New Delhi, Sep 23 : The tractor segment in India is expected to grow by 4-7 per cent in FY2026, while the two-wheeler industry is also likely to record healthy growth, a new report said on Tuesday.

The forecast is supported by above-normal rainfall, strong rural incomes, festive demand, and the recent GST rate cuts that are expected to improve affordability and boost sales, according to the data compiled by rating agency ICRA.

The tractor industry has already shown strong performance in FY2026 so far. Wholesale volumes grew 28.2 per cent year-on-year (YoY) in August 2025, while cumulative growth for the first five months of the fiscal stood at 11.7 per cent.

Retail sales in August also recorded a sharp 30.1 per cent rise compared to the same month last year -- reflecting positive farmer sentiment and healthy rainfall.

India has received 108 per cent of the long-period average rainfall till September 17, which has boosted agricultural activity and rural demand.

ICRA said that the recent cut in GST rates on tractors to 5 per cent will further lift demand during the upcoming festive season.

The industry is also preparing for a possible round of pre-buying before the TREM V emission norms come into effect from April 1, 2026.

Tractor manufacturers are expected to maintain strong financial profiles, supported by steady demand, operating leverage and stable raw material costs.

In the two-wheeler industry, wholesale volumes rose by 7.2 per cent year-on-year (YoY) in August to 1.8 million units, as companies pushed dispatches ahead of the festive season.

However, retail sales in August grew by only 2.2 per cent due to excess rainfall in some regions and customers delaying purchases in anticipation of GST benefits. A stronger demand recovery is expected during the festive season.

Exports gave further support to the segment, with overseas shipments rising by 27.5 per cent in August compared to the same period last year.

Electric two-wheeler sales also continued to grow steadily, with 1,04,725 units sold in August, a 1.8 per cent increase from the previous month.

EV penetration in the two-wheeler category remained stable at around 6-7 per cent, the rating agency said.

Looking ahead, ICRA estimates domestic two-wheeler volumes to grow by 6-9 per cent in FY2026.

The report said this will be supported by replacement demand, urban market recovery, healthy rural incomes due to good monsoon rainfall, and the recent GST rate cut that will make vehicles more affordable.

/IANS