India’s agricultural sector is the backbone of our economy, contributing to 58% of the population. It has supported the economic growth during the pandemic, leading to an all-time rise in tractor sales. Experts, during the FE Agri Tech Summit, share their opinion on how innovation and the use of new-age technology will play a crucial role in transforming the agriculture sector.
Delivering the keynote is Hemant Sikka, President, Farm Equipment Sector, Mahindra, while the special address is delivered by Dr Ashok Gulati, Infosys Chair Professor for Agriculture Indian Council for Research on International Economic Relations (ICRIER).
Global conflicts, economic down terms, and climate-related issues are the main driving forces for hunger in the world. With the current war, key agricultural products have gone up, especially wheat. The war has forced Ukrainian farmers to flee the country, and fertilizer prices have also gone up.
Many countries have started hoarding food, leading to further shortages. Indonesia and Egypt have tightened exports. There is no food security without peace. Even before the war, or the pandemic, the global food chain was strained. Climate change has pushed food prices high.
However, India can take care of its own population and export food as well. It can also be a high-tech exporter of technology and talents. The demand for tractors and farm machinery, warehousing, and hybrid seeds have always been in demand, and India emerged as a global supplier of food during difficult times.
The Indian agriculture sector stayed robust during the pandemic, having registered a growth of 3.6%. The tractor industry also grew by 27% in FY 21, selling 9 lakh units, the highest ever. However, this shows only tractor sales and not agri mechanisation. The combined growth is crucial for India and at the moment, it is very low.
The need for mechanisation in the agriculture space is a huge opportunity for manufacturers such as Mahindra, for equipment and technology. Strong policies are the backbone of the agriculture sector and the policies are aimed to do exactly that.
India is the largest exporter of rice in the world and is soon to export wheat in large quantities. Technology is key in increasing output and farmers’ income. Technology needs to help India grow on that, but with sustainable energy. India has been inefficient in the use of water since most agriculture is through flood irrigation. With the proper technology, India can reduce the use of water by 50%.
Shamsher Dewan, the Vice President & Group Head, ICRA, said that there have been strong sales in tractor wholesale volumes. There has been a moderation in the past few months, leading to a decline in YoY volumes. In ICRA’s view, this could be because of the pent-up demand for tractors after the pandemic, and because of the uneven rainfall that delayed the harvest season.
The financing sector for the tractor segment has remained adequate, while NBFCs and banks found a way to continue financing during the pandemic. Also, similar to the auto industry, the tractor segment is expected to undergo emission norms, applicable for tractors over 50hp from April 2022.
The norms were supposed to come into effect in 2020, however, the government postponed the dates by a year, and subsequently another six months. From the OEM’s perspective, this should not be a challenge, as they have significant exposure as export models meet global emission norms. However, there is a cost involved, ~6 to 8%, which the OEMs will pass on to their customers gradually.
OEMs are also working on product upgrades, as they are looking at making tractors with lower HP and higher torque outputs. Going forward, despite the rise in tractor sales and penetration, the industry has scope for healthy growth.
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