New Delhi, Jan 20 (UNI) India’s manufacturing sector recorded its highest-ever performance in the third quarter of FY 2025–26, reflecting sustained growth and strong business sentiment, according to FICCI’s latest Quarterly Survey on Manufacturing (QSM).
The survey revealed that 91 percent of respondents reported higher or stable production levels in Q3 FY26 (October–December 2025), up from 87 percent in the previous quarter.
Rising optimism was also visible on the demand front, with 86 percent of manufacturers expecting higher or unchanged domestic orders compared to Q2 FY26, supported by recent GST rate cuts.
The 68th edition of the QSM covered eight major manufacturing sectors, including auto components, capital goods, chemicals, fertilizers and pharmaceuticals, electronics and electricals, machine tools, metal and metal products, textiles and apparel, and miscellaneous industries.
Responses were received from both large enterprises and SMEs, together representing an annual turnover exceeding Rs 3 lakh crore.
Average capacity utilisation across the manufacturing sector stood at nearly 75 percent, indicating continued economic momentum.
While investment and expansion plans for the next six months remain steady, manufacturers highlighted challenges such as global and geopolitical uncertainties, trade restrictions, labour availability, raw material shortages, and regulatory hurdles in scaling capacities.
Inventory levels remained elevated, with around 90 percent of respondents reporting higher or unchanged inventories in Q2 FY26. For Q3 FY26, 83 percent expect inventory levels to remain the same or increase.
On the export front, about 69 percent of manufacturers reported stable or higher exports in Q2 FY26, while over 70 percent expect exports in Q3 FY26 to be higher or at least the same compared to corresponding quarters last year.
Hiring sentiment improved, with 38 percent of respondents planning to add workforce in the next three months, compared to 35 percent in the same period last year.
The average interest rate paid by manufacturers was reported at 8.9 percent, while more than 87 percent of respondents indicated adequate availability of bank funding for both working capital and long-term needs.
Based on expectations, electronics and electricals are projected to witness a strong growth of 10-20 percent in Q3 FY26.
Most other sectors, including capital goods, auto components, chemicals, machine tools, metals, and textiles, are expected to record moderate growth in the range of 5-10 percent.
Despite strong performance, cost pressures continue to weigh on manufacturers. Nearly 57 percent of respondents reported an increase in production costs as a percentage of sales, in line with the previous quarter.
Higher raw material prices, currency depreciation, and rising logistics, power, and utility costs were cited as key factors.
While workforce availability remains largely stable, with around 80 percent of respondents reporting no labour shortages, about 20 percent continue to face a lack of skilled manpower.
Industry participants emphasised the need for intensified efforts by both government and industry to address skill gaps.
Overall, the survey underscores resilient manufacturing activity and positive sentiment, even as global uncertainties and cost pressures persist.
