Does ris­ing trac­tor sales sig­nal de­mand re­vival in ru­ral In­dia?

Hindustan Times ST (Jaipur) - - World - Sayan­tan Bera sayan­tan.b@livemint.com

FIELD RE­PORT Trac­tor man­u­fac­tur­ers sold 363,071 ve­hi­cles dur­ing April­Sept NEWDELHI:

Do­mes­tic trac­tor sales rose to a record in the first half of the fis­cal year, but econ­o­mists are hes­i­tat­ing to in­ter­pret it as a sign that the farm econ­omy has fi­nally turned the cor­ner.

Trac­tor man­u­fac­tur­ers sold 363,071 of farm ma­chines be­tween April and Septem­ber, a 21% in­crease year-on-year, data from the Trac­tor Man­u­fac­tur­ers As­so­ci­a­tion shows. The num­ber of trac­tors sold is the high­est on record for a six-month pe­riod.

All ma­jor man­u­fac­tur­ers have seen ro­bust sales growth.

Mahin­dra and Mahin­dra Ltd, the largest trac­tor maker in the coun­try, last week said the do­mes­tic trac­tor in­dus­try grew 37% in the July-Septem­ber quar­ter from a year ear­lier, helped by a nor­mal mon­soon that boosted ru­ral sen­ti­ment and de­mand for the farm ma­chines.

The com­pany added that the in­crease in min­i­mum sup­port prices for both kharif and rabi crops are likely to keep ru­ral sen­ti­ment pos­i­tive.

Son­alika In­ter­na­tional Trac­tors Ltd reg­is­tered its high­est ever sales of more than 50,000 trac­tors in the first six months of 2017-18, with do­mes­tic sales ris­ing by 51% in Septem­ber from a year ago. Sales by Es­corts Ltd grew 19% dur­ing the first half of 2017-18; its sec­ond-quar­ter sales rose by 32%.

But do ris­ing sales of trac­tors sig­nal a re­vival in ru­ral in­comes and de­mand fol­low­ing the con­sec­u­tive years of drought in 2014 and 2015 and the im­pact of de­mon­e­ti­za­tion last year?

“I am hes­i­tant to say this is a sign of ru­ral pros­per­ity. After two years of neg­a­tive growth, sales are pick­ing up as ru­ral wages are ris­ing and non-avail­abil­ity of farm labour is trig­ger­ing de­mand,” said Ashok Gu­lati, agri­cul­ture chair pro­fes­sor at the Delhi-based In­dian Coun­cil for Re­search on In­ter­na­tional Eco­nomic Re­la­tions.

Num­bers from the Trac­tor Man­u­fac­tur­ers As­so­ci­a­tion cor­rob­o­rate this. Trac­tor sales reached a high of 634,151 units in 2013-14 but de­clined 13% and 10.5%, re­spec­tively, in the next two years be­cause of wide­spread drought. In 2016-17, de­spite a nor­mal mon­soon, do­mes­tic sales were 582,844 units, an in­crease of 18% year-on-year, but still lower than the to­tal sales recorded three years be­fore, likely due to the cash crunch fol­low­ing the de­mon­e­ti­za­tion of high-value ban­knotes in Novem­ber last year.

“This year, the we are ex­pect­ing that overall sales will cross 650,000 units,” said Ra­man Mit­tal, ex­ec­u­tive di­rec­tor at Son­alika In­ter­na­tional Trac­tors. “In­dia has 670,000 vil­lages but in­dus­try­wide sales have never crossed the num­ber of one sale per vil­lage in a year.”

“The in­dus­try was in a down­turn due to con­sec­u­tive mon­soon fail­ures... sales picked up in the sec­ond half of last year (2016-17) but then de­mon­e­ti­za­tion hit us. In June and July this year, there was a slow­down due to (the in­tro­duc­tion of) goods and ser­vices tax (GST) but we are fi­nally see­ing a re­vival in sales,” Mit­tal said.

Waivers of farm loans in states such as Pun­jab, Ut­tar Pradesh and Ma­ha­rash­tra and lower in­ter­est rates have helped boost sales, said Hi­man­shu, an as­so­ciate pro­fes­sor at Jawa­har­lal Nehru Univer­sity, Delhi, and a Mint colum­nist.

“As most trac­tors are pur­chased through for­mal loans, a waiver has helped farm­ers who had turned de­fault­ers to be­come el­i­gi­ble,” Hi­man­shu said. “This is not a leap in sales but com­ing back to where we were in 2013-14.”

Sales have gone up in a year which has seen farm­ers’ protests in sev­eral states, with de­mands for re­mu­ner­a­tive crop prices and loan waivers.

Fol­low­ing last month’s kharif har­vest, whole­sale prices of oilseeds and pulses plunged be­low state-set min­i­mum sup­port prices (MSPs).

Farm­ers are likely to lose close to ₹36,000 crore due to fall­ing prices in just seven crops, the All In­dia Kisan Sang­harsh Co­or­di­na­tion Com­mit­tee, a coali­tion of over 180 farmer unions, said last week after com­par­ing av­er­age whole­sale prices and MSPs.

MINT/FILE

In 2016­17, de­spite a nor­mal mon­soon, do­mes­tic trac­tor sales were 582,844 units, an in­crease of 18% year­on­year, but still lower than the to­tal sales recorded three years be­fore

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