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Rural inflation expected to ease as consumer confidence improves: RBI MPC

According to a RBI report, households in rural and semi-urban areas reported a slight uptick in their current perception of inflation, which rose by 10 bps to 5.9 percent compared with the previous round of surveys.

October 01, 2025 / 14:23 IST
RBI Governor Sanjay Malhotra

The Reserve Bank of India’s (RBI) latest set of surveys, released with the MPC document, point towards an easing of inflation expectations in rural India, stronger consumer confidence, and continued optimism among businesses, even as credit conditions remain an important factor shaping monetary policy.

According to the September 2025 round of the bi-monthly Rural Consumer Confidence Survey (RCCS), households in rural and semi-urban areas reported a slight uptick in their current perception of inflation, which rose by 10 bps to 5.9 percent compared with the previous round.

However, one-year-ahead inflation expectations softened by 30 bps to 7.6 percent. The rural households’ long-term inflation expectations have been on a sequential decline for the past five rounds of the survey.

The RCCS, conducted since July 2024, now covers all states and three Union Territories, with responses from 8,848 households forming the September 2025 round.

While inflation remains a key concern, rural households’ current situation index showed improvement, remaining optimistic, unlike urban households where sentiment is still pessimistic but showing signs of recovery.

The future expectations index strengthened further for both rural and urban households, suggesting that consumers remain optimistic about their economic conditions in the year ahead.

The RBI’s broader Consumer Confidence Survey also confirmed improving household sentiment in September 2025, with optimism about one-year-ahead economic conditions. A fall in consumer confidence during downturns often typically means reduced spending.

The RBI further quantified these links by estimating econometric models such as MIDAS regression and ARDL analysis, using data from 2011-12 to 2024-25. The findings suggest that both the Current Confidence Index and the Future Expectations Index significantly influence actual spending trends.

Moneycontrol News
first published: Oct 1, 2025 02:23 pm

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