Is India’s Manufacturing Sector Gaining Strong Growth Momentum in Q2 FY26?
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Synopsis
India's manufacturing sector shows remarkable resilience, with a notable uptick in production levels and a positive outlook for demand. This report sheds light on the driving forces behind this growth, including domestic orders and investment intentions, while also addressing the challenges manufacturers face.
Key Takeaways
- 87% of manufacturers reported steady or increased production.
- 83% expect higher domestic demand due to GST cuts.
- Over half plan to invest in expansion within six months.
- Challenges include high input costs and labor shortages.
- Positive export sentiment, particularly in chemicals and electronics.
New Delhi, Oct 9 (NationPress) India's manufacturing sector is experiencing consistent growth and expansion, fueled by strong domestic demand and positive investment sentiment in the second quarter of the current financial year (Q2 FY26), according to a recent report.
Approximately 87 percent of manufacturers reported either increased or stable production levels during July–September 2025, an improvement from 77 percent in the previous quarter, as highlighted by the latest FICCI quarterly survey on manufacturing.
The report indicates that this optimism is mainly driven by a surge in domestic orders, with 83 percent of respondents anticipating higher demand in the upcoming months, further enhanced by recent GST rate reductions.
Utilization of around 75 percent of the sector's capacity indicates ongoing activity.
A positive investment environment is evident, as more than half of the respondents expressed intentions to expand capacity or invest in new projects over the next six months, the report emphasized.
However, manufacturers continue to face challenges, including high input costs, geopolitical instability, trade barriers, and a shortage of skilled workers in certain markets.
Increased costs in metals, bulk chemicals, energy, logistics, and labor were the primary reasons cited by over 50 percent of businesses reporting higher production costs compared to the previous year.
Despite these pressures, financial conditions remain stable. While 81 percent of respondents reported adequate access to bank credit for both working capital and long-term requirements, the average lending rate for manufacturers stood at 8.9 percent, the report noted.
With over 70 percent of manufacturers expecting shipments to either increase or remain stable compared to the previous year, export sentiment is also optimistic.
This positive export trend is being led by industries such as chemicals, electronics, and automobiles. The hiring outlook remains encouraging, with 57 percent of manufacturers indicating plans to increase workforce in the next quarter.
Simultaneously, many companies stressed the urgent need for more skilled labor and called for enhanced collaboration between industry and government on skill development, even though 80 percent of manufacturers reported no labor shortages.
This report was compiled based on insights from eight crucial sectors, including capital goods, automobiles, chemicals, electronics, machine tools, metals, textiles, and others, showcasing the resilience of Indian manufacturing amidst global uncertainties.
Point of View
I can confidently state that the resilience displayed by India's manufacturing sector in Q2 FY26 is commendable. This growth, driven by domestic demand and strategic investments, reflects the sector's adaptability in the face of global challenges. It is vital for stakeholders to address ongoing challenges while leveraging opportunities for sustained progress.
NationPress
09/10/2025
Frequently Asked Questions
What factors are contributing to the growth of India's manufacturing sector?
The growth is primarily driven by robust domestic demand, increased production levels, and positive investment sentiment. Recent GST rate cuts have also played a significant role.
How is the hiring outlook for manufacturers in India?
The hiring outlook is positive, with 57% of manufacturers planning to increase their workforce in the upcoming quarter.
What challenges do manufacturers face currently?
Manufacturers face challenges including high input costs, geopolitical instability, trade barriers, and a shortage of skilled labor in certain sectors.
What sectors are driving export growth in India?
The export growth is being driven by industries such as chemicals, electronics, and automobiles.
Are financial conditions favorable for manufacturers?
Yes, financial conditions are stable, with 81% of manufacturers reporting sufficient access to bank credit, although the average lending rate is at 8.9%.
