New Delhi: India’s manufacturing sector continued to show resilience despite mounting cost pressures, with demand-led growth driving optimism in the final quarter of FY 2025-26. The latest Ficci Manufacturing Survey points to sustained expansion, underpinned by stable production levels and robust domestic demand across sectors.
The survey indicates that nearly 93% of manufacturers reported either higher or unchanged production levels in Q4 compared to the previous quarter, reflecting strong business continuity. This is complemented by healthy order books, with 89% of respondents expecting higher or stable domestic orders.
“Responses based on expectations of both large and MSME manufacturers, reflect the overall positive sentiments and strong domestic fundamentals for manufacturing growth,” notes the Ficci survey.
The data underscores that domestic consumption remains the backbone of industrial growth, even as global uncertainties persist. India’s internal demand dynamics appear to be insulating the sector from external volatility to a significant extent.
Cost Pressures Cast Shadow
Even as growth momentum holds, rising input costs are emerging as a key concern for manufacturers. A significant 70% of respondents reported an increase in production costs as a percentage of sales, up from 57% in the previous quarter.
“Production costs for manufacturers in this quarter seem to remain on higher side,” the Ficci survey observes, highlighting persistent inflationary pressures.
The surge in costs has been attributed to higher raw material prices, currency depreciation, and increased logistics and energy expenses. These factors are squeezing margins, forcing firms to balance pricing strategies with competitiveness.
While companies continue to absorb some of these costs, prolonged pressure could eventually impact profitability and investment cycles if not mitigated.
Capacity, Investment & Hiring Outlook
Capacity utilisation, a key indicator of industrial health, witnessed a slight dip, averaging around 72% in Q4. While this marks a marginal decline from the previous quarter, the broader investment outlook remains stable for the next six months.
“The only impact seen was in the capacity utilization which saw a little dip vis-à-vis previous quarter,” according to the Ficci survey.
Despite this, hiring intentions have improved modestly, with 41% of respondents planning to expand their workforce in the near term, signalling confidence in future demand. Access to finance also remains largely supportive, with over 86% of manufacturers reporting adequate availability of funds at an average interest rate of 8.85%.
However, structural challenges persist. Geopolitical uncertainties, supply chain disruptions, and regulatory hurdles continue to weigh on expansion plans, particularly for capacity addition.
Sectoral Trends & Structural Resilience
Sector-wise, growth expectations remain broadly moderate, with pockets of strength in chemicals, fertilizers and pharmaceuticals, which are projected to see strong-to-moderate expansion. Other sectors such as automotive, capital goods, and textiles are expected to grow in the 5-10% range.
Export sentiment has also improved, with 80% of respondents expecting higher or stable export levels compared to the same quarter last year. This marks a notable uptick from the previous quarter and suggests a gradual recovery in external demand.
A deeper reading of the Ficci Manufacturing Survey suggests that the sector’s resilience is increasingly structural rather than merely cyclical. With respondents representing a combined turnover exceeding Rs 8 lakh crore, the findings reflect alignment across both large enterprises and MSMEs.
Inventory trends further reinforce this stability, with 86% of respondents expecting higher or unchanged inventory levels, indicating confidence in demand visibility and supply chain continuity. Workforce availability remains largely stable, though a segment of the industry continues to flag shortages of skilled labour, underlining the need for sustained focus on skilling initiatives.
The broader macroeconomic environment is also lending support. Public infrastructure spending, policy incentives, and improving credit access are helping sustain manufacturing competitiveness. At the same time, firms remain cautious about global risks, including tariff barriers and trade restrictions, which could influence export performance.
(Cover photo by Josh Beech on Unsplash)