Tractor sales is set grow 10-11 per cent this fiscal on government focus on rural spending and infrastructure creation, says a report.
"An expectation of improvement in non-farm income, supported by the government's thrust on rural spending, infrastructure creation and irrigation spending would continue to support the demand for tractors by 10-11 per cent," Icra said in a report today.
"Over the long term, we continue to maintain a long term annual growth estimate of 8-9 per cent for the industry. The long term industry drivers for the industry continue to remain intact," said ICRA Senior Vice President and Group Head, Corporate Ratings, Subrata Ray.
"The government remains committed towards rural development and agri-mechanisation, a critical component in improving the state of agriculture in the country," added Ray.
Continued support towards enhancing irrigation penetration through fresh allocations would reduce rainfall dependence over long term, he 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 report said, the Indian tractor industry which has recorded a steady performance in the current fiscal with a volume growth of 12.8 per cent during April-August FY18 is likely to end FY18 with a volume growth of 10-11 per cent amid concerns regarding adverse impact on farm cash flows due to uneven rainfall.
Ray said, "while monsoon arrival was timely and progression was in line with expectation of key weather forecasting agencies till July, rainfall precipitation has been weak since August, with several areas receiving deficient rainfall in the current season. Thus, monsoon deficiency has been reported across Uttar Pradesh and Madhya Pradesh, with 20 per cent sub divisions pan India reporting deficient rainfall."
Even Southern India was reporting deficiency in rainfall till August, which has to an extent been offset by heavy rains in September 2017, he added.
"On the flip side as against deficiency in central and north-west, other key states like Bihar, Gujarat and Rajasthan have reported instances of excess rainfall," he said.
Though the domestic tractor industry had experienced a minor blip in sales momentum in June 2017, when channel participants postponed purchases and de-stocked (to minimise the transition impact on inventories ahead of implementation of Goods and Services tax), the domestic volumes have recovered, with the industry growing at healthy double digit pace during July and August 2017, it said.
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