Strong Monsoon and GST Cuts to Drive Tractor Industry Growth

Issue: To revise the growth outlook for the domestic tractor industry for the fiscal year 2026 (FY26), based on the favorable performance of the monsoon season and the stimulus provided by the recent Goods and Services Tax (GST) rate rationalization.

Facts:

The domestic tractor industry’s previous growth estimate was a more modest 4-7%.
The 2025 Southwest Monsoon season recorded 108% of the Long Period Average (LPA) rainfall, exceeding the normal level.
The government implemented a GST rate cut on tractors to 5% in September.
The industry already saw robust 45% year-on-year (YoY) growth in wholesale volumes in September 2025, contributing to an 18.8% growth in the first half of FY26.

Decision:

Credit rating agency ICRA revised the projected growth for the domestic tractor industry in FY26 to a substantial 8-10% in wholesale volume, up from its earlier estimate.

Key TakeDowns:

Dual Growth Catalysts: The accelerated growth projection is primarily driven by the synergy between above-normal monsoon rainfall (boosting farm income and sentiment) and the GST rate reduction (improving affordability of agricultural machinery).
Dealer Inventory Build-up: The robust wholesale growth (45% YoY in September) was notably higher than the retail growth (4.0% increase), indicating that dealers are actively building up inventory in anticipation of massive demand during the festive season.
Credit Profile Strength: Tractor Original Equipment Manufacturers (OEMs) are expected to maintain strong credit profiles, aided by rising volumes, benefits from operating leverage, and stable raw material costs. * Future Stimulus: The industry anticipates additional volume support from potential pre-buying ahead of the proposed implementation of the TREM V emission norms (which typically increase costs) from April 1, 2026.

Source :- Free Press Journal