ICRA sees tractor sales growing 2-4 pc on good rains in FY16

With the monsoon registering a good progress since its onset this year, the tractor industry is likely to witness a marginal growth of 2-4 per cent in the ongoing financial year, said a report.
In FY15, domestic tractor sales volume had declined by 13 per cent due to a deficient monsoon.
The growth in both domestic as well as exports markets may pick up marginally in FY16 benefiting from the lower base last year with likely moderation of cyclical headwinds and recovery in non-farm demand, rating agency ICRA said in a report here.
In the view of Met department's revised forecast for monsoon and actual rainfall and precipitation of monsoon till third week of June, ICRA expects tractor industry volumes in domestic as well as exports markets to grow 2-4 per cent.

Over the medium-term, ICRA continues to maintain a volume compounded annual growth rate (CAGR) of 8-9 per cent for the industry over the next five years on account of long-term industry drivers remaining favourable, the report stated.
The government's efforts toward rural development and agri-mechanisation, besides other factors like scarcity of farm labour, healthy credit availability, moderate penetration and shortening replacement cycle continue to encourage demand for tractors, the report said.

Domestic tractor sales volume plunged 13 per cent last year owing to the host of unfavourable factors including delayed and deficient monsoons, decline in kharif output, softening commodity prices, modest increases in MSP of major crops, lower realisations in cash crops, altered rabi sowing pattern and farm losses due to extensive crop damages due to unseasonal rainfall and hailstorms in several key rabi cropping states.

Domestic tractor volumes, which remained supported in H1FY15 aided by wholesale push to some extent, witnessed a severe slump of 22 per cent year-on-year (YoY) in Q3FY15 and 30 per cent YoY in Q4FY15 in the absence of any pickup in demand with farm sentiments being negatively impacted owing to a dip in farm incomes because of aforesaid factors.
Further, non-agri demand pull has also remained subdued with the slow pickup in the pace of infrastructure and construction activity.
While domestic tractor sales remained sombre, exports continued to perform well through the fiscal with a 20 per cent YoY growth during FY15, the report said.