Tractor Industry Outlook Brightens: ICRA Projects 8-10% Growth for FY2026 on Strong Monsoon and GST Cut

Key Highlights:

• ICRA raises FY2026 tractor industry growth forecast to 8-10%.

• 108% monsoon rainfall boosts farm output and rural sentiment.

• GST cut to 5% makes tractors more affordable.

• Wholesale volumes up 45% YoY in September 2025.

• Strong financial health and low debt levels for OEMs.

Rating agency ICRA has revised its growth forecast for India’s tractor industry for FY2026, projecting an 8-10% growth in wholesale volumes. This is an upgrade from its earlier estimate of 4-7% growth, reflecting stronger market sentiment supported by favorable monsoon conditions, better farm output, and the recent reduction in GST to 5%.

Also Read: Domestic Tractor Shipments Jump 45% in September 2025, Boosted by GST Cut and Festive Demand

Strong Monsoon Boosts Farm Sentiment

The 2025 Southwest Monsoon performed exceptionally well, delivering 108% of the Long Period Average (LPA) rainfall. Although the rainfall distribution was uneven across regions, it significantly improved agricultural conditions.

As per the Ministry of Agriculture and Farmers Welfare’s Third Advance Estimates (AY 2024-25), foodgrain output rose 7.9% for kharif crops and 4.5% for rabi crops year-on-year. This strong agricultural performance has boosted farmer confidence and is expected to drive tractor demand further.

GST Reduction Makes Tractors More Affordable

In September 2025, the government cut the Goods and Services Tax (GST) on tractors to 5%, enhancing affordability for farmers. The lower GST rate is anticipated to stimulate retail demand and encourage higher sales volumes in the months ahead.

Additionally, ICRA expects a pre-buying trend in the second half of FY2026 as buyers advance purchases before the implementation of TREM V emission norms from April 1, 2026.

Strong Sales Momentum in FY2026 So Far

The tractor industry recorded robust growth in September 2025, with wholesale volumes up 45% year-on-year and retail volumes up 4%. For the first half of FY2026, wholesale volumes grew 18.8% compared to the same period last year.

ICRA noted a gap between wholesale and retail growth, indicating inventory buildup by dealers ahead of the festive season to meet the anticipated surge in demand.

Financial Health and Stability Remain Strong

ICRA highlighted that tractor manufacturers (OEMs) continue to maintain strong credit profiles, with healthy profit margins supported by:

• Higher sales volumes

• Operating leverage benefits

• Stable raw material costs

The sector’s financial stability is also strengthened by low debt levels and adequate cash reserves.

Solid Growth Base from FY2025

In FY2025, India’s tractor industry had already achieved 7% growth, creating a strong base for FY2026. The combined impact of favorable weather, government support, and strong agricultural fundamentals has built a positive environment for sustained growth.

Also Read: Domestic Tractor Sales Rise to 1,66,145 Units in October 2025, Up 14.84% YoY

CMV360 Says

With an upgraded growth projection of 8-10% for FY2026, the Indian tractor industry is set for another promising year. Supported by a strong monsoon, GST reduction, healthy farm output, and financially sound OEMs, the sector is well-positioned to capitalize on rising rural demand and evolving emission standards.