Rural demand surges as 80pc households report higher consumption, income outlook stronger than ever: NABARD

THEBUSINESSBYTES BUREAU

NEW DELHI, DECEMBER 11, 2025

India’s rural economy is showing its strongest signs of revival in years, with nearly 80 per cent of rural households reporting higher consumption over the past 12 months — a clear indicator of rising prosperity and broad-based demand, according to the latest NABARD Rural Economic Conditions and Sentiments Survey (RECSS). The findings, released on Thursday, mark a significant shift in rural economic confidence, backed by improving incomes, increased investments and deeper integration with formal credit channels.

The survey revealed that rural households are now spending 67.3 per cent of their monthly income on consumption, the highest share recorded since the survey began. Officials in the Finance Ministry attributed this trend to steady demand expansion supported by GST rate rationalisation, which has helped reduce tax burdens and improve affordability across essential and discretionary categories.

In a reflection of strengthening economic health, 42.2 per cent of rural households reported income growth — the best performance across all rounds of the survey. Only 15.7 per cent registered any form of income decline, the lowest level so far, signalling a decisive turnaround in rural earnings. The optimism is even stronger looking ahead, with 75.9 per cent of respondents expecting their incomes to rise next year — the highest level of confidence recorded since September 2024.

Investment momentum, too, is gaining ground. About 29.3 per cent of rural households increased capital expenditure over the past year, the highest across all survey cycles. This renewed push toward asset creation in both farm and non-farm sectors is being driven by improved consumption and income prospects rather than credit-related distress, underscoring a healthier investment climate.

A notable shift toward formal credit channels also emerged from the survey. Around 58.3 per cent of households relied exclusively on formal sources of finance, up sharply from 48.7 per cent in September 2024. Despite this progress, informal credit continues to account for about 20 per cent of borrowings, highlighting the need for continued efforts to deepen formal financial inclusion.

The role of welfare transfers remains significant in supporting rural purchasing power. Nearly 10 per cent of average monthly income is effectively supplemented through subsidised food, utilities, fuel, fertiliser, education support, pensions and transport benefits. For some households, these transfers form over 20 per cent of their total income, helping stabilise consumption and ensuring resilience during economic fluctuations.

With inflation easing and interest rates softening, households have been able to allocate a smaller share of income toward loan repayment compared to previous rounds. This financial breathing room, coupled with rising incomes and welfare support, has further strengthened rural sentiment.

Conducted every two months across India, NABARD’s RECSS continues to serve as a crucial barometer of rural economic health. The latest edition paints a picture of rural India firmly back on a growth path — spending more, earning more, investing more and looking to the future with renewed confidence.