Discovering the Entrepreneurship Potential of Rural India

According to a report by GrantThornton, India holds an enormous pool of opportunities across various sectors in rural India. With increased awareness and disposable income, the Indian rural populace is exploring its entrepreneurial side through start-ups and various franchise models.

Further, to discover the business potential of rural India, it is important to introduce a commercial paradigm to the rural market, which addresses the social needs of the community, provides easy access to credit, and generates profit and employment.

India’s Entrepreneurial Environment

The consumer services segments mainly include travel services, financial services, cleaning, real estate, and transaction services, with the highest franchise penetration in financial services. The average return on investment in the industry is 23% to 33% with a payback period of 0.5 to 4 years. The revenue per sqft has ranged between INR 6,600 to INR 9,000 per annum.

According to the Hurun Global Unicorn List 2019, there are 494 unicorns in the world in 25 countries. With 21 unicorns, India has emerged as the third-largest ecosystem for more successful start-ups right behind China and the US but is ahead of Britain.

As per the Global Entrepreneurship Index, 2018 by Global Entrepreneurship Development Institute (GEDI), India is ranked 68 out of 137 countries. India’s remarkable performance was largely due to the significant contribution from key government initiatives such as Startup India, Make in India, financial inclusion, and others. Moreover, the role of entrepreneurship in rural India and creating jobs in the Indian labor market is in itself noteworthy.

Rural India

Over a decade, the government is focusing on nurturing the idea of entrepreneurship and start-ups, which are backed by initiatives Skill India and Right to Education. It is due to some of these initiatives the skilled and aware youth of rural India is evolving and exploring opportunities beyond agriculture and farming. Their increased appetite for risk is the key driver of government vision of nurturing rural entrepreneurship.

Need For Rural Entrepreneurship

As per GrantThornton’s report, rural entrepreneurship plays a major role in helping India achieve its developmental goals. A large number of people migrate to urban from rural India, which has multiple levels of impact not only on balancing the economical distribution of wealth and prosperity, but also adds to tremendous pressure on the infrastructure of the city, stress, and distress.

However, there is an urgent need for rural entrepreneurship largely due to:

The great disparity in rural and urban income

The majority of the rural populace is either directly or indirectly dependent only on agriculture for income as compared to an urban counterpart who has created multiple avenues of income. Thus, due to this imbalance, a large gap between rural and urban income.

Regional development

The government and private players together have realised the relevance of regional development by focusing on providing education, access to basic banking and ATMs, opening bank accounts, and others.

Reduce poverty and migration

By promoting rural entrepreneurship, people get multiple income opportunities besides farming and that too with moving out of their own village. It slows down urban migration drastically.

Optimum utilisation of resources

With large manpower residing in rural India, large companies today have realised its immense potential and size of the untapped market. But, expanding geographically would prove expensive without involving rural entrepreneurs. Thus, companies would any day prefer a low-cost business model to utilise the abundance of resources in rural India.

Increase in awareness of the rural population

The vast role of an entrepreneur is not restricted only to create employment and income sources. It is the duty of an entrepreneur to increase the knowledge and awareness of the society or community they are serving.

Entrepreneurial Advantages

Although the advantages of entrepreneurship have been widely accepted, it has a certain set of challenges as well. But despite its challenges, the popularity of entrepreneurship, it can be said there exists a model within entrepreneurship that offers a similar set of benefits. It offers a large base of employment opportunities by minimising the risk and it is easy to connect with the rural masses.

To increase economic activities across rural India, it is necessary for private companies and people living in rural areas together to adopt measures like franchising.

Private companies perspective (Franchisor)

Multiple factors affect the exposure of private players in rural areas, such as CAPEX requirement, operational costs, regulations (if moving to different state or country), target market, logistics, and others. In a franchise model, they just have to look for the right partner, who aligns with the company’s vision, has a significant local presence, and connect with the people around.

Franchise buyers perspective (Franchisee)

Often choosing start-ups over farming is not a preferred choice for an individual in rural India as it requires in-depth business expertise, funding to sustain a new idea and involves maximum risk and lack of training. Whereas, in the franchise business model, individuals are aware that they will gain an established running system, years of knowledge from the franchisor, a successful brand, and business model, as well as continuous training and interrupted support.

Consumers perspective

Consumers find it difficult to connect and cannot trust the intent of any international or domestic company opening its store in rural India. Low awareness and literacy levels make the situation worse to believe in a product or new service being offered. Thus, to overcome such challenges it is best to adopt a franchise business model. Through franchising, it becomes easier for the consumer to connect with the franchise holders as he/she is a local resident and his intent hardly gets questioned. For companies, too, it is easier to connect with masses and penetrate deeper into the market with optimised cost.

Currently, private players like Vakrangee Limited, Connect India E-commerce Services Private Limited, DTDC Express Limited through their unique franchises business models, have made the difference focusing largely on rural India, according to a report by GrantThornton. They have not only helped to create employment but also improved the living conditions of people living there.

Besides, players like Vakrangee have made a huge impact by promoting government initiatives like Pradhan Mantri Jan Dhan Yojana (PMJDY), direct benefit transfer (DBT), and others to rural masses through there efficient franchise model. Through Vakrangee’s extensive franchise network with 10,000+ operational NextGen Kendras and with 15,000+ NextGen Kendras in the onboarding process, the company provides multiple services, such as financial, assisted e-commerce, e-governance, and logistics services to individuals residing in semi-urban and rural cities.

Vakrangee is fully equipped to play an active role in this rural entrepreneurship sector and is in the process to create many of entrepreneurs across India. On the other hand, DTDC with its 10,500 franchise stores connects rural India to other parts of India and the world with its strong logistics services offered.