ICRA Raises FY26 Tractor Industry Growth Outlook to 15–17% on GST Cut, Strong Rural Demand

ICRA has sharply upgraded its growth outlook for India’s tractor industry, revising its wholesale volume growth estimate for FY2026 to 15–17%, from an earlier projection of 8–10%. The revised forecast also marks a significant acceleration from the 7% growth recorded in FY2025, signalling a strong recovery in rural demand and improved industry fundamentals.

The ratings agency said the upward revision is backed by the sector’s robust performance in recent months. Wholesale tractor volumes rose 30.1% year-on-year in November 2025, while cumulative volumes for the first eight months of FY2026 were up 19.2%, reflecting sustained momentum across key agricultural markets.

A major driver behind the improved outlook has been the reduction in the Goods and Services Tax (GST) on tractors to 5%, which has materially improved affordability. According to ICRA, the tax cut has translated into a price reduction of around ₹40,000 to ₹1 lakh, depending on the horsepower segment. This has lowered the entry barrier for farmers and encouraged replacement as well as first-time purchases.

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Favourable agricultural conditions have further supported demand. The 2025 Southwest Monsoon ended at 108% of the long-period average, providing a broadly supportive backdrop for the farm economy. While rainfall distribution remained uneven across regions, overall precipitation levels were adequate to sustain sowing activity and support crop yield expectations. This, in turn, has improved farm cash flows and bolstered rural sentiment, aiding tractor demand.

ICRA also expects regulatory factors to influence sales trends over the next few quarters. With stricter TREM V emission norms proposed to come into effect from April 1, 2026, the agency anticipates a phase of pre-buying. Farmers and dealers are likely to advance purchases to avoid higher costs and uncertainties associated with the transition to new emission standards, providing a temporary boost to volumes.

From a financial standpoint, ICRA noted that the credit profiles of leading tractor manufacturers remain strong. The expected volume growth, coupled with historically low debt levels and adequate cash and liquid investments, is likely to support healthy balance sheets.

Overall, the revised forecast points to a period of sustained expansion for the tractor industry, driven by policy support, favourable monsoon-led farm economics and near-term regulatory dynamics.