31-10-2020

Tractor sale volumes are expected to grow 10-12 per cent this fiscal over the previous year primarily driven by a strong rural income owning to solid rabi crop harvest, ratings agency Ind-Ra has said. Moreover, government initiatives in the form of a hike in minimum support price (MSP) for kharif crops and increased budgetary allocation under MGNRES are supporting rural income, it said in a report.

According to Ind-Ra, the segment volumes in 2021-22 are estimated to stand at a high single to low double-digit rate on account of four consecutive good crop harvests, translating into higher cash flows for farmers. During April-September period of this fiscal, tractor sale volumes grew 10 per cent year-on-year, the report stated, adding three consecutive good crop harvests and a likely strong harvest of kharif 2020 will spur demand for tractors over the remaining FY21-FY22.

Agricultural activities, being under essential commodities, were least impacted by the nationwide lockdown. Also, until date, the spread of COVID-19 has been limited in rural areas, thus not impacting the labour force and the overall production levels, it said.

Ind-Ra also said it expects the agriculture sector to grow better at 3.5 per cent than the overall economy for the second consecutive year in 2020-21 after a 4 per cent growth in the fiscal compared to the overall growth (gross value added) of (-) 12.2 per cent, it said.

As around 80 per cent of the tractors sold are used in the agriculture sector, tractor sales usually move in tandem with agricultural GVA, it said adding in 2019-20 there was a gap in these metrics where agricultural GVA grew, but tractor sales fell.

With the two consecutive years of better agricultural GVA growth, tractor sales are likely to benefit over FY21-FY22, Ind-Ra said.