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

NEW DELHI: India’s rural economy expanded and recovered strongly in late 2025, with consumption, incomes and investment improving after a key tax reform and as inflation eased, a survey showed.

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

The survey was conducted after the rationalization of the goods and services tax was announced by the GST Council on 3 September during the festival season and against a backdrop of a sharp moderation in rural inflation and food deflation. The results were mixed during this period for companies benefiting from lower taxation as consumers postponed purchases in anticipation of the revised rates.

The GST rate cuts that came into effect on 22 September positively impacted categories such as television, automobiles, air-conditioners, refrigerators, soaps, and biscuits.

“The rural consumption demand buoyancy appears to have received a boost after the GST rate rationalization, with improved real purchasing power of rural non-farm income due to softer inflation also contributing to the momentum,” as per the survey findings.

Large consumer companies such as Nestlé, Parle Products and Marico reported similar trends in the September quarter. Several companies continue to double down on the rural markets.

Biscuit maker Parle Products registered faster growth in its Rs.10- Rs.20 price packs in the rural markets after the GST reduction. In India’s snacking category, Rs.5- Rs.10 packs account for the bulk of the market.

“As a result of the reduction in GST, overall consumption has gone up… some of the premium items have seen really good traction. In rural sales, we've seen good traction and good growth coming in lower-unit packs of our premium products as well,” said Mayank Shah of Parle.

This includes Rs.10 and Rs.20 packs of Hide & Seek, Milano and NutriChoice biscuits. Parle also sells Parle-G biscuits for as low as Rs.2. GST on biscuits was reduced to 5% from 18%.

The rise in consumption coincided with perceptions of rural households of inflation easing to 3.77%, falling below 4% for the first time since the survey was initiated.

Rural growth

India’s rural markets are hugely important for large consumer goods makers. The rural markets account for 38% of sales for packaged consumer goods and two-thirds of Indians living and earning livelihood.

Nestlé India is building the right portfolio and distribution to tap more rural consumers, chairman and managing director Manish Tiwary said in a recent interview with Mint.

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

The packaged foods maker gets 15% of its sales from the rural markets and plans to increase this share.

“It needs the right portfolio and the right reach initiatives—we are working on both. Rural is growing 1.5-1.6 times that of urban,” he added.

Source : https://www.livemint.com/companies/rural-markets-demand-surge-gst-cuts-inflation-consumption-nabard-india-gdp-itc-hul-nestle-marico-11765523512284.html