About 72 percent of the population and 135 million households of India live in the rural areas of the country. Many of them are poor.
Definition of ‘Rural’:
Agencies of the Government of India like, National Council of Applied Economic (NCAER) and Insurance Regulatory and Development Agency (IRDA) have defined the terminology ‘rural’ as “villages with a population of less than 5000 with 75 percent population engaged in agriculture…”
Rural India is no longer an agrarian economy:
A recent study by ‘Credit Suisse’ indicates that rural India is no longer a pure agrarian economy, depending mostly on the quality of rain falls during monsoon season. This has been corroborated by the fact that the contribution of agriculture to the total GDP of rural India has come down from 50 percent, as registered during the turn of this century, to its current level of about 25 percent.
This transition of rural India from agriculture to industry and services, is now taking place at a much faster pace than ever before, as the rural economy is getting increasingly attuned to the national economic cycle, creating more and more non-agrarian jobs in those areas. Most of the incremental job creation is taking place in manufacturing, construction, retail and wholesale trade and also in the community services.
Currently, 55% of India’s GDP from manufacturing comes from rural India as the ‘Credit Suisse’ report highlights. As a result, since April 2000, per capita GDP in rural India has grown at a much faster pace than in urban India.
This welcoming change, in turn, is expected to play a key role in significantly improving the consumption of reasonably affordable healthcare, besides many other products and services, in the rural India.
Rural share of GDP growing faster:
Since last several years with various rural reform initiatives of the Government, the hinterlands of India have started growing faster than ever before.
A National Council of Applied Economic (NCAER) Research survey, indicating rural share of India’s GDP improved from 40 percent in 1980 to 54 percent in 2010, vindicates this point. At the same time, aggregate rural consumption (US$ Bn) increased from 94 in 1985 to 203 in 2005 and is expected to reach 350 in 2015. (Source: National Statistical Offices, UN, Euro Monitor International, Office of the Registrar General & Census Commissioner, India).
A new growth opportunity:
According to McKinsey Report, rural India currently accounts for 21 percent of the Indian Pharmaceutical Market (IPM). It is interesting to note from the NCAER report that both urban and rural India spend 5% of their total income on health.
Rural growth drivers:
McKinsey estimates that by 2015, upcoming smaller towns and the rural markets will contribute as much to the growth of IPM as the metros and top tier towns.
The following factors are expected to drive the growth of the pharmaceutical industry in the rural India:
- Large patient base
- Increasing overall income (over 1 percent of the total population coming above the poverty line every year)
- Increasing number of middle class in rural areas
- Disease pattern gradually shifting to chronic ailments
- Improving healthcare infrastructure with increasing Government spend on the National Rural Health Mission (NRHM)
- Rashtriya Swasthya Bima Yojana (RSBY), which is the National Health Insurance Scheme for Below Poverty Line (BPL) families, will provide health cover to increasing number of BPL households
- New initiatives of the Department of Pharmaceuticals (DoP) like, “Janaushadhi” scheme will provide low cost quality medicines to boost the uptake
Rural market size:
The rural markets contribute about 21 percent of U.S$ 12.5 billion pharmaceutical market in India (AIOCD-AWACS, February, 2012). As reported in ‘India Pharma 2015’ of McKinsey, by 2015 rural pharma market size is expected to reach U.S$ 4.8 billion from U.S$1.2 billion in 2005.
Currently, rural markets are dominated by ailments related to various types of infections. As stated above, this disease pattern is expected to change by the next decade to non-infectious chronic illnesses, like diabetes, cardiac, cancer, hypertension etc.
Increasing Pharmaceutical growth trend in the rural markets:
In 2011 the rural markets of India registered a growth of around 23 percent over the previous year. This decent pace of growth is expected to continue in the next decades.
MAT Dec 2011 (INR M)
MAT Dec 2011 (Saliency)
|Indian Pharma Market
|CLASS I TOWNS
|CLASS II TO VI
(Source: IMS Town Class Data – Dec MAT 2011)
Moreover, McKinsey Report forecasts that rural markets will contribute around 27 percent of the total consumption of India by 2020 and by 2015, rural India will account for over 24 percent of the domestic pharmaceutical market from its current level of 21 percent.
Charting the uncharted frontier:
It has been reported that growth rate of the rural markets of many companies have more than doubled due to their rural marketing focus. Possibly as a testimony to this new business opportunity, one can now see:
1. Novartis with its “Arygoya Parivar” initiative is rolling out a tailor-made program for rural areas of seven states of India, to start with. They have developed special packs of essential medicines with special prices to reach out to the rural population. To create disease awareness within the target population and also for disease prevention and treatment, Novartis has deployed health educators for this project.
2. Sanofi has initiated a dedicated rural marketing initiative called ‘Prayas’. The initiative is aimed at ‘bridging the diagnosis‐treatment gap through a structured continuing education program for rural doctors across India’.
The Company says, “through ‘Prayas’, specialists from semi‐urban areas will share latest medical knowledge and clinical experience with general practitioners based in smaller towns and villages in the interiors of India”. Their second strategy, reportedly, is for improving healthcare access by making quality medicines available at affordable prices for the rural patients.
3. Novo Nordisk is currently engaged in screening patients for diabetes in the rural areas of Goa with mobile clinics. This initiative is expected to create widespread awareness about diabetes and early detection of the disease, so as to prevent early onset of the disease related complications.
4. Eli Lilly developed a program along with the Self-Employed Women’s Association in Ahmedabad to educate and encourage rural patients suffering from tuberculosis to go for treatment.
5. Elder pharmaceuticals created a dedicated 750 strong rural marketing sales force called Elvista.
6. Cadila Pharma has set up a dedicated rural marketing arm called ‘Explora’.
7. Alembic Chemicals created a rural business unit called ‘Maxis’.
These are just a few illustrations and not an exhaustive list. However, the issue is whether the rural marketing initiative will continue to remain an experimental one to the pharmaceutical companies in India or will get translated into a decent long term strategic business move.
“The Fortune at the Bottom of the Pyramid”:
The iconic management guru C K Prahalad in his well-known book titled, “The Fortune at the Bottom of the Pyramid” wrote:
“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative consumers, a whole new world of opportunity will open up.” I am not sure whether the above profound observation is encouraging the pharmaceutical companies to explore the rural India with the wings of courage, where majority of the Indian populations live and most of them are poor.
A ‘Pot of Gold’ in the rural markets?
Currently around 20 million middle class households live in over 6,00,000 villages of India. This is almost the same as the number of middle class households residing in urban India and holds the key to significant increase of healthcare spending in rural India.
Rural market-entry strategy:
Instead of transplanting the urban marketing strategy into rural India, some companies, as mentioned above, have taken the community-welfare route to make the rural population aware of particular disease segments like, tuberculosis, diabetes, cardiovascular, waterborne diseases etc. together with the treatments available for such ailments.
These value added marketing strategies offer benefits to both the patients and the company concerned. The local medical practitioners, in turn, are also benefited as they get increasing number of patients in their clinics through such disease awareness community program by the pharmaceutical companies.
There are some key challenges for effective rural penetration by the Indian pharmaceutical industry, as follows:
• Inadequate basic healthcare infrastructure. Only 20 percent of total healthcare infrastructure of the country is in rural areas where over 72 percent population of the country lives. • Density of doctors per 10,000 populations in India is just 6. A large number of villages in India do not have any doctor. As per AC Nielson study, an average rural Indian has to travel about 6 km to visit a doctor. A Medical Representative will require traveling about 250 to 300 km every day just to meet about 10 doctors and 4 dealers. • Many villages are not well connected by proper all season roads. • Lack of appropriate supply chain network and logistics support.
With increasing infrastructural support and tailor made innovative marketing strategies for rural India, simultaneously delivering both preventive and curative therapies under one umbrella, it may not be difficult for the Indian pharmaceutical companies to discover ‘The Fortune at the Bottom of the Pyramid’ – a win-win situation indeed for both the ‘haves’ and a vast majority of ‘have-nots’ living in an amazing country called India.
The name of the game is less moaning and a bagful of implementable creative ideas.
By: Tapan J Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.