Tale of two consumers: Rural aspiration vs. urban caution

While rural Indians began the year feeling relatively confident, their urban counterparts remained cautious, according to a reading of the Reserve Bank of India (RBI)’s consumer confidence survey. While the rural population is driving consumption beyond essentials, urban consumers remain financially conservative, despite enjoying slightly better income stability, the survey results suggest. The conclusions are based on the January 2026 round of the survey.

Tables 1 and 2 summarise the survey findings based on the net responses of participants. A net response represents the difference between the share of respondents reporting optimism and those reporting pessimism on a specific subject. Values range from +100 (maximum optimism) to -100 (maximum pessimism), with any score above zero indicating optimism and any score below zero indicating pessimism. Tables show both current perceptions (how respondents felt compared to a year ago) and expectations (what respondents expect one year ahead).

Blue arrows represent positive sentiments: an upward arrow signals improvement from the last round, a downward arrow indicates deterioration, and a double-headed arrow signifies no change. Conversely, red arrows represent negative sentiments, while their directions have the same meaning.

Urban consumers are pessimistic about the economic situation, employment opportunities, and price levels, which keeps their Consumer Confidence Index in the negative sentiment category. In contrast, while rural consumers are pessimistic about income and price levels, they are upbeat about the general economic situation and employment opportunities; consequently, their overall index is in the positive sentiment category.

The directionality of the arrows offers an interesting reading. Urban consumers are not only pessimistic about the economic situation and price levels, but their pessimism has deepened since the last round. In contrast, positive sentiment regarding the economic situation has strengthened among rural consumers, as have outlooks on employment opportunities. Table 1 indicates that rural consumers are also positive about the future, whereas Table 2 shows that urban consumers are more cautious with discretionary spending.

A higher share of net respondents in both urban and rural areas reported an increase in spending compared to a year ago. However, the true distinction lies in what they are spending on. The RBI survey distinguishes between essential and non-essential items: generally, a rise in essential spending may point towards inflationary pressure, whereas an increase in non-essential spending possibly indicates an aspiration for a better lifestyle. Notably, a significantly higher share of rural consumers reported an increase in spending on non-essential items compared to their urban counterparts.

Charts 3 and 4 illustrate the proportion of rural and urban consumers who perceived an increase/improvement or a decrease/deterioration in various factors. The difference between these two figures constitutes the net responses presented in Tables 1 and 2. Interestingly, 25.9% of rural consumers reported a decrease in current income levels compared to a year ago, while only 22.6% reported an increase, resulting in a net response of -3.3%. In contrast, 23% of urban consumers reported a decrease against 26.3% who saw an increase, yielding a net response of +3.3%. Despite this pessimistic income outlook, the share of rural consumers with increased spending on non-essential items remains notably high.