India Inc's rural engine sputters in Sep quarter

Tepid farm income, sluggish credit growth and an uneven consumption recovery weighed on the momentum of companies linked to rural India in the September quarter, pulling back their pace of growth, even as they stayed ahead of the non-rural pack on some key parameters, a Mint analysis showed.

- Abhinaba Saha

Earnings of 73 Nifty Rural Index companies—whose business models are closely tied to the hinterland—revealed that their aggregate growth in total income hit an eight-quarter low of 2.8% year-on-year (yo-y) in Q2 of FY26, the lowest since Q3 of FY24 when it recorded 13% growth.

For the first time in two years, aggregate total income of rural-linked firms grew slower than the rest of India Inc (comprising 2,753 companies), which posted a 6% revenue expansion in Q2.

The weakness is more apparent when viewed quarter-on-quarter. The total income growth of the Nifty Rural Index constituents has fallen 1.3% each for two successive quarters, extending a slowdown that began earlier this year. Meanwhile, the rest of India Inc managed a topline growth of 1.4% on a sequential basis.

Significantly, though, rural-linked firms recorded higher growth than non-rural peers in net sales (8.7% vs 5.7%) as well as net profit (15.6% vs 10.7%) in the July-September quarter on a y-o-y basis, a ninth straight quarter of outperformance.

Experts link this resilience to strong auto, FMCG and cement volumes, aided by easing input costs. However, banking, financial services and insurance (BFSI) firms, which make up over a quarter of the index and nearly 60% of its total income, pulled down its overall topline growth.