Rural Business Hubs
Prime Minister, on his visit to ISB at Hyderabad on 5th December, 2006 emphasised that the education at Business Schools should be India centric. We haveto educate the B-school students with the Global perspective keeping in view the local environment - economic, cultural and geographical. He emphasised that rural sector is neglected by the corporates. It is only in recent times that corporate world is evincing interest on developing rural business hubs. In fact if we invest in rural infrastructure, supply side management of agricultural produce and logistics like storage and transporation of agricultural produce and rural goods, it will not only increase the per capita income of rural India, where 70% of our population lives, but also contribute around 0.6 to 0.7% to our GDP growth rate. This is what is called "inclusive growth" as per the Eleventh Five Year Plan document. Recently, as per the preliminary estimates based on the latest Sample Survey data released by the National Sample Organisation (NSO), the population below poverty line (BPL) has declined to 22% in the decade 1993-2003, when compared to 36% in the previous decade, which says that the liberalisation introduced by the then FM, Mr. Manmohan Singh, present Prime Minister, is all not that bad for India. In fact, liberlisation and structural changes made in the various sectors of the economy has unleashed the potential of private sector to contribute to the economic growth of India. As per the latest figures, our GDP has grown at a handsome rate of 9.1% during the first two quarters of the present financial year.
On November 11, 2006, I attended the Healthcare & Pharma Summit at ISB. One good example where business can work with social objectives is the case of Anand Eye Care, based at Chennai, Tamil Nadu. Dr P Namperumalsamy, Chairman, Aravind Eye Care System, spoke about his institution’s efforts at providing healthcare to the 500 million who comprise the ‘Bottom of the Pyramid’ segment in India. Aravind’s healthcare strategy aims at subsidising the middle income group and providing free healthcare to the poor people. It achieved this objective through optimisation of their resources – they do 2000 cataract surgeries per doctor per year, where the figure stands at 250-300 cataract surgeries per doctor per year for the rest of the hospitals in the country. And they do not compromise on quality. Aravind was also aiming at making optimal use of IT through telemedicine efforts where paramedics take care of the preparatory activities and a qualified doctor takes care of the diagnosis. further, during the deliberations of the Summit, it is stressed that Indian medicine is the cheapest in the world and also, many in India could not afford the medicine. This dichotomy exists because of poor delivery mechanism in India. Any person who comes with a good delivery mechanism for delivering the cheap medicine at the door steps of the rural folk is making his/her/its social responsibility very clear, of course, with a profit.
We should welcome the Reliance, Bharti-Walmart and Aditya Birlas who are coming in a big way in retail sector in India. This expansion by the big conglommerates is a welcome move because their strategy is useful for the vendors as well as customers, which is as follows:
1. Firstly, they want to enter with vegetables and food grains. They will remove the intermediaries who are milking the margins between the farmers and the customers. Their model is contract farming wherein there will be an agreement between the farmers and the reatailer, by whcih the reatail may provide finance, inputs and other expertise and in turn, the farmer has to sell only to that retailer at the price fixed on day to day basis, which in most cases will be higher than the present price being offered at Agricultural Produce Market Committe(APMC) yards. On the other hand, the retailer can offer these vegetables and food garins at a cheaper price to consumers as there will be no middlemen. It is a win-win situation for the farmer and consumer. I can give an example of my own experience where I used to sell good quality bitter gourd for Rs. 5 / Kg at the mandi and the commision agent takes 10% commission, though officially he is entitled to only 4% commission and in the retail market, the price used to be around Rs. 20 to 25/ Kg, which is 3005 to 4005 of my price. In United States, the margin from the farmer to the retailer does not exceed 100% in any case.
2. Gradually they move into mass consumable goods, wherein the logistics and supply chain management plays a bigger role. In an exclusive interview with the Economic Times, the CEO (Indian Operations) of Walmart has said that, even if they establish a shop in India as JV with Bharathi Enterprises, their 70% of the goods will be sourced from China, where the walmat entered in 1996 itself. The reason being that the supply chain and logistics management is well developed in China and in India, this is still at nascent stage and most of the Indian goods are routed through intermediaries like distributors, sub-distributors, agents etc., which eventually increse the prices for the end consumer. Walmart can bargain directly from the manufacturers and get huge discounts, which are ultimately passed on to the consumers. Hence, there is a great opportunity in India in supply chain ang logistics management in the context of growing orgnised reatil sector which is presently contribute only 5% of the entire retail sector in India.
3. These new comers have done a lot of study on the consumer behaviour in our country. walmart wants to introduce free home delivery service in India. even then, average Indian consumer wants to feel the goods before buying it. This is the reason why most of the internet sites selling consumables were a failure. You want to buy a shirt, jeans, watch or soap, you want to feel with you eyes and try yourslef at the store before buying it. All the newcomers has to understand this pshycology of Indian consumers.
4. Reliance want to establish a strong back end operations capability by establishing cold store facilities, ware housing facilities in the hinterland of India. They also want to use these back end facilities to be used for the purpose of opening medical retail stores in rural India, along with the diagnostic and other primary health care facilities. this will go a long way to generate sufficient employment in paramedics and other sectors in rural India, which will increase the per capita income of average rural household.
Last, but not the least, I hope the B-school teaching imbibes our rural sector and make big industrialists like Ambani and others to shower our rural india with many business hubs making our Growth a truly "Inclusive Growth" encompassing all our Indian into its fold.
The interested viewers can see the details of Healthcare & Pharma Summit at ISB-Second Healthcare & Pharma Summit .
On November 11, 2006, I attended the Healthcare & Pharma Summit at ISB. One good example where business can work with social objectives is the case of Anand Eye Care, based at Chennai, Tamil Nadu. Dr P Namperumalsamy, Chairman, Aravind Eye Care System, spoke about his institution’s efforts at providing healthcare to the 500 million who comprise the ‘Bottom of the Pyramid’ segment in India. Aravind’s healthcare strategy aims at subsidising the middle income group and providing free healthcare to the poor people. It achieved this objective through optimisation of their resources – they do 2000 cataract surgeries per doctor per year, where the figure stands at 250-300 cataract surgeries per doctor per year for the rest of the hospitals in the country. And they do not compromise on quality. Aravind was also aiming at making optimal use of IT through telemedicine efforts where paramedics take care of the preparatory activities and a qualified doctor takes care of the diagnosis. further, during the deliberations of the Summit, it is stressed that Indian medicine is the cheapest in the world and also, many in India could not afford the medicine. This dichotomy exists because of poor delivery mechanism in India. Any person who comes with a good delivery mechanism for delivering the cheap medicine at the door steps of the rural folk is making his/her/its social responsibility very clear, of course, with a profit.
We should welcome the Reliance, Bharti-Walmart and Aditya Birlas who are coming in a big way in retail sector in India. This expansion by the big conglommerates is a welcome move because their strategy is useful for the vendors as well as customers, which is as follows:
1. Firstly, they want to enter with vegetables and food grains. They will remove the intermediaries who are milking the margins between the farmers and the customers. Their model is contract farming wherein there will be an agreement between the farmers and the reatailer, by whcih the reatail may provide finance, inputs and other expertise and in turn, the farmer has to sell only to that retailer at the price fixed on day to day basis, which in most cases will be higher than the present price being offered at Agricultural Produce Market Committe(APMC) yards. On the other hand, the retailer can offer these vegetables and food garins at a cheaper price to consumers as there will be no middlemen. It is a win-win situation for the farmer and consumer. I can give an example of my own experience where I used to sell good quality bitter gourd for Rs. 5 / Kg at the mandi and the commision agent takes 10% commission, though officially he is entitled to only 4% commission and in the retail market, the price used to be around Rs. 20 to 25/ Kg, which is 3005 to 4005 of my price. In United States, the margin from the farmer to the retailer does not exceed 100% in any case.
2. Gradually they move into mass consumable goods, wherein the logistics and supply chain management plays a bigger role. In an exclusive interview with the Economic Times, the CEO (Indian Operations) of Walmart has said that, even if they establish a shop in India as JV with Bharathi Enterprises, their 70% of the goods will be sourced from China, where the walmat entered in 1996 itself. The reason being that the supply chain and logistics management is well developed in China and in India, this is still at nascent stage and most of the Indian goods are routed through intermediaries like distributors, sub-distributors, agents etc., which eventually increse the prices for the end consumer. Walmart can bargain directly from the manufacturers and get huge discounts, which are ultimately passed on to the consumers. Hence, there is a great opportunity in India in supply chain ang logistics management in the context of growing orgnised reatil sector which is presently contribute only 5% of the entire retail sector in India.
3. These new comers have done a lot of study on the consumer behaviour in our country. walmart wants to introduce free home delivery service in India. even then, average Indian consumer wants to feel the goods before buying it. This is the reason why most of the internet sites selling consumables were a failure. You want to buy a shirt, jeans, watch or soap, you want to feel with you eyes and try yourslef at the store before buying it. All the newcomers has to understand this pshycology of Indian consumers.
4. Reliance want to establish a strong back end operations capability by establishing cold store facilities, ware housing facilities in the hinterland of India. They also want to use these back end facilities to be used for the purpose of opening medical retail stores in rural India, along with the diagnostic and other primary health care facilities. this will go a long way to generate sufficient employment in paramedics and other sectors in rural India, which will increase the per capita income of average rural household.
Last, but not the least, I hope the B-school teaching imbibes our rural sector and make big industrialists like Ambani and others to shower our rural india with many business hubs making our Growth a truly "Inclusive Growth" encompassing all our Indian into its fold.
The interested viewers can see the details of Healthcare & Pharma Summit at ISB-Second Healthcare & Pharma Summit .
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