Southeast Asia: The New Battleground of Alibaba
March 15, 2017

e-Commerce in Rural India: Lessons for Bangladesh (1)

Introduction:

More than half of Bangladesh’s population lives in villages. Over the years, our country made great economic progress. Since 2000, Bangladesh consistently maintained a consistent GDP growth of 6 percent. According to World Bank from 1991 to 2010, 20.5 million people came out of poverty. The poverty rate was 44.2% in 1991 which dropped to 18.5% in 2010. Out of 188 countries Bangladesh 142nd  at the Human Development Report 2015.

The government took various steps to develop rural economy. As a result, the economic condition of rural people improved a lot over the years.

Yet, rural Bangladesh faces major challenges. Currently, more than 63 million people live below poverty line and majority of them live in rural areas. Natural calamity, political instability, and structural changes, in rural areas are forcing people to migrate from villages to cities. Every year thousands of people are coming to big cities, living in slums, causing a rise in urban poverty, congestion and rapid degradation of environment.

Infrastructure continues to be a major problem in rural Bangladesh. There are no good schools and colleges, markets, hospitals in rural areas. This is also another reason behind migration of village people.

Spreading e-Commerce in rural areas can help the government overcome many of these challenges.

Objective of this series post:

This series post will look at various public projects as well as innovative approaches taken by the e-Commerce startups to spread e-Commerce in rural India and come up with some suggestions that will help our policy makers to determine the best possible course of action to successfully spread e-Commerce in rural Bangladesh.

Why India?

Source: iamwire

India currently has the fastest growing e-Commerce sector in the world. Like Bangladesh, majority of the Indian population lives in small towns and villages. Indian e-Commerce companies as well as Indian Government are trying to spread e-Commerce in small towns and villages.

Rural economy of Bangladesh:

Name People’s Republic of Bangladesh
Capital Dhaka
Population 159 Million (as of 04 November 2015)
Population below Poverty Line 24.3% (daily intake below 2122 k. Cal.)   (As of 2015)
GDP  total $112.00 bn (at current prices 2011-12)
GDP- per capita (PPP) US$ 1314 (2014-15)
GDP growth rate (%) 6.12 (at constant prices 2013-14)

 

Agriculture products Rice, Wheat, Jute, Tobacco, Sugarcane, Pulses, Oilseeds, Spices, Potato, Vegetables, Banana, Mango, Coconut and Jackfruit
Labor force-by occupation Agriculture Sector  45.1% (2013)

Industries Sector  20.8% (2013)

Other  34.1% (2013)

More than 70 percent of our country’s population lives rural areas. Agriculture is their main source of livelihood. Though there are small industries but their number is not big. Jute was the symbol of our agricultural prowess. During British and Pakistan period, jute was the main export product of Bangladesh.

Source: The Open University

Growth in agriculture played critical role in poverty reduction and overall economic growth of our country since 2000. According to World Bank report, a ten percent increase in farm income results into a six percent increase in non-farm incomes. Government took various steps to develop the agriculture sector. These include policy reformation, research and development, creation of new breeds of high-yield crops, development of infrastructure, mechanization.

According to Household Income and Expenditure Survey (HIES), from 2000 to 2010, farm income contributed to nearly half of the poverty reduction and it remained so till today. From 2000 to 2005, almost 40 percent reduction in poverty took place due to non-farm income growth and 21 percent due to farm income growth. However, things changed in the next five years. During this time, more than 90 percent of poverty reduction happened due to rise in farm income.

According to the 2011 Labour Force Survey of Bangladesh Bureau of Statistics (BBS), there were 54 million workers in Bangladesh. Of these, 42 million were employed in rural areas. 22.7 million of the 42 million were in the farm sector and 18.9 million were in the non-farm sector.

From the above discussion, it is evident that rural economy is actually heart of our economy.

For this reason, our government makes huge allocation for rural development and agricultural development in the State Budget every year. For example, in 2016-2017 State Budget, government allocated Tk. 8,987.77 crore for rural development and rural institution which is 8.23% of total budget. In agriculture sector, government allocated Tk. 4,991.11 crore (4.57 per cent).

The Changing face of Rural Bangladesh:

গ্রামে এখনো দারিদ্র্য আছে, কিন্তু না খেয়ে থাকা মানুষ আর নেই। এখনো আঁতুড়ঘরে সদ্যোজাত শিশু শেষ চিৎকার দিয়ে চির বিদায় নেয়, কিন্তু সংখ্যায় অনেক কম। গ্রামের শিশুদের এখনো লাঙল ধরতে হয়, তবে বিদ্যালয় থেকে ফিরে। রোগশোকজরা আছে, সেই সঙ্গে আছে চিকিৎসার ব্যবস্থাও। জীবন বদলানোর আশায় এখনো শহরে যায় গ্রামের বহু তরুণতরুণী, তবে সমৃদ্ধ জীবনের স্বপ্ন এখন গ্রামে থেকেও দেখা যায়। শুধু নৌকাবাইচ আর হাডুডু নয়, গ্রামের ছেলেটি এখন লা লিগার বার্সেলোনা বনাম রিয়াল মাদ্রিদ ম্যাচেরও খবর রাখে।

বদল এসেছে গ্রামীণ অবকাঠামোতে, খাদ্যের প্রাপ্যতায়, জীবনযাত্রার মানে, যোগাযোগব্যবস্থায়, শিক্ষায় স্বাস্থ্যে। কুঁড়েঘরের জায়গায় এসেছে টিনের ঘর। প্রায় প্রতি বাড়িতেই আছে স্বাস্থ্যসম্মত পায়খানার ব্যবস্থা। মহামারি বিদায় নিয়েছে। হাঁটা আর নৌকার বদলে মানুষ এখন যন্ত্রচালিত বাহনে চড়ে। শুধু ভাত আর ডাল নয়, পাতে সবজিমাছমাংসও থাকে। এক বেলা নয়, বেশির ভাগ মানুষই এখন তিন বেলা ভরপেট খেয়েই বেঁচে থাকে। সন্তানদের বিদ্যালয়ে পাঠায়। খুব কম পরিবারই বাল্যকালে কন্যাশিশুর বিয়ে দেয়

Source: কালের কন্ঠ

This is a news report published in January last year. There is poverty in villages but it is not severe. Village people now have access to mobile phones. There are banks in many villages.

According to 1973-74 Household Income Expenditure Survey (HIES), average income of rural household was Tk.464.  2010 survey revealed that average rural household income increased by 21 times to Tk. 9,648. This increase in income also increased people’s purchasing power. Previously, they only spent money to fulfill their basic needs i.e foods, clothes, etc. Now, they are buying other items.

1.3. Darkness under the light

We are seeing rapid growth in rural economy but there is still poverty. As it has been mentioned earlier, a significant number of people are living below poverty line and most of them live in rural areas.

Climate change is a major threat for our agriculture sector and rural economy. Every year, due to floods, many farmers lose their lands and migrate from villages. Rural women and children also suffer a lot. There is not much scope for village women to work and earn money.

Infrastructure is another big problem. There are no good shops, libraries, or hospitals. For this reason, village people often have to go to Dhaka temporarily spending lot of money.

Our farmers work hard all the year round but they do not get proper price for their produce.  The middlemen get the lion’s share of benefit. The same goes for rural artisans and handicrafts workers.

Though agriculture is the biggest employer of our country, its contribution in GDP is decreasing and the contribution of the services sector is increasing.

Most of the jobs in services sector require highly educated and skilled people. Hence, every year thousands of people move to the cities for higher education. Upon completing their studies, they search for jobs and settle down in the cities. In addition, there are many unskilled laborers who are working in the cities and earning money.

According to BBS statistics, rate of migration from villages to the cities during 2001-2011 was far higher than that during 1991- 2001. In 2015, 90 persons per 1000 rural people migrated to the cities. In 2011, this rate was 67.3, 69.7 in 2012, 68.1 in 2013, and 77.1 in 2014.

Because of this migration, urban population is increasing at an alarming rate causing serious problems. Our cities are not big enough to provide facilities to large people, which is why there is enormous pressure on resources such as gas, water, electricity etc. Unplanned urbanization is taking place which is degrading city environment. There is also sharp increase in urban poverty.

It is high time to address these issues if we want to build a prosperous Bangladesh. Otherwise, there will be no real economic development in our country.

India rural economy:

 

Name Republic of India
Capital New Delhi
Population 1,210 million approximately (As per 2011 census)
Population below poverty line 30% ( As of 2013)
Real Gross Domestic Product $ 1,012.0 billion (FY 13)
GDP growth rate (%) 7.2 percent (CAGR, FY 08-13)
Gross Domestic Product (GDP) Composition by Sector (FY 2014) Services: 65 per cent

Industry: 18 per cent

Agriculture: 17 per cent

Agriculture products rice, wheat, oilseed, cotton, jute, tea, sugarcane, lentils, onions, potatoes; dairy products, sheep, goats, poultry; fish

 

At present, India is the fastest-growing economy and the third-largest economy in the world.

According to PricewaterhouseCoopers’ report “The World in 2050,” by 2040, India’s GDP in purchasing power parity will surpass that of USA making it the second largest economy after China.

Rural economy is a very important part of India’s overall economy. According to 2011 Census, nearly 70% of the country’s population is rural people. Rural India contains 6,50,000 villages that are home to 850 million people.

Roughly 15% of India’s GDP does come from agriculture but over 50% of India’s population depends on agriculture.

The 2011 Census also revealed that agriculture is the largest private-sector enterprise. There are nearly 119 million farmers and 144 millino landless laborers. Fresh vegetables and seeds, pulses, wheat, milled products, Basmati rice, cereals are some of the top export products of the country.

Agriculture contributes one third of rural India GDP.  Services contribute 40%, manufacturing (including unorganised) contribute 30%. E.g. poultry and construction

There has been a major change in the agriculture sector in the last 60 years. Thanks to the Green Revolution, food grain production increased to 245 million tonnes in 2010-11 from 50 million tonnes to. GDP per agricultural worker also increased.

Rural India contributes around half of the country’s GDP. Just like the Government of Bangladesh, the Government of India gives huge emphasis on rural development. In 2016-2017 Union Budget, the government allocated more than Rs. 8200 crore for rural development.

Earlier this year, India’s Union Minister of Finance, Defence and Corporate Affairs Arun Jaitley announced that his government is undertaking the largest infrastructure creating program in the world. It will drastically improve the rural economy. The government will build 10,000 kms of road every year which will connect all the villages by 2019. Electricity will be delivered to every village by 2018.

For the last 15 years, Indian government worked tirelessly to create job opportunities for rural people. Rural programs helped 22 million women. Through various rural programs government created jobs for nearly 7,45,000 young people.

Since 2000, per capita GDP in rural region grew at a Compound Annual Growth Rate (CAGR) of 6.2 per cent since 2000. There is a sharp growth in salaried individuals in rural India. In 2008, 11% of the rural population was salaried individuals. That number rose to 22% in 2013.

This rise in income increased purchasing capacity and disposable income of the rural households three times compared to that of the urban households. This has happened because the cost of living in rural areas is lower. Already, some of the top local brands gets one third of their businesses from rural India.

The Fast Moving Consumer Goods (FMCG) sector in rural and semi-urban India is expected to cross $ 20 billion by 2018 and reach $100 billion by 2025. Currently, the rural FMCG market generates 40% of the country’s FMCG revenue.

Challenges of Rural India:

Just like Bangladesh, infrastructure is a big problem for rural India. There are no good schools, colleges or hospitals in rural areas. 85% of villages do not have a secondary school, more than 40% of the same villages do not have roads. In many places the roads are in poor condition, means of transport is inadequate, bridges are broken.

There are 19,909 villages in India that have no electricity. Even those that have electricity suffer from frequent power outage.

Poverty is still a big issue for India. According to World Bank 30% of the country’s population 224 million live below poverty line. According to last year’s India Rural Development Report 7% of the rural population is‘very poor.’

About 70 per cent of the country’s farmers are struggling to make ends meet. In 2012-13, the National Sample Survey Office (NSSO)’s ‘Situation Assessment Survey of Agricultural Households’ showed that farmers who own 1 hectare or less of land have an average monthly income of Rs.5,247. With this income, they cannot even meet their household expenses. The main reason behind this problem is farmers do not get fair prices for their crops.

Like Bangladesh, migration is a big problem in India. Due to limited scope of employment in rural India, large number of rural people migrates from village to the big cities.

The condition of Indian rural women is not good. In many villages, women do not get proper education and face lots of discrimination.

Why e-Commerce in Rural area is important for Bangladesh?

Before getting into detailed discusson on rural e-Commerce, we need to know the necessity of spreading e-Commerec in rural Bangladesh.

First and foremost, e-Commerce is not a luxury anymore. It is the future of business. We must become serious about adopting e-Commerce in all the spheres of our economy.

Without the development of rural people, true development of our country will never happen. e-Commerce can play a critical role in this regard. By spreading e-Commerce in rural Bangladesh, we shall be able to create new business opportunities for rural people.

Through e-Commerce we can provide a wide range of services to the rural people such as healthcare, education etc.

e-Commerce will also enable rural people to sell their products to a large number of people thus increasing their income. Today, it is a well-known fact that our farmers do not get fair prices for their produce. The main reason behind this is they have no opportunity to directly sell their products to the buyers. Rural e-Commerce can create this opportunity for farmers.

Not only farmers, but also rural artisans, small and medium enterprises, can highly benefit from e-Commerce.

The current government’s Digital Bangladesh initiative aims to use Information and Communication Technology (ICT) to provide a wide range of services at people’s door step. In a way, by spreading rural e-Commerce in Bangladesh, the government will build a Digital Bangladesh. Without rural e-Commerce there can be no Digital Bangladesh.

Rural e-Commerce will also improve the economic condition of women and will empower them. Rural women, staying at their homes, can sell products online and earn money.

Rural e-Commerce will create jobs in villages which will result in lower migration from rural to urban. People will stay in their villages and will earn their livelihoods.

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