ICRA has significantly upgraded its growth forecast for the domestic tractor industry, projecting wholesale volumes to expand by 15–17 per cent during the current financial year, compared with its earlier estimate of 8–10 per cent. The upward revision reflects the sector’s strong performance in recent months, supported by favourable policy measures, healthy agricultural conditions and improving rural sentiment.
According to the ratings agency, the industry recorded a sharp acceleration in sales momentum, with wholesale tractor volumes registering a robust year-on-year growth of 30.1 per cent in November. This strength is also evident in the cumulative numbers, with wholesale volumes rising 19.2 per cent during the April–November period of the current fiscal, prompting ICRA to reassess its earlier assumptions.
ICRA attributed the improved outlook to a combination of economic, regulatory and sector-specific factors that have reinforced demand fundamentals. A key driver has been the reduction in the Goods and Services Tax (GST) rate on tractors to 5 per cent, which has directly improved affordability for farmers across regions. The lower tax incidence has resulted in a meaningful decline in tractor prices, translating into savings of around Rs 40,000 to Rs 1 lakh, depending on the horsepower segment. This price correction has made new tractor purchases more accessible, particularly for small and medium farmers.
In addition to policy support, favourable monsoon conditions have played a crucial role in strengthening rural demand. Adequate rainfall across major agricultural regions has supported timely sowing, improved crop yield expectations and boosted farm cash flows. These factors have contributed to higher farmer confidence and a more positive outlook for discretionary spending in rural areas, including investments in farm mechanisation.
The ratings agency also highlighted that regulatory developments could influence demand trends in the coming quarters. With the implementation of stricter tractor emission norms scheduled from April 1 next year, ICRA expects a phase of pre-buying activity. Farmers and dealers are likely to advance purchases to acquire tractors under the existing emission standards, which are more familiar and potentially lower-cost, thereby providing an additional boost to wholesale volumes before the transition.
Overall, the revised forecast signals a phase of strong recovery and expansion for the tractor industry, driven by a supportive policy environment, favourable agricultural outcomes and near-term market dynamics linked to upcoming regulatory changes, ICRA said.