Normal monsoon, farm loan waivers to rain good times for tractors
- A normal monsoon this year may fuel demand for FY20 by at least 6-8%, translating into 12-14% CAGR between FY17 and FY20
- Historically, a growth cycle that lasts 3-4 years is a result of good monsoon, alongside measures such as farm loan waivers
Rural distress notwithstanding, tractor sales are set for double-digit growth for the third straight year. After recording growth of 19% and 22% in FY17 and FY18, respectively, tractor sales are expected to grow by 10-12% in FY19, according to Crisil Research.
A normal monsoon this year may fuel demand for FY20 by at least 6-8%, said the research firm. All of this translates into 12-14% compound annual growth rate (CAGR) between FY17 and FY20. Of course, on the back of strong growth in the past three years, it isn’t surprising that growth is expected to come off a bit.
Historically, a growth cycle that lasts 3-4 years is a result of good monsoon, alongside measures such as farm loan waivers. This time, too, farm loans have been waived off across seven states, including Uttar Pradesh, Punjab, Maharashtra, Karnataka, Rajasthan, Madhya Pradesh and Chhattisgarh. Besides, “higher tractor financing, better farm profitability for major kharif crops, scarcity of farm labour and use of tractors in construction are driving demand”, added Crisil.
With a good monsoon expected to aid sentiments, replacement demand can get triggered. Analysts say that the 41-50 horsepower segment, which accounts for half the tractor market, will lead demand expansion.
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