When rural optimism rose but farm returns lagged

GST rate cuts and welfare transfers lifted consumption, but falling crop prices clouded farm incomes

- SANJEEB MUKHERJEE

India’s rural economy, which showed signs of revival in 2025 owing to a good monsoon before being hit by a sharp dip in crop prices, appears to have found support from the reduction in goods and services tax (GST).

The tax cuts have lowered prices of several categories of major agricultural equipment, boosting sales. They are also expected to spur broader consumption growth across commodities.

According to the eighth round of the National Bank for Agriculture and Rural Development's (Nabard’s) “Rural Economic Conditions and Sentiments Survey (RECSS)”, released in November, nearly 80 per cent of rural households reported higher consumption over the past year. Consumption now accounts for 67.3 per cent of monthly household income — the highest share since the survey began in September 2024 — aided by GST rate rationalisation.

RECSS, a high-frequency, bimonthly assessment conducted since September 2024, showed that in November 2025, about 42.2 per cent of rural households experienced income growth, the best performance across all survey rounds. Only 15.7 per cent reported an income decline of any kind, the lowest so far.

The outlook remains strong, with nearly 76 per cent of surveyed households expecting their incomes to rise next year — the highest level of optimism since September 2024.

The survey also highlighted the role of welfare transfers, which effectively supplement about 10 per cent of the average monthly income of rural households through subsidised food, electricity, water, cooking gas, fertilisers, school support, pensions, and transport benefits. For some households, transfers exceed 20 per cent of total income, helping stabilise consumption and rural demand.

Nominal farm growth slumps