Rural Optimism Persists : 72% rural households expect income growth in one year

Nabard’s September 2025 survey highlights cautious optimism among rural households, with 72.8% expecting income growth, slightly down from July's 74.7%. While income stagnation rose to 44.5%, fewer reported losses. Consumption remains resilient, but severe floods and GST changes influenced spending trends. Borrowing shifted toward formal sources, and infrastructure improvements and government welfare schemes continue to support rural incomes. The survey underscores the importance of policy and infrastructure investments for sustained rural growth.

Rural households across India exhibit cautious optimism about their financial prospects, according to the latest findings from the National Bank for Agriculture and Rural Development’s (Nabard) Rural Economic Conditions and Sentiments survey conducted in September 2025. The survey, which tracks key economic trends in rural areas, sheds light on income expectations, consumption patterns, savings, and credit behavior over the past year.

Income Expectations Show Mixed Sentiments

The survey revealed that 72.8% of rural households anticipate an increase in their income over the next year, a slight dip from the 74.7% optimism rate recorded in July 2025. While this represents a drop, the current optimism is still higher compared to a year ago, when 70.2% of respondents expressed confidence in income growth.

Nabard noted that external factors, such as tariff-related risks affecting agricultural and non-agricultural exports, may have tempered household sentiments. These uncertainties, coupled with potential impacts on rural employment, appear to have influenced expectations.

Interestingly, the percentage of households reporting a decrease in income over the past year fell to 18%, the lowest figure recorded since the survey began in September 2024. This marks an improvement from the 23.8% who reported income declines a year ago. On the other hand, the proportion of households experiencing stagnant incomes reached 44.5%, the highest level across all seven survey rounds conducted in the past year.

Meanwhile, 37.5% of households reported an increase in actual income, a figure nearly unchanged from 37.6% during the same period last year.

Consumption Trends Reflect Resilience Amid Challenges

Consumption trends in rural households continue to show resilience, with 76.2% of respondents reporting higher spending over the past year. However, this marks a slight decline from 76.6% in July 2025 and a more noticeable drop from over 80% in September 2024. Nabard attributed this moderation to short-term disruptions caused by severe floods and landslides in states such as Himachal Pradesh and Punjab.

The survey was largely conducted before the GST rate reduction announcement on September 3, 2025, and thus does not account for its anticipated positive impact on rural consumption.

Another factor potentially contributing to the moderation in consumption is the increase in household savings. 23.7% of households reported higher savings, while 34.5% reported increased borrowings—a decline compared to previous surveys.

Shifts in Borrowing Patterns

Changes in borrowing behavior were also highlighted in the survey. The share of households relying exclusively on formal credit sources rose to 54.5%, reflecting a gradual shift toward regulated lending. However, for the 21.8% of households still dependent on informal sources, the average interest rate on loans remained high, ranging between 17–18%.

Rural Infrastructure and Policy Support Drive Growth

Despite the challenges, 76.2% of rural households acknowledged improvements in infrastructure over the past year. Investments in roads, electricity, and other essential facilities have played a significant role in uplifting rural living standards.

The survey also highlighted the critical role of government welfare programs in supporting rural income and consumption. These initiatives include direct fiscal transfers, subsidies on essential goods, and benefits such as free or subsidized food, electricity, cooking gas, fertilizers, and public transportation. Additional provisions, such as scholarships for students, pensions for vulnerable groups, and interest subventions, have further bolstered the rural economy.

Resilience Amid Uncertainty

While rural households remain optimistic about income growth, the survey underscores a cautious sentiment influenced by external uncertainties and recent natural calamities. Nevertheless, robust infrastructure development and government support continue to provide a safety net for rural families, helping them navigate economic challenges and sustain consumption trends.

As the rural economy evolves, continued investments in infrastructure, policy interventions, and efforts to formalize credit markets will be vital in fostering long-term growth and stability for India’s rural population.