India's tractor industry is projected to maintain growth momentum with volumes expected to rise 4-7% in FY2026, driven by favourable monsoon conditions and positive farm sentiments, according to ICRA's latest assessment released Monday.
The growth forecast comes as the industry seeks to build on a mixed FY2025 performance. The Indian tractor industry witnessed a marginal decline of 1% in overall sales during FY2025, though recent months have shown strong recovery with July 2025 recording wholesale volumes increasing 8.0% year-on-year and retail volumes climbing 11.0% year-on-year.
The demand surge has been supported by early monsoon arrival and progress in kharif sowing activities. India's domestic tractor market reported a 9.12% year-on-year growth in May 2025, supported by the early arrival of monsoon and favourable rural demand, indicating sustained momentum in recent months.
ICRA's projection builds on the India Meteorological Department's (IMD) forecast of above-normal precipitation at 106% of the long-period average during the current monsoon season. The rating agency expects this weather pattern to further support agricultural activities and industry volumes in a market that is expected to reach USD 8.4 billion in 2025 and grow at a compound annual growth rate of 6-7% over the medium term.
The market recovery comes amid government support measures, with a 1.4–12.5% hike in MSP for 14 kharif crops set to inject INR 35,000 crore into farm incomes in 2025. This policy support is expected to boost demand particularly in grain-heavy states like Punjab and Haryana.
Agricultural output data reinforces the positive outlook. The Ministry of Agriculture and Farmers Welfare's third Advance Estimates for AY2024-25, released in May 2025, show foodgrain output increases of 7.9% for kharif crops and 4.5% for rabi crops year-on-year.
The industry continues to be dominated by established players, with Mahindra & Mahindra remaining the clear market leader and selling around 389 thousand units in FY2023. The competitive landscape includes Sonalika, Swaraj, Escorts, and John Deere, with competitive intensity in the domestic tractor market remaining high.
Market dynamics show the 31–50 HP band owns 46% of the tractor industry market share, anchored in plots of 1–3 hectares, reflecting the predominance of small and marginal farmers in Indian agriculture.
Additional volume support may come from pre-buying activities ahead of TREM V emission norms, which are proposed to take effect from April 1, 2026. The industry has also seen increased adoption of precision farming technologies such as GPS guidance systems and variable rate technology, enhancing operational efficiency.
ICRA expects tractor manufacturers to maintain strong credit profiles, with margins remaining healthy due to rising volumes, operating leverage, and stable raw material costs. The credit profiles are anticipated to benefit from volume increases, low debt levels, and adequate cash and liquid investments among original equipment manufacturers.