After three years of muted demand and wage stagnation, rural India is poised for a turnaround, according to Sushant Bhansali, CEO of Ambit Asset Management.
In the firm’s August newsletter, Bhansali noted that FY26 could mark the start of a broad-based rural recovery, driven by easing inflation, higher wages and a strong monsoon.
The note added that real wage growth, which had been negative for several years, turned positive during mid-FY25 as inflation cooled and government’s infrastructure spending gathered pace. This, Ambit said, has started to rebuild household savings and lift consumption of fast-moving consumer goods, low-end two-wheelers and durables.
Agriculture too is benefitting from timely rainfall, with monsoon precipitation in June at about 105 percent of the long-period average, and kharif sowing running 8 percent ahead of last year as of July-end. These factors should bolster farm output and income visibility for rural households, the newsletter said.
The optimism follows an extended period of rural discomfort, when between 2020 and 2023, inflation surged to 7.5 percent while wages stagnated, forcing downtrading in staples, delaying housing construction, and suppressing volumes in tractors and motorcycles. FMCG companies such as Hindustan Unilever and Dabur, as well as auto majors Hero MotoCorp and Bajaj Auto, had reported sluggish rural trends through this period.
Ambit now expects the recovery to be broad-based, spanning staples, consumer discretionary and agro-linked sectors. “FMCG, retail, two-wheelers, consumer durables, agrochemicals and affordable housing stand to benefit the most,” the note said, adding that earnings growth across these areas could bounce back strongly in FY26.
The fund house has raised exposure to these segments across equity strategies while pointing out that moderating demand for MGNREGA jobs - traditionally a barometer of rural distress - signals improving availability of non-farm employment avenues.
While risks such as commodity price swings or uneven policy execution remain, Ambit believes rising wages and robust monsoons will provide the foundation for a more durable rural recovery in the coming year.
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