Emerging Trends in

Rural Marketing

Name : chandan kumar

Enroll.No. : 06713304409

Class : MCA (first sem.)

College : HMR Institute Of Technolog&Management

Table of Content

Topic Page No.

1. INTRODUCTION 1

2. SIGNIFICANCE OF RURAL MARKET 2

3. ATTRACTIONS OF RURAL MARKET 2

4. OPPORTUNITIES 3

5. IT , ECONOMICS AND DEVELOPMENTS 3

6. PROBLEMS AND THE ROLE OF GOVT. & PRIVATE INSTITUTIONS 4

7. RURAL IT : ISSUES AND CONCEPTUAL FRAMEWORK 6

8. IMPLEMENTATION , CASES IMPACTS AND LESSONS 14

9. CONCLUSION 26

10. REFRENCES 27

11. WORD MEANINGS 27

Introduction
The rural markets are estimated to be growing fastly compared to the urban markets. The
potentiality of rural markets is said to be like a 'woken up sleeping giant'. These facts are
substantiated in a study of market growth conducted by various researches. In recent years,
rural markets have acquired significance in countries like China and India, as the overall
growth of the economy has resulted into substantial increase in the purchasing power of the
rural communities. On account of the green revolution in India, the rural areas are consuming a
large quantity of industrial and urban manufactured products. In this context, a special
marketing strategy, namely, rural marketing has taken shape.

How can information technology (IT) contribute to rural development and thus its marketing
values? What are the channels through which impacts can be realized, and what are the
practical means for realizing potential benefits? This presentation examines several ongoing
projects that aim to provide IT-based services to rural populations in India. These projects are
distinguished by the goal of commercial sustainability, which supports scalability and,
therefore, more widespread benefits. The analysis highlights the common building blocks
required for successful implementation, and the relative strengths and weaknesses of different
approaches.
Significance of Rural Markets

A number of factors have been recognized as responsible for the rural market boom to come into
existence :
1. Increase in population and hence increase in demand.
2. A marked increase in the rural income due to agrarian prosperity.
3. Standard of living is also increasing in rural areas.
4. Large inflow of investment for rural development programs from government and other sources.
5. Increased contact of rural people with their urban counterparts due to development of transport and
wide communication network.
6. Increase in literacy and educational level and resultant inclination to sophisticated lives by the rural
folks.
7. Inflow of foreign remittances and foreign made goods into rural areas.
8. Change in the land tenure systems causing a structural change in the ownership patterns and
consequent changes in the buying behaviour.
9. Rural markets are laggards in picking up new products. This will help the companies to phase their
marketing efforts. This will also help to sell inventories of products out dated in urban markets.

What makes Rural Markets Attractive?

Rural market has following arrived and the following facts substantiate this.

* 742 million people

* Estimated annual size of the rural market
- FMCG Rs. 65,000 Crores
- Durables Rs. 5,000 Crores
- Agri-inputs (incl. tractors) Rs. 45,000 Crores
- 2 / 4 wheelers Rs. 8,000 Crores
* In 2001-02, LIC sold 55 % of its policies in rural India.
* Of two million BSNL mobile connections, 50% in small towns/villages.
* Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT)
* 41 million Kisan Credit Cards issued (against 22 million credit-plus-debit cards in urban) with
cumulative credit of Rs. 977 billion resulting in tremendous liquidity.
* Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from these towns on
Rediff online shopping site
* 42 million rural HHs availing banking services in comparison to 27 million urban HHs.
* Investment in formal savings instruments: 6.6 million HHs in rural and 6.7 million in urban
Opportunities:

* Infrastructure is improving rapidly.

- In 50 years only 40% villages connected by road, in next 10 years another 30%.
- More than 90 % villages electrified, though only 44% rural homes have electric connections.
- Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected by
STD.
* Social Indicators have improved a lot between 1981 and 2001
- Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses halved (41% to 23%)
- Percentage of BPL families declined from 46% to 27%
- Rural Literacy level improved from 36% to 59%
* Low penetration rates in rural so there are many marketing opportunities.

IT, Economics and Development

In abstract, there are two types of potential economic gains from the use of IT.
First, there are both static and dynamic efficiency gains one kind pertains to increases
in operating efficiency, while the other comes from reduced transaction costs. In both
cases, the channel for gains is through more effective and lower cost information
storage, processing and communication. Dynamic gains come from higher growth ,
potentially raising the entire future stream of consumption.
The second type of potential benefit comes from reductions in economic inequality, to
the extent that such reductions are an agreed-upon social goal, and therefore a social
benefit.

IT involves the electronic processing , storage and communication of information,

where anything that can be represented in digital form is included in the term
‘information’. Thus news, entertainment, personal communications, educational
material, blank and filled-out forms, announcements , schedules, and so on are all
information. Software programs that process data (searching, tabulating, and
calculating, for example) are also information in this sense, representing a particular
kind of intermediate good.
Information goods typically have the characteristic that one person’s use does not
reduce their availability for another person. Thus, a message or weather news can be
viewed by many people, simultaneously or sequentially .The ability to share information
among users can impact the feasibility of providing it on a commercial basis. IT
dramatically increases shareability of information, and this affects the economics of
private provision of information goods and services.

Experience with Internet use in developed countries suggests that information

exchange related to the completion of market transactions is especially valuable. The
ability of IT-based communications (combined with storage and processing) to bring
together buyers and sellers more effectively represents major potential gains. These
gains can come about through lower search costs, better matching of buyers and
sellers, and even the creation of new markets. In the rural Indian context, farmers
selling their crops and buying inputs, and job seekers are all potential users of
Internet-based matching services.

Problems and the role of government and private institutions

An important barrier to realizing the economic benefits of IT is the often substantial up-
front cost of investment in new infrastructure – both hardware and software. In
developed countries such as the US, large potential customer bases and efficient
capital markets help overcome this barrier. Hardware and software designed for
developed country markets can easily be adapted to serve higher income consumers in
developing countries, but this leaves out the majority of the population in developing
countries. Thus, one potential consequence of IT is an exacerbation of inequality, as
only higher income groups enjoy its benefits – this is the so-called ‘digital divide’.

On the other hand, because government-provided goods and services, including

redistributive transfer payments, are often aimed at lower income groups, to the extent
that IT can increase the efficiency and effectiveness of government, the benefits of IT
will be more widely spread, partly reducing ‘digital divide’ concerns. However,
achieving these benefits requires more than just internal use of IT: beneficiaries of
government services (particularly the economically disadvantaged) must be able to
access IT resources also. While governments may invest in such front-end interfaces
with citizens(and have done so in developed countries), the cost of doing so for
governments in developing countries may be prohibitive. Such governments typically
already have difficulties in raising sufficient resources through taxes and user charges.

While successful examples of implementation of ‘e-governance’ initiatives exist, there

is a conceptual alternative. This comes from recognizing the fact that citizens typically
incur private costs (often substantial) in availing of government-provided services. If
the use of IT can reduce such costs, even low-income individuals may be willing to
pay at least some fraction of the cost savings, and there is scope for private provision
of intermediate services that reduce the cost of access to government. Of course, this
idea is not specific to IT: private intermediaries already help in filling out forms, getting
access, and so on. One difference that IT can make is in reducing costs even further,
often by an order of magnitude. In broad terms (as is also the case with electronic
marketplaces and job-matching boards), IT changes the scope and nature of
intermediation.

Private providers may therefore have a role in delivering IT-based information services
that are complementary to government services, as well as in providing conventional
private goods and services. However, the private individual benefits that determine the
prices charged by private providers may not reflect the overall social benefits of
provision. As discussed earlier, these may include benefits such as greater awareness
and participation in the political process. In such cases, there may be a role for
government subsidization of private provision. This assumes that government provision
is likely to be less efficient than private provision, which seems to be true in some
cases in developing as well as developed countries. In either case, richer information
flows increase the transparency with which the government operates, thereby
promoting better monitoring, and potentially – depending on whether electoral and
legal institutions are effective – greater accountability. The ultimate payoff is more
efficient delivery of government services.

In rural areas and smaller towns, however, the various demographic and
socioeconomic factors such as income levels, cultural attitudes, and geographic and
social fragmentation may not be present in configurations that would easily enable the
diffusion of commercial access to various IT-enabled services. Furthermore, the
market power of traditional rural intermediaries may act as a barrier to partial
innovations in how matching of buyers and sellers is conducted. Finally, vernacular
language requirements and different demand patterns imply the need for software that
is tailored for fragmented rural markets.

Rural IT: Issues and Conceptual Framework

Now,in this section we will examine the potential for rural IT use, both from supply and
demand perspectives. On the supply side, we examine the technical and organizational
issues that arise for delivering IT-based services to rural populations in India. On the
demand side, we examine the potential benefits that IT can bring to these populations,
if the implementation is successful. We begin with the demand side, as a way of
motivating the supply side issues.
Figure 1: Rural Household Economic Decisions

Human capital

Inputs Operations Selling Saving

Consumption

Potential sources of demand for IT-based services can be framed in terms of a simple
flow diagram representing the decisions of rural households. We will treat a typical
household as engaged in farming, though this will not be true for all of them. Figure 1
presents a simplified representation of the various economic decisions.
Beginning from the left of Figure 1, input decisions include material inputs such as
seeds, fertilizer and pesticides; and capital inputs such as tractors and land (whether
through purchases or rentals); as well as the credit required for such purposes. The
focus of analysis will be market transactions for inputs. In all cases, there is a potential
for benefiting through improved information about prices, quality and availability.

Continuing to the right of Figure 1, marketing of outputs primarily requires price

information. Increasingly, producing for sale also requires knowledge of quality
requirements in different markets. Selling of produce provides income for consumption,
investment and inputs (the reverse arrows in the figure), as well as generating
information that affects input and production decisions.

Non-production decisions of households can be roughly divided into pure consumption

activities, as well as human capital investment in education and health. The boundary
is not distinctive, since even basic food consumption has nutritional impacts and
therefore a human capital component. These activities generate impacts on operations,
since they affect the quality of decision-making, as well as household labor inputs: we
indicate this with the vertical arrows. While poorer households may be severely limited
in their consumption, a significant proportion of rural households in India have incomes
sufficient to support some discretionary consumption. In some cases, consumption may
be only superficially discretionary – social norms may dictate spending on activities
relating to marriage and other life cycle events.

Finally, the rightmost box captures household saving, again something that is not
feasible for all rural households, but is an activity of growing importance. Saving may
be for consumption smoothing, investment, or precautionary reasons.

Even this simplified and summary picture of rural households’ economic activity
illustrates that they engage in a broad range of transactions and decisions with
economic impacts. What is noteworthy besides this complexity is that many decisions
are made with very limited
information, and that market interactions are often subject to high transaction costs,
due to imperfections in information, as well as high transportation costs, inefficient
intermediation and time delays. High transaction costs will always prevent marginal
transactions from being undertaken; in extreme cases, the market may fail to function
at all. Given this scenario, the role of IT can be understood in terms of reducing
transaction costs, as well as improving the efficiency of decision making within
households (both as producers and as consumers).
Reductions in communication and transaction costs are particularly beneficial where
they can allow new markets to develop, in the sense that existing goods and services,
otherwise restricted to urban areas, or to a very limited segment of rural populations,
now can be offered to broad cross-sections of the rural population. Examples include
financial services, particular types of education, health services, long distance
communications, and expertise on a range of production-related decisions. Whether
this can be done in a sustainable manner depends on the supply conditions for IT-
based rural services.

It must be further understood that the activities outlined, in Figure 1 and the
accompanying discussion, take place within a particular institutional environment. This
includes private actors as well as governments. For example, farmers may obtain
credit and inputs, as well contract their output, to private ‘commission agents,’ even in
the presence of government procurement and government-run local markets.
Governments play a major role in subsidizing inputs, providing infrastructure, and
enforcing property rights. To the extent that these activities are also subject to
inefficiencies, it may be the case that, in order to be successful, IT-based
interventions geared towards rural households will have to simultaneously alter the
institutional environment, or else achieve sufficient scale and scope in order to impel
changes in it.

Figure 2: Value Chain for IT- Based Services

Organization Power and Computing / Applications HRM and CRM

and partners connectivity peripherals
Turning to the supply side, we can illustrate the various stages of decision-making and
delivery of IT-based services in terms of a typical value chain, as shown in Figure 2.
At each stage of the chain, the IT components include a mix of hardware, software and
services. In addition, the creation of an organizational structure and value network is a
critical first step, while managing human resources and customers is vital for
successful final implementation.

We next discuss each of the components of the value chain in Figure 2. The
organizational structure typically requires commercial goals of profitability to be built in.
This is easily done through a standard corporate structure. It is clear that, for
scalability, some minimum size of the organization is required. In addition, there are
fixed costs of innovation that can be spread more effectively across a larger
organization. Social goals can be incorporated in two ways. For organizations that are
dedicated specifically to rural IT-based services delivery, controlling ownership of the
corporation by a non-profit entity provides the social focus. For existing corporations
with broader businesses, social goals may enhance reputation, meet corporate social
responsibility guidelines, or otherwise be consistent with the mission and values of the
organization. In other words, including social goals may make good bottom-line
business sense.

For both types of organizations, building the right capabilities requires some effort.
Creating what amounts to a brand new infrastructure for rural IT service delivery
requires a broad mix of skills, and finding talented and trained people who can be
effective in a role that mixes entrepreneurial tasks with corporate line responsibilities,
all in an unfamiliar rural environment, can be a challenge. One solution to the
potentially insurmountable problem of collecting the necessary talent and skills is to
enter into partnerships with other organizations that may provide specific pieces of the
overall package that is needed: application software, content, maintenance services,
technology, marketing, and so on. These partnerships can pose their own problems,
particularly in goal alignment and consequent performance monitoring requirements. Of
course all these organizational issues are well recognized in management writing and
experience: what is important is to recognize their criticality in a setting that has more
typically been the arena of pure ‘social service’ entities such as governments and
NGOs. It is also critical to recognize that the organizational innovation required in this
case is an order of magnitude greater than the task of selling consumer goods in rural
areas, something that is now accepted as a given in India. The greater complexity and
variety of the services being delivered through IT is the root cause of this difference.

The second stage of the supply chain in Figure 2 concerns access to electric power
and Internet connectivity. In both cases, a major constraint is the failure of the public
sector to deliver adequate power and telecommunications to rural India. Privatization
has helped in the case of telecommunications, as has technological change. In fact,
innovation in digital communications technologies is the foundation of all rural IT-
based service delivery. While conventional telephone connectivity has often proved
inadequate for Internet access in rural areas, because the quality of existing voice lines
is too poor to sustain data transmission, several innovations provide alternatives that
are likely to be cost effective. These include wireless in local loop (WLL), fiber optic
cables, and high powered versions of Wi-Fi (802.11 wireless standards). The Internet
boom in the United States clearly played a role in pushing down costs and speeding
innovation in fiber optics and wireless transmission. In some cases, VSAT satellite
connectivity has been used for Internet access, but it is not very cost effective. The
major challenges for connectivity are likely to be regulatory, having to do with
interconnection to the main network, and with maintenance, rather than with the
fundamental technological choices and implementation.

Electric power is more of a problem, and this is true throughout India. Battery backups
are a very partial solution to the lack of reliable power supplies, and solar technologies
may be more promising in the near future: they are already in use in existing rural IT
efforts. The difficulty is that having to rely on these alternatives and backups
unnecessarily raises costs of operation. Of course this is true for all of India’s
economy. It is well recognized that the power sector is the major bottleneck, with
capacity well short of demand, and the quality of transmission and distribution
remaining poor.

The third stage of the supply chain is the most straightforward, because of the
standardization of components of desktop computing and peripherals, rapid
technological improvements, falling costs of production, and, most recently, price
reductions resulting from changes in tariffs on imported hardware. It is now possible to
fully equip a single computer rural Internet kiosk for less than Rs. 50,000, including CD
drive, printer, scanner, power backup, and web cam. Potentially, the highest cost
component is the operating system, since Windows enjoys a virtual monopoly on the
desktop. However, Microsoft seems to have concessional pricing for socially oriented
developing country initiatives, and this helps to reduce costs. The operating system is
still typically in English, but as long as simple drills can take kiosk operators to local
language
applications and content, this is not a substantial usage barrier. One can conclude that
this stage of the supply chain is easiest to implement, with a highly standardized,
almost cookie-cutter approach – although ongoing maintenance can be a challenge.
The major business decision is whether to have more than one computer per kiosk, but
experience suggests that one is sufficient for almost all situations, at least in the
beginning

The next stage of the supply chain, namely applications, presents more challenges.
The range of possible applications is vast. Many IT-based services require non-IT
logistics or processes as complements. Availability of local language software becomes
more of a constraint. There is much more variation across localities, not just regions.
Delivery of services or development of content often stretch the resources and
expertise of the primary provider, and require varied partnerships or other contractual
relationships. Deciding the sequencing, scope and sophistication of various
applications can be a major challenge, since many of the services are being offered for
the first time, or are being delivered in novel ways that challenge existing institutional
frameworks and relationships. Pricing for low income markets, where market
penetration is limited in any case, and where some services may be perceived as
public goods that are traditionally unpriced, presents another major challenge. In the
case of financial services or
government records or services, substantial government cooperation may be required,
raising political and bureaucratic hurdles. In some ways, of course, the essence of the
success of the rural IT-based-service business model depends on the selection,
quality and pricing of the services being offered. What is interesting is that a substantial
amount of learning has occurred in this arena, in just a few years.

The final stage of the value chain in Figure 2 refers to human resource management
(HRM) and customer relationship management (CRM). In this context, these more
general terms take on specific focuses. Training of rural kiosk operators, whether they
are formal franchisees or independent farmer operators, becomes a key aspect of the
delivery model. Training the field personnel at various levels (village and district hub) is
also critical. Gathering customer information on usage patterns (nature and timing of
use), revenue streams, responsiveness to pricing, social acceptance, and so on is
also vital, as these are brand new markets in terms of the nature of service delivery.
Furthermore, being able to respond to this information with appropriate and timely
changes in strategy is also necessary for successful implementation.

One might expect that a ‘labor surplus’ developing economy such as India’s would not
have a problem with the more labor-intensive tasks at either end of the value chain as
it has been mapped in Figure 2. However, it seems that these value chain activities are
the most difficult to carry out successfully, because those with the requisite skills are
more likely to be taken up by more traditional corporate organizations, in urban
environments. This does not minimize the challenges associated with technical
implementations and adaptations for rural areas, whether in software, hardware and
maintenance. However, solutions in these cases are often one-time and replicable,
whereas building organizational expertise involves much more of a situation-specific or
local approach.

We have so far provided a general and abstract discussion of the various aspects of
supply and demand of rural IT-based services. In the next section, this discussion is
made more concrete and specific, through an assessment of several initiatives in India.

Implementation: Cases, Impacts and Lessons

In this section we will discuss the various IT related institutions which are active in this
field. We will use the conceptual framework of the previous section to bring out
common features as well as differences.

Drishtee

Drishtee.com had its origins in Gyandoot, a government project in Dhar district of

Madhya Pradesh, in central India. Gyandoot provided an intranet for 33 village
information kiosks, offering a range of mainly e-governance-related services. The
most prominent of these is land record certificates, which are needed by landowners
for transactions such as sale or leasing of land. While Gyandoot was a specific local
initiative, involving heavy support from the District Collector, Drishtee has attempted to
take that model and rapidly replicate it across the country. Currently, Drishtee has over
100 rural Internet kiosks in several states, run by franchisees according to a revenue
sharing arrangement. In Drishtee’s case, a kiosk has, at least initially, just one
computer. The set-up cost is in the range of Rs. 50,000.

Drishtee is a commercial organization, with specific social objectives of targeting

benefits to the rural poor built into its vision and strategy. Drishtee has developed some
software on its own, but also relies on various partners for software development, as
well as, in some cases, other partners for management of district hubs, from which
kiosks in a district are managed. Thus Drishtee’s model involves not only franchising
individual kiosks, but also potentially franchising district hubs. Partnering with local
district hub ‘channel partners’ allows Drishtee to expand faster without creating a bulky
organization, spreads risks, and also insulates Drishtee from some of the commercial
pressures that might conflict with social objectives. At the same time, it reduces
Drishtee’s ability to monitor and implement the achievement of social objectives. This
tension between commercial success and meeting social objectives is a general
challenge for all the rural
IT initiatives examined here. Despite some challenges, Drishtee appears to have built a
capable but lean organization, with learning having been systematized in a manner that
makes it transferable across locations, permitting more effective scaling up.

Electric power and telecom connectivity have posed challenges for Drishtee, since it is
a pure startup, without resources for heavy investments in infrastructure. It uses
standard battery backup for power interruptions, and has relied mainly on dial-up
Internet access, though it is
experimenting with Wi-Fi for district-level intranets. In some cases, it has set up
kiosks even without phone connectivity, relying on physical delivery of information.
Software has also been developed that economizes on bandwidth for information
exchange, making the constraint of dial-up access less severe.
As we have noted, the software and hardware for basic kiosk operations are quite
standardized, and their cost has been falling. Drishtee was able to get concessional
terms for using the Windows operating system. Various local language software
applications have been developed, for e-governance, market price information, buying
and selling, and so on.

With the origins in Gyandoot playing a role, simple e-governance, such as making
government forms available and allowing a variety of complaints to be relayed to the
district level government, has typically been the lead service in setting up operations in
a new district. In this context, informal partnerships with district level government
officials (both state and local) have been very significant. For example, in Sirsa and
Jaipur districts, Drishtee has been able to act as a significant intermediary for
information exchange between the district government and constituents. It obviously
remains limited in its ability to improve the internal functioning of government.

Expanding the range of services has meant tying up with content partners, particularly
organizations such as Agriwatch, which provides a substantial quantity and range of
agricultural information to farmers. Agriwatch is essentially developing into a large-
scale Internet portal for farmers, and Drishtee’s role can be seen as providing lastmile
access to this rich information, through its kiosks. It is difficult to quantify the benefits of
this service, but its popularity with farmers suggests that it is valuable. Related
examples from the cases of ITC and n-Logue will provide a more definite assessment
of these benefits.

Drishtee’s pricing scheme for e-governance services follows a set model. The full cost
of a transaction such as obtaining, filling out and submitting a government form is
estimated, including imputing the value of time spent in travel. The kiosk owner’s fee
for this is then set at about 10 percent of the estimated transaction cost, also taking
into account possible willingness-to-pay considerations in choosing “pricing points”
such as Rs. 5, 10 or 20. Assuming that these fees can cover the full cost of the kiosk
owner and Drishtee (which depends largely on generating sufficient volume) the
saving in transaction costs is substantial. The savings in such cases are generated by
reductions in travel and time costs. There may also be benefits in terms of improving
the effectiveness of transactions (e.g., if a complaint through this channel s more likely
to be addressed), but these are harder to quantify.

In sum, Drishtee has emerged as a typical start-up. Without very substantial financial
resources, it has still managed to expand, and it has built an organization with strong
competencies in what may be broadly termed ‘rural IT-based service delivery.’ This
judgment holds despite Drishtee’s lack of any clear strength in technology,
applications, partnerships or ability to scale. In all these dimensions, it is ‘good
enough,’ but it appears to have built a strong, low-cost organization from scratch, one
that may be well suited to delivering at least some components of the overall service.
This competence is discussed further in the context of Aksh, a former Drishtee partner.

Aksh
Aksh is essentially a fiber optic cable company, with its core competence in layingand
maintaining cable. Its revenue model is driven by the content and data that can be
delivered over this cable. Therefore it has an interest in increasing such content
delivery. While urban areas in India have seen substantial penetration of cable TV,
through a model (now in transition) of largely unregulated local operators, the rural
market remains largely unserved. The bottleneck has been the lack of last mile
infrastructure, since there is a significant percentage of rural households (especially in
richer districts) that can afford cable TV. Aksh, along with other companies such as
Reliance, has received licenses for laying a new fiber optic network in rural areas.
In the case in point, Aksh rapidly laid a large fiber optic network in rural Jaipur district
(excluding the city itself). It initially partnered with Drishtee for the development and
maintenance of kiosks that would act as distribution points for cable TV access, as well
as Internet kiosks. The Drishtee franchise model, interface and services were adopted,
but with the brand name of “Gramdoot.” Aksh therefore appeared in the value chain
as the provider of connectivity, with Drishtee handling all the other value chain stages
illustrated in Figure 2. However, this asymmetry between Drishtee and Aksh was fairly
quickly reversed, and now Aksh stands as the main service provider, with Drishtee
reduced to the role of providing software and related services.

In any case, the model of rural IT-kiosks managed by a large company with incentives
to provide access to large numbers of rural households appears to be scalable and
sustainable. Cable TV over fiber optic networks provides a strong revenue base, and a
range of Internet-based services and content can be provided through partnerships.
As companies such as Drishtee also scale up, they may be more effective in providing
the necessary scale for ongoing management of the kiosks, including training services
and customer relationship management. For now, providing software is easier for
start-ups in such cases.

The history of Aksh’s initiative means that the range of services provided in their
kiosks, the revenue model, and pricing structures currently follow the Drishtee model.
Hence the earlier discussion of benefits transfers over to this case. The importance of
cable TV revenues, however, suggests that these kiosks may emphasize a range of
entertainment services more than utility services such as agriculture-related
information or e-governance. It is conceivable, however, that kiosk operators will be
able to span the entire range of services. The bandwidth available will certainly support
a full range of offerings, and the issues will be managerial attention and the
perceptions of rural users. One important implication of greater bandwidth is that video
interactions are possible, and Drishtee and Aksh have been able to test several
communication services based on this. The power of video over text is in increasing the
richness of information exchange, as well as greatly increasing the attractiveness and
acceptance of all the services offered by the kiosks.

n- Logue
While Aksh and Drishtee are mostly active in north India, n-Logue has its origin and
chief presence in the south. It is a for-profit corporation, with majority ownership
residing with a nonprofit organization. The main impetus for n-Logue came from the IIT
Chennai research group headed by professor Ashok Jhunjhunwala. This group has
been responsible for a stream of hardware and software innovations that enable rural
IT-based service delivery, through connectivity and applications.

The core innovation at the heart of n-Logue’s operations is a WLL technology,

Cordect, which provides joint wireless Internet and voice connectivity. The kiosk-level
hardware is relatively inexpensive, and adds only marginally to the overall cost of
akiosk. However, the construction of WLL towers and maintenance of the WLL hub is
relatively costly, and this fixed cost requires a substantial density of kiosks within a
particular radius of the tower. The n-Logue model is designed to achieve this density,
with kiosks generating returns from fairly small user populations (somewhat smaller
than in the case of Drishtee and Aksh). Another constraint on this connectivity model is
the requirement of clear lines of sight, and therefore relatively flat topography.
Nevertheless, large parts of India are still suitable for this implementation. Furthermore,
n-Logue has progressed well beyond being simply a connectivity provider, to
delivering a range of services – these can be adapted to different connectivity
technologies. N-Logue is the second largest organization in this field, supporting over
500 rural-IT kiosks.
The WLL technology does provide several strengths. It overcomes lack of dial-
upconnectivity, and provides an extra revenue stream for kiosk operators, through
voice calls. Furthermore, it has greater bandwidth than traditional fixed line dial-up,
which allows a wide range of applications to be delivered. In particular, the IIT Chennai
group has been able to develop video applications that are sufficiently compressed to
work within the constraints of the WLL.

In general, the close links with the IIT Chennai group have given n-Logue access to a
range of software innovations for delivery and implementation of various applications in
the fields of education, health and agriculture. For example, web cams have been used
for remote diagnostics for diseases of people, animals and plants. A considerable
amount of local language software has been created quite rapidly and effectively. The
university connection is important, and stands out as a model for other providers to
emulate.

N-Logue has also been able to leverage its university connections to build strong
partnerships across the board. The Tamil Nadu government has been strongly
supportive of n-Logue’s operations in Madurai district, where numerous innovations
have been piloted and showcased. MIT’s Media Lab has also been involved in the
initial stages, and ICICI Bank is piloting various financial services products in kiosks in
Madurai. In Nellikuppam district, n-Logue has partnered with EID-Parry to improve
sugar farmers’ access to information, and reduce their transactions costs in dealing
with Parry’s large sugar factory in the district, through improved tracking and
settlements of payments. In this case, the factory chimney has also served as a base
for the tower, and the control hub is housed in the factory, substantially reducing fixed
costs. Parry plans to use those kiosks that are under its own brand (several dozen in
total) to offer processed foods to farmers.

N-Logue also appears to have developed a very capable organization, and has
expanded beyond Tamil Nadu into other southern states, as well as the west and north
of India. One advantage that emerged in discussions was the relative ease of
establishing organizational capabilities, training kiosk operators, and serving rural
communities in the south relative to the north of India. This reflects higher proportions
of the population with basic education, greater population densities, and, in general, a
more structured and stable civil society. A factor that seemed to emerge in all cases
was the greater average success of women kiosk operators, possibly reflecting the fact
that there is greater untapped potential for rural women, given their otherwise more
restricted employment opportunities.

Overall, n-Logue has several strengths compared to Drishtee, in terms of access

technology, software applications and partnerships. Nevertheless, the two
organizations are quite similar in terms of the range of services offered, and their ability
to deliver close to an ‘end-to-end’ solution. Their social goals are more salient than
those of Aksh, and each has achieved a substantial geographic reach and partnership
capability. There are some differences in emphasis in terms of applications, services,
and revenue models (Drishtee relies more on overall revenue sharing, whereas n-
Logue charges mainly for connectivity). In each case, however, there has been a
demonstration that rural IT-based services are commercially feasible, and as a
corollary, provide quantifiable economic benefits. Since estimates of the overall market
size suggest that it can support at least 50,000 kiosks (roughly one per 10,000
people), and these two organizations, plus Aksh, have less than 1,000 kiosks, there
appears to be substantial room for further growth.

ITC

ITC stands out as a large Indian corporation serving global markets. Its kiosks are
called e-choupals, and they have several differentiating features. The key
distinguishing factor is that the e-choupals are totally designed to support ITC’s
agricultural products supply chain. This gives them a focus that is not present even in
EID-Parry’s kiosks in Nellikuppam. In addition, the e-choupals are totally owned and
set up by ITC, with the operators not having any investment or risk of their own.

The e-choupal initiative has involved a clear focus and strong direction from the head
of ITC’s International Business Division. ITC has been able to turn its substantial
organizational and managerial capabilities toward this initiative. Management trainees
are heavily immersed in the e-choupal model as part of their inculcation into ITC’s
workings. There are four kinds of e-choupals, tailored very specifically for four different
products: shrimp, coffee, wheat and soybeans. The first two of these involve large
commercial farmers, and the focus is on creating Internet access to global market
information to guide production and supply decisions. There are a few dozen of these
e-choupals. In the case of wheat and soybeans, there are many small farmers, and
over 2,000 e-choupals have been set up, in several states of India.

The description here is based on soy-choupals. Wheat-choupals are somewhat

similar, with the final market and products being somewhat different. Soybeans are
pressed to extract oil, which is sold domestically, while the remainder is exported as
animal feed. Thus they are a cash crop, without the regulated market conditions or
subsistence consumption associated with a food grain such as wheat. Soy-choupals
are used as registry points for procurement of soybeans. Actual procurement is done at
factories and warehouse hubs, but the initial logging in is done through the e-choupal,
which provides price information and therefore price certainty. In fact, the
e-choupal price acts as a floor price for procurement – the factory or warehouse price
can be higher. E-choupals also provide access to local market (mandi) prices and
global market price
information on soybeans and derivative products, to allow farmers to compare prices.
They give access to operational information, developed by ITC experts, pertaining to
cropping, seeds, fertilizer, and so on.
E-choupals are set up by ITC, with solar power backup and VSAT connectivity. The
equipment cost for the e-choupal is borne by ITC, with the selected farmer providing
the location. In addition to the adoption advantages that come from using a farmer with
high social status as the operator, the house should be spacious and sturdy enough to
house all the required equipment, including the VSAT and solar panel on the roof. E-
choupal farmers take an oath to serve the village, and they are trained by ITC. While
there is an important element of social pressure and pride of work, the operators also
receive commissions on soybean shipments booked through the e-choupals. This
provides substantial revenue to the e-choupal operator.

The narrow (at least initial) focus of the e-choupals and the substantial commitment of
financial and human resources by ITC has made rapid expansion possible, as well as
quick acceptance by farmers. The narrow range of applications has limited software
requirements, and operators bear no risk in the ITC model. The longer-term goal is,
however, to use e-choupals and warehouse hubs as sales points for soybean oil,
tractor rentals, and eventually a range of ITC-produced consumer goods.

The initial benefits of the ITC effort include a substantial reduction in transaction costs,
from 8 percent of a transaction, down to 2 percent, approximately. It is estimated that
these gains are shared roughly equally between ITC and individual farmers. Some of
this gain may be at the expense of traditional intermediaries, who operate in mandis,
but much of it comes from genuine efficiency gains, including clearer quality guidelines
and measurement, greater timeliness and reduced waits, quicker payments, and
reduced uncertainties. To some extent, traditional intermediaries are co-opted in the
new process, by being hired to perform tasks such as handling payments at ITC’s
receiving points.

Clearly the use of information technology is just a part of ITC’s overhaul of its supply
chain, but speedy delivery of complex information pertaining to market conditions
makes IT essential. It might be asked what acts as a check on ITC’s market power in
this process. Clearly, the traditional mandi system, with its accompanying government
regulation and oversight, acts as continuing competition. More significantly, ITC’s
concern with its reputation acts as a disciplining device. Finally, the long term goal of
selling back to farmers as customers also gives ITC an incentive to cultivate
relationships with individual farmers. In fact, farmers view ITC as treating with greater
respect and dignity than is the case in traditional mandi interactions.

It is quite conceivable that the ITC model will not broaden significantly beyond the two-
way flow of agricultural produce from farmers to ITC, and processed foods, consumer
goods and inputs from ITC to farmers, without extending to e-governance,
entertainment, health or
education-related services. Instead, other firms may provide these services in similar
locations to ITC e-choupals.

TARAhaat

TARAhaat has evolved in a somewhat unusual manner. It achieved well publicized

success with Internet kiosks in Bundelkhand in Uttar Pradesh. These kiosks were very
much along the lines of those implemented by Drishtee and n-Logue, with a mix of e-
governance services, market price information, and so on. TARAhaat’s long range
plans include a comprehensive portal for rural information services and an extended
vision of its ‘TARAkendras’ as community centers. However, in its expansion into
Punjab, at the invitation of the administrator of Bathinda district, its model evolved quite
differently.

While the Bundelkhand model had used VSAT connectivity, this was not economical
for a commercially sustainable expansion. While Punjab is a high-income state with
relatively good infrastructure, the level of telephone connectivity turned out to be too
poor for practical Internet use. Other issues arose with the substantially greater
investment required by TARAkendra operators, since the model assumed that each
kiosk with have three or four computers. Perhaps the greatest problem was in building
an organization for implementation. While TARAhaat is a subsidiary of Development
Alternatives, an established NGO, it is set up as a corporation, with social goals meant
to be enforced through ownership by the nonprofit parent. The expansion of TARAhaat
required building an organization from scratch, and this turned out to be a slow
process. There were also problems with establishing effective partnerships with local
and state government, and TARAhaat has mostly gone it alone.

TARAhaat does have an educational content partner, called TARAgyan. In association

with various partners, TARAgyan is developing local language content and software for
use in TARAkendras. Basic IT education is an important part of TARAgyan’s actual
and potential offerings, but it is not the exclusive focus. In fact, there has been a
substantial diversification into developing materials for English language instruction,
rural marketing, personality development, and so on. This development was initially
very slow, though it may be picking up steam.

The constraints faced by TARAhaat pushed its Punjab effort in the direction of locating
in mandi towns rather than villages, and focusing on offering offline education rather
than a full array of IT- and Internet-based services. Thus, the few dozen
TARAkendras in Punjab have emerged as quite distinct from the Internet kiosks of the
other organizations discussed in this paper. It is conceivable that TARAhaat will end up
occupying a very distinct niche in small town India, quite different from a direct impact
on the rural, agricultural part of the country.
Conclusions
This presentation has briefly discussed several initiatives to provide IT-based services
in rural India. I have tried to provided a broad overview of the economic impacts of IT,
and gone onto examine demand side and supply side issues of successful
implementation. In particular, I have suggested that there is a broad range of services
that can be provided to a cross-section of rural households, even at relatively low
levels of income. This creates challenges for implementation by posing choices for
organizations, but also opportunities for creating niches. I have also mentioned a
framework in terms of the supply side value chain, and used this to discuss the
implementation of rural IT-based initiatives by several organizations.

All the organizations discussed in the presentation face common issues of

implementation, but differ in terms of how they have been handled. There are
differences in scale, connectivity technologies, services offered, revenue models,
organizational structures, and so on. Clearly, focused efforts with substantial financial
and organizational backing have a good chance of success. However, even startups
that have put together the required competencies and resources through partnerships
and slow organization building appear to have room in this market.

There appears to be enough evidence now that it is commercially feasible to use IT to

deliver services to rural populations either at costs that are lower than previous delivery
methods, or in ways that make it possible to achieve delivery where none was earlier
cost effective or feasible. Initially, the static savings from reductions in transaction costs
may be of the order of a few percent of value added. However, the benefits from
enabling new transactions should be an order of magnitude greater. In the long run,
bringing rich information to the population of rural India, whether in the form of
education, market prices, market opportunities, and more, can only have positive
impacts on the material well being of rural masses.
References ( e books)

1. Dr. T.P. Gopalaswamy, Rural Marketing, Wheeler Publishing, First reprint, Delhi, 1999.

2. Philip Kotler & Gary Armstrong, Principles of Marketing , Eithth Edition, Prentice Hall of India, 1999.

3. S. Dhinesh Babu, Marketing Management, University of Madras Press, Chennai, 2006.

4. S. Neelamegham, Marketing in India, Vikas Publishing House Pvt. Ltd., Seventeenth Revised
Edition, Delhi, 1999.

5. M. J. Xavier, Marketing in the New Millennium, Vikas Publishing House Pvt. Ltd., New Delhi, 1999.

6. Kaushik P. D., and Nirvikar Singh (2004), Information Technology and Broad-Based
Development: Preliminary Lessons from North India, forthcoming, World Development.

7. Singh, Nirvikar (2002), Information Technology as an Engine of Broad-Based Growth in

India, in The Information Economy in India, ed. Parthasarathi Banerjee and Frank-Jürgen
Richter, London: Palgrave/Macmillan, pp. 24-57.

Word meanings :

• FMCG Fast moving consumer goods

• LIQUIDITY Finance , The availability of liquid assets to a market company

• BPL Below Poverty Line

• Kiosk A small open fronted hut or cubicle for business activities

• NGO Non Government Organizations

• VSAT Very small aperture terminal (Two way satellite ground station

with a dish antenna that is smaller than 3 meters )

• WLL Wire Less Local Loop