Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Rural economy of India - statistics and facts
“The soul of India lives in its villages.” Mahatma Gandhi’s famous words from about 70 years ago still hold for modern India. Rural India is home to around 65 percent of the country’s population. The Reserve Bank of India defines rural areas as those with a population of less than 49,000. With agriculture as its cornerstone, the rural economy contributes significantly to India’s economic growth engine.
As per the Household Consumption Expenditure Survey 2024, the share of food items in rural India's average monthly per capita consumption expenditure increased compared to the previous year. However, the rural-urban consumption gap has significantly reduced in the last decade. Although a positive development, this may not be an accurate indicator of India’s farm economy. Some economists argue that urban India’s economic activity plays a key role in rural household consumption. Many agricultural households get income from wages and non-farm businesses. Circular migration involving construction, manufacturing, and informal jobs in the urban service sector, and internal remittances, is crucial in boosting rural consumption.
Rising inflation, especially food inflation, has further compounded these issues. It is estimated that high inflation rates combined with low-income growth may lead rural consumers to compromise on the nutritional value of their food purchases, aggravating food security in the country.
In addition to microfinancing roles, SHGs play a crucial role in livelihood diversification and skill development, especially for women. For instance, started by seven women, Lijjat Papad (a type of savory snack) from Maharashtra has now become a household name. The story of SHGs showcases the strength and resilience of community-based systems and continues to shape India’s rural landscape.
The rural consumption story
Fueled by private consumption, India is one of the fastest-growing economies in the world. Rural consumption is anticipated to continue being a bright spot in the economy. Sales of two-wheelers and tractors, which are key indicators of rural demand, looked promising, while sales of fast-moving consumer goods have remained strong at the end of 2024.As per the Household Consumption Expenditure Survey 2024, the share of food items in rural India's average monthly per capita consumption expenditure increased compared to the previous year. However, the rural-urban consumption gap has significantly reduced in the last decade. Although a positive development, this may not be an accurate indicator of India’s farm economy. Some economists argue that urban India’s economic activity plays a key role in rural household consumption. Many agricultural households get income from wages and non-farm businesses. Circular migration involving construction, manufacturing, and informal jobs in the urban service sector, and internal remittances, is crucial in boosting rural consumption.
Pinched pockets: Cost of living in rural India
In 2024, while median salaries in businesses rose by over nine percent, rural incomes experienced sluggish growth, driving many toward self-employment. This contrasts with urban areas where salaried jobs are predominant. The demand for work under the government’s rural employment initiative for unskilled labor, the Mahatma Gandhi National Employment Guarantee Act (MGNREGA), remained higher in financial year 2025 than in pre-Covid times.Rising inflation, especially food inflation, has further compounded these issues. It is estimated that high inflation rates combined with low-income growth may lead rural consumers to compromise on the nutritional value of their food purchases, aggravating food security in the country.
Self-help groups: A case for self-sustainability
The rural landscape in India is known for the critical role played by community-based cooperatives, including self-help groups (SHGs). India has over nine million self-help groups, mobilizing over 100 million women. SHGs are typically groups of 20 to 25 members, mostly residents of villages. In 1992, these groups were linked to banks for small loan disbursal under the SHG-Bank Linkage Program. These groups are collectively operating a financing operation emerging as the world’s largest microfinance project.In addition to microfinancing roles, SHGs play a crucial role in livelihood diversification and skill development, especially for women. For instance, started by seven women, Lijjat Papad (a type of savory snack) from Maharashtra has now become a household name. The story of SHGs showcases the strength and resilience of community-based systems and continues to shape India’s rural landscape.
