People travelling in a tractor in rural India
People travelling in a tractor in rural IndiaReuters

The Indian tractor industry is estimated to see a small pickup in volume sales in the current financial year, owing to receding cyclical concerns and a rebound in demand in the non-farm segment, according to a report by credit rating agency ICRA.

In view of the Indian Meteorological Department (IMD's) revised forecast for the 2015 monsoon and the actual rainfall and monsoon precipitation so far (till June third week), ICRA expects tractor industry volume (domestic and exports) to grow by 2 to 4 percent. 

"Government of India (GOI)'s efforts towards rural development and agri-mechanisation; besides other factors like scarcity of farm labour, healthy credit availability, moderate penetration and shortening replacement cycle continue to encourage demand for tractors," ICRA said.

Domestic tractor sales volume declined 13 percent in 2014-15 for various reasons that included delayed and deficient rainfall, decline in kharif output, softening commodity prices, modest increase in MSPs of major crops, altered rabi sowing pattern and farm losses due to crop damages arising out of unseasonal rainfall and hail storms in many rabi crop growing states, it said.

Further, non-agricultural demand pull also remained subdued with slow pick-up in pace of infrastructure and construction activity, it added.

In 2014-15, central India was the worst hit, with Madhya Pradesh registering a decline of 25 percent (YoY) owing to a high base (27 percent CAGR growth between 2009-10 and 2013-14) and negative sentiments prevailing due to low demand, primarily due to crop failures and damages.