Seeds of change in rural landscape point to farm sector recovery signs

Several indicators in the last few weeks point towards a stronger “Rural India”, prompting agriculture analysts and economists to assess if the farm sector is indeed in the midst of a real turnaround.

 

The recent provisional gross domestic product (GDP) estimates for FY25, for instance, captured the early signs of a rural consumption boost. The numbers showed that private final consumption expenditure had outpaced the GDP growth last financial year (FY) and the share of consumption in GDP had risen to its highest level since FY05 at 61.5 per cent. The commentary around this data set was that even though urban consumption remained dull,  rural demand picked up, aided by robust growth, in the agriculture sector and low inflation.

 

To be more specific, the farm sector growth in the fourth quarter of FY25 was pegged at 5.4 per cent against 0.9 per cent in the corresponding quarter of last financial year. This is expected to act as a catalyst in propelling the full-year gross value added (GVA) in agriculture and allied activities for FY25 to 4.6 per cent, up from 2.7 per cent in the previous year, in real terms.

 

Numbers further showed that in nominal terms, the agriculture and allied sector registered a growth of 8.7 per cent in the fourth quarter of FY25 against 7.9 per cent in the corresponding quarter of FY24. For the full year, GVA for the farm sector in nominal terms was registered at 10.4 per cent against 9.6 per cent in FY24. 

 

A strong monsoon, aided by robust prices, spurred the agriculture and allied sectors to their good performance in FY25. The food grains production data reaffirmed the trend of a rural revival. The third advance estimates released a few weeks ago said food grains production touched an all-time high of 353.95 million tonnes in the 2024-25 crop season (to end in June), largely due to the record harvest of rice, wheat and maize.

 

Look at some of the other indicators of rural growth. In FY25, around 19.6 million units of two-wheelers were sold, registering a growth of 9.1 per cent over FY24, according to the Society of Indian Automobile  Manufacturers (SIAM). Also, rural demand growth in fast moving consumer goods (FMCG) was much faster than in urban areas during the January to March quarter, data from NielsenIQ showed. Domestic tractors sales in FY25 too registered a growth of 7.3 per cent.

 

Apart from that, real rural wage growth, which had remained weak, displayed signs of an uptick in FY25. And, around 78.8 million people worked in the government’s flagship Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in FY25, which was 5.51 per cent lower than FY24. The last time fewer individuals worked under the scheme was in 2019-20, before Covid19 outbreak. The scheme provides a legal guarantee of 100 days of wage employment in a financial year to rural households willing to do unskilled manual work, with the aim of generating rural employment opportunities.

 

Bright outlook

 

If FY25 was good for rural India, initial signs indicate that the trend would possibly gain strength in FY26. Here’s how.

 

While predicting a bumper cumulative monsoon in 2025, the India Meteorological Department (IMD) said the Core Monsoon Zone, which comprises some of the most rain-dependent but agriculturally vital parts of north, central, and western India, is expected to get ‘above normal’ rains. Some pockets of Bihar, West Bengal, and North-Eastern India could be an aberration.

 

The monsoon has set in early and retail prices of major cereal crops such as wheat, rice, and even maize are trading above their MSP (minimum support price) in most markets. 

 

Domestic tractor sales in April 2025 — the first month after the rabi harvest — rose by almost 8 per cent. While households demanding work under MGNREGA dropped 6.6 per cent in April compared to the corresponding month of the previous year, the numbers rose 4.2 per cent in May.

 

On the whole, brokerage firms and economists are of the view that rural consumption is poised to remain a bright spot in the Indian economy, supporting growth in the ongoing FY26. Even Agriculture and Rural Development Minister Shivraj Singh Chouhan believes that the sector will maintain its growth momentum in FY26. A recent Reuters report suggested rural wage growth, adjusted for inflation, was at its highest in four years, citing data from ICICI Securities Primary Dealership. Projecting a similar trend, a note by CRISIL said that the Reserve Bank of India’s  (RBI’s) Monetary Policy Committee (MPC) expected yet another healthy agriculture year in FY26 to add impetus to rural demand.

 

On the policy side too, things have started moving on research and innovation in agriculture, after many years.

 

The launch of two new genome-edited rice varieties and multiple researches being carried out across the country using the new gene-editing techniques do show that science may be finally getting its due in agriculture. 

 

Noted agriculture economist and NITI Aayog member Ramesh Chand believes that the turnaround in agriculture had started back in 2015-16. There are occasional dips, though. “If you see the new normal, long-term growth trend is now almost 4 per cent plus, which was 3 per cent for a long time in whatever way one calculates,” Chand tells Business Standard.

 

He points out that real agriculture food prices have risen by almost 30 per cent in the past 10 years while irrigation coverage has gone up from 47 per cent to 55 per cent and states such as Andhra Pradesh and Madhya Pradesh are becoming the new engines of agriculture growth in India.

 

Ashok Gulati, distinguished professor at the Indian Council for Research on International Economic Relations (ICRIER), argues that for real benefits of growth to flow into the rural sector, farmer incomes have to rise.

 

According to the latest All India Rural Financial Inclusion Survey (NAFIS) 2021-22 by Nabard, the average monthly income of rural households has increased from ₹8,059 in 2016-17 to ₹12,698 in 2021-22.

 

“This income should grow by a minimum 8-9 per cent annually considering a real agriculture growth of 4 per cent per annum and average inflation of 5 per cent, which in a family of 4.6 is not very great,” Gulati says, adding it is just at manageable levels.

 

Gulati says to accelerate incomes, production and productivity of crops need to be much faster and the whole consumer bias in the system has to go for good.

 

Also, farmers have to move towards high value crops, Gulati suggests.

 

Clearly, one good year for the rural and agriculture sector and a positive outlook for another may not mean that the challenges facing the farm and rural sector are over.