ICRA Estimates Tractor Industry Volumes at Record 11.3-11.5 Lakh Units in FY2026; Growth to Slow to 1-4% in FY2027

India's tractor industry is on course to record its highest-ever annual wholesale volumes of 11.3-11.5 lakh units in FY2026, driven by above-normal monsoons, a reduction in GST on tractors from 12% to 5%, and pre-buying ahead of TREM V emission norms, according to ICRA's March 2026 sector report. The agency expects growth to slow sharply to 1-4% in FY2027 on the back of the elevated base.

Wholesale volumes grew 22.8% year-on-year in the first 11 months of FY2026, while retail volumes rose 19.3% over the same period. The GST reduction reduced tractor prices by ₹40,000 to ₹1,00,000 across horsepower ranges. Pre-buying that had been expected ahead of TREM V norms — originally scheduled for April 2026 but subsequently deferred also contributed to the volume surge, though ICRA noted this tailwind is now expected to ease.

Agricultural output data supports near-term demand: the Ministry of Agriculture and Farmers' Welfare's Second Advance Estimates, released on March 10, 2026, showed both kharif and rabi food grain output for AY2025-26 rising 3% year-on-year over final AY2024-25 estimates. India recorded 108% of the long-period average rainfall in CY2025, keeping reservoir levels above historical averages.

However, ICRA flagged potential El Niño conditions in the latter half of 2026 as a downside risk to farm output and tractor demand in FY2027. Dealer inventory levels were assessed as normal, and financing availability remained healthy with moderate delinquency levels. Tractor OEM credit profiles were described as strong, supported by low debt levels and adequate cash and liquid investments.