India’s manufacturing sector closed FY26 on a resilient note, with strong domestic demand cushioning the impact of rising input costs and geopolitical disruptions linked to the West Asia crisis, according to the latest survey by FICCI.

The industry body’s 69th quarterly manufacturing survey shows that nearly 93% of respondents reported higher or stable production levels in Q4 FY26, an improvement from 91% in the preceding quarter. The findings, based on responses from large firms and MSMEs with a combined turnover exceeding Rs 8 lakh crore, underline sustained optimism across key sectors.

Demand conditions remained supportive, with about 89% of manufacturers indicating higher or unchanged order books during the quarter. Export sentiment also strengthened, with 80% of respondents expecting shipments to remain stable or grow compared to the year-ago period, up from 74% in Q3.

However, rising cost pressures emerged as a key concern. Nearly 70% of manufacturers reported an increase in production costs as a share of sales—significantly higher than 57% in the previous quarter—driven by elevated raw material prices, currency depreciation, and higher logistics and energy costs.

Capacity and investment outlook steady

Capacity utilisation saw a marginal dip, with average levels hovering around 72% across sectors, indicating some caution in the system. Sub-sectoral trends showed metals (76%), textiles (76.4%) and automotive (75.7%) operating at relatively higher utilisation levels, while electronics (68%) and capital goods (69%) lagged behind.

Despite this, the investment outlook remains stable for the next six months, although companies flagged geopolitical uncertainty, trade restrictions, and operational bottlenecks such as labour availability and raw material shortages as key constraints to capacity expansion.

Hiring, and credit availability improve

The survey points to a gradual pickup in hiring sentiment, with 41% of respondents planning to expand their workforce over the next three months, up from 38% in the previous quarter.

Access to finance appears largely adequate, with over 86% of manufacturers reporting sufficient availability of funds. The average interest rate paid by industry stood at 8.85%, indicating relatively stable borrowing conditions.

At the same time, labour availability remains comfortable for most sectors, although about one-fifth of respondents flagged a shortage of skilled workforce, signalling the need for continued skilling initiatives.

Moderate growth expected across sectors

Sectoral outlook remains broadly stable, with most industries—including automotive, capital goods, metals and textiles—expected to clock moderate growth of 5–10% in Q4 FY26. The chemicals and pharmaceuticals segment stands out with a “strong to moderate” growth expectation.

Overall, the survey highlights a manufacturing sector navigating cost pressures and global uncertainties, while drawing strength from domestic demand and steady export expectations.