Tractor Industry Expected to Grow 4-7% in FY2026 - ICRA

India's tractor industry is expected to continue its growth momentum in FY2026, with volumes projected to rise by 4–7%, according to the latest assessment released by ICRA on Monday. The growth outlook is supported by favourable monsoon conditions, improved farm sentiments, and steady rural demand.

Industry Shows Recovery After FY2025 Decline

The forecast comes after a mixed performance in FY2025, when the industry saw a 1% decline in overall sales. However, recent months have shown signs of strong recovery.

In July 2025, wholesale tractor volumes grew by 8% year-on-year, while retail volumes increased by 11% year-on-year. Similarly, in May 2025, India's domestic tractor market rose 9.12% year-on-year, supported by the early arrival of monsoon and strong rural demand.

Key Growth Drivers

ICRA's projection builds on the India Meteorological Department's forecast of above-normal rainfall at 106% of the long-period average during the ongoing monsoon season. This rainfall is expected to support kharif sowing and overall farm activities, boosting tractor demand further.

The government's support is also driving rural demand. The Minimum Support Price (MSP) for 14 kharif crops has been raised by 1.4–12.5%, which is likely to add INR 35,000 crore to farm incomes in 2025. This is expected to increase demand for tractors, especially in grain-producing states like Punjab and Haryana.

Agricultural output data also reflects positive trends. The Ministry of Agriculture and Farmers Welfare's third Advance Estimates for AY2024-25 show foodgrain production increased 7.9% in kharif crops and 4.5% in rabi crops compared to last year.

Market Size and Competition

The tractor market is projected to reach USD 8.4 billion in 2025 and grow at a 6–7% compound annual growth rate over the medium term.

Mahindra & Mahindra continues to dominate the industry, selling about 389,000 units in FY2023. Other key players include Sonalika, Swaraj, Escorts, and John Deere, with competition remaining intense.

In terms of market segments, the 31–50 HP tractor range accounts for 46% of market share, serving mostly small and marginal farmers with land sizes of 1–3 hectares.

Additional demand could come from pre-buying ahead of TREM V emission norms, which are expected to be implemented from April 1, 2026. The industry is also witnessing higher adoption of precision farming technologies. These include GPS-based systems and variable rate technology. Such innovations are helping farmers improve efficiency.

Strong Financial Performance Expected

ICRA expects tractor manufacturers to maintain strong financial positions. Rising sales volumes, stable raw material prices, and better operating leverage are likely to keep profit margins healthy. Low debt levels, adequate cash reserves, and strong balance sheets among original equipment manufacturers support the industry.

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