Why tractor sales are on fast track, what this says about India’s agri sector

Thus, when India had four consecutive normal-to-surplus monsoon seasons from 2019 to 2022, tractor sales were buoyant in those years. It was otherwise during 2014-15 to 2016-17, when sales fell consequent to two successive bad monsoon years (2014 and 2015) and a crash in global agri-commodity prices translating into low realisations at home.

The accompanying chart shows domestic sales of tractors touching 9.45 lakh units in 2022-23 and dipping to 8.76 lakh the following fiscal, which was also a strong El Niño-induced poor monsoon year. But 2024-25 recorded above-par rainfall alongside recovery in sales to 9.40 lakh units.

Current year’s trend

The southwest monsoon has been excellent this year, with all-India rainfall at 7.1% more than the long period average for the season so far from June 1 to September 14.

The rains have also been spatially and temporally well-distributed. All states – save Bihar, Assam, Meghalaya and Arunachal Pradesh – have received rainfall well within the normal range. The likes of Karnataka, Telangana, Maharashtra, Madhya Pradesh, Gujarat and Rajasthan, which usually bear the brunt of monsoon failures, have had surplus precipitation. Moreover, the monsoon arrived this time in May itself, while retaining its strength in all subsequent months to September.

The good monsoon has led to record being sown in the ongoing kharif season, especially under crops such as rice (44 million hectares) and maize (9.5 million hectares), where farmers may benefit from a higher government-declared minimum support price or remunerative open market rates.

All that is also reflected in a 11.6% jump in tractor sale volumes during April-August 2025 over April-August 2024. If the growth trend is maintained, 2025-26 could close with sales crossing the 10-lakh mark for the first time.

However, it’s not just the monsoon and crop prices.

An additional factor this time has been the early onset of the festival season. It began with Raksha Bandhan (on August 9, as against August 19 in 2024 and August 30 the year before) and Ganesh Chaturthi (August 27 versus September 7 and September 19), and will be followed by the first day of Navratri (September 22 versus October 3 and October 15), Dussehra (October 2 versus October 12 and October 24) and Diwali (October 20 versus October 31 and November 12).

Farmers largely align their big-ticket purchases with auspicious festivals like Ganesh Chaturthi and Dhanteras (on October 18). “As these have been pushed forward, tractor sales have picked up from August itself and will peak over Navratri through Diwali, before tapering off by October-end,” says Narinder Mittal, President & Managing Director (India Region) of CNH, the Italian-American farm equipment multinational that makes ‘New Holland’ tractors and ‘Case IH’ sugarcane harvesters.

But even with sales slowing in November-December, he sees the monsoon as creating “positive momentum”. High single-digit growth should take sales comfortably past one million units in the current fiscal.

GST factor

The goods and services tax (GST) rate on tractors and other agricultural machinery has been slashed from 12% to 5%.

The cut, approved at the GST Council’s meeting on September 3 and effective from September 22, will make a 45-horsepower tractor, costing farmers roughly Rs 7.5 lakh now, cheaper by Rs 47,000.

There would similar savings of around Rs 85,000 and Rs 5 lakh on square balers (which can compact loose straw into high-density bundles of 20-30 kg) and sugarcane harvesters that currently sell at Rs 13-14 lakh and Rs 80-82 lakh respectively, inclusive of 12% GST.

“The rate cut is definitely a long-run positive for tractorisation and farm mechanisation in general. It will also encourage the adoption of new technologies, from higher horsepower tractors to larger balers,” points out Mittal.

The timing of the rate reduction couldn’t also, on the face of it, be better. It comes on the back of a good monsoon (whose benefits, in terms of recharged groundwater aquifers and filled-up reservoirs, should extend to the ensuing winter-spring rabi cropping season too) and just before the main festival buying period.

There’s a minor complication though.

Dealers have stocked up tractors for selling in the peak festival season, on which they have already paid 12% GST. The same machines sold from the first day of Navratri will, however, attract the lower 5% duty. Since farmers are likely to defer purchases till then – the 16-day ‘Shraddh’ or ancestral remembrance period from September 7 will hardly see much sales anyway – it would mean the dealers having to bear the burden of the additional (12% minus 5%) tax.

Rajat Gupta, founder of Tractor Junction, a digital marketplace for farm equipment, estimates that there are some 10,000 tractor dealers across India. Most sell 8-10 machines a month, with the bigger ones doing 20-25.

“The average dealer keeps a minimum 45-days inventory, which goes up to two months ahead of the festival season. For all those who have stocked up tractors after paying 12% GST, the losses from selling at 5% would be huge. They will have to either absorb it or not give the normal festival-time discounts to farmers,” notes Gupta, whose online platform handles sale “leads” for about 1.5 lakh tractors every month, out of which 5% (7,500) convert into actual transactions.

GST rules allow dealers to claim refund in case of paying higher rate of tax on their purchase (input) than what they collect from customers on sales (output).

“Our industry has requested the government to announce refunds of the additional duty. And this should happen quickly – within 3-6 months, and not 2-3 years – so that the dealers’ working capital is not blocked,” adds Mittal.

This is, hopefully, a transition problem that shouldn’t detract from the “long-run positive” of lower GST rates on agricultural machinery.