On Aug. 14, a day before India's Independence Day, which marks the end of British colonial rule, I visited the Canadian High Commission.
The I-Day evening is celebrated as India-Canada Friendship Day. I have been to many Western missions over the past several years, but none come close to Canada in terms of going that extra mile to reach out to Indians. Canada has no colonial baggage and its multicultural outlook plays a great role in breaking the ice. I met High Commissioner Stewart Beck after he danced in a colourful kurta-pyjama while his staff flew kites in the monsoon sky.
There's a lesson here for Canadian companies, and an opportunity. Late last month, credit rating firm CRISIL, an affiliate of Standard and Poor's, released a study that underlines a landmark change in the rural economy of India.
While it's true that India's economy as a whole has slowed in the past four years as a result of the global economic crisis, there has been a quiet revolution in the countryside. Rural incomes and spending have increased significantly. India has been hit by a surge in the cost of food, but that's because hundreds of millions of people have now moved above the poverty line and they are consuming eggs, pulses and animal proteins – long considered luxuries for the poor. This is the result of 20 years of annual economic growth rates around 6 per cent to 8 per cent.
"For the first time since economic reforms began two decades ago, consumption in rural India is growing faster than in urban India," CRISIL said.
Over a recent two-year period, additional spending in rural India was 3,750 billion rupees ($66-billion at current exchange rates), significantly higher than the 2,994 billion rupees ($53-billion) spent by urban citizens.
New employment opportunities have emerged outside the farming sector, helped by job creation by government to build rural infrastructure, which offers work in villages at guaranteed minimum wages. The result is that labour costs have increased for private farms.
"Rural wages have risen faster than inflation since 2007-08," CRISIL said
Citing government survey data, CRISIL says between 2004 and 2010, there were more rural construction jobs while the number of people employed in agriculture fell from to 229 million from 249 million. "In addition, migrants from villages to urban areas who benefitted from job opportunities in infrastructure and construction projects increased remittances to their families in rural India, which boosted consumption," CRISIL says.
About one of every two rural households has a mobile phone and 42 per cent owned a television in 2009-10, up from 26 per cent five years earlier.
What does all this mean for Canadian companies? A lot of the focus of Canadian firms in India has been on large infrastructure projects or in hot sectors such as automotive or on consumer goods.
It's time for smaller Canadian companies serving farming communities to try to harness the rural Indian market. Rising rural wages and a shift in rural employment indicates a trend toward increased demand for automation and other productivity-enhancing services. India has been hit by a surge in global crude prices. Sooner than later, a rise in state-administered diesel prices seems inevitable.
If there are Canadian firms that make cost-effective agricultural machinery that also saves on fuel, they know where to look to find a big market. Canada's large Sikh community, which has its roots in the farm belt of Punjab, could be a vital cultural link in tapping an emerging economic landscape in rural India.
These could present a number of strategic opportunities to help build the economic partnership Canada craves.
Narayanan Madhavan is associate editor of the business news pages of Hindustan Times, a leading Indian daily newspaper. He has previously worked for Reuters, the international news agency, as well as The Economic Times and Business Standard, India's leading business dailies. Though focused mainly on business and economic journalism with a strong focus on information technology and the Internet, he has also covered or written about issues including politics, diplomacy, cinema, culture, cricket and social issues. He has an honours degree in economics and a master's degree in political science from the University of Delhi.
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