New Delhi: Rural India is undergoing a major economic transformation, moving from an agriculture-dominated economy to one increasingly driven by services, according to a new report by HDFC Securities.

The study, titled "Rural India – Shifting Economic Foundations," reveals that 112 rural districts, home to 291 million people, have surpassed a per capita income of $2,000. This emerging segment of affluent consumers is expected to fuel steady demand for discretionary goods and services, the report said.

In recent quarters, rural regions have played a crucial role in sustaining consumption growth across India, even as urban spending slowed due to persistent inflationary pressures.

The report presents a granular, bottom-up analysis of 250 rural districts across eight major states, which together account for nearly 72% of rural India’s GDP, estimated at ₹109 lakh crore.

"Maharashtra, Tamil Nadu, Kerala and Andhra Pradesh are driving the growth, supported by the burgeoning services sector. Uttar Pradesh's per capita income was low compared to peer states, but growth was stronger," the report noted.

Services is the fastest-growing sector with an 8.8 per cent compound annual growth rate (CAGR), led by financial services (9.1 per cent), trade and hotels (9.8 per cent), and real estate (8.3 per cent).

Industry is stable at 7.1 per cent CAGR, supported by strong performance in mining (13.5 per cent) and construction (8.7 per cent).

According to the HDFC Securities report, on the states front, Uttar Pradesh (8.1 per cent CAGR), Maharashtra (7.7 per cent CAGR) and Tamil Nadu (7.6 per cent CAGR) have led the overall real growth of rural India, while other states also remained healthy with 6-7 per cent real growth rates.

Rajasthan (6.6 per cent CAGR), Maharashtra (7.7 per cent CAGR), and Tamil Nadu (7.6 per cent CAGR) have witnessed encouraging improvements as their real growth rates were subdued at 3.7 per cent, 5.6 per cent, and 6.1 per cent, respectively, in the pre-Covid period (FY16-FY19).

Rural Uttar Pradesh has grown at 8.1 per cent real CAGR during FY22-FY25, 120 bps ahead of the overall state growth. Growth has been driven by the industry sector (10.6 per cent real CAGR during FY22-FY25), led by construction and mining, contributing 44 per cent-13 per cent to the sector and growing at 12 per cent-35 per cent real CAGR, the report noted.