| Seeds of a surge
New Delhi, Nov. 2: The removal of agricultural quotas under the World Trade Organisation (WTO) will spur sliding tractor sales as farm export will boost agricultural incomes, says a study by Icra.
“In the medium term, a rise in the farm export will raise the ability of farmers to purchase tractors.” said Icra, a leading rating firm which has a tie up with the US-based Moody’s.
Demand for tractors has headed south since the past four years due to lower crop output.
Sales had slumped 25.3 per cent in the last financial year due to a severe drought which had depleted crop output. Sales for the first quarter of the current financial year, also declined by 18 per cent to 36,927 units.
“The recessionary conditions prevailing in the agricultural sector affected tractor demand, while a poor monsoon in financial 2002-03 hastened sales decline,” said the report.
The farm sector, which accounts for a quarter of GDP, remains a key growth driver as close to 70 per cent of the country’s billion-plus population is agriculture-income dependent.
“With the removal of quotas, Indian agriculture would have a major opportunity to export many commodities in which it has a comparative advantage,” the report said.
“Sales would jump next fiscal due to the bumper crop output witnessed this year as a result of good monsoon,” a spokesman for Escorts said.
“We have been able to clear our inventories this year and so our production level is as per market demand,” he said.
Among the major domestic firms are Mahindra & Mahindra, Escorts, Eicher Motors, while New Holland, L&T John Deere are MNCs.
During the first quarter, the tractor maker has reported a 69.5 per cent rise in sales. However, last financial, it had reported a 29 per cent slump in net sales which led to operational losses.
In the long-term, a sustained increase in tractor demand would hinge on the ability of the players to develop new models, meeting specific customer requirements, manufacturing strategy and a wide dealer network. The report said the popularity of multiple cropping would require acceleration of the farming process, which would improve tractor sales.