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In June 2020, tractor sales within India jumped 22.5% to 92,888 units. In June 2019, 75,858 tractors were sold. Does this imply a revival in the rural economy as is being touted? Will the rural economy drive up the Indian economy in the months to come? Mint takes a look.

What does a rise or fall in tractor sales signify?

A jump in tractor sales essentially indicates that big farmers are doing well. Buying a tractor with an engine power of more than 30 horsepower costs 5 lakh or more, which is a lot of money for an average Indian farmer. As many as 99.9 million or nearly two-thirds of Indian farms, technically referred to as operational holdings, are marginal, meaning that they are less than one hectare (around 2.47 acres). The average size of a marginal farm is just 0.38 hectares, which is less than an acre. Hence, it is extremely difficult for an average marginal farmer to be able to buy a tractor worth lakhs.

Does a jump in tractor sales signal revival?

If we just compare June 2020 sales with June 2019 sales, it hints at a revival in the rural economy. However, what we need to take into account is that the period between April and June is the traditional season for tractor sales. The sales between April and June 2020 have fallen 13.7% to 1,65,156 units in comparison to last year. This is the lowest in four years. Hence, high sales in June might be nothing more than pent up demand, given the lockdown in April and May. Only if tractor sales numbers remain robust between July and September can we suggest a marginal revival in the rural economy.

Peak time
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Peak time

What else can we conclude from rising tractor sales?

Following the coronavirus-induced lockdown and disruption, tractor sales have not reduced as much as sales of other vehicles like two-wheelers and cars. This is mostly because the agriculture sector has not been as badly hit by the pandemic as the other sectors. Additionally, a good rabi crop harvest and a promising monsoon season helped drive the sales of tractors.

Can agriculture rescue the economy this year?

Agriculture is the only sector that is expected to grow this year. That is good news. However, it is important to note that the size of the sector, which includes forestry, and fishing as well, stood at just 13.4% of the overall economy in 2019-20. This is too small to rescue  the  whole  economy. Also, the size of agriculture as a proportion of the economy has been shrinking over the years. As Arvind Panagariya writes in India Unlimited, in 2017-18, “the share of agriculture in the total rural workforce was 59.4%."

What is the point being made here?

As Panagariya, the first vice-chairman of NITI Aayog, puts it: “A significant part of improving the lives of today’s farmers lies in helping a large proportion of them to exit to more productive jobs in industry and services." Hence, while improving farm incomes is important and a growing agriculture sector helps further that aim, a few percentage points growth in the sector does not take away the problem of it employing too many people than is feasible.

Vivek Kaul is the author of Bad Money.

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