Budget proposals can put tractor, two-wheeler segments in the fast lane

New Delhi: Tractors and two-wheelers could witness demand traction thanks to improved sentiment following rural and farmer oriented measures announced in the interim budget, according to industry experts.

The outlook for the two segments is positive considering the enhanced allocation towards various farmer welfare and rural development schemes, they said.

According to ICRA Vice President & Sector Head- Corporate Ratings Anupama Arora, the impact of the interim Budget 2019-20 is positive for both tractor and two-wheeler segments.

"The government's continued thrust on promoting rural development and farmers welfare in the budget remains a positive for the farm sector," she said.

The announcement of assured income support for small and marginal farmers is likely to aid in timely procurement of key crop inputs and the supplementary income under the ‘Pradhan Mantri Kisan Samman Nidhi’ scheme on top of the various farmer friendly schemes implemented by various state governments augurs well for farm sentiments, she added.

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Expressing similar views, Mahindra & Mahindra Managing Director Pawan Goenka said, "For us what it does is that the overall sentiment in the villages will improve and these kind of things will have a very positive psychological impact. Therefore, right now when the farm sentiments are somewhat subdued, this clearly will create cheer and that would help."

He, however, added that direct income support of ₹6,000 a year to farmers with cultivable land holding of up to two hectares would not directly affect the sales of agri equipment, "very simply because these are not the farmers who buy tractors or equipment since their farms are too small to justify that".

Agreeing with him, Sonalika Group Executive Director Raman Mittal said there will not be an immediate effect on the tractor demand but the Budget announcements will definitely start a new chapter for direct fund transfer to farmers.

"We feel this is a first revolutionary step in new direction of direct cash transfer to farmer, definitely once the process is in place the ₹6,000 amount should be increased looking at real challenges faced by our farmers,” he added.

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KPMG India Head, Industrial Manufacturing and Automotive Vinodkumar Ramachandran said, "With focus on rural India, this year’s budget will help boost the demand for tractors, farm equipment and light commercial vehicles."

For the two-wheeler segment, Honda Motorcycle and Scooter India Pvt Ltd Senior Vice President - Sales and Marketing, Yadvinder Singh Guleria said in the short term, more disposable income in the hands of 3 crore households for whom two-wheeler is a basic transport need is good news for the industry.

"We are cautiously optimistic that the resultant positive customer sentiments can offset the industry slowdown caused by the insurance premium hike earlier this year and bring back the industry momentum to earlier estimate of higher single digits," he added.

Rural markets account for a large proportion of motorcycles sales, specially for the entry level commuter segment bikes.

Ramachandran said government's allocation of ₹19,000 crore for development of rural roads, will bring a positive boost in construction equipment industry, thereby leading to a demand in the two-wheeler and small car market.

Airing similar views, Arora said the direct income support for small and marginal farmers, coupled with initiatives towards higher allocation for crop insurance, rural infrastructure, MGNREGA, higher interest subventions besides various State specific schemes announced in recent past augur well for farm sentiments.

"Moreover, the tax exemption to small tax payers as well as increased standard deduction results in higher disposable income available supports demand for two-wheelers," she added.