India Inc's rural engine sputters in Q2

rural-linked firms grew slower than the rest of India Inc (comprising 2,753 companies), which posted a 6% revenue expansion in Q2.

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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 yo-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.

The equity markets remain optimistic. The Nifty Rural Index has returned 15% in 2025, beating the Nifty 50's 9% gain, suggesting that investors are still staying with the rural consumption story.