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Rating agency CRISIL in its latest report has said that healthy farm incomes should provide support to rural incomes next fiscal (FY26) and lower inflation and scope for reduced interest rates should improve purchasing power for discretionary spending in India. This fiscal (FY25), real private consumption growth revived to 7.3 per cent from 4 per cent last fiscal. This fiscal, growth in government consumption expenditure rebounded to 4.1 per cent from 2.5 per cent last fiscal, supporting private consumption growth recovery.

The report said over the past few fiscals, government revenue spending on welfare schemes, such as NREGA, rural roads and housing construction, generated employment and bolstered rural demand in the immediate term. It said in FY26, for private consumption to remain strong, government spending must focus on employment generating schemes that put incomes in the hands of those with a higher propensity to consume.

According to the report, a combination of such spending on asset-creating schemes (rural roads, affordable housing and National Rural Employment Guarantee Act works) and furthering government capital expenditure or capex on infrastructure (railways, highways and ports) could moderate the inflation impact of such spending. It noted that if the supporting factors kick in, the pick-up in private consumption growth could be preserved next fiscal.