Tractor sales remain weak for second consecutive year

In FY 2015, tractor sales in India fell by 13% compared to FY 2014. According to a statement by ICRA, the sales of tractors are likely to remain weak in FY 2016 as well. The agency has forecast a further fall 7-8% for the year. In August 2015, tractor sales saw a year-on-year decline of 21% and the period April - August 2015 saw a year-on-year decline of 16.4%.

The tractors market was already sluggish and a poor monsoon has made matters worse. While late rainfall could reduce the damage, the market for tractors is expected to remain weak over the short term.

In 2014, the kharif harvest was unfavourable and heavy and unseasonal rain during February - March 2015 all over the country, damaged crops. In the first quarter of FY 2016, the rabi harvest was weak and there is uncertainty regarding the kharif crop as well due to the weak south-west monsoon.

According to ICRA, the market will maintain a compounded annual growth rate of 8-9% in the long term (5 years). A commitment from the government towards rural development and agri mechanisation, low penetration and falling replacement cycle are likely to fuel growth. Other factors that could aid growth are increasing rural wages, scarcity of farm labour as well as long term trend of improvement in MSPs.

Source: Money Control, Economic Times