Business

‘Tractor sales growth may ease to 3-5% in FY22’

Rising COVID-19 cases in rural areas amid the second wave of the pandemic, along with last year’s high-base effect may limit the growth of domestic tractor sales to 3-5% in the current financial year, according to Crisil Ratings.

“The already high base of last fiscal and severity of the second wave preclude significant tractor volume growth this fiscal,” Gautam Shahi, Director, Crisil Ratings Ltd. said, adding several States had imposed lockdowns recently and crucially, rural India was less insulated this time around.

States such as Maharashtra, Uttar Pradesh, Haryana, Karnataka, Madhya Pradesh and Rajasthan, that account for more than 50% of tractor volumes, had seen a surge in infections.

“Growth in domestic tractor sales volume will be limited to 3-5% this fiscal, given the strong second wave of COVID-19 infections and rising cases in hinterland, apart from high-base effect of last fiscal. This is despite the forecast of a normal monsoon auguring well for farm incomes and therefore tractor demand,” the rating agency said in a statement.

The domestic tractor volumes logged a 27% year-on-year growth last fiscal to a record 9 lakh units. This growth was driven by strong government spend on rural schemes and an increase in farm incomes, supported by good monsoons, it noted, adding that rural India was less impacted by the pandemic last fiscal and farmers redirected savings from spending on marriages, etc, towards tractor purchases.

It added that even as tractor volumes growth remained in the positive territory, players in the sector had seen their cost of operations rise sharply as the price of the primary raw material, steel (75-80% of total cost), had appreciated sharply. Primary steel prices increased by more than 60% in the six months through April, and are expected to remain strong in the near term, before easing in the second half.


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Printable version | Jun 24, 2021 3:07:32 AM | https://www.thehindu.com/business/tractor-sales-growth-may-ease-to-3-5-in-fy22/article34590511.ece

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