A shoe company sent two salesmen to Africa. They found most people in the Dark Continent walking barefoot. The first salesman reported to the company: "Stop all shipments, no one wears shoes here." The second salesman wrote back: "Double the shipment, nobody wears shoes here."

PICTURE SPEAK

THE PIED PIPER: Deveshwar leads a network of firms to rural India

Corporate India is now waking up to this marketing folklore. For most of the past 50 years, companies looked at rural India from the point of view of the first salesman. But now they realise that the potential for business is closer to what the second salesman found once upon a time in Africa. Result: every corporate house worth its name is entering, expanding or rethinking rural business. Says Adi Godrej, chairman, Godrej Group: "Rural India is not sleeping any longer. We were."

Ask ITC Chairman Yogi Deveshwar, who, through his e-choupal initiative, is betting on rural India like nobody else does. "If India has to grow fast, 60 per cent of the country's private consumption that comes from villages has to grow fast. E-choupal is an attempt to achieve that," he says (see "To Boldly Go ..."). If that sounds ambitious, hear out Sunil Mittal, chairman of Bharti Enterprises, who has jumped onto the rural bandwagon with FieldFresh Foods, a $50 million venture with de Rothschilds of Europe. "India has emerged as the global hub of it outsourcing. We can replicate the same momentum in agriculture and transform the country into a global food basket," says Mittal (see "The New Deals for Rural India").

So what has made farming suddenly so irresistible to India Inc.? In its sheer size, India's 600- million-strong village community is a market any private company would die to get into. But barriers to this market have been daunting. Forty-two per cent of India's villages have population of less than 500-too small for a company to venture into. The average size of an Indian farm is 1.5 hectares compared with 500 hectares in the US. Small farms generate small incomes. So an average Indian farmer is not the consumer companies would drool over. Compounding the problem is the vast geographic dispersion and disparity. India has 6.4 lakh villages, most with abysmal physical infrastructure (power, roads, telecom), creaking social infrastructure (health, education) and underdeveloped institutions (banking, marketing).

LURE OF RURAL INDIA

The Tradition Draw Largest arable land in the world. Large domestic consumption base. Attractive emerging export markets. Diverse climatic zones allow growing of a variety of crops through the year. The Recent Triggers Steep rise in rural incomes in the 1990s Growing demand for processed food Compulsion to go beyond urban markets Government doubling it rural spending. New tax incentives for food exports.

Yet with the beginning of the 1990s, the fortunes of rural India have changed decisively. For the first time in more than 100 years, monsoons were normal in 11 out of 13 years. In a country where 60 per cent of the farming is rain-fed, that means a lot for farmers' prosperity. The price the government pays to buy grains from farmers rose more than 100 per cent in the 1990s-the highest in all decades. By tripling its spending on rural development between the 8th and the 10th Five-Year Plans-from around Rs 30,000 crore to about Rs 90,000 crore-the government opened the floodgates to rural India. Though only a small fraction of public money reaches the beneficiary, as long as that fraction is constant, the absolute flow of funds to rural areas would have tripled in the '90s. That will accelerate further with the UPA Government promising to double rural credit in three years.

Increased rural prosperity is showing up in income and consumption. FICCI estimates show that rural India's share in total consumption of FMCG (e.g. toothpaste, cream, food products) and consumer durables has exceeded urban India's share. According to ncaer, the percentage of very poor families in rural India (annual income Rs 16,000 or less) will fall from 61.4 in 1994-5 to just 20.2 in 2006-7. So while rural India isn't a land of milk and honey yet, things aren't as bad as the frequent news reports of farmers' suicide and protests suggest.

RURAL AWAKENING    Instances of companies entering or    expanding into rural business:

ITC: e-choupal reaches 3.1 million farmers. Adding 30 new villages a day. TATA: Tata Kisan Sansar spread over 14,000 villages in three states. GODREJ: Acquired and merged HLL's agribusiness; entering rural retail. MAHINDRA: Sells farm inputs and equipment through Shubhlabh. Present in corporate farming, rural financing. BHARTI: Entering food processing and exports of fruits and vegetables. PEPSI: Revolutionised horticulture in Punjab; entering citrus cultivation and seafood farming. SHRIRAM: Setting up a chain of rural malls-10 already operational. RELIANCE: Entered cropping and sale of medicinal and herbal plants.

The pull for agri-business is coming from outside the farm sector too. The food habits of Indians, especially urban Indians, are changing faster than farmers can change farming (see "An Indian Diet Revolution"). A greater corporate participation in agriculture will ensure a better alignment of farming patterns with food consumption pattern. For instance, the French fries sold by McDonald's in India are imported because the kind of potato used in the fries isn't grown in India. Ditto for most packaged fruit juices which are all imported from abroad. These are small pointers to the huge opportunities companies see in the food business. Less than 1 per cent of the farm produce is processed (it is about 50 per cent in the US) while 25 per cent of fruits and vegetables grown in India (worth Rs 2,500 crore) rot in farms. The scope for agribusiness-from cultivation to processing to retail-is immense.

For brave hearts there is lots to cash in on the traditional strengths of Indian agriculture. India has the largest area under cultivation in the world, covering all the 14 agro-climatic zones. This means almost every kind of fruit, vegetable and foodgrain can be grown in the country. Though productivity is very low so is the cost of cultivation, making Indian farm produce globally competitive. Proof: wherever corporate farming has been experimented with in small measures, farm productivity has zoomed.

True, handicaps-legal, policy and poverty-induced-are many. In most states, it is illegal for companies to buy crop from farmers. Contract farming isn't legal too and processed food is still taxed heavily. But the biggest hindrance is the farmer's inability to invest in his productivity improvement. This is where private investment will make a big difference. By investing in the farmers' ability to grow more and grow better, companies will not only get better product for their agri-business but they will also help farmers get prosperous. This in the long run, will create a rising army of consumers for all products. "An enlightened self-interest is the key driver behind corporate India's rural rush," says Pradeep Kashyap, head of rural business and marketing consultancy MART. He is convinced that corporate India's current rural push is the biggest ever. "I see big investments and a bigger shift in mindsets," he says. The UPA Government's pro-rural rhetoric has helped too by giving companies already lured to agribusiness a psychological push. For instance, the Mittals' plunge into food exports was triggered by the incentives announced in this year's export-import policy.

S. Sivakumar, the brain behind ITC's e-choupal initiative, feels that it is only in developing countries like India that complementarity between social good and corporate good exists so perfectly. "You can really have your cake and eat it too," he says.

What follows are the select profiles of companies that have marched into rural India, some with giant strides, some with baby steps-but all riding on the hopes of a new rural revolution.

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