India Ratings and Research (Ind-Ra) expects tractor sales volumes to grow in low-mid single digits of 3%-6% yoy in FY22, mainly on a higher base following the 27% yoy growth witnessed in FY21. The macroeconomic tailwinds mostly remain intact for the rural economy, including the normal monsoon forecast, expectation of a strong Kharif harvest, and improved rural income.

Though the second covid wave had impacted sales in April-May 2021, with the average monthly sales dropping to 76% of the monthly sales achieved in 4QFY21, the industry witnessed a sharp rebound in sales volume in June 2021, as per data released by original equipment manufacturers (OEMs).

Sales volume is likely to pick up from 2QFY22 as the localised lockdown/restrictions have been relaxed. However, given that 1Q is generally a critical quarter with seasonally higher sales (around 33%), especially in May and June for land preparation for the Kharif season, the sales lost are unlikely to be recovered in the subsequent part of the year.

Ind-Ra also believes that tractor purchase may be deferred in favour of saving for/incurring higher medical expenses amid the anticipation of a third covid wave. In case, the country witnesses a third wave which is as severe as the second one resulting in localised/ nationalised lockdowns, the growth on yoy basis could be flattish.