CRISIL Research expects domestic tractor sales log double-digit growth for the third consecutive year in fiscal 2019, rising 10-12% to just short of 8 lakh units.

Given the high base, growth in fiscal 2020 is seen coming off a notch, though it could still be a respectable 6-8%. A normal monsoon could ensure growth of 4-6%, while various state and central government schemes – if executed well – could add 1-3%.

High-growth phases backed by normal monsoon and loan waivers

The high growth in the three preceding years has come on the back of normal monsoons – at 3%, 5% and 9% short of the long period average in fiscals 2017, 2018 and 2019, respectively. As per the Indian Meteorological Department, rainfall deficiency up to 10% is considered normal (compared with the long period average). So, all eyes are on whether monsoon will be normal yet again.

To be sure, the past 15 years have seen two such periods of four consecutive normal rainfall years –2005-2008 and 2010-2013 – during which the industry logged compound annual growth rate (CAGR) of 5.4% and 9.8%, respectively.

A growth of 6-8% in fiscal 2020 will result in a robust CAGR of 12-14% for fiscal 2017-2020.

Interestingly, farm loan waivers have played a key role in both the earlier periods – in Kerala and Tamil Nadu during 2005-2008, and in Karnataka, Chhattisgarh and Uttar Pradesh in 2010-2013. And so far in 2017-2020, as many as seven states have given farm loan waivers, including Uttar Pradesh, Punjab, Maharashtra, Karnataka, Rajasthan, Madhya Pradesh and Chhattisgarh.