Tractor sales to moderate in FY19 after record in ongoing fiscal: Ind-Ra

Tractor sales in India will hit a record in the current fiscal but moderate in 2018-19, according to a report by India Ratings and Research (Ind-Ra).
The industry has already recorded strong volume growth of 16.6 per cent with total domestic volumes sales of 6,59,170 tractors in the April-January period of 2017-18, the credit rating agency said.
Ind-Ra expects tractor sales to reach a record high this fiscal, crossing the peak achieved in financial year 2013-14 (696,828 units), it added.
"The agency estimates a year-on-year growth rate of 14 per cent to 15 per cent in FY18. The rate would moderate in FY19," it added.

Two consecutive years of normal-to-good monsoons, improved crop production, easy availability of credit to farmers and increasing use of tractors in non-agricultural sectors are responsible for the growth of tractor sales in India, it said, adding the sector also benefits from low penetration of tractors.
However, the growth rate could moderate in FY19, primarily due to the strong base built over the last two years (FY17 and FY18), along with uncertainty over rainfall, as it is a rare possibility to have three consecutive years of a good monsoon, Ind-Ra said.

Highlighting immediate challenges for the tractor industry, Ind-Ra said Central Statistics Offices (CSO) advance estimates suggest gross value added of agriculture, forestry and fishing would fall to 2.1 per cent in FY18 which was 4.9 per cent in FY17.

It is primarily due to the uneven spread of rainfall leading to lower kharif and rabi crop yield and affecting farmers cash generation, it added.
"Higher delinquencies for tractor loans also show the continued stress in the agricultural sector. As around 45 per cent of the total tractor sales are financed through organised channels, loan delinquency rightly represents the average credit profile of a farmer; which might worsen in case of inadequate monsoons in FY19, thus impacting the additional demand for tractors," the ratings agency added.
Timely implementation of Rs 638 billion (Rs 63,800 crore) support to the agricultural and allied sectors announced in the union Budget for FY19 is important to lead to a steady increase in the demand for tractors and other farm equipment in the medium term, it added.

Demand of tractors from non-agricultural sectors, especially of higher tonnage in construction and infrastructure is likely to grow.
"About 20 per cent of the tractors are used for non-agricultural use. The governments thrust on roads and highways development as seen in Bharatmala project would also be positive for the higher tonnage tractor segment and the players therein," it said.