Only 28% of rural households saw income rise in a year: Nabard Survey

New Delhi: Rural households are experiencing the weakest rate of income since the National Bank for Agriculture and Rural Development (Nabard) began monitoring rural economic conditions nearly two years ago, while their dependence on informal credit is on the rise, pointing to emerging financial strains.

That’s according to the latest survey of rural economic conditions and sentiment from the state lender (Round 12, July 2026), only 27.7% of rural households reported an increase in income from a year ago, the lowest figure since the survey began. The two-month survey also showed that incomes of 52.6% of households remained unchanged over the year, the group’s highest proportion on record, while 19.8% reported a decline.

The latest edition of the survey, which was first launched in September 2024, shows that the share of rural households reporting an increase in income has steadily declined since the November 2025 round, indicating momentum in the loss of income.

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The farm-focused lender’s findings, published on its website, are based on a multi-stage survey of 20,000 rural households across 29 states and union territories.

The weakness in rural incomes comes amid rising inflationary pressures. India’s retail inflation, as measured by the consumer price index, rose to 4.38% in June, a 17-month high.

The waning momentum in the rural sector, which is heavily dependent on agriculture, coincides with delayed and insufficient monsoon rains amid the threat El Nino weather phenomenon.

India’s monsoon rainfall remains well below normal, dampening concerns over sowing and harvesting of kharif crops. From the start of the season from June 1 to July 15, India received 23% less rainfall than normal, according to data from the India Meteorological Department (IMD). Sowing of kharif crops, largely dependent on southwest monsoon rains, is 6% lower than a year ago.

Consumption holds, just right

Amid weakening income trends is the story of consumption in rural India. Although still robust, Nabard’s report shows some slowdown in growth. The share of respondents who reported higher consumer spending fell to 74.1%, marking only the second time since the survey began that this figure has fallen below 75%. It was 77.2% in the previous survey round in May 2026 and 76.6% a year ago in July 2025.

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However, the broad trend shows resilience in the segment as hHousehold consumption expenditure continued to make up a substantial part of monthly income, with approximately two-thirds of the amount devoted to it.

Formal lenders left out

The declining income trend was accompanied by greater reliance on informal loans or loans from friends, relatives or moneylenders.

The share of households relying solely on formal sources of credit, including banks, non-bank lenders and microfinance lenders, eased to 51% in July 2026 from a peak of 58.3% in November 2025. Conversely, households relying solely on informal sources of credit rose to 23.6%, the highest level recorded in all rounds of the survey.

Among households dependent only on informal finance, loans from friends and relatives remained the most common source. About 16.2% of respondents only borrowed from friends and relatives, while 6% relied solely on moneylenders, while 1.4% used both.

Early distress signals

Economists say the survey points to the emerging weakness of India’s rural economy and the disparity between rural and urban income trends and highlights the need to boost non-farm employment opportunities in rural India.

“Two things stand out from these findings. First, urban India is different from rural India, where incomes are lower and not growing. The problem is the creation of paid jobs in rural areas. Agriculture alone cannot absorb the labor force, while the labor force employed in other sectors does not see meaningful income growth,” said Madan Sabnavis, chief economist at Bank of Baroda.

The numbers speak for themselves. Nearly 46% of the country’s workforce is dependent on agriculture, while agriculture and allied sectors account for only about 16% of India’s gross domestic product.

For informal lending on the rise, Sabnavis cited convenience as a key factor. “Dependence on informal sources of credit is largely due to ease of access. While financial ignorance may still play a role, Jan Dhan has provided banking access to most households,” he said. “However, formal loan processes, including credit evaluation and documentation, can still be daunting, leading many borrowers to prefer family members or loan sharks.”

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Madhavi Arora, Chief Economist at the company Emkay Global Financial Services said Nabard’s survey should be seen as an early warning rather than conclusive evidence of a widespread rural slowdown.

“The survey suggests that rural income growth has lost steam even as consumption remains relatively resilient. The growing reliance on informal credit is worth noting as this may indicate emerging liquidity pressures or constraints in accessing formal finance,” Arora said. “However, we would view this as an early signal rather than definitive evidence of a broad-based rural slowdown and look for confirmation from wages, employment and consumption indicators in the coming months.”

Queries on rural trends emailed to Nabard and the finance ministry on Monday remained unanswered till press time.