It happens only in India!
Indian agricultural sector
- Agriculture’s contributes to India’s total GDP is declining in recent years and is currently at ~18%
- Agriculture in India is currently growing at an average rate of 2.8%
- 68% Indian live in villages & are highly dependent on agriculture & allied activities.
- Agriculture accounts for ~10% of India’s exports
- India also holds critical position in the world in terms of Agri-production
- No.1 position in the world for production of Pulses
- No.1 position in the world for production of Milk
- India is the largest exporter of Castor Oil, holding about 70% share of the global trade
- No.2 position in the world for production of Cotton
- No.2 position in the world for production of Rice
- No.2 position in the world for production of Wheat
- No.2 position in the world for production of Vegetables, Fruits & Groundnut
- It ranks 2nd , 3rd, 4th & 5th in production of groundnut, rapeseed-mustard, linseed and soybean, respectively
Indian Agriculture in World Trade
India is among the 15 leading exporters of agricultural products in the world. As per international trade statistics, 2010, published by WTO, India’s agricultural exports amounted to US $ 17 billion with a share of 1.4% of word trade in agriculture in 2009. On the other hand, India’s agricultural imports amounted to US 14 billion with a share of 1.2% of World Trade on agriculture in 2009.
Agricultural exports increased from Rs. 89341.50 crore in 2009-10 to Rs 120185.95 crore in financial year 2010-11 registering a growth of about 34.52%. Increase in value of agricultural exports during 2010-11 was primarily on account of higher exports of sugar,
molasses, cotton, guar gum meal, spices, Niger seed, ground nut, maize, coffee, oil meal, castor oil, tea and jute compared to corresponding period of previous year. However, the share of agricultural exports in total exports decreased slightly from 10.57% in
2009-10 to 10.47% in 2010-11.
Agricultural imports recorded an overall decrease from Rs. 59528.33 crore in 2009-10 to Rs 56196.20 crore in 2010-11 registering a decline of -5.6% over the corresponding previous period. Decrease in the value of agricultural imports during this period was
primarily due to lower imports of pulses, sugar and cotton. The share of agricultural imports in total imports also decreased from 4.37% in 2009-10 to 3.50% in 2010-11.
There has been generally a surplus in agricultural trade over the years. The trade surplus increased from Rs. 29813.17 crore in 2009-10 to Rs. 63989.75 crore in 2010-11 mainly due to the higher export of cotton, sugar and oil meals. India’s major exports and imports in terms of value of total agricultural exports and imports in the recent period are:
- The Indian Tractor Industry has developed over the years to become the largest in the world.
- Starting in 1960’s it had reached just about 50,000 units in the early 1980’s, but today the size Indian Tractor market has grown to over 600,000 units.
- Increasing Tractors are being used for haulage and non-agricultural applications as well.
- The opportunities are still huge considering the low farm mechanisation levels in the country, when compared to other developed economies across the world.
- After a splendid performance during the last two to three years, the Indian tractor industry is believed to head for a slowdown, which we believe is a myth.
- Tractor market has grown at a CAGR of 12.8%, in the last five years
- Sales, steady since FY07, should increase even more (as witnessed in FY12) due to rising farm income and rural growth.
- Tractor sales have always been better in the second half of the year than the first half. The exception to this was FY09, when 2HFY09 sales were 8% lower than in 1HFY09.
Outlook for the year FY12-14
- Demand outlook for FY12-14 remains positive. We expect the industry to grow ~11-12% YoY.
- Farm income growth continues to be strong and acts as a strong catalyst for demand.
- Tractor financing continues to enjoy priority lending status, thus attracting lower interest rates and higher participation by banks.
- The greater participation by NBFCs and private banks will further boost sales.
- The meteorological department has predicted a regular monsoon for this year. Although rainfall does not directly affect tractor sales, availability of water will definitely lead to higher productivity, which will boost tractor sales.
- Successful implementation of government schemes (NREGA) and higher minimum support prices will put more money directly in the farmers’ hands, driving tractor demand.
Indian Tractor Market – Market Share
- M&M’s post acquisition market share (39.7%), in FY11, increased from M&M and PTL’s combined FY08 market share (M&M 28.5%, PTL 8.1%).
- Tractor and Farm Equipment Limited (TAFE), the second largest tractor player in India, has been consistent and registered g a growth in its market share from 17.4% in FY00 to 21.0% in FY11.
- Escorts is the third largest player in India and has managed to maintain its position, but has lost much of its market share. Its ~20% share in FY00 has come down to 12.1% in FY11.
- International Tractor Limited (ITL), started tractor production in FY02 and currently has a market share of ~9%
Indian tractor market: Segment-wise sales
- India has been predominantly a 31-40 hp market, ~42% of the industry.
- However, during the last 5 years, there has been a shift to higher hp tractors. The share of 40+hp tractors has gone up from 29% in FY05 to 44% in FY11, clearly indicating the multi-use of tractors.
- Combined share of tractors above 40 hp has more than doubled over the last ten years
- More sophisticated and powerful tractors are making their way into the market.
- The dependence on machines is increasing every day due to a large exodus of farmers into urban areas, which in turn makes labour scarce and costly in rural areas.
- Powerful tractors of over 50 hp may be in great demand, with leasing gaining importance (as the future is expected to lie in co-operative farming).
- Also driven by a growing demand for tractors from the infrastructure sector (mainly construction activities).
Future Trend Forecasting
- Rainfall: Contrary to popular belief, the last 10-year data depicts that the rainfall has no significant bearing on the sales of tractors. (Correlation 0.25).
- Farm Income: It is evident that tractor sales are highly proportional to farm income. Higher farm income leads to higher tractor sales. Farm income continues to be higher and should continue to benefit tractor sales in the coming years as well (Correlation 0.88)
- Interest Rates: There is a strong inverse relationship between the two variables observed in previous years data. Lower interest rates have been one of the major drivers for tractor sales and vice-versa.
- Tractor financing: In FY11, only 75-80% of total tractors sales were financed in comparison to 85-90% in FY09, the main reason for such a strong growth in the cash sales of tractors was the higher farm income and the booming rural economy mainly through Higher MSP’s, Govt. Schemes like NAREGA
- State of Indian Agriculture: 2012 Report (bhuwanchand.wordpress.com)
- Farm Mechanization in India (bhuwanchand.wordpress.com)
- Indian Tractor Industry – An Update : February 2012 (bhuwanchand.wordpress.com)
- Advance Technology Transforming Indian Agriculture (bhuwanchand.wordpress.com)
- To revitalise agricultural growth in India, top officials look to Plantwise (plantwise.org)