Impact of COVID-19 on Rural Markets and Consumers

A vegetable shop in Patna.

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Let us take an example of consumerism in rural India in the agricultural context. In a village in Bihar, a farmer is not able to transport its tomatoes to even small towns as the truck drivers are not operating because they have gone to their native village.

This is prompting the farmers to sit idle with their produce creating a ripple effect in the market. COVID- 19 is likely to impact the Indian rural market, given how much the market size is in our country. Due to the scarcity of tomatoes, the price will increase for the remaining stock. According to the UN report, COVID- 19 impact has estimated a loss of $348 million on the Indian economy.

Background

Rural population account almost 70% of the country's population. But about 50% of the villages have people less than 500. Big FMCG giants like Hindustan Unilever have already established their market in the rural landscape. With the increase in income, rural consumers started to buy lifestyle products too which is evident in many rural parts in Bihar. This implies that there is also the presence of hedonic motivation in consumers. Here the consumerism does not depend upon the brands but rather on the usability of the product, and the consumers will buy them as per their needs. Predominantly the FMCG companies are the main markets for the rural consumers. Of all the products, it is mainly the food and beverage industry that is deemed very much essential in their daily lives.

Scarcity evaluation

If a scarcity arises, then it will be in the food and retail sector because, in the current situation, the supply chain in the agricultural and food sector is highly disrupted. If no intervention takes place and the scenario continues like this, then there is a very high probability that we all will be soon facing shortages of food supplies. For example, in the case of edible oil, nearly two-thirds of it comes through exports. Now given the current lockdown situation, there are not enough labours for loading and unloading at container ports. This will result in the products lying idle and eventually leading to a shortage of edible oils in many places. We are already witnessing these shortages, and it is taking a continuous effort to maintain smooth logistics, which would make sure there is no scarcity in such a situation.

Likely Impact

One impact that the rural population facing is in the sector of poultry and fisheries. The producers and traders are facing a huge loss of demand for broiler chickens and coastal prawns, and as a result, the price is also going down. There are also cases of rotten vegetables in some parts due to the failure of the transport system. The rural haats, which is a very famous culture of rural areas are also shut down because of the fear of the spreading of the virus. This has resulted in a huge loss for the rural producers, farmers, and the small businesses who sell their products in the rural markets through these weekly village haats. The impact is likely going to last for a year. FPOs (Farmer Producer Organizations) in Bihar are also finding it difficult to source and sell the products and maintaining the existing warehouse.


Abhinav Srivastav is a resident of Patna and currently a first year MBA student at XIMB Bhubaneswar.

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