Village Vibe Check: Nabard data exposes rural India's huge economic crisis

Viksit Villages, said Prime Minister Narendra Modi, are the foundation of a Viksit Bharat. He was interacting with the participants of the Viksit Vibrant Village (Triple V) programme.

Let's go back to the villages and interrogate the ‘vibrant’ claims in the face of some recent data points, in particular, the Rural Economic Conditions and Sentiments Survey (RECSS) released by the National Bank for Agriculture and Rural Development (Nabard).

“Wherever you travel, spend at least 5 per cent of your travel budget on buying products from local people,” Modi advised. He specifically referred to border villages. Modi painted a picture of "once-deserted villages now bustling with vibrant activity" and robust local earnings that have been systematically accelerated by the Vibrant Village programme. ⁠

Data from rural India, however, paints a rather grim picture. The July 2026 round of the Nabard RECSS survey reveals worrying figures. Conducted bimonthly since last year, the survey gives some idea of how rural India is spending and consuming, levels of incomes and indebtedness and several other aspects of rural livelihoods. And, red flags abound on most of these parameters.

Rural incomes eroded

The July round finds that income levels in rural India are suffering serious erosion in real terms. This is particularly because of the cascading effect of costlier fuel and fertilisers amid global uncertainty, which has added to the input costs of farmers.

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The survey finds that the proportion of rural households reporting an increase in income has been on a consistent decline since the November 2025 RECSS survey, reaching 27.7% in July 2026. That’s “the lowest level recorded since the inception of the survey”.

The picture has been far from vibrant as far as earnings are concerned for quite some time now.

With his analysis of the wage rates in rural India from Labour Bureau data, economist Jean Dreze has for some time been pointing to the “alarming stagnation of real wages in rural areas from around 2014 onwards”.

Deny, delete, distort

But then the government did what it does best with data — denial, deletion or distortion. An unannounced change in methodology by the Labour Bureau has manipulated the rural wage data to project a sharp rise in earnings in recent years. The sample was expanded from 600 villages to 787 villages with effect from July 2025.

What this reshuffling meant was that the combined weight of the Northeastern states, the Delhi National Capital Region (NCR), and Goa increased by roughly 11%.

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Given that the newly added regions have smaller agricultural workforces, higher skill concentrations, and much higher average wages, this pushed the numbers.

Spending trends

Nevertheless, the Nabard study categorically demonstrates that rural incomes have been under severe pressure for a prolonged period.

While incomes have been falling, the price of an entry-level car or motorcycle has risen by 7-8% annually. Medical costs climb at 14% and a vegetarian thali now costs 11% more in every successive year.

The Nabard survey July round shows that over time, the proportion of respondents reallocating a larger share of income for food expenditure has increased. The proportion of households allocating a larger share of their monthly consumption expenditure (60-80%) to food has increased over the survey rounds.

Falling savings

Another red flag that the Nabard survey raises is about falling savings. The proportion of households reporting an increase in financial savings during the preceding year declined to 17.8% in the July 2026 round, the lowest level recorded since the inception of the survey.

The direct fallout of dwindling income levels and shrinking savings is quite naturally visible in demand. Economists and FMCG companies seem to underline the drop in sales as a result of the fall in consumption levels.

Low income + low savings + high prices = Dwindling demand

While a handful on the top splurge, ordinary Indians, particularly in rural India, seem to be consuming less. Reports show that overall consumption remains below even pre-pandemic levels.

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The latest Nabard survey underlines that the proportion of respondents reporting an elevation in consumption expenditure declined to 74.1%, marking only the second instance since the commencement of the survey that this proportion has fallen below the 75% mark.

Forward-looking surveys

This is corroborated by the forward-looking surveys released by the RBI in June. Consumer confidence for the current period declined for the third successive round with the Current Situation Index (CSI) going down to 90.7 from 95.7 in the previous round. Confidence for the year ahead also weakened from the previous round.

The Future Expectations Index (FEI) dropped by 1.5 points to 118.7, the lowest since September 2023. These are the repercussions of stagnant wages, coupled with uncertainties and inflation caused by the conflict in West Asia.

Households’ current perception of the economic situation (per the RBI’s Consumer Confidence Survey) also receded, registering a further decrease of 7.9 points from the previous round.

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As expected, households’ sentiment weakened significantly, particularly on discretionary expenditures, which is not good news for domestic demand. This means that households are holding back on things like eating out, travel, electronics, apparel, etc — anything that is not essential. This has a direct fallout on growth and jobs.

Lower sentiments

If we look more exclusively at the sentiments and forecasting in rural India, then the July round of the Nabard survey shows that expectations relating to income and employment softened compared to earlier rounds, with the proportion of households expecting improvements in both income and employment during the next quarter falling to its lowest level since the inception of the survey. This is a picture that is very, very far from being a “vibrant village”.

Similarly, one-year ahead income expectations weakened further, recording their lowest expectation since the inception of the survey. Apprehensions about price rise in the year ahead have also increased. Inflation expectations of rural households also edged up in the July 2026 round from the previous round.

Debt concerns

The emerging debt landscape is concerning. When prices outstrip incomes, one restricts discretionary spending. Or they simply borrow to meet some of their consumption needs.

In late June, the Reserve Bank of India (RBI) released the Financial Stability Report (FSR), which underlined that India’s household debt stood at 45.5% of its gross domestic product (GDP).

A recent study by TransUnion CIBIL shows that the share of over-leveraged consumers rose threefold from 2016-17 to 2023-24. The proportion of such households increased from 5% to 18% in this period, before easing marginally to 15% in 2025-26. An over-leveraged borrower is typically one whose debt burden has grown large enough relative to their income that it jeopardises their capacity to repay the loan.

Debt-burdened youth

Modi should remember that the problem of excessive borrowing is concentrated largely among younger borrowers, who have also been the fastest-growing segment of India's retail credit market. Among the over-leveraged, their share increased from 8% in 2017 to 20% in 2026.

Worryingly, the figure is spurred largely by non-housing retail loans. These are loans not for durable assets or for investment in businesses, which may generate income in the future. Instead, they are primarily consumption loans, indicating that the growing indebtedness has arisen from stressed income levels.

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A micro-study that the Centre for Financial Accountability conducted in Nagercoil, Tamil Nadu, found that a large share of women were taking micro-credit to meet expenses related to education (55%) and health (47%) while loans for business or enterprise were minimal. A whopping one-third of the respondents in this survey said that they have taken loans to redeem their gold mortgaged at another source of credit.

Burdened women

An all-India survey by the All India Democratic Women’s Association (AIDWA) across 20 states found that more than 70% of the women borrowers reported a monthly family income of less than Rs 10,000.

The study highlights that with the increase in the amount of outstanding loans, the share of women who are compelled to borrow from multiple companies also increases.

The report also underlined policy changes that have turned rural India into a preying field for predatory lending practices. It is an outcome of a process whereby the credit landscape has been slowly vacated by the public sector banks and has come to be dominated by micro lending private institutions and NBFCs.

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The July round of the Nabard RECSS survey shows that “the share of rural households reporting an escalation in borrowings moderated from 40.2% in September 2024 to 28.7% by July 2026. What is alarming is the fact that the share of rural households relying exclusively on formal sources of credit has been falling (58.3% in November 2025 to 51% in July 2026).

In contrast, the proportion of households relying exclusively on informal sources of credit increased to 23.6%. Significantly, this is the highest level ever reported across all rounds of the survey.

Whither Viksit Villages?

This is not a picture that instills confidence in the narrative of Viksit Villages or even Viksit Bharat. This is a direct outcome of the abdication of the role of social banking by our public sector banks.

What contributes to this outcome? Partly it’s the decline in the share of rural branches that have come down from close to 58% in 1990 to 34% today. It is also partly due to the fact that urban and metro regions are cornering the loans. The fact that the share of credit that cooperatives supply is now at 30% of the overall credit, which used to be more than 40% around 10 years ago, is another aggravating factor.

Taken together, slowing income growth, rising prices, falling savings growth and rising exposure to informal credit, paint a rather grim picture of rural India in recent times, a far cry from the illusion of Vibrant Villages that officialdom seeks to portray.

Administrative apathy

In that context, how does this dismal picture square with the fact that the proportion of households receiving no government transfers increased to 16%, the highest level observed in the surveys so far? Establishment apologists would say this is because of “better targeting” and “reduced leakages”, but it only conveys an attitude that reflects apathy.

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Much of the outrage that we have witnessed over the past month on the streets across the country was a direct fallout of this systemic crisis, wherein the youth are staring at a bleak prospect in terms of their aspirations, futures and prospects.

As Rana Mitra, General Secretary of the All India Nabard Employees Association, put it: “A U-turn course correction, rejecting all essentials of the neo-liberal logic, should be the principal weapon to fight out the fire.”