Tractor industry to grow 8 –10% in FY2026 supported by good monsoon and GST relief: ICRA

The tractor sector in India is set for a robust recovery in FY2026. The latest ICRA report forecasts an upward growth of 8 -10%, up from an earlier estimate of 4-7% due to a good monsoon, GST relief and rural recovery. After two uneven seasons, the industry is now clearly on the path to recovery supported by better farm output and improved dealer sentiment.

According to the India Meteorological Department, rainfall will be around 108% of the long-period average this year as it raises sowing and crop output. A strong rainfall will boost farm income, which feeds directly into demand for tractors. When farming is good, new investment in machines for farmers will help maintain tractor sector growth.

According to ICRA, wholesale volumes have gathered pace across key states. In September 2025, dispatches expanded 45% year-on-year while cumulative FY2026 sales were up around 19% over the previous year. Up to now, key states such as Uttar Pradesh, Madhya Pradesh, Maharashtra and Rajasthan have remained the largest markets, while southern states like Tamil Nadu and Karnataka are also doing well owing to better irrigation and mechanization.

The government's GST reduction on tractor parts, from 28% to 18%, has alleviated cost pressures and positively impacted sentiment. Lower ownership and upkeep costs encourage shorter replacement cycles and allow new buyers to enter the market. Dealers say bookings are strong as affordability improves.

Beyond farming, the tractor nowadays serves the broader needs of rural society. Tractors operate as commercial vehicles in haulage, transport and construction. This dual purpose maintains demand over the year and aligns the tractor segment with the broader rural infrastructure development. The manufacturers' response has been efficient multi-utility models offering higher torque and better mileage.

ICRA has observed that retail sales, while still moderate, have only moved ahead by 4% in September 2025, although wholesale dispatches were strong. Furthermore, rising input costs for steel and tyres may put pressure on margins moving forward. Though ICRA still thinks the combination of the stabilisation of commodity prices and disciplined cost support would help mitigate that.

Overall, FY2026 should clearly offer growth based on solid fundamentals- good rainfall, fiscal support and a strong rural sentiment. The India tractor market finds itself right at the junction of agriculture and mobility. Having a mid-point expectation of 8-10% growth, the revival is also a reflection of confidence in rural India's economy, not just based on better numbers.

Stay updated with 91Tractors for more articles, insights and  news from the tractor and agriculture industry. Don’t forget to subscribe to our YouTube channel and follow us on Instagram for the latest videos and updates.