Domestic tractor wholesale volumes are expected to record modest growth this fiscal year at 1-4 per cent, according to ratings agency ICRA. As reported by ANI, this represents a significant slowdown from the 23.5 per cent rise recorded in FY26. The agency attributes this moderation to a high base effect and the IMD's forecast of a below-normal monsoon, which is expected to have adverse implications on agricultural output and consequently tractor sales. Following a robust rise of 23.5% YoY in FY2026, wholesale volume growth is likely to soften to 1-4% in FY2027 owing to a high base effect and the IMD's forecast of a below-normal monsoon.
Despite the expected slowdown, tractor demand remained robust in May with wholesale volumes rising sharply by 19.3 per cent year-on-year, while retail volumes increased by 13.6 per cent YoY, according to ICRA. As reported by ANI, wholesale volumes reported strong growth of 19.3% YoY in May 2026, driven by a low base effect and improved affordability following the GST reduction on tractors. The strong performance was supported by farm incomes and lower ownership costs, with tractor demand remaining healthy during the month. However, volume growth is expected to slow down as the government has deferred and staggered the implementation for revised emission norms for the key 30-50 horsepower segment to April 2028 from April 2026.
The IMD's first-stage Long Range Forecast for the 2026 southwest monsoon reflects below-normal rainfall at 90 per cent +/- 4 per cent of the Long Period Average (LPA), driven by likely development of El Nino conditions during monsoon, according to ICRA. As reported by ANI, a deficient precipitation is likely to have adverse implications on agricultural output and, consequently, tractor sales. Recent developments show that kharif sowing as of June 12 stood at 8.5 million hectares, down 3.9 per cent from 8.8 million hectares during the corresponding period last year, with the sharpest decline seen in pulses where acreage contracted 43.2 per cent year-on-year. The monsoon is off to a slow start at 35% below normal, with Central India recording 61% below LPA and East India at 43% below LPA, while Northwest and South regions showed better performance. However, the report noted that both kharif and rabi foodgrain output for AY2025-26 increased by 3 per cent year-on-year, supported by healthy rainfall in calendar year 2025.
Despite the growth moderation, ICRA expects the margins of tractor manufacturers to remain healthy, aided by operating leverage and stable raw material costs, as reported by ANI. The agency stated that credit profiles of manufacturers are expected to remain comfortable, supported by healthy profitability, low leverage, and adequate liquidity. This financial stability is expected to provide some cushion against the anticipated volume growth challenges in the coming fiscal year. The report also noted that growth is expected to normalise after pre-buying seen ahead of the implementation of revised emission norms, which have now been deferred for the key 30-50 horsepower segment until April 2028.
