 "Tractor sales drop by 4% in FY24, signalling rural economic trouble")
Tractor sales in India have witnessed a significant downturn in crucial states across the western and southern regions during the initial nine months of the ongoing financial year (FY24), contributing to an overall 4 per cent decline in the world's largest tractor market, according to a report by the Economic Times. Tractor sales are often regarded as a tool to measure rural economic well-being. Major states, including Maharashtra, Karnataka, and Telangana, experienced a decline in sales, with Uttar Pradesh being the only anomaly with a six per cent increase. This downturn comes after the previous financial year reported record growth.
Maharashtra recorded a 33 per cent drop, Karnataka 21 per cent, and Telangana 36 per cent, marking the most substantial decline ever observed in these states. Additionally, a four per cent decrease in Madhya Pradesh, the second-largest tractor market by volume after Uttar Pradesh, further impacted the overall sales figures.
The plummet in sales can be attributed to erratic weather conditions, including an uneven monsoon-influenced by El Nino, coupled with insufficient rainfall, which adversely affected agricultural output and, subsequently, farm income. This, in turn, led to the deferral or cancellation of tractor purchase plans by farmers. Moreover, diminished reservoir levels, down by 18 per cent compared to the previous year and five per cent below the decadal average, according to the Central Water Commission, added to the prevailing sentiment of uncertainty.
The leading players in the Indian tractor market, Mahindra and Mahindra, had anticipated ending the FY24 with approximately 900,000 units in sales, a decline from the 945,000 units sold in the preceding financial year, as earlier reported by Business Standard. Despite the market slowdown, M&M has managed to increase its market share to 41.8 per cent in Q3FY23 from 41 per cent in the same period, underscoring its resilience amidst challenging market conditions.
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In the April-January period of FY23, total domestic tractor sales amounted to 760,000 units, compared to 800,000 units in the same period last year. However, M&M's consolidated farm revenues remained stagnant at Rs 8,600 crore in Q3FY24, while profit after tax (PAT) for the farm business declined by four per cent to Rs 898 crore.
Agriculture, which accounts for approximately three-fourths of tractor demand, is heavily influenced by farmer sentiment, primarily dictated by monsoon patterns and rural income. The residual demand originates from commercial sectors such as infrastructure and mining.
The irregular temporal distribution of rainfall has adversely impacted kharif output, with Rabi sowing exhibiting sluggish progress. Furthermore, weak Mandi arrivals from the kharif season point towards a widespread reduction in farm output, exacerbating the prevailing economic challenges in rural India.