Trump tariff risks cast shadow on rural income outlook: Nabard survey

In July, the same survey showed that almost 75 per cent of rural households expected their incomes to rise in the next one year, which has now come down to 72.8 per cent in September

Just months after a survey showed nearly three-fourths of rural households expected incomes to rise, a new study by the National Bank for Agriculture and Rural Development (Nabard) finds sentiment weakening, as US President Donald Trump’s steep tariffs cast a shadow over India’s rural economy.

 

Nabard’s bi-monthly rural economic conditions and sentiment survey for September 2025 highlights how tariff-related risks for farm and non-farm exports -- and their knock-on effects on rural incomes and employment -- have dented confidence among rural households.

 

“For the next one-year income prospects, a lesser percentage of households reported expectation of an increase in income,” states the survey.

 

 

In July, almost 75 per cent of rural households expected higher incomes over the next 12 months. That figure has eased to 72.8 per cent in September. Short-term optimism also slipped, with 51.6 per cent of households expecting an improvement in the next quarter, down from 56.4 per cent in July.

 

Like earlier, the seventh round of the Nabard survey was also conducted in 600 villages across India. The latest survey comes against the backdrop of Trump’s 50 per cent tariff on Indian goods -- among the steepest globally -- which is set to affect 55 per cent of India’s shipments to the US. The duties cover sectors with strong rural linkages, including seafood.

 

According to the report, much of the survey was completed before the rollout of GST reforms, meaning their potential positive impact on expectations is not reflected in the results.

 

The findings also underline shifts in borrowing behaviour. Because of sustained policy efforts to boost financial inclusion, 54.5 per cent of households reported relying solely on formal sources of credit—the highest since the survey began. Still, one-fifth of households continue to borrow exclusively from informal channels, with more than half of that borrowing from friends and relatives.

 

Informal credit costs remain elevated. The average interest rate hovered around 17–18 per cent, with the median unchanged at 12 per cent. About 30 per cent of households -- possibly those borrowing from family and friends -- paid no interest, while a third faced rates above 20 per cent.

 

Among households that reported an income increase over the past year, average earnings rose 12.8 per cent, a higher rate than that reported in the previous round of the survey.

 

Inflation expectations, meanwhile, moderated further.  The average perceived rate of inflation declined to 4.09 per cent in September, while the median stayed at 3 per cent. Since November 2024, average inflation perceptions have dropped by about 150 basis points.

 

The survey also points out that rural roads have emerged as the top ranked area of rural development, with 45.3 per cent of rural households expressing satisfaction about improving conditions, followed by education (12.0 per cent) and electricity (8.7 per cent).