131805509

ural output and, consequently, tractor sales.It also said the margins of tractor manufacturers are likely to remain healthy, aided by operating leverage and stable raw material costs.According to ICRA Tractor demand remained strong in May with the wholesale volumes rising sharply by 19.3 per cent year-on-year, while retail volumes increased by 13.6 per cent YoY during the previous month, driven by a low base effect, steady farm cash flows and improved affordability following the GST rate cut.However, volume growth is expected to slow down, as the government has deferred and staggered the implementation for the revised emission norms (led to pre-buying in FY26) for the key 30-50 horse power segment to April 2028 from April 2026, it said.Following a robust rise of 23.5 per cent in FY26, wholesale volume growth is likely to soften to 1-4 per cent in FY27 owing to a high base effect and the IMD's forecast of a below-normal monsoon, as per ICRA.The IMD's first-stage Long Range Forecast (LRF) for the 2026 southwest monsoon reflects a below-normal rainfall at 90 per cent +/- 4 per cent of the Long Period Average (LPA), driven by likely development of El Nino conditions during monsoon.A deficient precipitation is likely to have adverse implications on agricultural output and, consequently, tractor sales, ICRA said.As per the second advance estimates released by the Ministry of Agriculture and Farmers' Welfare in March 2026, both kharif and rabi foodgrain output for AY2025-26 increased 3 per cent year-on-year, supported by healthy rainfall in CY2025, the ratings agency stated.While strong crop output in AY2025-26, MSP support and government subsidies continue to underpin farm cash flows and tractor volumes, the risk of El Nino conditions could weigh on industry growth with the likely moderation to 1-4 per cent in FY27, given an elevated base, it said.It also said the margins of tractor manufacturers are likely to remain healthy, aided by operating leverage and stable raw material costs. Credit profiles of manufacturers are expected to remain comfortable, supported by healthy profitability, low leverage, and adequate liquidity.