Rural economy on growth track, shows optimism & stability: NABARD survey

New Delhi: Rural India is experiencing economic optimism, the latest report from the July 2025 round finds, with 76.6 per cent of the households reporting increased consumption and almost 40 per cent witnessing a rise in income over the last year, according to NABARD’s Rural Economic Conditions and Sentiments Survey (RECSS), which indicates a consistent rise in household prosperity and financial confidence in the villages of India.

Biannually conducted, the RECSS has become an important index for measuring the success of rural development schemes and government programmes. The sixth round of the survey indicates a continued momentum of income-and consumption-driven growth underpinned by infrastructure development, policy support, and strong financial inclusion initiatives.

The survey report has shown that this year, 39.6 per cent of rural families have reported a rise in income, the highest since the survey began. The income has increased by 5–10 per cent for most families, and 9.1 per cent of them have reported an income increase of more than 20 per cent. The increase in income has translated into higher consumption as more than three-fourths of rural families have spent more in the last year. But 3.2 per cent even testified to reduced consumption. NABARD’s figures also indicate a significant change in the way households are spending their incomes. Spending on monthly consumption now represents 65.57 per cent of income, higher than the September 2024 figure of 60.87 per cent. At the same time, the proportion of income spent on savings has increased to 13.18 per cent, while loan repayment accounts for 11.85 per cent of spending, reflecting both increased disposable incomes and improved financial discipline.

Government welfare programs-from food and fuel subsidies to education, pension, and rural transport support-are still an important source for pumping up household incomes. Fiscal transfers now account for about 10 per cent of the earnings of a rural household, providing necessary relief to lower-income groups and during economic downturns. Financial inclusion also improved sharply.

A record 52.6 per cent of the respondents said they were using only formal institutions like banks, cooperatives, non-banking finance companies (NBFCs), and microfinance institutions (MFIs) for credit. A further 26.9 per cent borrowed from both formal and informal sources. This is not only lowering the cost of borrowing but also providing greater consumer protection. Even among the informal category, the average rate of interest reduced marginally to 17.53 per cent, and almost 30 per cent of informal borrowers had zero-interest loans, frequently drawn from familial or social contacts. Future incomes and employment outlook are the most optimistic ever.

Short-term prospects are especially optimistic, with 56.2 per cent of families looking forward to improved job opportunities in the upcoming quarter and 56.4 per cent eyeing enhanced incomes. On a longer horizon, 74.7 per cent of households foresee a rise in income over the next year, up significantly from 70.2 per cent in September 2024. This confidence is attributed to a good monsoon, steady public investment in rural infrastructure, and enhanced access to credit and welfare. Infrastructure development continues to serve as a backbone of rural progress.

Just 2.6 per cent of the respondents said there was a deterioration in infrastructure during the past year, but an impressive 76.1 per cent admitted improvements. Some of the most noticeable improvements included improved roads, improved schools, more consistent drinking water supplies, and better electricity and health care. Rural roads were the leading sector in terms of perceived improvement, followed by education and access to water. The survey also registered a welcome decline in perceived inflation.

Whereas official CPI-rural inflation reduced to 2.59 per cent in May, rural households placed their own inflation experience at a mean of 4.28 per cent. The majority of respondents—more than 78 per cent—felt that inflation was now at or below 5 per cent. Prospects for the coming quarter are likewise subdued at a mean of 4.29 per cent, showing increasing optimism about price stability.

Even as softening food inflation kept a lid on overall growth, food still comprised a consistent 50 per cent of family expenditure, indicating that increased incomes are being directed towards diversified consumption instead of inflating essential requirements. Compared to the September 2024 RECSS round one, the July 2025 round shows a positive trend in major parameters. Income growth is marginally better, employment expectations are improved, and optimism about year-ahead income improvement has increased by over four percentage points.

The RECSS results occur when the government and policy-makers are emphasising rural development as a strategic priority for inclusive growth. NABARD, the nodal agency conducting the survey, continues to be a key driver of this agenda through a combination of financial interventions, agri-infrastructure development, credit linkages, and rural entrepreneurship support.

All in all, the July 2025 RECSS paints a scenario of resilience and resurgence. With higher incomes, improved savings, less dependence on informal credit, and a further improving perception of jobs and inflation, rural India seems to be heading solidly on the path to economic empowerment and autonomy.