What is the story about?
India’s manufacturing sector is poised for strong growth and expansion, supported by rising domestic demand, a post-GST rate cut boost, and improving capacity utilisation, according to FICCI’s latest Quarterly Survey on Manufacturing.
The 67th edition of the survey, covering eight key sectors including automotive, capital goods, chemicals, textiles, and metals, found that 87% of manufacturers reported higher or similar production levels in Q2 FY26, up from 77% in the previous quarter.
"This is one of the highest percentages witnessed in the last many quarters," the survey said.
This optimism is also evident in domestic demand, as 83% of respondents expect higher order books, reflecting strong domestic demand momentum, particularly after the recent reduction in GST rates on several products.
Capacity and investment outlook
Average capacity utilisation in the sector stood close to 75%, suggesting sustained economic activity. Over 50% of manufacturers plan to invest or expand capacity in the next six months, the survey said.
However, respondents flagged challenges including geopolitical uncertainties, raw material shortages, and regulatory hurdles that could impact expansion plans.
Also Read: India’s manufacturing PMI hits 17-year high in August
Employment and costs
The manufacturing rebound is also translating into job creation, with 57% of respondents looking to hire additional workers in the coming quarter.
On the cost front, over half the respondents reported higher production costs due to elevated prices of raw materials, labour, and logistics. Despite this, most manufacturers (81%) said they had adequate access to bank funding, with the average borrowing rate at 8.9%.
Workforce availability has largely stabilised, though 20% of firms still face skilled labour shortages, FICCI noted, calling for continued collaboration between industry and government to strengthen vocational training.
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