ICRA Forecasts Slump in Indian Tractor Market By 7-8% for FY 2016

There have been weak market sentiments prevailing in the country and this has brought down enquiries for tractors, thereby lowering volumes alarmingly.

According to premier ratings agency ICRA Limited, domestic tractor volumes should be going down by approximately 7-8% for the fiscal year 2016. This can be attributed to sluggish levels of demand going by the current economic conditions and of course, the weak monsoon. This will be the second straight slump year for the domestic tractor industry. FY 2015 saw a 13% decline and the situation should not be improving too much in the near future.

Late rainfall along with other contingency measures could definitely counter rainfall deficiencies in several districts but short term demand for tractors will continue to remain really weak. Farm sentiments have been additionally hit by problematic cash flows due to lower harvests of Rabi and the weak monsoon for the second year in succession. MSPs of various crops have not gone up as expected and infrastructural development is not at all in tune with requirements. ICRA spoke of how weak sentiments would hamper the market and hence the prediction.

According to the market leader, Mahindra & Mahindra, this season has witnessed the worst rainfall volumes in 30 years and hence the huge decline in sales figures. 5-6% growth had been projected by Mahindra & Mahindra earlier but this has been revised rapidly to negative 5-6% post the impact of the monsoon. Rain deficit being 14% has severely weakened the industry according to the company. Overall production volumes have gone down in tandem with enquiries. However, demand has been better in global markets like Algeria, United States of America and Turkey. However, exports still remain a very small part of the business done by manufacturers.

However, ICRA does forecast future growth of 8-9% for the tractor industry in the long term which should be consolation for manufacturers of these vehicles.


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