India manufacturing growth holds in Q4 FY26 despite rising input costs
Synopsis
India's manufacturing sector is holding its ground in Q4 FY26, with 93% of FICCI survey respondents reporting stable or higher output. But the headline optimism masks a sharp jump in cost pressure — 70% of firms now report rising production costs as a share of sales, up from 57% last quarter, driven by raw material prices, currency depreciation, and logistics inflation.
Key Takeaways
93 per cent of FICCI survey respondents reported production as higher or flat in Q4 FY26 , up from 91 per cent in Q3 FY26.
89 per cent of respondents anticipate higher or same domestic order levels in Q4 FY26 .
Capacity utilisation averaged approximately 72 per cent , ranging from 65 per cent (miscellaneous) to 76.4 per cent (textiles and apparels).
Production cost pressure surged: 70 per cent of firms reported rising costs as a share of sales, up from 57 per cent in the previous quarter.
Hiring intentions rose to 41 per cent planning to add staff, up from 38 per cent last quarter.
Export outlook improved, with 80 per cent of respondents expecting higher or flat exports in Q4 FY26 .
India's manufacturing sector maintained sustained growth and rising optimism in Q4 FY 2026 even as input costs climbed sharply, according to a report released on Wednesday, 6 May 2025. The FICCI Manufacturing Survey, which captured responses from large and MSME manufacturers across eight major sectors with a combined annual turnover of over ₹8 lakh crore, pointed to resilient domestic fundamentals underpinning the sector's performance.
Production and Demand Outlook
A strong 93 per cent of survey respondents reported production as higher or flat in Q4 FY26, up from 91 per cent in the previous quarter. Domestic demand sentiment also held firm, with 89 per cent of respondents anticipating higher or same order levels in Q4 FY26 compared to the prior quarter. These figures suggest that demand-side pressures have not yet materially disrupted the sector's momentum.
On the exports front, around 74 per cent of respondents reported higher or flat export levels in Q3 FY26, while 80 per cent expect exports to be higher or flat in Q4 FY26 compared to the same quarter of the previous year — a notable uptick that signals improving external demand.
Capacity Utilisation and Inventory
Capacity utilisation eased slightly to an average of approximately 72 per cent, with sectoral averages ranging from roughly 65 per cent in the miscellaneous category to about 76.4 per cent in textiles, apparels and technical textiles. The future investment outlook for the next six months remains steady, according to the survey.
Inventory levels remained broadly stable. Around 89 per cent of respondents reported higher or same inventory in Q3 FY26, while 86 per cent expect a higher or same level in Q4 FY26, indicating that manufacturers are not aggressively drawing down stocks despite cost pressures.
Rising Input Costs: A Key Risk
The survey flagged a significant jump in production costs, with nearly 70 per cent of firms reporting an increase in cost of production as a percentage of sales — up sharply from 57 per cent in the previous quarter. The rise is attributed to higher raw material prices, currency depreciation, and increased logistics, power, and utility costs.
This comes amid a broader global commodity price environment that has kept input inflation elevated across emerging market manufacturers. Notably, the jump of 13 percentage points in cost-pressure reporting within a single quarter is among the sharpest seen in recent FICCI survey cycles.
Hiring Intentions and Workforce
Hiring intentions strengthened modestly, with 41 per cent of respondents planning to add staff in the next three months, up from 38 per cent in the prior quarter. However, the skilled workforce gap remains a concern — 21 per cent of respondents said they lacked access to adequately skilled workers in their sector, even as 79 per cent reported no issues with workforce availability overall.
With export expectations rising and hiring intentions ticking upward, the sector's near-term trajectory will hinge on how quickly firms can absorb or pass on the surge in production costs.
Point of View
But the 13-percentage-point jump in cost-pressure reporting in a single quarter is a warning sign that deserves more attention than the headline production figures. India's manufacturing sector has long struggled to convert output optimism into durable margin expansion, and rising raw material prices combined with currency depreciation could erode the competitiveness gains that recent PLI-linked investments were meant to deliver. The skilled workforce gap — flagged by 21 per cent of respondents — is also a structural fault line that quarterly surveys keep surfacing without a policy response commensurate with its scale. If cost absorption outpaces pricing power, the hiring intentions uptick could reverse quickly.
NationPress
10 May 2026
Frequently Asked Questions
What did the FICCI Manufacturing Survey find for Q4 FY26?
The FICCI Manufacturing Survey found that 93 per cent of respondents reported production as higher or flat in Q4 FY26, up from 91 per cent in the previous quarter. Domestic demand sentiment also remained firm, with 89 per cent anticipating higher or same order levels.
Why are manufacturing input costs rising in India?
According to the FICCI survey, the rise in production costs is driven by higher raw material prices, currency depreciation, and increased logistics, power, and utility costs. Nearly 70 per cent of firms reported an increase in cost of production as a percentage of sales, up sharply from 57 per cent in the prior quarter.
What is the capacity utilisation rate in India's manufacturing sector?
Capacity utilisation averaged approximately 72 per cent in Q4 FY26, according to the FICCI survey. Sectoral averages ranged from roughly 65 per cent in the miscellaneous category to about 76.4 per cent in textiles, apparels and technical textiles.
How are India's manufacturing export expectations for Q4 FY26?
Around 80 per cent of respondents expect their exports to be higher or flat in Q4 FY26 compared to the same quarter of the previous year, up from 74 per cent who reported higher or flat exports in Q3 FY26.
What is the hiring outlook for India's manufacturing sector?
Hiring intentions strengthened modestly, with 41 per cent of respondents planning to add staff in the next three months, up from 38 per cent in the prior quarter. However, 21 per cent of respondents flagged a lack of adequately skilled workers in their sector.
