Thanks to a good monsoon, the tractor sector, which has seen a recovery in demand after two consecutive years of sluggishness, is optimistic of achieving higher-than-expected growth this fiscal.

Tractor firms and industry analysts are projecting a strong double-digit growth in sales, against the low double-digit they had projected in the beginning of this fiscal.

Tractor sales have grown steadily this fiscal, aided by better-than-expected Rabi production and improved foodgrain prices.

In Q1, tractor volumes grew about 15 per cent to 1.64 lakh units against the year-ago period. This was also significantly higher than the 1.05 lakh units registered in the March quarter.

In FY15 and FY16, volumes had fallen 13.1 per cent (at 5.51 lakh units) and 10.5 per cent (at 4.93 lakh units) respectively on the back of erratic monsoon and lower crop prices.

“With prospects of normal monsoon for the season and its positive impact on production, farmers’ income will get a boost and that will eventually lead to increased demand,” Rajesh Jejurikar, President & Chief Executive – Farm Equipment, Mahindra & Mahindra, told BusinessLine.

“Given the healthy monsoon and rural demand for tractors, we can say the industry outlook for FY17 can be at 15 per cent rather than the 10 per cent we had communicated during the start of this fiscal,” he added. M&M, which has a 44 per cent market share, saw its domestic tractor sales grow 20 per cent at 88,101 units during April-July 2016 when compared with the year ago period.

Escorts’ tractor volumes increased 13 per cent at 20,143 units. “Tractor industry growth for 2016-17 is expected to increase 12-15 per cent and we are also likely to grow in line with the industry,” said Bharat Madan, Group Chief Financial Controller, Escorts.

South leads

According to rating agency Icra, the South is leading the growth, while the North is facing challenges.

“After being the best performing region during FY15 and FY16, the southern region has continued its robust growth trend in the current fiscal, led by continued strong demand in States like Andhra Pradesh and Tamil Nadu, on account of improved monsoon as well as winter rainfall (select districts) and government support programmes,” it added.

However, Jejurikar said States such as Maharashtra, Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh and Uttar Pradesh have started showing signs of growth. “Going forward, the month-on-month trend will only help understand which States will take the leap,” he added.

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