'Domestic tractor industry volumes to grow by 12-13% in FY18'

Mumbai: Domestic tractor industry's volumes are expected to touch all-time high levels in the current financial year at around 12-13 per cent, according to a report.

The all-time high volumes, would be riding on improved farm sentiments on the back of two consecutive normal south-west monsoons, ratings agency ICRA said.

"We expect the domestic tractor industry to record a volume growth of 12-13 per cent during FY18 with positive growth momentum also to spill over in next fiscal," ICRA Senior Vice President and Group Head, Corporate Ratings, Subrata Ray said.

Over the long term, ICRA continued to maintain a long-term annual growth estimate of 8-9 per cent for the industry, with the long-term industry drivers for the industry continue to remain intact.

The government remains committed towards rural development and agri-mechanisation, a critical component in improving the state of agriculture in the country, Ray said.

"This coupled with other factors such as increasing rural wages and scarcity of farm labour is likely to aid growth in industry volumes over the long term," Ray added.

The domestic tractor industry has recorded a robust growth in volumes of 15.7 per cent in the April-November FY18, with the industry continuing to grow at a healthy double digit pace on a month-on-month basis, barring a minor blip attributable to GST implementation, the report said.

ICRA said, to assuage the protesting farmers, various state governments have waived off farm loans for select farmers. However, even though its long-term implications might be muddled by moral hazard, it has had a soothing impact for farm community in the short-term, it pointed out.

Overall, along with increased allocations for various farmer welfare schemes, enhanced focus of the government on creating rural infrastructure through increased allocation to irrigation and roads among others, bodes well for the an improvement in the rural economy and the tractor segment over the medium to long-term, it added.

Fears of an adverse impact of a below-normal post monsoon rainfall and resulting weaker reservoir levels on rabi crop yields, even as rabi sowing levels are slightly better than previous year levels, remains a concern, it said.

Nonetheless, it said, an expectation of improvement in non-farm income, supported by the government's thrust on rural spending, infrastructure creation and irrigation spending, is expected to continue to support the demand for tractors at a pan India level.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.