How Lok Sabha Election 2024 Result Will Impact the Tractor Industry?

01 Jun, 2024

Voting is done at 1.048 million polling booths and the results of Lok Sabha Elections 2024 are locked in the 5.5 million electronic voting machines. Now, India and the rest of the world have set their eyes on 4th June 2024- the result day. India, being the 5th largest economy in the world, has a crucial role to play in global trade and political stance. It is the world's biggest democracy and when Lok Sabha elections happen here, it causes a sense of excitement across the world.  

The results of the Lok Sabha Elections 2024 will have a great influence on the entire Indian tractor and agriculture industry. 

In this introspection, TractorGyan aims to provide its reader with a clear picture of how Lok Sabha Election results are going to influence the Indian tractor industry.

The Role of the Tractor Industry In Shaping the Indian Economy 

India is the breadbasket of the world with over 65% of its popularity engaged in farming and allied services. No nation has such a huge popularity in agriculture. When farming is performed on such a large scale, it’s obvious that there is more demand for tractors for farm mechanization.

No wonder why India is the world's largest tractor market. Its size is mammoth, nearly 2.5 times that of China and 3.5 times that of the US.

The Indian tractor industry has shown positive growth trends for the past three years. According to TMA, the domestic tractor sales in India were at 9,03,724 units, 9,12,061 units, and 9,15,474 units in the years 2021, 2022, and 2023 respectively.

Believe it or not, India is the world's largest manufacturer of tractors, manufacturing more than 950,000 units every year during 2021-2023. That's about a third of all tractors produced globally. Home-grown brands such as Mahindra, Swaraj, and Sonalika have impressive global presence and are playing a key role in empowering the global farming landscape.

According to ETIG Analysis, the total revenue generated by the Indian tractor industry was around Rs. 48,500 crore in 2021.

As per the GII research, the overall Indian tractor industry is likely to expand at a CAGR of 5.80% during 2024-2029 and is anticipated to reach the mark of USD 3.13 billion. I

In 2024 Indian tractor industry is estimated to reach USD 2.37 billion. When one industry is so large and contributes so heavily, no ruling political party can avoid it. 

Impact of Lok Sabha Election 2024 Results on Tractor Industry 

Whenever a new government comes into power, certain changes in government policies and frameworks are assured. These modifications impact various sectors such as education, power, healthcare, and FMCG, including the tractors industry, energy, and many more.

The 7th and last phase of the hotly contested Lok Sabha Elections 2024 is finished today. Have you ever wondered how and what impact the result will have on the Indian tractor industry?

If you have thought of the impact of the ruling regime on the tractor industry, let us help you. 

The Circle of Stable Government 

Regardless of the ruling party, it's important for any nation, including India, to have a stable government in power. A government that can make reforms, watch out for improvement opportunities, make citizen-friendly policies, and use the tax amount for the welfare of the taxpayers.

Such a government ensures that every industry, including tractors, has enough governmental support. Let us break this from the tractor industry point-of-view.  

Better Policy Making 

The first stage of a stable government is the formation of better and more effective policies. A stable government will make sure that Indian farmers have policies for: 

• Easy and quick agricultural financing

• Enough subsidies for farmers to lower income group 

• Increased Financial Stability of the Farmers

Imagine a marginal farmer, owner of only 2 acres of land,  from a remote village of  Uttar Pradesh, can buy a 2WD tractor with precise farming technologies and even use heavy-duty implements like a harvester. 
This is not a fiction or a fairy tale but it’s a reality that came into being when farmer-focused policies from a stable government were in place. Such policies enable Indian farmers to get any type of aid without delays. They will have the capital to purchase farming tools, raw materials, fertilizers, and other types of resources even with limited income. 

Increased Tractor Sales 

Even though a tractor is one of the most crucial farming equipment, only a small number of farmers, 5.2%, own a tractor, as per NABARD All India Rural Financial Inclusion Survey 2016-17. The household ownership of tractors in Indian states like Punjab, Gujarat, and Madhya Pradesh is 31%, 14%, and 13% respectively.

In some states like Assam, tractor ownership is less than 2%, which is an alarming number for any agricultural-dominating economy like India.

One main reason behind this low tractor ownership is the lack of direct capital for the farmers. But, when farmers have enough and easily accessible capital through the government policies, buying a tractor will not be a matter of concern. More and more farmers will be able to purchase tractors in India, resulting in overall boosted domestic tractor sales. 

High Farm Mechanization 

We have qualms to admit that the average crop yield of India has gone up over the years and it even stands first in the production of many crops. It’s the agriculture capital of the world. But, the country still lags in farm mechanization level, currently at the mark of 40-50%. On the other hand, nations like the US, Brazil, and China are sitting at 95%, 75%, and 57% in terms of farm mechanization.

When a stable government promotes the purchase of tractors and other farm equipment through better policies, the farm mechanization percentage will certainly boost. 

Higher Crop Yield 

There is a direct connection between farm mechanization and crop yield. Countries with higher farm mechanization will have higher production per acre. Certain farming activities such as harvesting, seedbed preparation, and threshing have a high farm mechanization scope, and farmers performing manuals are squandering their efforts and time.

When farmers have easy accessibility to tractors, they can use farm implements like harvesters, threshers, cultivators, reapers, zero-till drills, laser levelers, and many more with their tractors increasing farm mechanization, resulting in high crop production.  

Strong National Revenue and Economy 

Needless to say, more production means high per capita farmer income, more national revenue generation, and a stronger economy. Farmers will have more ready crops to sell in the market and India, as a country, will have more crops to export to other countries. Both these factors will accelerate economic growth and increase the national reservoir of capital. 

This is how the circle of a stable government is completed. As Lok Sabha Elections 2024 results are about to come out,  we expect only a stable government to come into the force so that the Indian tractor industry will become stronger than ever. 

Area of Improvement for Future Government 

Despite multiple policies and initiatives by past governments of all the time, the Indian agriculture sector is so vast that there are ample growth opportunities for future governments. This is what we meant. 

The Changed Policy Maker Stance 

It’s high time that Indian policymakers should think from a different perspective and start making policies to address the current challenge and work as a catalyst for promoting dual farm mechanization. At present, tractors are the prime farm equipment receiving maximum subsidy. In addition to this, tractor-based farm machinery such as power tillers, combine harvesters, and power tillers are offered through subsidies.

We understand that a tractor is a non-negotiable farming asset for farmers. But, what about self-propelled or hand-driven farm implements? Because a large number of India's total farmer population belongs to rural India and is from a marginal category,  future governments should focus on offering subsidies for self-propelled or hand-driven farm implements as well.

Solving Supply-side Challenges 

Before the future government plans to give more focus to farm mechanization, it’s important to address existing supply chain challenges and improve the ease of doing business. The farm machinery industry in India still lacks more control and direct accessibility to the farmers when it comes to non-tractor farm machinery. According to the National Council of Applied Economic Research Report 2023, about 53% of non-tractor farm machinery imports happen from China, despite India having the advantage of low production cost.

But why?

It’s because of the high intra-industry trade, limited scalability, and lack of innovation. Inconsistent regulations in this sector make operations difficult for the industry players. The skilled labor shortage is another challenge.

Further governments should focus on making policies that must favor the non-tractor farm machinery industry, focus on workforce upskilling, and encourage public-private partnerships to increase the ease of doing business. 

Working on Interest Rate 

There is a huge scope for lowering the interest rate on new tractor loans and old tractor loans. Government-owned banks provide tractor loans at an average interest rate of 8-10% while private banks are even charging up to 20% interest rate on tractor loans, which is very high.

Also, there are anticipations of privations of public sector banks (PSBs) in FY25. While this seems a beneficial move from streamlined workflow processing, it may exert more pressure on farmers from the interest rate aspect.

Future governments must enforce stringent policies to put a tab on how banks in India are implementing interest rates on tractor loans. This is crucial to foster financial independence in farmers across the nation. 

Ending Notes 

The Indian tractor industry is vast enough to bring the attention of any ruling party. During every financial year, considerable attention is given to farming sectors. However, there is still great scope for improvement in certain areas such as tractor loan interest rates, better policies for farmers, subsidies for farm mechanization, and supply chain.

A future government that will come into force, once the result of Lok Sabha Elections 2024 is out on 4th June 2024, must shift its focus on these persisting challenges to strengthen the Indian tractor industry.