Tractor sales are soaring as the effect of demonetisation wears off and near normal monsoon points to signs of a revival in rural demand and perhaps another year of strong farm sector growth. After a gap of four years, tractor sales seem to be on course to break the record of 6.27 lakh units set in 2013-14. Drought in 2014 and 2015 had scarred the industry, which staged a mild recovery after last year's good monsoon. "This year, we are expecting growth of 11-13%, and sales of 6.45 lakh units," said Binaifer Jehani, director at the research firm Crisil Research.
Sales have been strong since January even though the country was facing a demonetisation-induced cash crunch at that time. August broke the all-time record for the month with a 34.4% increase and September followed it with 50.2% growth to cross the 1-lakh monthly sales mark. Mahindra & Mahindra, India's largest tractor maker, alone sold 44,000 units in September — its highest ever in the month.International Tractors (ITL), makers of Sonalika Tractors, sold 50,002 units during April-September — its best first-half sales ever.
Experts say demand from the farm sector has been strong because of plentiful rain and an early start to the festive season. While surplus rains till July benefited Kharif sowing, a near-normal monsoon promises good yields. Economists expect the farm sector to grow around 3% after last year's 4.9% expansion.
"There are some very strong reasons behind the surge this year, and these include a good monsoon, healthy crop prices, abundant availability of finance and support from the government. Sowing has been good, and crop prices have been holding up," said Shenu Agarwal, chief sales and marketing officer, Escorts.
Others in the industry agreed and sounded upbeat about the solid sales sustaining in the months ahead. "The effects of demonetisation are behind us, and there is positivity and a positive sentiment," said Rajesh Jejurikar, president of farm equipment sector at Mahindra & Mahindra, adding, "Rains have been more or less normal, except for some deficiency in states such as Karnataka, Andhra Pradesh, and parts of Madhya Pradesh and UP. However, this seems to have been covered now."
While Raman Mittal, executive director at Sonalika Tractors, said he expects the tractor industry to grow 15-18% this year, economist Ashok Gulati, Infosys chair professor for agriculture at the economic think tank Icrier, was cautious, "You are getting back on the trend line. This is a recovery from the drought years. This is a positive news, but you cannot jump on it."