ICRA revises tractor growth to 15 pc on buoyant farm sector

Rating agency ICRA has revised its growth outlook for the tractor industry this fiscal upwards to 15 per cent from 13 per cent earlier, citing continued buoyancy in domestic sales amid strong farm sector growth.
The above average monsoon pushed up acreage of most rabi crops with total acreage rising by five per cent till January 24, which has led to rural prosperity and higher demand for tractors. This cyclical upswing comes after stagnant or marginally negative growth in second half of FY'12 and FY'13.
Though exports are expected to be limited this fiscal, higher domestic sales will more than compensate for this and as a result push up the overall growth to 15 per cent from the earlier projection of 13 per cent, ICRA said in a note issued today.

The agency continues to maintain a volume CAGR forecast of (8-9 per cent) for the tractor industry over the next five years as the long-term industry drivers continue to remain favourable.
Other factors helping demand upswing are government commitment to agri-mechanisation, scarcity of farm labour, healthy credit availability, moderate penetration and shortening replacement cycle.
The tractor industry recorded strong growth in the second quarter with growth bouncing to 32 per cent, after a rather dull first quarter when sales moderated to 9 per cent.

An upswing in demand during the festive months coupled with positives like sustained higher minimum support price, healthy kharif output and expectation of healthy rabi production contributed to robust sales growth in second quarter, it said.

However, industry growth moderated in November and December at 10 per cent, a period of lean business for tractor sales.
Overall domestic sales were buoyant in the first three quarters averaging at 22.7 per cent, while exports were weak with volumes declining by 2.2 per cent, primarily because of demand contraction in Sri Lanka and Bangladesh which are two of the biggest markets for domestic manufactures.