Rural demand surges as GST rate cuts, slowing inflation help to boost consumption

NEW DELHI: India’s rural economy is growing strongly and recovering after a major tax reform in late 2025, with consumption, incomes and investments improving and inflation easing, a survey has shown.

According to the November 2025 round of NABARD’s Rural Economic Conditions and Sentiments Survey (RECSS), 79.2% of rural households have increased their consumption expenditure so far this year (the highest rate so far in FY26), compared to 76.2% in the previous round. Additionally, aided by the rationalization of the GST rate, 67.3% of monthly income is now spent on consumption; This is the highest share since the start of the survey.

questionnaire It follows the rationalization of goods and services tax was announced by the GST Council on September 3. During the festive season and a period of sharp moderation in rural inflation and food deflation. Results were mixed during this period for companies benefiting from lower taxation, as consumers postponed purchases in anticipation of revised rates.

The GST reductions, which came into force on September 22, had a positive impact on categories such as televisions, automobiles, air conditioners, refrigerators, soap and biscuits.

“The buoyancy in rural consumption demand seems to have given a boost following the rationalization of the GST rate; the rising real purchasing power of rural non-farm income due to softer inflation is also contributing to the momentum,” according to the survey findings.

Major consumer companies such as Nestlé, Parle Products and Marico reported similar trends in the September quarter. Many companies continue to double their sales in rural markets.

Biscuit maker Parle Products recorded faster growth ₹10- ₹20 price packs in rural markets after GST reduction. In India’s snack category, ₹5- ₹10 packages make up the majority of the market.

“Overall consumption has increased as a result of the fall in GST… some of the premium products have seen really good traction. In rural sales, we have seen good traction and good growth coming in sub-unit packs of our premium products as well,” said Parle’s Mayank Shah.

This includes: ₹10 and ₹20 packs of Hide & Seek, Milano and NutriChoice biscuits. Parle also sells Parle-G biscuits at very low prices ₹2. GST on biscuits has been reduced from 18% to 5%.

The increase in consumption coincided with the perception that inflation in rural households had fallen to 3.77%, falling below 4% for the first time since the start of the survey.

rural growth

India’s rural markets are extremely important to major consumer goods manufacturers. Rural markets account for 38% of sales of consumer packaged goods and two-thirds of Indians living and earning a living.

Manish Tiwary, chairman and managing director, said Nestlé India has built the right portfolio and distribution to reach more rural consumers. Mint.

“We certainly have prosperity in these markets now. In the last two years, rural the clock is working twice the growth of urban markets. “To tap into rural markets, you need the right technology to make sure you do it at the right cost,” he said.

The packaged food manufacturer derives 15% of its sales from rural markets and plans to increase this share.

“It needs the right portfolio and the right outreach initiatives; we are working on both. The rural sector is growing 1.5-1.6 times the urban sector,” he added.

FMCG demand in rural markets grew faster than in urban areas in the three months ending September, according to market researcher NIQ. While volume growth in rural areas was 7.7% in this quarter, this rate was 3.7% in urban markets.

“The Indian FMCG sector continues to demonstrate resilience, leading rural markets for seven consecutive quarters. Rural demand remains the cornerstone of volume expansion, while urban recovery is gaining momentum, especially in small towns,” NIQ said.

More powerful macros

Indian economy recorded The unexpected six-quarter high growth rate for the July-September period was 8.2 percent, the government said in late November. Growth was helped by strong expansion in manufacturing, financial services and consumption.

Growth in private final consumption expenditure (PFCE) increased to 7.9% from 7.1% in the previous quarter. Retail inflation slowed to 1.7% in the September quarter from 2.7% in the first quarter; wholesale inflation decreased from 0.26% to 0.02%.

It helps reduce food inflation…It constitutes approximately 40% of the CPI basket– has been in negative territory for five months, pulling down overall inflation.

“With the decline in rural food prices for four consecutive months (June-September 2025), the share of total monthly consumption allocated to food by a segment of rural households seems to have increased, resulting in the overall share of food in monthly consumption expenditure rising to 55.4%, the highest among all rounds of this survey,” according to the survey.

Parle’s Shah said rural markets for the biscuit maker are currently growing at 8-10%, while urban growth is at 4-5%.

“If you look at the last six to seven quarters, rural growth has outpaced urban growth… overall macroeconomic indicators are quite positive for rural areas,” he said.

Manoj Verma, COO of Bikaji Foods, which gets 45% of its business from rural markets, said: “We have seen the emergence of a lot of small, local players in rural markets in the last one year and when you look at external data, the growth is driven by unit packs, which means in terms of consumption, small packs in general are growing faster, which shows that the demand from the rural market is stronger.”

sharper focus

Others expect a greater focus on rural markets in the future.

“Over the next few years, the center of gravity of volume growth in broader consumption categories will increasingly shift to rural markets as households look to make small but steady improvements in subsistence food, personal care, mobility and household essentials, provided monsoons remain supportive and real rural incomes begin to rise steadily,” said Deepak H, partner and country head of India Ipsos Strategy3, the management consultancy and strategy arm of Ipsos.

Priya Nair, CEO and managing director of Hindustan Unilever, said during the September quarter earnings call: “There is a massive transformation taking place in rural areas in the country and we will double down on the back of growth in the country’s price brand pyramid.”

The recent GST rate reforms have directly benefited 40% of HUL’s portfolio, which has now been moved to the 5% GST bracket. The company planned “bolder marketing transformation and channel transformation” for rural markets.

Income levels have also improved, with 42.2% of households reporting higher incomes last year, the strongest performance in the survey’s history. The survey showed that the percentage of households experiencing a decline in income fell to its lowest level last year.