The tractor industry’s volume growth is expected to slow to 1-4 per cent in FY27 from 23.5 per cent in the previous fiscal, according to ICRA, due to a high base and the prospect of a below-normal monsoon | Photo Credit: V RAJU

The tractor industry’s volume growth is likely to moderate to 1-4 per cent in the current fiscal due to a high base effect and a forecast of a below-normal monsoon, after growing at 23.5 per cent year-on-year in FY26, ratings agency ICRA said.

The Indian Meteorological Department’s first-stage long-range forecast (LRF) for the 2026 Southwest Monsoon projects below-normal rainfall due to the expected El Nino conditions, the agency said.

Recent IMD rainfall data (from June 2026) also points to precipitation deficits across parts of central, southern and coastal India, it said, adding that prolonged rainfall shortfalls could adversely affect kharif crop production and farm incomes, thereby posing downside risks to tractor demand and sales.

Tractor industry’s wholesale volumes for the previous month rose by 11.9 per cent year-on-year, while retail increased by 25.3 per cent in June 2026, aided by a low base effect, steady farm cash flows and improved affordability after the GST rate cut (last September), according to ICRA.

However, it said, volume growth is expected to moderate over the remainder of FY27 owing to the high base of FY26, lower kharif acreage, and weak monsoon outlook, which could adversely affect farm incomes and replacement demand.

As per the second advance estimates released by the Ministry of Agriculture and Farmers Welfare in March this year, both kharif and rabi foodgrain output for the Assessment Year 2025-26 increased by 3 per cent year-on-year, supported by healthy rainfall in 2025.

While MSP support and government subsidies continue to underpin farm cash flows and tractor volumes, the risk of lower kharif acreage and below-normal monsoon could weigh on industry growth with likely moderation to 1-4 per cent in FY27, given an elevated base, the agency noted.

At the same time, the margins of the tractor OEMs (original equipment manufacturers) are likely to remain healthy, supported by operating leverage and stable raw material costs, the ratings agency said, adding credit profiles of the manufacturers are expected to remain comfortable, supported by healthy profitability, low leverage and adequate liquidity.

Published on July 21, 2026