Healthy monsoon to bring cheer to domestic tractor industry

Like the passenger car and motorcycle sectors, which have seen an uptick in sales volume in the past month, expect the tractor market too to benefit from the good monsoon which is spreading across the country.

Ratings agency ICRA expects tractor volume growth to remain at moderate levels with a growth of about 6-7% in FY2017. On the long-term front, it continues to maintain a volume CAGR of 8-9% for the industry over the next five years as long-term industry drivers remain intact.

Domestic tractor volumes for the industry have shown a healthy positive growth rate over the past five months, riding on growth in select states driven by region-specific factors. Although overall farm sentiments continue to remain weak, select markets have witnessed partial recovery, driven by healthy rainfall precipitation, government support programmes, better than expected rabi crop production as well as festive impact in certain regions. Although this has helped the industry record a growth in volumes in the fiscal till date, the same comes on a low base and a sustained improvement in demand in the industry remains to be seen.

According to ICRA’s senior Group vice-president, Subrata Ray, “The farm sentiments have also been alleviated by expectation of a healthy monsoon season; the progress in monsoon on a pan India basis has remained satisfactory till now and largely in line with expectations. While the larger markets such as Uttar Pradesh, Rajasthan and Punjab continue to witness weak tractor volumes, there have been green shoots evident in select states like Andhra Pradesh, Tamil Nadu, Maharashtra, Bihar, Orissa and Madhya Pradesh, which raises hopes of recovery in domestic volumes.”

Meanwhile, the government of India remains committed towards rural development and agri-mechanisation, which remains of paramount importance in improving the state of agriculture in the country. Also, continued support towards enhancing irrigation penetration through fresh allocations would reduce rainfall dependence over long term. This, coupled with other factors such as increasing rural wages and scarcity of farm labour, is likely to aid growth in industry volumes over the long term.