NEW DELHI: Manufacturing sector rebounded in the July–September quarter of 2026-27 (FY27), with 95 per cent of manufacturers reporting higher or steady production, up from 77 per cent in the previous quarter, according to the Federation of Indian Chambers of Commerce and Industry’s (Ficci’s) quarterly survey on manufacturing sector released on Tuesday.
The survey, however, flagged that production costs are rising for a number of firms and geopolitical uncertainty is keeping many of them from investing in new capacity.
“This edition of the manufacturing survey reflects rebound in the sentiment for production compared to the previous quarter indicating recovery signs from the prevailing geopolitical situation,” said Ficci.
The survey found that demand recovered alongside output in the second quarter of FY27.
About 90 per cent of respondents reported higher or steady orders, compared with 77 per cent in April–June period.
“Further, average capacity utilisation rose to about 75 per cent from 72 per cent in the previous survey. Sectoral analysis revealed that glass saw the highest capacity utilisation at 88 per cent (out of nine sectors covered), while machine tools were the lowest at 68 per cent.”
About 80 per cent of manufacturers reported overseas shipments at or above year-ago levels, up from 74 per cent in the first quarter.
“Export diversification efforts by the government and industry seem to be yielding results,” said Ficci.
Costs are rising faster than before, however. Nearly 83 per cent of manufacturers said their cost of production rose as a share of sales, up from 79 per cent last quarter.
Ficci noted that increase in the share of firms reporting higher costs indicated higher cost pressures in this quarter.
“The increase in cost of production compared to last year is mainly due to higher raw material costs, energy costs, currency depreciation, increased logistics, and utility costs,” it added.
Higher costs and an uncertain global environment are making firms cautious about expansion.
Ficci described the overall investment outlook as “steady for the next six months.”
“Challenges faced by respondents in expanding capacities include uncertainty due to the geopolitical situation (tariffs, trade restrictions and demand uncertainty) and operational issues (skill gaps, raw material shortages, increasing logistics costs and regulatory challenges),” Ficci said.
The effects of the West Asia conflict are still visible in some parts of the industry. In the miscellaneous category, inventory levels have been flat “largely due to low demand caused by geopolitical tensions and working capital limitations,” said Ficci.
Hiring intentions improved, with 43 per cent of manufacturers planning to add workers in the next three months, up from 35 per cent last quarter.
“Most sectors are not facing shortage of labour at factories as around 67 per cent of respondents mentioned that they do not have any issues with workforce availability. The remaining 33 per cent feel that there is still lack of skilled workforce available in their sector. And, there is a need to step up efforts both at the government and industry level,” said the survey report.
Automotive and auto components is the only sector where respondents expect strong growth, in the range of 10–20 per cent.
Supply constraints could still slow the leading sectors. For autos, unavailability of labour, raw materials and components are the most significant constraints, according to Ficci.
To keep the recovery going, manufacturers asked the government to lower logistics, energy and input costs.
They also called for making credit cheaper and easier for micro, small and medium enterprises (MSMEs), speeding up regulatory approvals, and acting quicker against cheap imports.
Source: Business Standard
