Rural Economic Survey 2025: Income Trends, Fiscal Transfer & Impact | UPSC

NABARD conducts the Rural Economic Conditions and Sentiments Survey (RECSS), which presents the bi-monthly picture of the income, consumption, and savings in rural households, along with borrowing and sentiments of rural households. It is based on 600 villages in India and measures trends, expectations and concerns, informing policies on enhancing rural demand and livelihoods and inclusive growth.

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Key Highlights from RECSS – May 2025 (Round 5)

1. Consumption Remains Strong

• 79.1% of rural households reported increased consumption, while only 4.5% saw it decline. This underscores a continued consumption-driven buoyancy in rural demand.
• Over the five rounds, around 80% consistently reported rising consumption.

2. Income Trends

• A higher share of households reported income increases than in previous rounds, with the lowest decline in income since the survey began.
• Still, income growth lags behind consumption—meaning heightened demand may partly be due to increased borrowing or reduced savings.

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3. Savings, Borrowing, and Investment

• 81.2% of households reported either a stagnation or declining financial savings.
• 38.7% increased borrowing; 22.5% increased capital investments.
• Pure consumption levels are supported by borrowing or curtailed savings.

4. Utilization of Monthly Income

• Consumption's share in monthly income rose to 64.9%, while savings (13.5%) and loan repayment (11.8%) dropped to historic lows.

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5. Income Growth Magnitude

• Among households experiencing income gains, the average increase was 12.9%, showing modest deceleration over time.

6. Fiscal Transfers

• Government subsidies and transfers (e.g., food, fuel, education support) contributed around 10% of households' average monthly income—remaining relatively stable across rounds.

7. Sentiments & Expectations

• Households were optimistic: the majority expected improvements in income and employment over the next quarter.
• A strong 73.6% expected their income to improve over the next year, the highest optimism.

8. Infrastructure Perceptions

• Perceptions of infrastructure (e.g., roads, facilities) continued to improve compared to previous rounds.

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9. Rural Inflation Perceptions & Expectations

• Rural CPI inflation for March 2025 stood at 3.25%, down from 3.79% in February.
• Households perceived current inflation at a mean of 4.75%, with expectations for next quarter at 4.70%; the majority expect inflation to remain at or below 5%.
• One-year inflation expectations also softened, with the mean dropping by about 48 basis points, though the median remained 5%.

10. Food Expenditure Share

• Households continued to allocate a significant portion—52.5%—of their monthly consumption expenditure to food.

11. Credit Access & Rates

• Most credit comes from formal sources. However, 18.8% of households relied solely on informal sources like relatives or moneylenders.
• Informal credit bore average interest rates near 17–18%, though the median remained stable at 12%. Around 30% paid no interest, while ~34% faced rates above 20%.
   

12. Priorities in Rural Development

• Households ranked rural roads as the most improved development area (50.8%), followed by drinking water (10.8%) and education (9.2%).

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Summary Table of Key Net Responses

Methodology Overview

• This bi-monthly survey (six rounds annually) covers 600 villages and 6,000 households across 28 States and 1 Union Territory, including West Bengal.
• Sampling employed a stratified, multi-stage design (districts → villages → hamlets → households), with probability proportional to size (PPS) and weight adjustments applied to ensure representativeness.

Impact

Strength in rural consumption, increased income optimism, and better perceptions of infrastructure stand out in the Rural Economic Survey. Nevertheless, it shows that savings are decreasing, and there is an increased reliance on borrowing and spending on food, characteristic of a mixed portrait that can guide policy planners in enhancing rural credit, welfare programs, and long-term economic prosperity.

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Conclusion

The Rural Economic Survey highlights the dynamism of the rural Indian economy, where strong consumption and optimism coexist with financial weakness, such as declining savings and higher borrowings. Its findings are essential to evidence-based policymaking as interventions must meet the short-term needs and structural problems to achieve the long-term inclusive and sustainable rural development.

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