India’s tractor sales, a crucial measure of the state of the rural economy, have decreased by 4% in the first nine months of the current fiscal year. Significant losses were observed in states such as Maharashtra, Karnataka, and Telangana, which were attributed to unpredictable weather and decreased agricultural output. Tractor sales in Uttar Pradesh increased by 6%, although this was insufficient to overcome the decreases in other states.
In the first nine months of the fiscal year, there has been a sharp fall in tractor sales in India, a proxy for the status of the rural economy. This has resulted in a 4% reduction in overall sales in the largest market for the equipment worldwide. These states are located in the west and south. This comes after FY23’s record increase.
Tractor sales decreased by 33% in Maharashtra, 21% in Karnataka, and 36% in Telangana. In these states, this decline is the steepest to date. The average was further lowered by a 4% decrease in Madhya Pradesh, the second-largest market in terms of volume after Uttar Pradesh. Nonetheless, the 6% rise in tractor sales in Uttar Pradesh supported the overall figures.
Plans to buy tractors have been postponed or abandoned due to unpredictability in the weather, an uneven monsoon brought on by El Nino, and insufficient rain. Decreased reserve levels affected sentiment as well. In the Central Water Commission’s assessment of 150 major reservoirs, they are 5% below the decadal average and down 18% from the previous year.
About three-fourths of tractor demand comes from agriculture, driven mostly by farmer sentiment shaped by the monsoon and rural income. The commercial industries that make up the remaining demand include mining and infrastructure.
State Incentives:
According to data from the Tractor Manufacturers Association, the decline in seven states that account for more than 40% of the overall volume could not be made up for by the gain in Uttar Pradesh, the nation’s largest tractor market by volume. Maharashtra, Karnataka, Telangana, Kerala, Bihar, Tamil Nadu, and Andhra Pradesh are the seven states.
The country’s biggest tractor manufacturer, Mahindra & Mahindra, alleged that Hemant Sikka, president of the farm equipment division, was responsible for the slowdown. He anticipates a return in the upcoming season.
According to Sikka, “good Rabi crop output is expected with prevailing cold conditions helping the key crop of wheat.” “The rural economy is expected to be boosted by the government’s announcement of a good estimate for horticulture production, with continued government support. This will aid in positive sentiments and support tractor demand in the coming months.” Mahindra anticipates that within the coming months, his inventory will decrease from its current slightly higher level.
The demand aggregator website Tractor Junction, which offers both new and used tractors, has experienced a decrease in monthly traffic, which is indicative of general slowness.
On average, 5 million people visit our platform each month. According to Rajat Gupta, the founder of Tractor Junction, this has decreased by (500,000) in the last few months. He anticipates that the tractor market will pick back up steam after the new crop cycle begins and a government is established following the anticipated April–May general election.
Tractor dealers claimed that the elimination of some incentives in some states reduced purchasing power in addition to the previously mentioned causes that decreased demand. For example, farmers in Maharashtra received a subsidy of `1.25 lakh up till March of last year, which covered the down payment for tractor purchases.
The company’s Massey Ferguson tractor dealer, TAFE, situated in Yavatmal, Maharashtra, stated, “They haven’t been getting it for the past six to seven months.” Moreover, he claimed that a decline in the cost of soy and cotton has reduced purchasing power.
According to a multi-brand tractor dealer in Ibrahimpatnam, Telangana, the termination of the Dalit Bandhu Scheme, which provided a `10 lakh grant to eligible individuals, has also negatively impacted tractor sales.
Tractor sales for the entire year, which concludes in March, are predicted to decrease by 4-5% annually. This will follow a record volume of 945,000 units in FY23, up 12% year over year after just recovering from a 6% decline in FY22. Crisil Ratings stated in a release on Thursday that tractor sales have grown at a compound annual growth rate (CAGR) of 10% over the previous ten years, outpacing the long-term average growth rate of 6%. This is because the 2021-23 fiscal years have seen consecutive years of normal monsoon, increasing rural income.
It predicted that domestic tractor volume would rebound to record modest growth of 3-5% in FY25, propelled by increased farm incomes, strong replacement demand, and the prospect of a regular monsoon improving rural sentiment.