Rural distress: Tractor sales to slide by 5-7%, says Crisil

Crisil ratings on Tuesday said that weak growth in rural income will lead to de-growth in tractor sales volume by 5-7 per cent this fiscal.

The rating agency said weak growth in rural income, moderation in rural infrastructure spending, higher channel inventory, and the effect of a high base will lead to de-growth in tractor sales volume by 5-7 per cent this fiscal, from an all-time high of 8.78 lakh units in fiscal 2019.

Crisil said that "rural incomes were impacted towards the second half of last fiscal because crop production was flat after two years of 5-6 per cent growth, and farm profitability declined due to weak pricing.

"Consequently, rural wage growth was lower at 3-4% as compared with an average 6% in the preceding two fiscals, " it added.

Besides, it also noted that lower growth in spending on rural infrastructure has impacted non-farm tractor demand in recent months.

Additionally, exports, which contribute 10-11 per cent of sales, also declined 28 per cent in the first quarter of this fiscal due to moderation in demand from Latin America.