Tractor sales to grow 7% during 2005-07, says Icra

Credit rating agency Icra estimates tractor sales to increase at a compounded annual growth rate (CAGR) of 6-7 per cent over financial years 2005-07.

Icra believes that in the medium term, tractor sales may benefit from the framework of World Trade Organisation, while in the long term, a sustained increase in tractor demand will depend on the ability of the players to develop new models meeting specific requirements (such as higher tonnage).

Soumya K Ghosh, author of the Icra report, said, "Liberal trade regime will bring more commodities from India in the international trade circles. Since it would benefit the farmer, the trickle down effect will be felt significantly by the tractor manufacturers too."

He added that in the long run tractor firms must pin their growth hopes on addressing specific requirements of pockets of agriculture-intensive regions with models that are suitable to that region.

"Today the tractor is more of an homogenous product and not customised to the needs of a specific region. Producing use-based models will help the industry in the long run," he said.

Replicating this model in the domestic market would help in improving the demand for tractors in the country. Indian tractor industry is currently producing around 2.3 lakh tractors annually with an installed capacity of close to 4.25 lakh units per annum.

Ghosh said that the six to seven per cent CAGR estimated for the next two years will be significant as the previous year's growth was around 4-4.5 per cent only.

He said the estimated growth is based on three assumptions - regular monsoon, receivable remaining at manageable levels and overall agriculture growth is above average.