GST cuts, easing inflation drive rural demand revival

India’s rural economy expanded and recovered strongly in late 2025, with consumption, incomes and investment improving after a key tax reform and as inflation eased, a survey showed.

- Suneera Tandon

So far this year, 79.2% of rural households have increased their consumption spending—the highest in FY26—up from 76.2% in the previous round, according to the November 2025 NABARD RECSS survey. The share of monthly income spent on consumption has also risen to 67.3%, the highest since the survey began, aided by GST rate rationalization.

The survey was conducted after the rationalization of the goods and services tax was announced by the GST Council on 3 September during the festival season and against a backdrop of a sharp moderation in rural inflation and food deflation. The results were mixed during this period for companies benefiting from lower taxation as consumers postponed purchases in anticipation of the revised rates.