How good monsoon in India can arrest slide in tractor sales

Despite the challenges that plague the Indian automotive sector as a whole, tractor manufacturers can look up and thank the skies, quite literally, because a good monsoon season is likely to slow down the fall in sales of the critical farming equipment.

According to ratings agency Crisil, the predictions of a good and widespread monsoon as has been made by the Indian Meteorological Department augers well for the rural farming sector and therefore, for makers of farm equipment like tractors. "Despite a 37% on-year decline in April and May combined, tractor volume will likely be barely 1% below last fiscal’s level, in sharp contrast to a double-digit decline expected for the rest of the automobile industry," it says.

Crisil further adds that this, combined with lower raw material costs and strong balance sheets, indicate stable credit outlook for tractor makers this fiscal.

The onset of monsoon across India has been swift this year. The entire country was covered by Friday, June 26 - 12 days ahead of normal pattern. This HT report notes that the last time the advance of the monsoon was this early was in 2013, when it covered the entire country by June 16.

For varying reasons, timely and widespread monsoon comes as great news for the Indian economy amid recent months of lockdown-related blues. The blues in the overall automotive sector, however, are likely to prevail. Several auto makers have highlighted that while demand in rural sector may recover quicker, cities remain a source of concern. Earlier this month, Crisil had also predicted sales' volume in the Indian passenger vehicles' segment - including exports, will likely fall by between 22% and 25% in fiscal 2021. The fall will be the second consecutive year of double-digit volume decline after a 15% decline in fiscal 2020.