NABARD Rural Economic Survey: The pace of income growth in the country’s rural areas has reached its lowest level in the last 2 years. According to a recent survey conducted by the National Bank for Agriculture and Rural Development (NABARD), rural households’ confidence about income, employment and future financial status is declining. The survey, based on 20,000 households from 29 states and Union Territories, shows that consumption expenditure has remained high despite a slowdown in income, resulting in increased dependence of people on informal credit.

Income growth rate at an all-time low

According to a NABARD report, only 27.7% of rural households reported an increase in their income in the last 1 year, the lowest figure since the survey began in 2024. On the other hand, 52.6% of households have no change in income, while 19.8% of households have reported a direct decrease in income. There is a steady downward trend in rural income from 2025, which gives clear indications of a growing recession in the rural economy.

Impact of delayed monsoon on agriculture sector

High inflation and delayed monsoon are the main factors behind the increasing pressure on rural incomes. Consumer Price Index (CPI)-based retail inflation rose to 4.38%, a 17-month high. In addition, the country received 23% less rainfall than normal, due to which Kharif crop cultivation fell by 6% compared to last year. This situation has adversely affected the financial condition of the agrarian rural population.

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Incomes steady, yet consumption spending rises

74.1% of households in the survey admitted that their consumption expenditure has increased compared to last year. On an average, a rural household spends 66.5% of its monthly income on daily consumption and food. Only 13.6% of this income goes towards savings, while 12.5% ​​is spent on old debt repayments.

Sharp rise in informal credit

The share of households borrowing from formal banks has declined to 51% as financial pressures mount. On the other hand, the share of households dependent on informal sources like relatives, friends and moneylenders has increased to 23.6%. Of these, 16.2% received credit from friends/relatives, 6% from moneylenders and 1.4% from both sources.

Worries about inflation

Rural households estimate the average inflation rate to be 5.8% over the next year, up from 4.4% previously. Only 39.3% expect employment conditions to improve in the next 3 months, while the proportion of households expecting an increase in income has dropped to 41.2%. However, 69.6% of households expect the situation to improve in the next full year. Economists are emphasizing on creating new non-agricultural employment opportunities in rural areas and facilitating the credit process.