The rating agency attributed the improved outlook to a combination of supportive economic and regulatory factors that have strengthened demand fundamentals.
The revised forecast highlights a period of strong recovery and expansion for the tractor sector, driven by concrete policy support, favorable agricultural outcomes and specific market dynamics associated with regulatory changes.
A key driver was the reduction in VAT on tractors to 5 percent, a policy change that has directly improved affordability for farmers, ICRA said. This reduction has translated into a decline in tractor prices, with savings of Rs 40,000 to Rs 1 lakh across various horsepower segments, making new tractors more accessible.
In addition, overall adequate rainfall has supported crop sowing and yield expectations, contributing to healthier agricultural cash flows and positive sentiment in rural areas, the rating agency said.
The additional factor expected to impact sales in the coming quarters is the impending transition to stricter emission standards for tractors from April 1 next year, the report said.
With the new standards, ICRA anticipates a phase of pre-purchase activities, where customers and dealers will want to purchase tractors under the current, familiar emission standards.
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