CRISIL expects a decline in Tractor sales this fiscal

Mumbai, PTI: Tractor sales are expected to be slightly lower in 2020-21 as compared to the previous year level due to a well-distributed normal monsoon, rating agency CRISIL said on Monday. Around 7 lakh tractors were sold in the domestic market in 2019-20.

The Indian Meteorological Department (IMD) has forecast the south-west monsoon to be at 102 per cent of the long period average (LPA) in 2020 with rains expected to be well-distributed at 96-107 per cent of the LPA in all the four regions, as per CRISIL.

"Despite a 37 per cent year-on-year decline in April and May combined, tractor volume will likely be barely 1 per cent below last fiscal's level, in sharp contrast to a double-digit decline expected for the rest of the automobile industry," CRISIL said in a note.

Domestic tractor sales stood at 7,09,002 units in 2019-20 and CRISIL expects a decline of about 1 per cent over this base financial year, the ratings agency said.

According to the note, a favourable distribution of rains can even offset the adverse impact of a below-normal monsoon, such as in fiscal 2019 when domestic tractor sales volume grew a strong 8 per cent on a high base and despite monsoon being 9 per cent below the LPA.

In 2019-20, on the other hand, poor month-wise distribution and large state-wise variation in rains, despite an above-average monsoon season overall, contributed partly to a 10 per cent decline in tractor sales volume, it stated.

"Apart from overall adequacy, monsoon needs to be spatially well-distributed - by geography and timeliness (June-September) - to propel farm incomes and stoke demand for tractors. IMD's forecast is very encouraging for tractor volumes this fiscal," said Manish Gupta, Senior Director at CRISIL Ratings.

The monsoon's approach so far has been timely with rains 21 per cent above normal in June to date, the ratings agency said. The forecast for July and August, which are crucial months for kharif crops, is also encouraging at 103 per cent and 97 per cent, respectively, over LPA.

Additionally, agriculture will be supported by high reservoir levels, seen at a massive 94 per cent higher than last year's and 71 per cent above the average of the past decade.

Also, the recent hike in minimum support prices for major crops by 3-8 per cent this kharif season also augurs well for rural incomes - more so as this follows a bumper rabi crop, CRISIL said.


AN Bureau