enhance the agricultural

productivity. During the post-green revolution period, the impact of farm mechanization on agricultural

production and productivity has been well recognised in India. Depending upon the use of other inputs such

as irrigation, high yielding seed varieties, chemical fertilizers, herbicides and pesticides, different States in India

have attained different levels of mechanization.

Agricultural mechanization has made significant contribution in enhancing cropping intensity. The growth

in irrigated areas and tractor density has had direct bearing on the cropping intensity. There has been a

substantial increase in productivity and efficiency by using agricultural machines vis a vis using traditional

equipment such as bulls for ploughing and men for harvesting. Timing is an imporatnt elemenst when it comes

to plantations and harvesting and any delay can severly affect the entire cropping cycle and thus affect the yeilds

to a large amount. The economic advantage of mechanisation can be seen in the table provided below:

JCB INDIA LTD 2009


12.7 AVAILABILITY OF TOOLS

As per indiastat.com there is a high usage of manual seed drill wherein the availability is 153 units per 1000

hectares which as compared to other developed nations is very minimal. Further the availability of tractor is 85

units per 1000 hectares which again is very low in numbers considering the number of people involved in this

profession. Further usage of other modern equipment such as potato digger, rotavator, and other tractor operated

implements are not very prominent and only used by the selected few prosperous farmers. However subsidies

given by the government and mass awareness has led to a gradual buying of such implements.

153.2

36.1

7.2

84.86.2

28.5

8.3

8.9 16.7

12.518.8

18.2

Availability in nos. per 1000 hectares

Manual Seed Drill/Seed Cum Fertilizer DrillAnimal Drawn Seed Cum Fertilizer Drill

Tractor Drawn Seed Cum Fertilizer Drill

Animal Drawn Leveller

Tractor Operated Levellers

Manually Operated Plant Protection EquipmentPower Operated Plant Protection EquipmentDrip & Sprinkler Equipments

Horticultural Tools (Power Operated)

Tractors

Tractor Operated Dise Harrow

Manual seed drill

Animal Drawn levelerTractor

www.indiastat.com

JCB INDIA LTD 2009


12. 8 AGRICULTURAL EQUIPMENT

12.8.1 TRACTORS:

• The tractor industry grew at a CAGR of 16% between 1994 and 1998 and reached plateau in 2001.

• 2001 and 2003 saw a declining state at negative CAGR of 13.5%. The recovery stage started from

2004.

• The largest industry in the world . Accounts for 1/3 of the world production

• Growth @ 5 – 7 % depending about macro factors.

• Uttar Pradesh is the largest tractor market in our country. One out of every four tractor is being

purchased here.

• 95% of tractor sales are on credit. Credit is extended by commercial banks, state land development

banks and regional rural banks

• 30-40 hp tractors primarily used in southern and western regions due to hard soil conditions dominate

Indian market.

• 21-30 hp finds its market in soft soil conditions and well irrigated northern states .

• Expect the domestic industry to stabilize at 300000 units per year by 2010

44%

23%

11%

14%

5%4%

7%

Mahindra & MahindraTAFE Ltd

International Tractors LtdEscorts

New Holland

John Deere

Others

Market share

www.ibef.org

JCB INDIA LTD 2009


www.indiastat.com

STATEWISE SALES:

The Indian tractor industry is the largest in the world accountuing for one third of the world production. In the

long term the industry is expected to grow at a rate of 5to 7 percent largely due to the thrust by the government

to increase agriculture GDP. 93 percent of the tractor industry is concentrated in twelve states namely Andhra

Pradesh, Bihar, Gujarat, Haryana, Punjab, Orissa, Tamil Nadu, Karnataka, Maharsahtra, Uttar Pradesh, Madhya

Pradesh and Rajsathan. Uttar Pradesh is the largest tractor market with 44, 308 units sold in 2006-07. Tractor

sales in Maharashtra, Karnataka, Tamil Nadu and Gujarat have shown a tremendous growth in the 2005 -06

percent of about 63 %, 54%, 47 %.

150582 138879164841

191329220937

251198273181254825

225280190336

247531202708

0

50000

100000

150000

200000

250000

300000

Tractors

Power Tillers

51%

24%

8%

Sale by Hp - 2007

31 -40 hp

41 -50 hp

51 hp

JCB INDIA LTD 2009


www.indiastat.com

12.8.2 FACTORS FOR PURCHASING A TRACTOR:

A rural consumer ususlly uses the influence of a opinion leader when it coes to purchasing a tractor. They can

be in the form of a progressive farmer, a tractor owner, banker. The gestation period between deciding and

buying a tractor is long owing to information seeking process which may involve consulting with the opinion

leaders, checking the performance of the brand in mind which may take months, regular visits to the dealer

showroom and deciding the one to choose from. The following factors are important toa rural consumer when it

comesto buyin a tractor:

6034269665 68354

0

10000

20000

30000

40000

50000

60000

70000

80000

1998-99 1999-00 2000-01

Andhra PradeshAssamBiharGujaratHaryanaHimachal PradeshJammu and KashmirKarnatakaKeralaMadhya PradeshMaharashtraOrissaPunjabRajasthanTamil NaduUttar Pradesh

29%

21%9%

15%

26%North(Punjab, Haryana & U.P)

Central (M.P & Rajasthan)

East (Bihar, W.B, Orissa & Assam)

West(Gujarat & Maharashtra)

South (Andhra Pradesh, T.N, Karnataka, Kerela)

•Desired power requirement based on size of arable land for which it is being used.Power Capacity

•Due to lack of sufficient funds, Price is considered the most important criteriaPrice

•Fuel consumption factor is more important for farmers with higher power capacity equipment.Fuel consumption

•After sales service is considered as a moderately important criteriaAfter Sales

•Brand preference varies across the different regions and geographies across the countryBrand Value

JCB INDIA LTD 2009


12.8.3 THE ECONOMIC IMPACT OF A TRACTOR:

A study in Mathura district of Uttar Pradesh on the basis of three levels of mechanization:

(i) non-mechanised farms having neither tubewell nor tractor

(ii) partially mechanised farms having only tubewell,

(iii) mechanised farms having both tubewell and tractor.

The yield was reported to be higher by about 10 to 27 percent in mechanised farms and by about 2 to 26 per cent

in partially mechanised farms in comparison with non mechanised farms for all the major crops grown on the

sample farms.

All the crops raised on different sizes of farms, tractor owning farms obtained higher yields per acre and the

increase was more for the larger sizes of tractor owning farms.

12.8.4 MAJOR PLAYERS IN THE INDUSTRY:

Mahindra & Mahindra Limited (M&M)

• Distribution and sale of farm equipment and related utility vehicles

• Established market leadership in the sector over past 24 years

• One of the top five tractor brands in the world, the company has its own state-of-the-art plants in India,

USA, China and Australia and has a capacity to produce 1,50,000 tractors a year

• Range of Horse power 15 to 75hp.

• 680 dealers along with widest service network across India.

JCB INDIA LTD 2009


• Has four manufacturing facilities in India, located in Mumbai and Nagpur in Maharashtra, Rudrapur in

Uttaranchal and Jaipur in Rajasthan.

• Domestic sales as on Year 2008 -34455 units

Tractors and Farm Equipment Limited (TAFE)

• A unit company of the Amalgamations Group, one of India’s largest Light Engineering Groups

• Collaboration with AGCO Corporation, Georgia, one of the largest manufacturers, designers &

distributors of agricultural equipment.

• Has a network of more than 800 dealers, branches, service outlets as well as its own sales offices and

depots covering the entire length and breadth of India

• Range in Hp 41 to 50 hp

• Domestic Sales as on year 2008

John Deere

• John Deere established a green field project in 1999 under a 50:50 joint venture with Larsen & Toubro

• Limited (L&T)

• A state of the art tractor manufacturing plant for 5000 series John Deere tractors was set up at

Sanaswadi, near Pune, in the state of Maharashtra

• Tractors manufactured in Sanaswadi are also exported to the USA, Mexico, Turkey, North and South

Africa, and South East Asia. The company has received awards for export excellence in 2005 and 2006

from the Engineering Export Promotion Council.

• Range in Horse power 35 to 75 hp

New Holland:

• In 1999, New Holland AG’s parent company FIAT bought 70 per cent of holdings of Case Corporation

and created Case New Holland Global.

JCB INDIA LTD 2009


• In 2000, the capacity of the Noida plant rose to 12,000 tractors per year and in 2007 the company can

manufacture close to 24,000 tractors for the domestic and export markets.

• New Holland India exports fully-built tractors to 51 countries in Africa, Australia, South-East Asia,

West Asia, North America and Latin America. It also exports subassemblies and other tractor parts to

the facilities of CNH Global, around the world.

• Manufactures tractors between 35 -37 hp.

12.8.5 OTHER AGRICULTURAL EQUIPMENT:

Usage of power tillers have been prominent in small scale holdings and orchards. The year 2001 saw 16018

units being sold but owing to choice of using tractors and other factors such as credit facility, power tiller saw a

fall in sales to 15000 units after having had high sales of 22303 units in the year 2006.

Further owing to electricifcation of villages and farmlands, there has been a huge usage of electric pumps which

save the farmers from the onslaughts of repeated diseal prices hikes by the government. A total sale of 11.86

million electric pumps was reported in the year 2005 -2006 a jump of about 24 %. The government has given

huge subsidies in the form of either free power supply or at rates to farmers so as to avoid the cost associated

with diseal while using diseal pumps.

Further as per the FICCI report use of threshors by farmers with medium and small scale holdings has increased

by nearly 20% since 1994, use of Harvesters has increased by nearly 5 % since 1994, usage of Reapers has

increased by nearly 315% since 1994, usagese of levelers has increased by more than 35% since 1994 and usage

of Maize Shellers has increased by nearly 61% since 1994.

16018

22303

15000

0

10000

20000

30000

2001 2002 2003 2004 2005 2006 2007 2008

Power Tillers Sale

Power Tillers Sale

www.ficci.com

JCB INDIA LTD 2009


WWW.FICCI.COM

12.9 GOVERNMENT SUBSIDIES:

4.8 5.528 6.466 7.4326.019

7.4649.525

11.866

0

5

10

15

1991 -1992 1995-1996 2000 -2001 2005-2006

Diseal Engines

Electric Engines

Million units

1351 1465 1551 16142782

6779

9602

11595

1540 2057 2450 2749

0

2000

4000

6000

8000

10000

12000

14000

1994 1998 2002 2006

Threshers

Harvestors

Reapers

Levelers

Power tillers

Tractors

Disc Harrow

Potato Digger

0

500

1000

1500

2000

2500

An

dh

ra P

rad

esh

Aru

nac

hal

Pra

des

h

Ass

am

Bih

ar

Ch

hat

tisg

arh

Go

a

Gu

jara

t

Har

yan

a

Him

ach

al P

rad

esh

Jam

mu

& K

ash

mir

Jhar

khan

d

Kar

nat

aka

Ker

ala

Mad

hya

Pra

des

h

Mah

aras

htr

a

Man

ipu

r

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hal

aya

Miz

ora

m

Nag

alan

d

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ssa

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nja

b

Raj

asth

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im

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il N

adu

Trip

ura

Utt

ar P

rad

esh

Utt

aran

chal

Wes

t B

enga

l

2003-04 2004-05 2005-06 2006-07

Source: www.indiastat.com

JCB INDIA LTD 2009


The Government of India has initiated several steps to improve mechanisation and boost farm productivity.

Assistance in the form of subsidy at the rate of 25 per cent of the cost with permissible ceiling limits is made

available to the farmers for the purchase of agricultural equipment including hand tools, bullock-

drawn/powerdriven implements, planting, reaping, harvesting and threshing equipment, tractors, power-tillers

and other specialised agricultural machines under the centrally sponsored scheme of Macro Management of

Agriculture.

According to the Economic Survey 2006-2007, 7,292 tractors, 16,500 power tillers, 64,610 hand tools, 41,854

bullock-drawn implements, 15,236 tractordriven implements, 6,080 self-propelled/power-driven equipment,

81,496 plant protection equipment, 6,587 irrigation equipment and 66,464 gender-friendly equipments were

supplied to the farmers under the Scheme during 2005-06.

Some initiatives undertaken by the government are as follows:

• Promotion of agricultural mechanization

In this scheme, subsidy for the purchase of tractors below 18 hp to hp along with 3 matching implements is

being provided to farmers, individually or in a group, having irrigated land between 2.4 to 3.2 ha. Subsidy rate is

30% of the cost to a maximum limit of Rs. 30000.

• Special food production programmes (for wheat, maize and millet)

Under these programmes subsidy is provided up to 50% of the cost limited to Rs. 1500/- per implement/ farm on

bullock drawn implements. Under maize and millet programmes, subsidy is also provided on plant protection

equipment limited to 50% of cost or up to Rs.600/

• Intensive cotton development programme

Under this programme subsidy is being provided on plant protection equipment up to 50% of cost limited to

Rs.600 for manually operated equipment and 25% of cost limited to Rs. 4000 for tractor mounted equipment.

• Integrated programme for rice development

JCB INDIA LTD 2009


Under this programme subsidy is being provided on animal drawn implements, rice transplanter and water

pumps up to 50% of cost limited to Rs.1500. Subsidy is also being provided on power tillers up to 25% of cost

limited to Rs.12000.

• Development of industrial designs of prototypes of implements

This scheme was approved for the 8th plan with an outlay of Rs.13.5 million. The scheme envisages

identification of improved, nearly developed equipment and grant of financial assistance to the R&D institutions

for developing industrial designs together with jigs and fixtures needed for their commercialization.

Other Initiatives

Fund of Rs.5,000 crore to be created in NABARD to enhance its refinance operations to short term cooperative

credit institutions

• Rashtriya Krishi Vikas Yojana launched with an outlay of Rs. 25,000 crore, National Food Security

Mission with an outlay of Rs. 4,882 crore under National Policy for Farmers in the Eleventh Five Year

Plan. RKVY aims at achieving the 4 per cent annual growth in the agriculture sector during the

Eleventh Five Year Plan period by ensuring a holistic development of agriculture and allied sectors.

• Growth of agricultural credit set to exceed target set for 2007-08. For 2008-09, target set at Rs.280,000

crore, with short-term crop loans continued to be disbursed at 7 per cent per annum; initial provision of

Rs.1,600 crore made for interest subvention in 2008-09.

• Corpus of RIDF-XIV to be raised in 2008-09 to Rs.14,000 crore, with a separate window for rural

roads.

• National Horticulture Mission (NHM): NHM covering 340 districts in 18 States and two Union

Territories, provided Rs.1,100 crore in 2008-09.

• Crop Insurance: National Agriculture Insurance Scheme (NAIS) to be continued in its present form for

Kharif and Rabi 2008-09. Rs.644 crore provided for the scheme.

• Bharat Nirman has made impressive progress in 2007-08 with 290 habitations provided with drinking

water each day, 17 habitations connected through all weather road, 52 villages provided telephones, 42

villages electrified & 4,113 rural houses completed each day.

JCB INDIA LTD 2009


Complete waiver of all loans that were overdue on December 31, 2007 and which remained unpaid until

February 29, 2008 for marginal farmers and small farmers. About 3 crore small and marginal farmers and about

one crore other farmers to benefit from the scheme; Total value of overdue loans being waived estimated at

Rs.50,000 crore and the OTS relief estimated at Rs.10,000 crore

JCB INDIA LTD 2009


13. GOVERNMENT PROGRAMS FOR RURAL UPLIFTMENT:

13.1 BHARAT NIRMAN

• Time bound programme to develop infrastructure during the tenth and eleventh Year plan with an

investment proposal of Rs. 174000 crores for four years in 2005.

• Areas: Irrigation, Drinking Water, Electrification, Roads, Housing and Rural Telephony

Targets for 2009:

• To create 10 million ha of additional irrigation capacity

• To provide all weather roads to every inhabitants in areas with population above 1000 and above.

• To provide electricity to 125000 villages and to 23 million households

• To construct 60 lakh households

• To provide water to 55067 uncovered habitants by 2009

• To connect remaining 66822 villages with telephone.

13.2. PRADHAN MANTRI GRAM SADAK YOJANA:

• A sub programme under Bharat Nirman and 100% centrally sponsored scheme.

• Roads play a vital role in S ocio economic upliftment of rural community.

• Value of proposal Rs. 646 billion out of which Rs. 286 billion released.

• Of the total 3.3 million km road network, rural roads account for around 2.6 million km (80%).

• Estimated 66,802 habitants would get access with a road length of 1,46,185 km.

Also proposed to upgrade 194,132 of existing roads for ensuring farm to market connectivity.

JCB INDIA LTD 2009


13.3 NATIONAL RURAL EMPLOYMENT GUARANTEE ACT (NREGA)

• The NREG was launched on February 2, 2006 and the first full year of operation was 2006-07 covering

200 districts.

• The primary objective of the scheme is to provide guaranteed work for 100 days for any household

wishing to have such employment

• The secondary objective is to ensure that employment generated is from works that raise land

productivity.

13.4 SWARNJAYANTI GRAM SWAROZGAR YOJANA (SGSY)

• SGSY is a major on-going scheme for the self-employment of the rural poor.

• The basic objective of the scheme is to bring the assisted poor families (swarozgaris) above the poverty

line.

• Provides income generating assets through a mix of bank credit and government subsidy.. The scheme

involves organisation of the poor into Self Help Groups (SHGs)

• During 2008-09, an amount of Rs.1989.60 crore has been released

• The ministry has released a sum of Rs.9262.37 lakh for setting up 1647 village haats, each district have

3 such haats.

13.5 INDIRA AWAAS YOJANA (IAY)

• The IAY is being implemented as an independent scheme since 1996.

• It aims to provide assistance for construction / upgradation of dwelling units to the Below Poverty Line

(BPL) rural households, with special emphasis on SCs, STs and freed bonded labor categories.

• A maximum assistance of Rs 35,000 per unit is provided for construction in plain areas and Rs 38,500

per unit for hilly/difficult areas.

• Rs 15000 is given for upgradation of a dwelling unit for all areas.

• The funding of IAY is shared between the Centre and State in the ratio of 75:25. (100% in the case of

UTs).

JCB INDIA LTD 2009


• The total fund available for construction of houses and upgradation during 2007-2008 is Rs. 876.03 lakhs

and Rs. 144.35 lakhs respectively.

• During 2008-2009 the total availability of fund per new construction is Rs. 275.48 lakhs

There are manymore programs initiated by the government which have been successful in developing the ruarl

sector of India. It is important to keep a close tab on such policies especially the ones related to the development

and construction - Pradhan Mantri Gram Sadak Yojana as they provide an opportunity to the construction

equipment manufacturers to sell their machines and equipments. This can be seen in the case of JCB India Ltd

rural activity - “Rural Attack” where the states selected are Rajasthan, Uttranchal and Gujarat where massive

funds are being allocated by the representative state government for Rural Development in terms of

infrastructure – roads, bridges, housing, canals, watersheds, dams, etc.

JCB INDIA LTD 2009


14. RECOMMENDED STATES

Owing to government diverse policies and fund allocation, the growth of various states across India has not been

equal or consistent. There still is a huge difference when it comes to the overall development of various states

across India. It is likely that attractive pockets will emerge in certain parts of India rather than on a whole.

Southern states have had a relatively better rural infrastructure and other basic provisons which have a direct

impact on the daily lives of the people residing there. Even such states have attracted a huge amount of foreign

direct investments , contributing more than 60% of the GDP and posting better social indicators.

JCB INDIA LTD 2009


Based on my earlier findings in terms of consumption patterns, levels of incomes, occupations, and level of

mechanisation I have shortlisted these states as a possible lucrative markets for JCB India to look into.

14.1 ANDHRA PRADESH

The state has been performing well in engineering industry producing a range of intermediate and final goods

such as foundry and forging items, machine tools, etc.

Huge infrastructure projects are in place. New international airport construction is on in Hyderabad. New

flyovers and other infrastructure developments to cater to this fast growing state are in place.

The state promises good quality manpower. The state has high literacy rates.

Many global players like Tecumseh, BPL, Electrolux, among others have established their manufacturing

facilities in the state.

The contribution of exports of machinery has been around US$ 35 million, which has grown at CAGR of around

50 per cent.

14.2 SWOT ANALYSIS

Strengths :

1. Manufacturing industry in this region has grown considerably. It has a large number of manufacturers in the

small scale sector. Village artisans, who are engaged in fabrication, repair and maintenance of agricultural

machinery, mostly traditional are gradually diversifying to improved implements.

2. One tractor manufacturer, one power tiller manufacturer, many pump manufacturers, thresher manufacturers

are located in this region.

3. Most of the needs of agricultural machinery is met through indigenous production. The industry in this zone

is technically sound and competent.

4. Tradition of custom servicing and custom hire amongst the rural people for field operations is common in this

region.

5. With increasing agricultural production and income of people, there has been an upward swing in the demand

for processed and high quality foods. Food processing industry has been growing at a reasonable pace and any

innovation in PHT and consumer food material or processed product has fair chances to get into the market

speedily. There is increasing trend towards quality consciousness in increasing middle classes that have paying

capacity.

6. There are many ICAR Institutes and SAUs located in undertaking research and development and

JCB INDIA LTD 2009


KVKs for transfer of technologies. The Research Institutes contribute in generating location specific

technologies.

7. Availability of technical personnel, farm machinery and post harvest technology experts will be abundant

with 3 Agricultural Engineering Colleges with Post Graduate research facilities located in this region.

Weaknesses:

1. Most of the Land holdings in Andhra Pradesh are very small, less than 1 ha. About 60–90% farmers in

Andhra Pradesh have less than 2 ha. farm holdings, with associated constraints of being resource poor, low risk

abilities, practising mixed farming, thereby, making task of mechanization and post-harvest management

difficult.

2. Holdings have become too small to sustain a family, forcing them to seek alternate/ supplemental

employment.

3. There is paucity of labour at peak demand period. Tractive power and matching implements continue to be a

constraint to farming, resulting in untimeliness in field operations, making jobs arduous and lowering crop

yields.

4. There is a vast gender bias in the wages. Ergonomic and safety considerations in design of hand tools, bullock

drawn implements and stationary farm machines require consideration.

6. Horticulture is an important thrust area for diversification of farming, but hardly any mechanization has taken

place except for tillage, irrigation and transport operations.

7. The after sales service for the farm machinery and sourcing of spare parts are rather slow though the

infrastructure facilities are reasonably good.

8. The farm equipment being manufactured by small scale manufacturers need to be looked at from the point of

view of quality and standardization. Even the power tillers lack in terms of specific fuel consumption, noise and

vibrations, and other safety and ergonomic aspects.

9. The manufacturers are in small scale sector and are not quality conscious, which results in frequent break

down of machineries in the farms.

10. The State Governments in this region need to focus more on mechanization aspects.

11. The infrastructure for transfer of engineering technologies, through awareness campaigns, demonstrations,

trainings; for quality manufacture, supply, and after sales service of agricultural implements are weak and

inadequate. The extension activities for mechanization is carried out only by R&D centres, that too, to a limited

extent.

JCB INDIA LTD 2009


12. In the absence of proper plant protection equipment and techniques, for tall crops, plantations and high

density orchard crops, there is significant loss of production due to diseases and pests.

13. The farmer is only a producer and not a primary processor of his produce.

14. Though women are involved with various unit operations of agriculture, the farm equipment are

mostly designed for operation by men folk.

15. Farmers sell their produce without value addition and thus have low economic returns. There is hardly any

incentives for high productivity.

Threats:

1. Failure in maintaining desired levels of production, productivity and PHT can lead to food shortages,

nutritional insecurity, social in-security and economic collapse in this zone.

2. The globalization of trade gives MNCs an easy access to many industries, import technologies at a higher cost

and prevent adoption of low cost indigenous technologies. Many imported machinery have been introduced in

rice farming operations.

3. Failure to mechanise the farming, at least selectively, would result in higher cost of production of food grains,

bringing less revenue to farmers.

4. Failure to make agricultural operations labour friendly with improved machinery and tools to reduce human

drudgery, would result in rural youth migrating to cities in search of employment, causing delays in agricultural

operations.

Opportunities:

1. Mechanization can encourage farmers to expand their area under cultivation of crops.

2. India has emerged as number one tractor producing country in the world but the tractor distribution is not

adequate. More draught power is required in the farms to meet the demand. About 2.5% of the total 105 million

farm holders in the country possess 2.7 million tractors and only about 25% of the total land is estimated to be

cultivated by tractors.

3. Drips and sprinklers have great potential to use the available water more efficiently, increasing net irrigated

area and providing sustainability in summer months.

4. There is tremendous scope for adoption of many other promising farm equipment.

5. Opportunities also exist for export of agricultural machines and value added agro-products to other Asian and

African countries.

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14.3 GUJARAT

The state in the past attracted FDI amounting to around 7 per cent of total FDI approvals in India till 2004.

The state offers quality manpower and infrastructure facilities such as power, water supply, ports, and gas grid.

This has encouraged many multinational companies to set up manufacturing operations in this state.

Engineering sector is highly attractive in this state. This sector is supported by proactive policies and is

capability driven.

14.4 SWOT ANALYSIS

Strengths:

1. Average size of holdings in 1995–96 was 2.62 ha compared to the national average of 1.41 ha. Area under

medium and large holdings was 51.3% of total cultivated area. This figure increased to 78.7% if semi-medium

holdings were grouped with medium and large holdings.

2. Plains dominate the topography.

3. Alluvial soils and medium black cotton soils which are suitable for mechanized cultivation account for 70%

of area under cultivation.

4. Soil and ambient temperatures favour cultivation of commercial crops like groundnut, cotton, vegetables,

selected fruits and spices which imparts economic viability to mechanization.

5. Survey data confirms that the number of tractor users in much larger than the number of tractor owners and

relatively few farmer’s depend on draught animals and labour alone for power. The multi-farm use of tractors

and farm equipment has already become a common practice.

6. Good draft cattle are available for mechanization of crop production operations under poor traction conditions

(heavy black cotton soils) using animal drawn equipment.

7. Good infrastructure, extensive banking network and a strong industrial sector have created the potential for

manufacture, marketing and introduction of better farm power sources and equipment.

8. Sardar Sarovar project will increase the area under irrigation which will raise intensity of cropping and land

productivity and encourage investment on mechanization.

9. Remittance of money by non-resident Gujaratis who have their roots in Gujarat villages offers a source of

funds for investment in agricultural machinery and power units.

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10. Government has planned substantial increase in production, productivity and cropping intensity in the next

few years.

11. Govt. plans to expand and strengthen agroprocessing activities, particularly for export purpose, which will

require good quality raw produce.

Weaknesses:

1. Twelve out of 26 districts of Gujarat are drought prone. Without assured irrigation, the risk of crop

Failure is too high. This discourages investment on mechanization.

2. Heavy allocation of irrigation resources to grow crops like rice and wheat, which yield below the national

average, restricts the potential to shift to the cultivation of high return crops.

3. The State does not have any policy or plan to encourage and promote the use of better power sources and

machinery. On the other hand Gujarat Agro-Vision 2010 proposes a substantial increase in the number of

persons engaged in agriculture which will lead to more fragmentation of holdings and increase in the number of

inadequately employed persons in the rural sector. In the Agro- Vision 2010 document farm mechanization is

not even recognized as an important input to upgrade State’s agriculture.

4. Capacity and facilities for manufacture and repair and maintenance of farm machinery are inadequate.

5. Extension and training programmes to acquaint the farmer with the development in agricultural

mechanization, to carry out farm machinery demonstrations, to help the farmer in the selection of farm

equipment and train him in its operation and maintenance and to train rural/small town artisans in repair and

maintenance of farm machinery do not exist.

6. The Department of Agriculture is short of well trained and experienced agricultural engineering experts to

plan and execute agricultural mechanization programme.

7. R&D programme in agricultural mechanization is very limited.

Opportunity

1. A time bound programme to extend water conservation activities to all drought prone areas to achieve better

crop stand and extend the growing period can greatly reduce the risk of crop failure.

2. A judicious allocation of irrigation resources will allow increase in the production of commercial crops which

will give higher returns to the farmer and improve his capacity and bankability to invest in mechanization.

JCB INDIA LTD 2009


3. Efficient irrigation techniques like drip irrigation, production techniques like raised bed cultivation and

precision in seed placement and application of fertilizers and plant protection chemicals will not only increase

production but also improve the quality of produce and reduce the expenditure on cash inputs.

Threats

1. In view of the diminishing contribution of agriculture to State GDP, agricultural development in general and

its mechanization in particular may be relegated to a position of low priority.

2. In its anxiety to absorb more people in agriculture, State may deliberately discourage agricultural

mechanization.

3. The emphasis on self sufficiency in cereals like rice and wheat, a carry over from the days of general shortage

and ban on inter-State movement of these commodities, may lead to status quo in respect of allocation of

irrigation resources and prevent shift in favour of commercial crops which could have created adequate financial

capacity at the farmer’s end to improve production technology including the use of better power sources and

equipment.

4. Lack of attention to water conservation oriented practices including irrigation, ground water mining may

accelerate and adversely affect the agricultural development programmes.

5. In the absence of proper equipment and technologies, quality of raw material may be too poor to produce

processed products of acceptable/ marketable quality.

14.5 TAMIL NADU

The state has good quality manpower, high literacy rates, presence of good education, vocational training

institutions.

The export from engineering/machinery sector has been around US$ 346 million and has been increasing at a

CAGR of 20 per cent.

Huge infrastructure projects are in place with the development of various SEZs.

Investments are also likely to come in mining & minerals.

14.6 SWOT ANALYSIS

Strengths

1. This zone is predominantly the rice bowl for the States included under it.

JCB INDIA LTD 2009


2. This zone is blessed with important rivers flowing through it which form the source of irrigation.

3. Marine and inland fish farming has developed well in the maritime States in this region.

4. The zone has the advantage of easy accessibility for all agricultural machinery and equipment in

view of its strategic location.

5. Major ports like Chennai, Tuticorin, Vishakhapatnam and Paradeep are located in this zone that would enable

the logistics accessibility much easier for export/import.

6. The mechanization trend has already begun in coastal areas in Tamil Nadu and Andhra Pradesh.

7. The agricultural equipment manufacturers are located nearer to this zone and a few small manufactures are

located within this zone.

8. A major tractor manufacturer and a few thresher manufacturers are in this zone.

9. Custom hiring concept is coming up amongst the farmers in Tamil Nadu.

10. Research Institutes, Regional Research Stations and KVKs are located at different places in the zone for

R&D efforts in the region and for Transfer of Technologies.

11. The zone has the headquarters of one Agricultural University, one Veterinary University and also three

Agricultural Engineering Colleges. Therefore, the availability of technical expertise for mechanization would be

assured.

12. Good service and dealership network are available in Tamil Nadu and Andhra Pradesh.

13. SSI units manufacturing small implements are located in many district headquarters in this zone.

Weaknesses:

1. This zone is lambasted by cyclones/storms repeatedly during North East Monsoon causing havoc and huge

loss of lives, agricultural crops, damage to soil fertility and many more irrecoverable losses.

2. The zone is prone to natural calamities causing setback to developmental programmes and also requiring huge

financial compensation for relief and reclamation works.

3. The holdings are highly fragmented making mechanised field operations difficult since individual ownership

of larger equipment would not be viable.

4. Due to the impact of urbanization and village youth unwilling to take up arduous field work, there is paucity

of labour at peak periods.

5. Inadequate Tractive power and matching implements is a constraint to farming in many areas in this zone.

6. There is a vast gender bias in the wages.

7. Ergonomic consideration in design of hand tools and bullock drawn implements require to be introduced.

JCB INDIA LTD 2009


8. Hill agriculture needs to be promoted in the hilly and tribal areas in the region, particularly in the North East

9. The small hand tools and farm equipment manufactured by small scale industries are to be improved on

quality and standardization aspects.

10. The small scale manufacturing units are not quality conscious.

11. The State governments do not have a strong policy on farm mechanization and the State governments would

have to be urged/impressed upon to vigorously take up the promotion of farm mechanization.

12. The extension activities for mechanization is carried out mostly by R&D Institutions, that too to a limited

extent. Extension activities on agricultural machinery is either totally absent or very meager.

13. The farm equipment/tools available are not women friendly.

14. The farmer is only a producer and not a primary processor of the produce.

15. Value addition to farm produce requires a boost.

16. Non adoption of water harvesting and water management techniques in the delta regions leads

to loss/wastage of precious water.

17. The delta farmers in Tamil Nadu often face the problem of non release of irrigation water from reservoirs

due to conflicts/disputes between riparian States which affects agriculture.

Threats:

1. Unless group farming/contract/cooperative farming is promoted in a long way, the further fragmentation of

holdings would reduce the scope for mechanization.

2. Failure to achieve desired levels of production, productivity and PHT may lead to food shortages, nutritional

insecurity and economic losses in the zone.

3. Many imported farm equipment have been introduced recently posing threat to sustainability of indigenous

manufacturers.

4. Failure to mechanise the farm at appropriate levels, would result in increased cost of agricultural production

forcing the farmers to even reduce their area under intensive agriculture.

5. Failure to provide labour friendly equipment would further discourage the reluctant agricultural labour to take

up field work and thus may cause delayed field operations.

6. Absence of primary processing centres and value addition of agricultural produce would continue

the heavy losses in post harvest operations in the farm.

7. Disaster/calamity management measures like quick processing of the produce during heavy rains to prevent

losses during natural disaster, high security storage structures would help in reducing losses.

JCB INDIA LTD 2009


Opportunities:

1. By adopting appropriate mechanization technology, the productivity can be increased considerably even in

marginal farms.

2. The region receives good rains from monsoon and the water table is high in most of the areas. Good water

management practices would help in expanding the area under irrigation. Use of drip and sprinkler irrigation can

help in increasing water use efficiency, whenever required.

3. Having closer proximity to major ports and economic zone, opportunities for export of agricultural equipment

and value added agro products to other eastern countries are very bright.

4. There is good scope for introduction of technologies for production and culture of marine crustacea, mollusks,

marine ornamental fishes, oyster culture etc in traditional marine fishing areas.

5. More fish processing industries would boost the employment and economy of the region.

6. Fruit processing sector can be strengthened.

JCB INDIA LTD 2009


15. BIBLOGRAPHY

1. WWW.INDIASTAT.COM.

2. WWW.PLANNINGCOMMISSION.NIC.IN

3. WWW.AGRICOOP.NIC.IN

4. WWW.RURAL.NIC.IN/

5. WWW.NABARD.ORG/

6. WWW.INDIARURAL.ORG/

7. THE RURAL MARKETING BOOOK – PRADEEP KASHYAP

8. THE MARKETING WHITE BOOK 2007 -08

9. CENSUS OF INDIA 2001

10. MGI INDIA CONSUMER DEMAND MODEL

11. STATISTICAL ABSTRACT INDIA OF 2004

12. SURVEY OF INDIA INVESTORS 2003

13. TAPPING RURAL MARKETS –V.V. GOPAL

14. INDIA BRAND EQUITY FOUNDATION 2007

15. OVERVIEW OF AGRICULTURAL MACHINERY IN INDIA – INDO – ITALIAN CHAMBERS OF

COMMERCE AND TRADE

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