This document discusses using e-commerce to fuel growth in rural India. It proposes a 5-star model to introduce e-commerce in rural areas through 5 steps: strategizing and setting up infrastructure, simplifying the technology, simulating online transactions, showcasing success stories, and spreading to new areas. Some challenges include lack of infrastructure, technology access, finance, and diversity across rural India. Solutions involve expanding telecommunications access, using wireless technologies, leveraging existing fiber networks, training local teachers, and promoting national languages. Successful case studies and potential e-commerce applications for rural areas are also outlined.

1. A Business Paper on
“Using E-commerce to fuel rural growth in India”
(Towards “In search of excellence” Business Paper Writing Competition)
Using E-commerce to fuel growth in Rural India

2. Using E-commerce to fuel rural growth in India
“There is one thing which is stronger than all the armies of this world, and that is an idea
whose time has come”
-Victor Hugo
1. Introduction
If wishes were horses, rural India would have progressed far beyond her present state. What we
see instead is that policy makers, administrative workers and citizens are at a loggerhead while
rural businesses are still waiting to take off. The purpose of this paper is to define the role of
E-commerce in fueling rural growth in the country. It tries to identify the contemporary needs and
aspirations of rural India and proposes a model to acknowledge the same.
1.1 Why Rural India?
India with a billion plus population holds 600 million of her people in the rural areas. And a hefty
66% of the workforce is employed in agriculture; which is credited to the rural areas. It is therefore,
imperative to toil hard for rural growth & development.
1.2 Why E-commerce?
E-commerce has already added many feathers to its cap, and is being viewed as a strategic tool
that can fuel rural growth in various developed and developing economies of the world. India has
already moved ahead to grab the opportunity and did almost Rs 450 Crores of e-commerce
business in 2004. There is no wonder why the same success story cannot be repeated in India’s
largest consumer segment i.e. the rural market.
2. E-commerce & Rural India
E-commerce in India is still in nascent stage, but even the most pessimistic projections indicate a
boom. For the multifarious benefits that e-commerce offers make it a preferred choice for possible
adoption in rural India.
2.1 What is E-commerce?
It literally means buying and selling of goods and services on the Internet especially using the
World Wide Web (WWW). E-commerce provides multiple benefits to the consumers in the form of
availability of economical goods or services, wider choice and saves time. People can buy and
sell goods or services with a click of a mouse button without moving out of their house or office.
Using E-commerce to fuel growth in Rural India

3. 2.2 Traditional Rural Setup
Urban & Rural India is categorized based on population, primary employment of males &
population density. The rural business encompassed agricultural activities like cultivation,
livestock, forestry, fishing, plantation, etc and other non-agricultural activities. Past economic
figures have registered rural contribution of 50% (20-25% by Agricultural activities alone) towards
Gross Domestic Product (GDP).
The agricultural market is inefficient given the asymmetry of price information, as the prices
prevailing at the mandis are often not known to them. This is because of the presence of
numerous middlemen who siphon off a large part of the price and consequently pass only a small
amount to the farmers. They are also duped while making purchases of agricultural resources.
Asymmetry of information is a formidable problem for the growth of rural India; be it agriculture,
education or entrepreneurship development.
2.3 Introduction of E-commerce
E-commerce can promise an effective market place for the rural populace by doing away with the
traditional roadblocks and asymmetry of information. E-commerce is a wider term and
encompasses: e-governance, e-business & e-citizen.
Needless to mention, that to provide such an e-commerce infrastructure would be an uphill task.
But, it has been aptly said:
"Growth begins when we begin to accept our own weakness"
- Jean Vanier
Using E-commerce to fuel growth in Rural India

4. 2.4 Benefits of E-commerce
E-commerce is a cost-effective simulation of common-place market operations. It reduces space
& time boundaries. It also promotes transparency & accountability and enables swift delivery of
information and services. The rural populace can reap the benefits of this medium by actualizing
their long-established market operations into this.
3. Feasibility Study
The billion dollar question is “Can the success stories of e-commerce be paralleled with rural
India?” This would require a lot of introspection: research & analysis. Methodically speaking, it
would be wise to first gauge the bottlenecks and then try to find solutions to them.
3.1 The Bottlenecks
There are several impediments which make this endeavor a daunting task. The formidable ones
being:
3.1.1 Infrastructure
E-commerce requires the use of Internet and Communication Equipment viz. typically a
Personal Computer (PC). On a broader sense, e-commerce requires the use of
Telecommunication Infrastructure for connectivity and Power Infrastructure for electricity.
At present the rural teledensity stands at an abysmal 1.70 (with negligible contribution
coming from mobile services). While only 30.54 per cent of rural households have
electricity [HDR 2002].
3.1.2 Technology
Information & Communication Technologies (ICT) has to be looked at the backdrop of
e-commerce bottlenecks. Issues relating to content and connectivity have to be
addressed.
3.1.3 Finance
Such a model has to be backed with promising monetary funding. It needs to be seen, as
to who would be at the forefront to this.
3.1.4 Human Resources
Trainers, motivators, supporters, administrators among other people would be required
for such a project to take off.
3.1.5 Diversity
It would be imprudent to consider rural India as a homogenous sector. Perhaps it is very
diverse and her culture, dialect, aspirations, economics, environment, politics, etc maybe
poles apart.
Using E-commerce to fuel growth in Rural India

5. 3.2 The Solutions
We cannot waste another generation to see this project to reality; it’s nor or never. The
implementation has to be fast and should be backed by continuous feedback and assessment.
3.2.1 Infrastructure
The Ministry of Communication & Information Technology is looking forward to
teledensity of 22 by 2007 (prioritizing rural India). The private company like Reliance has
promised to expand in the rural areas. Prices of PCs are coming down heavily and
abridged versions are being created for the rural masses. The concept of Thin Clients
and Fat Servers is just another example which can help provide low-cost computing
solution. The indigenously made Simputer can be tested here. Various organizations are
promoting the use of non-conventional sources of energy like solar energy, biogas, etc.
3.2.2 Technology
Wireless solutions like WiFi, WiMAX and VSAT would be preferred over wired solutions.
But what is interesting is that the Optical Fiber backbone is not being highlighted in this
frame of discussion. Considering the present or proposed OFC Network of BSNL
(4,00,000 km), Indian Railways (35,000 km), Power Grid (14,0000 km), GAIL (14,500 km),
Reliance Infocomm (60,000 km) among others, the ball certainly seems to be in our court.
Today 85% of the taluka headquarters have optic fiber, which can provide the backbone
for telecom and Internet connectivity.
3.2.3 Finance
There are various Government Organizations that support such initiatives. Individual
efforts to provide used PCs to the rural populace have also been in the light of all things;
also the work done by local NGOs. But it would be the private organizations which can
provide a Win-Win solution here. The Government funded projects do not stand much of
a chance for successful completion. This can be explained by a simple philosophy. There
are four ways in which money can be spent: Money earned by us and we spend it on
ourselves; Money earned by us and we spend it on others; Money earned by someone
else and we spend it on ourselves; and Money earned by someone else and we spend it
on others. We tend to be less and less prudent and lackadaisical in money management
as we move from category one through four. And Government funding unfortunately falls
in the latter category and thus prone to abuse and under-utilization.
3.2.4 Human Resources
Training can be imparted by engaging a group of teachers from the upper primary
schools. Rural population has a primary school within 1 km and in 85% of the areas an
upper primary school within a distance of 3 km. We have one of the largest elementary
education system networks in the world.
Using E-commerce to fuel growth in Rural India

6. 3.2.5 Diversity
The cultural diversity is a cause of concern especially the local dialect, but in majority of
the areas the national languages (i.e. Hindi and English) are either spoken or understood.
The intended audience should be trained on English or Hindi software applications.
Software giants like Microsoft has launched a scaled-down and low-cost versions of its
Windows XP Operating System (OS) and has been working on its Project Bhasha since
2003. It is also developing Microsoft Windows and Office in 14 regional languages.
Similarly, Linux has also launched its Hindi version Linux v4. Usually the village
panchayat plays an essential role when projects are Government driven; but for Private
projects the local human resources are put to use. The success of Broadband in South
Korea (having highest connectivity) can be attributed to the Government’s initiative to
promote the use of Internet and making the use of E-learning mandatory in the schools.
Once the rural populace brings the use of Internet into its culture then there would be no
looking back for us. The government should promote the National languages at any cost,
and may even go a step ahead in making it compulsory throughout India. Needless to
mention, the popularity of any languages cannot come unless there is some commercial
angle to it, English being the befitting example.
4. The Model
Only a strategic model can turn the E-commerce project into a reality. The model that would cater
to short as well as long term objectives; would be reviewed periodically and subjected to dynamic
alterations and/or adaptations. It is here that the “5-Star Model” can be proposed:
Strategize & Setup
Spread Simplify
5 Star Model
Showcase Simulate
Using E-commerce to fuel growth in Rural India

7. The following steps would drive the 5-Star Model:
Step I: Strategize & Setup
Extensive research has to be carried out for the selecting the appropriate locations or villages.
The various parameters that have to be gauged are: Infrastructure (Electricity,
Telecommunications, and Education), Population, Road & Transport, Postal & Courier Services,
Primary employment activities, geographical advantages, climate, etc.
After the research, the primary or secondary data would be analyzed to identify threshold value
for the selected parameters. Villages can be selected in this way where the e-commerce can be
applied to fuel rural growth.
The villages may be segmented based on several criterion, for example villages near
Mahabaleshwar can be classified as Strawberry producing zone; whereas those in and around
Nagpur may be classified as Orange producing zone.
These villages would be called as “Hot-Spot” zones, because most of the experiments would be
carried out only within this region. The potential customers would also be studied for example:
cultivators, distributors, transporters, stock-keepers, agro-based companies, etc.
Once the areas are decided, a proposal would be drafted for setting up the required infrastructure:
PCs, Internet, Hot-Spot Kiosks, etc.
Step II: Simplify
Next step would be to process of simplification of the use of e-commerce. It is here that the OS
like Linux v4 or Windows XP would come handy. Every Process or FAQs would be well-
documented in the local language, for example: “What has to be done when the PC or the
Internet connection requires maintenance?” These minute things can hinder the smooth flow of
any project. Till this step there wouldn’t be any interaction with the target segment i.e. the people
who would actually be using the services offered by e-commerce.
Step III: Simulate
The process of selling and buying would be explained to the villagers. They would undergo short
trainings for the same; also the concept of electronic money & online bank accounts would be
introduced to them in due course of time. A real world simulation of the e-commerce webpage
would be provided. The villagers would be given some amount of money (in their online bank
account) and they have to trade their produce over the e-commerce portal and simultaneously
purchase goods (like fertilizers, seeds, etc) or services. Every villager would we allowed to play
the simulation over the weekends, and winners would be given some token gifts. The idea is to
make them understand the concept of online transactions, of economics (sell for more & buy for
less) and of online banking. This being carried out in a playful mood. And, there is also some
Using E-commerce to fuel growth in Rural India

8. reward for performance at the end of the day. Rest would be done by word-of-mouth
advertisement which spreads like wild fire in any rural area.
Stem IV: Showcase
The villagers would gradually be introduced to the real world e-commerce portals; where they
would be offering their products or services as also request for the same. It should always be
remembered that if villagers are not able to make profit out of the e-commerce project; then that
would be the end of the story. We expect that the villagers would learn with their experiences and
make good money out of it. It would be then that the success stories need to be showcased in
upcoming hot-spots or potential areas that can be turned into a hot-spot.
Step V: Spread
Once the process takes off then the frequency of the hot-spots can be increased in the adjoining
or new areas. This would help spread the 5-Star Model thus providing greater reach of e-
commerce as also the extent of rural growth.
5. Various E-commerce Applications
All customers identified during the research phase would be motivated to use the common
e-commerce portal. Initially it would be very elementary & easy to use. Later on advancements
and modifications can be introduced into the portal. A lot of creativity & innovation can go into the
e-commerce portals and nominal charges can be levied on the customers. But the benefit that
can be derived out of the mass utilization of e-commerce would be immense considering the
second most populous country in the world. Some of the rural applications may include:
Job openings
This can help in solving the unemployment problems in the rural areas.
Matrimonial
To help in the selection of suitable bride or bridegroom; across villages.
Land Record Maintenance
To end disputes over land-ownership (which is very common) by means of digitization of records.
Agricultural Technology
New agricultural equipments/hybrid seeds or any other technological advancement can be
introduced to the rural farmers.
Rural Telephony
Economical voice services (using IP Telephony) can be provided to the villagers who want to
communicate to their friends or relatives outside India (inside India it is still not legalized)
Using E-commerce to fuel growth in Rural India

9. Travel
Lot of information can be made available for travels and tours; as also online booking or
reservations.
TeleMedicine or TeleDoctor
Medical consultations can be sought by means of written communication or video conferencing
via economical web cams.
Agriculture Consultancy
Online consultancy can be sought about farm productivity, soil requirements, nourishments, plant
diseases & remedies.
Talent Search Contest
Participation in various talent search events by means of online registration.
Online Banking
This would come much to the respite of insurance and others companies involving bill receipt and
payments like electricity, telephone, etc.
Rural E-lance
rd
The rural populace can outsource their products or services to any 3 party and vice versa.
Example: Producing potatoes for use in French Fries by MNC or big retail food outlets like
Pizzahut or Nirulas.
Auctioning
Rural products can also be auctioned over the Internet, for example: used farm equipments, etc.
Courier Service
Local courier service would grow with the growth of e-commerce transactions.
Market Research
A population of 600 million is a potential market especially for FMCG companies like HLL. To
understand the diverse moods and aspirations of this rural market, paid market researches can
be conducted.
In fact, there may be numerous applications that can get a berth in the rural e-commerce portal.
6. Success Stories
There are several projects that have been introduced with the prime objective of fueling rural
growth. Its’ not important to know if they succeeded or failed, what’s important is to know why
they succeeded or failed?
Using E-commerce to fuel growth in Rural India

10. Here are a few to quote:
Bhoomi
Bhoomi is a self-sustainable e-governance project for the computerizing land records and making
them available to the people of Karnataka for a nominal fee.
TaraHaat
It is an e-marketing portal for the rural populace.
Gyandoot
The goal of the project is to establish community-owned, technologically innovative and
sustainable information kiosks in the rural areas of Madhya Pradesh.
eSeva
It has been initiated by the Andhra Pradesh government to provide “one stop non stop
Government-to-Citizen (G2C) services”.
Information Village
It is a MS Swaminathan Research Foundations’ experiment to electronically deliver knowledge to
the rural masses in Pondicherry.
Drishtee
It is an organizational platform for developing IT enabled services to rural and semi-urban
populations through the usage of state-of-the-art software.
ITC’s eChoupals
eChoupals have been set across the agricultural belt to offer the farmers all the information,
products and services they need to enhance farm productivity, improve farm-gate price realization
and cut transaction costs. All these information are received through their Hindi portal.
Akashganga
Based in Gujrat, it has been conceived with the objective to spread IT among dairy cooperatives.
Setu
An initiative by the Maharashtra Government to create a foundation for citizen centric e-
governance at district as well as taluka headquarters.
Shristi
It is a NGO setup to strengthen the creativity of grassroots inventors, innovators and ecopreneurs
engaged in conserving biodiversity and developing eco-friendly solutions to local problems.
Other Technology-related initiatives
Media Lab Asia (MIT Media Lab & Indian Govt.), Warana Wired Village (Sugarcane Cooperatives,
Maharashtra), SARI (Tamil Nadu), FRIENDS and Akshaya (Kerela), Mahiti Shakti Kendras
(Gujrat)
Other Educational IT initiatives
Headstart (Madhya Pradesh), AP Schools (Andhra Pradesh & NIIT), Vidya Vahini, Community
Learning Centres (Azim Premji Foundation)
Using E-commerce to fuel growth in Rural India

11. 7. Conclusion
E-commerce can fuel rural growth. But, for it to succeed, we have to first step into the shoes of
the rural populace and strategize from all angles. To put it straight, if they are not able to make
money out of it, then the project is doomed to fail. Administrative reorganization happens at the
end of political tenure, red-tapism still persists and government process are not time efficient.
Thus the initiative should come from the private players; it is they who can provide a Win-Win
model. And there should be continuous monitoring and assessment to make it succeed.
“The line between failure and success is so fine that we scarcely know when we pass it;
so fine that we are often on the line and do not know it”
-Elbert Hubbard
Using E-commerce to fuel growth in Rural India

12. GLOSSARY
B2B
B2C
BROADBAND
FAQs
FAT SERVER
GDP
MANDIS
NGO
OFC
PANCHAYAT
PRIMARY DATA
PROJECT BHASHA
SECONDARY DATA
SIMPUTER
TALUKA
THIN CLIENT
VSAT
WEB CAMS
WWW
WIFI
WIMAX
Using E-commerce to fuel growth in Rural India