Tractor sales set for 10% rise in FY26 on monsoon, tax relief

India’s tractor market, a key indicator of rural economic health, is set for nearly 10% growth in FY26. A favourable southwest monsoon, lower inflation, and a recent goods and services tax (GST) cut are expected to boost sales, according to the Tractor and Mechanization Association (TMA).

Tractor sales have already recorded an 11.6% jump in the first five months of the current fiscal year. A total of 414,658 units were sold between April and August 2025, compared to 371,537 units during the same period last year.

According to TMA, the total domestic tractor sales stood at 939,725 units in FY25 compared to 867,085 units in FY24. The 7.3% growth was driven by factors such as a good monsoon and improved cash flow in the farming community.

Tractors are usually in high demand during October-November, when farmers invest post-harvest income, and in May-June, for pre-kharif sowing. These cycles remain crucial drivers of demand.

Official data from the statistics ministry showed that the agriculture sector grew by 3.7% in the April–June quarter of FY26, up from 1.5% in the same period of FY25. India’s overall economy also expanded 7.8% during the quarter, supported by robust growth in agriculture, manufacturing, construction, and services.

This growth signals stronger rural incomes and improved farm productivity. With lower costs and better rainfall, mechanisation is set to boost agriculture and overall economic growth.

“We are anticipating a growth of around 10 per cent in the current fiscal year on the back of good monsoon, lower retail inflation, and GST reduction on tractors,” said AS Mittal, president, TMA.

Meanwhile, India’s retail inflation fell to its slowest pace in eight years in July. The consumer price index (CPI) rose just 1.55% annually in July, the weakest increase since June 2017.

The matter assumes significance as high inflation leads to high manufacturing costs as raw material becomes expensive. Also,high inflation reduces purchasing power of the farmers.

The India Meteorological Department (IMD) in its latest update said the country has received cumulative rainfall of over 6% more than normal between June and August.

The rainfall in September is likely to be above normal, more than 109% of the long period average, said Mrutyunjay Mohapatra, director general of meteorology at the IMD during a virtual press conference on 31 August.

GST cut to boost rural growth

Rajesh Jejurikar, executive director & CEO – auto and farm sector at Mahindra & Mahindra, said GST restructuring will also make tractors and farm equipment more affordable for farmers.

On 3 September, the Goods and Services Tax (GST) Council slashed the tax rate on tractors and farm machinery from 12% to 5%, a significant 7 percentage point cut aimed at lowering costs for farmers and encouraging rural mechanisation.

“We expect there could be some slowdown in November and December, we are just evaluating impact of GST reduction. If the implementation is smooth, we could see a further upturn, and it can be close to 8% plus growth. Let’s wait the last week of this month,” said Narinder Mittal, president and managing director, India region, CNH (maker of New Holland Tractors in India).

The major tractor manufacturers in the country are Mahindra & Mahindra, Tafe (Tractors and Farm Equipment Ltd), International Tractors Ltd (maker of Sonalika brand tractors), Escorts Kubota, John Deere and CNH (maker of New Holland Tractors).

Highlighting India’s prominence in the sector, Gerrit Marx, CEO of CNH, said, “India has enormous potential. This is a 900,000 unit plus tractor market. For us it’s not nearly a market, we are positioning India as a centre for innovation, production, and export.” The company plans to set up its second New Holland tractor manufacturing facility in India to strengthen this strategy.