Anticipating a rise in demand, tractor sales witnessed a marginal increase in the month of February 2017. As per the latest data released by Tractor Manufacturers Association (TMA), tractor sales increased by 6.87 per cent in February, 2017 at 40,937 units (including exports) compared to 38,304 units in the corresponding month last fiscal.
Total exports in the month stood at 6,445 units as against 6,208 units in the same month last year.
However, total sales were lower in February when compared with January sales. In January, total sales stood at 42,019 units (including exports). But the overall production rose significantly last month at 53,381 units, citing a jump in demand in near future.
Mahindra & Mahindra President and Chief Executive, Farm Equipment and Two Wheeler Division, Rajesh Jejurikar, while announcing February sales number, said, "We expect that record crop production in the last rabi season and increased Union budget allocations to rural and agri sector will drive positive momentum in coming months."
Market leader Mahindra and Mahindra had earlier reported a 10.55 per cent increase in its total tractor sales at 15,007 units in February this year. The company had sold 13,574 units in the same month last year.
Budget Impact
In the 2017-18 union budget, the government increased budget allocation for agriculture and farmer welfare by 15.31 per cent, meaning an increase in purchasing power of rural India which could potentially increase demand of tractors. Finance Minister Arun Jaitley had announced an allocation of Rs 51,026 crore for the year 2017-18 from Rs 45,250 crore in the last budget. The total allocation in Union Budget for rural, agricultural and allied sectors for 2017-18 is Rs 187223 crore, which is 24 per cent higher than last year's budget.
Government’s other initiative like implementation of minimum support pricing (MSP) has helped farmers to get better price for their produce despite the low prices in the market. This has added in increasing the sales of tractors.
8-10% Growth In 2016-17As per a report by rating agency Crisil, sales of tractors are likely to witness growth of 8 to 10 per cent in the upcoming fiscal year 2017-18 (FY18).
"We see tractor volumes picking up in coming quarters, though, for lack of a low base as was the case this year, fiscal 2018 could close with a relatively sober growth of 8-10 per cent," cited Crisil Research.
The report added that domestic tractor manufacturers are projected to record 16 to 18 per cent growth in sales of tractors for the fiscal year 2016-17 (FY17) on account of revival of sales due to good monsoon which offset the impact of demonetisation on demand in the second half of the fiscal.
On the impact of demonetisation on the cash centric tractor market, Crisil said, "The transactions in the rural areas, which accounts for the bulk of tractor sales in India, are largely cash-based and with the demonetisation move the country's tractor sales recorded a decline of 13 per cent during the November month last year."
The ratings agency expects the impact of demonetisation to be short-term and the tractor sales are predicted to recover by the first quarter (Q1) of 2017-18.
"The growth of tractors is expected to remain in single digits even for February and March, as farmers cope with the note ban, and gradually shift to using cheques and online transfers (NEFT, RTGS) for making purchases," Crisil said in the report.
BW Reporters
The author is Senior Correspondent with BW Businessworld
