India’s manufacturing activity hit a record high in the third quarter of 2025–26, with 91% of companies reporting higher or stable production levels, according to a new survey by industry body FICCI. This is up from 87% in the previous quarter, showing strong momentum in the sector.

“The existing average capacity utilization in manufacturing is close to 75%, which reflects sustained economic activity in the sector. The future investment outlook is steady for investments and expansions in the next six months, the survey said. 

Strong demand lifts production

FICCI said the rise reflects growing confidence among manufacturers, supported by steady domestic demand and recent GST rate cuts. Around 86% of companies said they expect orders in the October–December quarter to be higher or remain the same compared to the previous quarter.

The findings are based on FICCI’s 68th Quarterly Survey on Manufacturing, which covered performance during Q3 2025–26. The survey included both large companies and small and medium enterprises across eight major sectors, with a combined annual turnover of over Rs 3 lakh crore.

Capacity use steady, investment outlook stable

Capacity utilisation in the manufacturing sector remains strong, with factories running at an average of nearly 75%. Companies said their investment and expansion plans for the next six months remain steady. However, many firms pointed to challenges such as global trade tensions, tariffs, labour availability, raw material shortages, and regulatory issues.

Inventories and exports show improvement

On inventories, about 90% of respondents reported higher or unchanged stock levels in Q2 2025–26. For Q3, around 83% expect inventory levels to remain the same or increase.

Export sentiment also improved. Nearly 69% of manufacturers reported stable or higher exports in Q2, while more than 70% expect exports in Q3 to be the same or better than the corresponding period last year.

Hiring picks up, funding remains available

Hiring plans showed a modest rise, with 38% of companies planning to add workers in the next three months, compared to 35% in the same quarter last year.

Manufacturers reported paying an average interest rate of 8.9%. More than 87% said banks are providing sufficient funds for both working capital and long-term needs.

Costs remain high, skills gap persists

Production costs continue to be a concern. Nearly 57% of companies said costs increased as a share of sales, mainly due to higher raw material prices, currency depreciation, and rising logistics, power, and utility costs.

On workforce availability, around 80% of firms said they are not facing labour shortages at factories. However, 20% said the lack of skilled workers remains an issue and needs stronger efforts from both the government and industry.

Looking ahead, electronics and electricals are expected to see strong growth in Q3, while most other sectors, including capital goods, chemicals, pharmaceuticals, metals, textiles, and auto components, are likely to record moderate growth.