New Delhi

India’s tractor segment is projected to grow 4–7% in FY2026, while the two-wheeler industry is also expected to see healthy growth, according to a report released Tuesday by rating agency ICRA.

The forecast is supported by above-average rainfall, strong rural incomes, festive demand, and recent GST rate cuts that are expected to improve affordability and boost sales. The tractor industry has already shown strong performance this fiscal year. Wholesale volumes rose 28.2% year-on-year (YoY) in August 2025, with cumulative growth for the first five months at 11.7%. Retail sales also increased sharply by 30.1% in August, reflecting positive farmer sentiment and favourable rainfall, which reached 108% of the long-period average by September 17, boosting agricultural activity and rural demand.

ICRA noted that the GST reduction on tractors to 5% will further support demand during the upcoming festive season. Additionally, manufacturers are preparing for possible pre-buying ahead of the TREM V emission norms coming into effect from April 1, 2026. Strong demand, operating leverage, and stable raw material costs are expected to help maintain robust financial profiles for tractor makers.

In the two-wheeler sector, wholesale volumes grew 7.2% YoY to 1.8 million units in August, while retail sales rose modestly by 2.2% due to excess rainfall in some regions and customers delaying purchases for GST benefits. Exports increased 27.5% in August, and electric two-wheeler sales continued to grow, with 1,04,725 units sold, keeping EV penetration stable at 6–7%.

Looking ahead, ICRA forecasts domestic two-wheeler volumes to grow 6–9% in FY2026, supported by replacement demand, urban market recovery, strong rural incomes, and the GST rate cut making vehicles more affordable.