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Tractor industry May Record Volume Growth Of 10% in FY18: ICRA

Healthy monsoon expectation, coupled with good reservoir levels, augurs well for farm output in the current fiscal, says ICRA.

The Indian tractor industry is expected to record a volume growth of 9-10 per cent in the current financial year, mainly supported by healthy monsoon, according to rating agency ICRA.

"Healthy monsoon expectation, coupled with good reservoir levels, augurs well for farm output in the current fiscal. This, coupled with an expectation of improvement in non-farm income, aided by the government's focus on rural spending, infrastructure creation and irrigation spending, is likely to drive the demand for tractors, which is expected to record a volume growth of 9-10 per cent this fiscal," ICRA said in a report here.

"Over the long term, we continue to maintain an annual growth estimate of 8-9 per cent for the industry. The long term industry drivers for the industry continue to remain intact. The government remains committed towards rural development and agro-mechanisation, a critical component in improving the state of agriculture in the country," ICRA Senior Group Vice President Subrata Ray said.

Also, he said, continued support towards enhancing irrigation penetration through fresh allocations would reduce rainfall dependence.

"This, coupled with other factors such as increasing rural wages and scarcity of farm labour, is likely to aid growth in industry volumes," he added.

Tractor volumes reported a healthy growth during FY17, boosted by improving farm sentiments following healthy southwest monsoon and expectations of better cash flows in the backdrop of strong growth in kharif and rabi crop production.

Additionally, ICRA said, government support programmes in various states also supported demand to an extent.

The volumes suffered a blip in November 2016 following demonetisation. However, domestic volumes recovered quickly to a moderate to healthy growth in volumes during December 2016-March 2017, it added.

In April and May, 2017 also, leading tractor Original Equipment Manufacturers (OEMs) have reported robust double digit growth rates in domestic volumes.

However, tractor exports market remained weak during FY17, with the weak demand in the global markets attributable to high supplies of commodities and accompanying fall in crop prices across various markets, ICRA said.

(PTI)


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