Tractor Sales in India Likely to Grow 4–7% in FY26: ICRA

19-June-2025: Tractor sales in India are expected to witness moderate growth of 4–7% in 2025–26, supported by a favourable monsoon forecast that is likely to boost agricultural production, ratings agency ICRA said on Wednesday.

The agency also noted that pre-buying ahead of the implementation of TREM V emission norms, scheduled to take effect from April 1, 2026, could further help improve tractor volumes during the year.

Monsoon and Crop Output to Drive Demand

ICRA noted that tractor industry wholesale volumes grew by 7% in FY2025, aided by steady demand and adequate rainfall across major farming regions. For FY2026, the forecasted 4–7% growth will be supported by good rainfall and strong crop output, leading to improved farm sentiment.

As per the IMD, rainfall during the current monsoon is expected to be 105% of the long-period average (LPA). ICRA stated that a favourable monsoon and strong agricultural production will help support tractor industry volumes in the upcoming financial year.

According to the third advance estimates released in May 2025, kharif crop output increased by 7.9% year-over-year (YoY), indicating improved foodgrain production and higher farm income. Similarly, rabi crop sowing also recorded a 1.5% YoY increase, suggesting positive rural activity and continued investment in farm machinery like tractors.

Early Monsoon and Sentiment Boost Sales

ICRA said tractor wholesale volumes rose by 9.1% YoY in May 2025, while retail volumes increased by 2.8% YoY during the same period. The rise was supported by early arrival of the monsoon and the timely onset of kharif sowing, which boosted demand for tractors in rural areas.

Strong farm sentiment is playing a key role in sustaining tractor demand, especially as farmers gear up for a productive kharif season. However, ICRA cautioned that commodity costs could rise in FY26 due to a 12% tariff on select steel imports, imposed from April 2025.

Domestic steel demand is also rising, which may add cost pressure to tractor manufacturers during the upcoming financial year. Despite this, ICRA expects tractor manufacturers’ credit profiles to remain stable, supported by growing volumes, low debt, and healthy cash reserves.

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