New Delhi, Nov 3 The domestic tractor industry is projected to grow by 8-10 per cent in wholesale volume in FY26 -- a substantial increase from the previous estimate of 4-7 per cent, driven primarily by above-normal monsoon rainfall and the recent reduction in the Goods and Services Tax (GST), according to a report on Monday.
The revised outlook by credit rating agency ICRA follows an exceptionally strong performance in September 2025, where the industry reported a robust 45 per cent year-on-year growth in wholesale volumes.
This surge contributed to a healthy 18.8 per cent growth in the first half of FY26, it added.
“The growth in wholesale was notably higher than the modest 4.0 per cent increase in retail volumes during September, indicating that dealers are building up inventory in anticipation of robust demand during the early onset of the festive season,” the report noted.
Moreover, the 2025 Southwest Monsoon season has been a key positive factor, with India receiving rainfall at 108 per cent of the Long Period Average (LPA).
This has fostered positive farm sentiments and is expected to significantly boost agricultural output.
The implementation of a GST rate cut on tractors to 5 per cent in September is another critical demand catalyst, making agricultural machinery more accessible to farmers.
Furthermore, the industry anticipates additional volume support from potential pre-buying in the latter part of the year, ahead of the proposed implementation of the TREM V emission norms from April 1, 2026.
According to ICRA, the tractor original equipment manufacturers (OEMs) will maintain their strong credit profiles. Profit margins are likely to remain healthy, aided by the expected rise in volumes, benefits from operating leverage, and stable raw material costs.
The industry's financial strength is further underpinned by low debt levels and sufficient cash and liquid investments, the report mentioned.
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