Context:

• The government’s decision to reduce GST on tractors to 5% provides relief to farmers and manufacturers, promoting mechanisation and strengthening domestic manufacturing.
• However, with global markets tightening emission norms, India must choose between relying on low-cost production or transitioning to cleaner, high-value tractors that meet international standards and enhance export competitiveness.
• This article highlights how India’s tractor industry is entering a crucial phase of transformation, driven by lower GST rates, stricter emission norms, and rising global environmental standards.

Emission Standards and the Global Competitiveness of India’s Tractor Industry

• Tractors are central to India’s farm economy, used for ploughing, sowing, harvesting, irrigation, and transport.
• Their versatility has driven India to become a major global exporter, with shipments worth $1.15 billion to 162 countries in 2024–25.
• However, as tractor numbers grow, their environmental impact has become significant — the International Council on Clean Transportation (ICCT) projects that emissions from tractors and other non-road machinery will surpass those from road vehicles by 2030.

India’s Leap in Emission Standards

• To address these challenges, India implemented Bharat Stage (TREM) IV emission standards for agricultural tractors in 2023, cutting particulate emissions by up to 94% and nearly matching U.S. and EU norms.
• By April 2026, the rollout of Bharat Stage (TREM) V standards will fully align Indian tractors with U.S. Tier 4f and EU Stage V standards.
• This shift is not only an environmental milestone but also a strategic move to make Indian tractors globally competitive through harmonised regulations.

Trade Gains from Regulatory Alignment

• Alignment with global standards has already yielded results. Despite a decline in overall tractor exports to the U.S. in 2023–24 and 2024–25, shipments in the large segment (75–130 kW), where Indian and U.S. norms align, rose sharply.
• Similarly, in Europe, exports to Belgium grew dramatically after the adoption of TREM IV — medium-range tractor exports increased nearly 200-fold in 2023–24, and large tractor exports reached $28 million in 2024–25.

Lessons from Brazil’s Experience

• India’s early adoption of emission norms also created export advantages in emerging markets.
• When Brazil introduced MAR-I standards in 2017, Indian tractors were already compliant due to similar standards in India since 2010.
• This readiness boosted exports from $4.5 million in 2017–18 to $88 million in 2024–25, marking a 65% annual growth rate.
• The case underscores how regulatory foresight not only cuts emissions but also strengthens India’s position in global agricultural machinery markets.

Emission Standards as a Gateway to Global Opportunity for India’s Tractor Industry

• While several factors influence global trade, trends show that India’s tractor exports rise when emission standards align between India and its trading partners.
• Even though exports have grown in non-regulated markets like Bangladesh, South Africa, and Thailand due to affordability and reliability, data from major destinations reveal stronger performance where emission norms match.
• This suggests that higher environmental standards can complement, not constrain, India’s export potential.

From Cost Competitiveness to Clean Innovation

• Rising U.S. tariffs and tighter global regulations present Indian manufacturers with an opportunity to move beyond low-cost positioning.
• By focusing on cleaner and more efficient machines that meet global emission norms, India can establish itself as a high-value, technology-driven exporter.
• Such tractors offer lower lifetime costs, higher fuel efficiency, and resilience against future policy shifts.
• The rollout of Bharat Stage (TREM) V norms will further ease entry into advanced markets like the U.S. and Europe while strengthening India’s leadership in emerging economies.

Policy Support and Future Pathway

• Supportive measures such as the recent GST cut on tractors and targeted incentives for electric or hybrid models can accelerate this transformation.
• Instead of viewing emission regulations as burdens, India must treat them as enablers of trade, innovation, and growth.
• If effectively implemented, these reforms can turn India’s tractor sector into a global benchmark for low-emission, high-performance machinery—fueling both rural prosperity at home and export competitiveness abroad.