Steep Fall In Tractor Sales After Demonetisation

Tractor sales, which are often seen a barometer of rural economic conditions, fell more than 50 per cent after the November 8 demonetisation announcement. As per data released by he Tractor Manufacturers Association (TMA), total industry sales (domestic and exports) in the month of December stood at 36,897 units compared with 100,261 units in October 2016.

In the month of November, when the decision to ban 86 per cent of the currency value in circulation was announced, sales nose-dived more than 50 per cent at 47,208 units when compared to the October 2016 sales.

However, on a year-on-year basis, sales for the month of December 2016 increased to 36,897 units from 35,584 units in the corresponding month in 2015 on the back of a favourable monsoon season and improved credit system in rural India.

Abdul Majeed, partner at consultancy firm PwC, said, "There has been a significant impact on rural sales after demonetisation as most of the purchase takes place in cash and with the withdrawal of a large chunk of money, sales have been postponed."

He said the northeast region and rural pockets are hit the hardest by demonetisation and it will take one to two quarters for things to normalise.

Banks in rural India have faced hardships to conduct the massive exercise of receiving old notes in deposits and exchanging currency. Their loan operations were also severely hit.

However, the government says the cash crunch will be over soon and positive announcements for the rural sector will be made in the upcoming Union Budget.

The country's largest tractor maker Mahindra & Mahindra Ltd's Farm Equipment Sector (FES) sold 14,047 units in December 2016 as against 12,868 units for the same period last year.

Rajesh Jejurikar, President and Chief Executive - Farm Equipment and Two-Wheeler Division, Mahindra & Mahindra Ltd, said, "With good progress in Rabi sowing and increased minimum supporting price (MSPs), we expect to see the growth momentum to continue in the coming months."

Tractor maker Sonalika ITL also reported a 20.3 per cent growth in total sales at 5,169 units in December 2016. The company had sold a total of 4,297 units in the same month of 2015.

"The brand initiatives, strategies and after-sale services have earned Sonalika ITL a well-deserved success in the winter month sales," Sonalika ITL Executive Director Raman Mittal said in a statement.

Farm equipment maker Escorts also reported 15.8 per cent increase in tractor sales at 3,187 units in December 2016.