Indian Tractor Sales Gets Hit by El Nino in FY24, Monsoon Forecast Shows Positive Signs

Recently, the tractor industry struggled with a setback in the fiscal year 2023-24, facing an 8 per cent decline in domestic sales compared to the previous year. This downturn came as a surprise following a period of peak volumes. The Tractor & Mechanization Association (TMA) revealed that the total domestic tractor sales grew to 867,597 units in FY24 from 945,311 units in FY23.

Analysts pointed this decline to various factors, with the El Nino impact as the main reason. El Nino, a climate pattern described by warmer-than-average sea surface temperatures in the Pacific Ocean, caused problems for India's agriculture. Its impact was worsened by erratic monsoon patterns and unseasonal rains, which hampered farming activities across the country.

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The uneven distribution of monsoon rainfall, a direct consequence of El Nino, severely affected crop production, particularly during the crucial kharif season. Southern states bore the brunt of this phenomenon, experiencing a staggering 20 per cent decline in tractor sales. Additionally, decreased reservoir levels, plunging 18 per cent lower than the previous year and 5 per cent below the decade-long average, further increased the agricultural trouble.

Market leaders in the tractor industry, such as Mahindra & Mahindra and Escorts Kubota Ltd, witnessed a decline in domestic sales. Mahindra & Mahindra reported a 6 per cent decrease in FY24 domestic volumes, while Escorts Kubota Ltd saw a 5 per cent dip in sales.

However, amidst this, there are some positive signs which we can see now. The Indian Meteorological Department (IMD) is confident to announce its monsoon forecast for 2024, with indications pointing towards favourable conditions. Private forecaster Skymet has already predicted "normal" monsoon rains for the year.

Delighted by these forecasts, analysts at Crisil expect a 3-5 per cent growth in domestic tractor volumes in the fiscal year 2024-25. This encouragement comes from the belief that a promising monsoon season will restore the rural economy, driving demand for agricultural machinery.

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