112 Rural Districts in India Surpass $2,000 Per Capita Income: Report

New Delhi: Rural India is undergoing a significant transformation, moving from an agriculturally centered economy to one dominated by the services sector. A recent report titled “Rural India – Shifting Economic Foundations” by HDFC Securities highlights that 112 rural districts, representing a population of 291 million, have already crossed the threshold of per capita income of $2,000. This growing affluent population is expected to drive sustained demand for discretionary products and services.

In recent quarters, rural India has taken the lead in consumption growth, even as urban mass consumption has remained soft due to persistent inflation. The report provides a detailed bottom-up analysis of 250 rural districts across eight key Indian states, which together account for 72% of rural India’s GDP (Rs 109 lakh crore).

The states of Maharashtra, Tamil Nadu, Kerala, and Andhra Pradesh are leading the charge, driven by the burgeoning services sector. While Uttar Pradesh’s per capita income is lower compared to its peers, its growth rate is notably strong. The services sector is the fastest-growing, with an 8.8% compound annual growth rate (CAGR). Financial services (9.1% CAGR), trade and hotels (9.8% CAGR), and real estate (8.3% CAGR) are the key drivers of this growth.

The industrial sector has also shown stability, growing at a 7.1% CAGR, supported by strong performances in mining (13.5% CAGR) and construction (8.7% CAGR). According to the HDFC Securities report, states like Uttar Pradesh (8.1% CAGR), Maharashtra (7.7% CAGR), and Tamil Nadu (7.6% CAGR) have led the overall real growth of rural India. Other states have also maintained healthy growth rates of 6-7%.

Rajasthan (6.6% CAGR), Maharashtra (7.7% CAGR), and Tamil Nadu (7.6% CAGR) have shown significant improvements, with their real growth rates increasing from 3.7%, 5.6%, and 6.1%, respectively, in the pre-Covid period (FY16-FY19). Rural Uttar Pradesh has grown at a real CAGR of 8.1% during FY22-FY25, outpacing the overall state growth by 120 basis points. The growth has been driven by the industrial sector, particularly construction and mining, which have contributed 44% and 13% to the sector and grown at real CAGRs of 12% and 35%, respectively.

This shift in the economic landscape of rural India underscores the potential for sustained economic growth and the rising purchasing power of rural populations, which could have far-reaching implications for various sectors of the economy.