FICCI‘s latest manufacturing survey continues to reflect sustained growth and increasing optimism for India’s manufacturing sector. For the third quarter of 2025-26, the index has touched all-time high with 91% of respondents reported either higher or same production levels as compared to 87% for Q2 FY 2025-26. This optimism is also evident in domestic demand, as 86% of respondents anticipated higher or same orders in Q3 FY 2026 compared to the previous quarter and more so after the latest GST rate cuts announced.
Source: FICCI survey
FICCI’s latest Quarterly Survey on Manufacturing (QSM), which is the 68th edition of the survey, assessed the performance and sentiments for Q3 October-December 2025-26 of manufacturers for eight major sectors namely, Auto Components, Capital Goods, Chemicals, Fertilizers & Pharmaceuticals, Electronics & Electricals, Machine Tools, Metal & Metal Products, Textiles, Apparels & Technical Textiles and Miscellaneous. Responses have been drawn from manufacturing units from both large and SME segments with a combined annual turnover of over Rs. 3 lakh crores.
Capacity Addition & Utilization
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.
Challenges faced by respondents in expanding capacities include global and geopolitical factors (tariffs, trade restrictions, economic uncertainty), operational issues (labour availability, raw material shortages, regulatory challenges).
The table below gives average capacity utilization for various sub-sectors of manufacturing:
Table: Current Average Capacity Utilization levels as reported in survey (%)
Sector
Average capacity utilization (%)
Auto Components
65
Capital Goods
72
Chemicals, Fertilizers & Pharmaceuticals
74.5
Electronics & Electricals
78
Machine Tools
69
Metal & Metal Products
79
Miscellaneous
75
Textiles, Apparels & Technical Textiles
75
Grand Total
75 (approx.)
Inventories
In Q2 2025-26, around 90% of the respondents reported higher or same level of inventory and for Q-3 2025-26, around 83% of the respondents are expecting higher or same level of inventory.
Exports
In exports, about 69% of respondents reported higher or same level of exports in Q2 FY 2025-26 and in Q3 2025-26 more than 70% of the respondents expect their exports to be higher or same as compared to previous year’s similar quarters.
Hiring
38% of the respondents are looking at hiring an additional workforce in the next three months as compared to 35% in the same quarter last year.
Interest Rate
The average interest rate paid by the manufacturers has been reported to be 8.9%. A little over 87% of respondents reported sufficient availability of funds from banks for working capital or long-term capital.
Sectoral Growth
Based on expectations, the likely sectoral growth range is shown below:
Production costs for manufacturers in this quarter seem to remain on higher side. Nearly 57% of respondents reported an increase in the cost of production as a percentage of sales, which is consistent with the previous quarter’s findings, indicating that costs are still on the higher side.
The increase in cost of production compared to last year is mainly due to higher raw material costs, currency depreciation, and increased logistics, power, and utility costs.
Workforce Availability
Most sectors though are not facing shortage of labor at factories as around 80% respondents mentioned that they do not have any issues with workforce availability, the remaining 20% feel that there is still lack of skilled workforce available in their sector and there is a need to step up efforts both at government and Industry level.
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