Despite the effects of demonetisation, the domestic tractor industry managed to end the fiscal 2016-17 with a double-digit growth in sales, which comes after two consecutive years of decline in volumes.

After a strong increase in volumes during the festival period, the growth momentum in the domestic sales suffered with a volume drop of 13 per cent in November 2016 due to demonetisation.

After this, however, tractor demand has recovered over the past three months, with industry volumes continuing to grow at a healthy pace.

Mahindra & Mahindra, Sonalika International Tractors Ltd (Sonalika ITL) and Escorts have reported more than 20 per cent growth in March sales, indicating a recovery in tractor volumes after the currency ban.

With 29 per cent increase in March sales, top tractor brand Mahindra has ended the year with a total domestic volumes of 2.48 lakh units against 2.02 lakh units, registering an increase of 23 per cent.

Sonalika International Tractors Ltd has recorded about 20 per cent growth in its sales at 81,531 units in 2016-17. Its March sales were up 26 per cent at 6,029 units.

Escorts recorded 32 per cent growth in March tractor sales at 7,014 units, while its total domestic volumes for the full fiscal 2016-17 grew by 24 per cent at 62,699 units.

Normal monsoon has been a big driver of growth. It fuelled good production and boosted farmers’ income, which eventually aided the growth in tractor demand.

All key states such as Maharashtra, Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh and Uttar Pradesh showed positive signs of growth.

“A healthy monsoon precipitation in fiscal 2016-17 led to an improvement in farm sentiments in the western and central regions, which had been severely hit on account of weak farm sentiments caused by the debilitating demand drivers during FY2014-2016,” pointed out Subrata Ray, Group Vice-President – Corporate Ratings, Icra Ltd.

“Although the northern region continues to constitute a majority of the domestic volumes, its contribution has declined from 39.9 per cent in FY2015 to 33.6 per cent in FY2017 (April-December period). On the other side, strong growth seen in the southern region has helped increase its contribution increase to 20.1 per cent,” he added.

Domestic tractor sales fell 13 per cent (at 5.5 lakh units) in FY-15 and 11 per cent (at 4.93 lakh units) in 2015-16 due to deficient rainfall, which impacted the agriculture output.

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