India’s rural economy witnessed a strong expansion and recovery in the latter part of 2025, driven by higher consumption, improved incomes and rising investment, according to the latest round of the Rural Economic Conditions and Sentiments Survey (RECSS) conducted by NABARD.
As per the November 2025 survey round, 79.2 per cent of rural households reported an increase in consumption expenditure, the highest level recorded so far in FY26, compared to 76.2 per cent in the previous round. The share of monthly income spent on consumption rose to 67.3 per cent, the highest since the survey began, supported by rationalisation of Goods and Services Tax (GST) rates and easing inflation.
The survey was conducted following the announcement of GST rate rationalisation by the GST Council on 3 September 2025, coinciding with the festive season. This period also saw a sharp moderation in rural inflation and sustained food price deflation. While some consumption was temporarily deferred in anticipation of revised tax rates, the GST cuts that came into effect on 22 September had a positive impact on several consumer categories, including household appliances, automobiles and fast-moving consumer goods.
The survey indicates that improved real purchasing power, supported by lower inflation and tax rationalisation, has strengthened rural consumption demand. Consumption growth was accompanied by a notable easing of inflation expectations, with rural households perceiving inflation at 3.77 per cent, falling below 4 per cent for the first time since the inception of the survey.
Rural Markets Driving FMCG Growth
Rural markets continue to play a critical role in India’s consumption landscape, accounting for around 38 per cent of packaged consumer goods sales and supporting the livelihoods of nearly two-thirds of the population. Market data show that demand for fast-moving consumer goods (FMCG) in rural areas outpaced urban markets during the three months ended September 2025. Rural volume growth stood at 7.7 per cent compared to 3.7 per cent in urban areas, marking the seventh consecutive quarter of rural-led volume expansion.
Growth has been particularly strong in smaller unit packs, reflecting rising affordability and steady upgrades in consumption patterns. Increased traction has been observed across food, personal care and daily-use categories, indicating broad-based demand revival in rural regions.
Supportive Macroeconomic Environment
India’s overall economic performance provided further support to rural recovery. The economy recorded a robust growth rate of 8.2 per cent in the July–September 2025 quarter, aided by stronger manufacturing activity, financial services and consumption. Private Final Consumption Expenditure growth rose to 7.9 per cent from 7.1 per cent in the previous quarter.
Inflationary pressures eased significantly during the period. Retail inflation declined to 1.7 per cent in the September quarter from 2.7 per cent in the first quarter, while wholesale inflation moderated to 0.02 per cent. Food inflation, which constitutes nearly 40 per cent of the Consumer Price Index basket, remained in negative territory for five consecutive months, contributing to lower overall inflation.
The survey also noted that with declining food prices over four consecutive months, a section of rural households increased the share of total monthly consumption devoted to food. Consequently, food expenditure accounted for 55.4 per cent of monthly consumption, the highest among all survey rounds.
Outlook
The sustained improvement in rural consumption, supported by favourable macroeconomic indicators, tax rationalisation and easing inflation, points to a positive outlook for rural demand. Over the coming years, rural markets are expected to remain a key driver of volume growth across consumption categories, supported by stable monsoons, rising real incomes and gradual shifts from subsistence spending towards incremental upgrades in quality of life.
The recent GST rate reforms directly benefitted 40% of HUL’s portfolio, which has now moved to the 5% GST slab. The company has planned “bolder marketing transformation and channel transformation” for the rural markets.
Income levels, too, improved, with 42.2% of the households reporting higher income over the past year, the strongest performance in the survey’s history. The percentage of households experiencing a decline in income during the last year fell to its lowest level, the survey showed.
