Tractor, Equipment Volumes May Boost Due To Farm Loan Waver!

The recent spate of farm loan waivers across the country may be causing a lot of trouble to bankers and analysts being negative for banking stocks. But, the move is expected to give a tremendous boost to tractor or farm equipment manufacturers.

In 2008, after the government waived off farm loans, tractor volume grew at an annualized rate of 21% for the next three years. In addition to the profitable loan waver for tractor and farm equipment market, average monsoon, higher sowing acreage, and moderate minimum support prices for various crops are likely to support farm income further.

In 2008, the central government announced farm loan waiver of Rs 70,000 crore and spent Rs 52,000 crore towards the scheme. After loan waiver, tractor volumes saw a sizeable pickup in volumes in March 2009 and September 2009. Agricultural product prices during the same period remained buoyant.

In FY 2017-18 till now Uttar Pradesh, Maharashtra and Punjab have announced farm loan waivers of Rs 36,000 crore, Rs 30,000 crore and Rs 20,000 crore, respectively as these three states contribute nearly one-third to the total tractor industry volumes.

Tractor manufacturers are likely to benefit the most from incremental tractor volume growth as other states such as Karnataka and Haryana are also considering farm loan waiver.

As you know that every new tractor sold becomes the base of the used vehicle & equipment industry analysts are now expecting 15-18 % volume growth in FY18 since it has been outperforming the industry growth for the past two years.

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