ICRA forecasts 10-12% growth for Indian two-wheeler industry in FY2017

The Indian domestic two-wheeler industry is set to grow at a rate of about 10-12% in the current fiscal, driven by broad-based growth across segments, ratings agency ICRA said in a report today.

Favourable budgetary allocations towards rural development, increased focus on creation of irrigation infrastructure as well as reasonable spell of monsoon rains during the sowing period is expected to aid in growth in disposable income of farmers, the single largest customer group for two-wheelers in India. This, in turn, will provide a much-needed fillip to two-wheeler sales in the fiscal, the report explains.

With the domestic two-wheeler industry having reported a growth of 16.5% during April-August FY2017, it is already witnessing early signs of improving rural demand, but a steady growth trend is yet to be established, says ICRA.

According to the agency, two-wheeler demand would also draw support from the benefits from pay revision (implementation of recommendations of the Seventh Pay Commission as well as the ‘One Rank One Pension’ scheme for the armed forces).

ICRA also expects the increasing penetration of organised finance into Tier 2/3 cities as well as rural centres to support domestic demand in the near to medium term as the current share of financed vehicles remains moderate. Additionally, the under-developed public transport system, in the backdrop of increasing road network in the past few years, has steered personal mobility requirement, supporting the demand for two- wheelers.

The agency highlighted that while the early buoyancy in motorcycle sales during FY2017 has been a relief (up 11.79% in April-August), sustainability of the same – especially in non-urban areas over the next few months would remain critical given the dependence on agricultural income.

Scooters (up 26.07% in April-August) on the other hand are expected to continue to outperform the industry in FY2017, driven by additional capacities coming on-stream, increasing urbanisation, rising women participation in work force, growing acceptance of scooters in non-urban areas and the current lower penetration of scooters, the agency concluded.