New Delhi

India's manufacturing sector is poised for sustained growth and expansion, backed by strong domestic demand and investment sentiment, according to the latest FICCI Quarterly Survey on Manufacturing (Q2 FY2025-26).

The survey, which assessed performance across eight key industries including Automotive, Capital Goods, Chemicals, Electronics, Machine Tools, Metals, Textiles, and Miscellaneous sectors shows continued momentum in production and order books. Nearly 87 per cent of respondents reported higher or same production levels in the second quarter (July-September 2025) compared to 77 per cent in the previous quarter.

Optimism in the sector is being largely driven by robust domestic demand, with 83 per cent of respondents expecting higher orders in the coming months, a trend further boosted by the recent GST rate cuts.

The FICCI survey indicates that average capacity utilisation stands at about 75 per cent, signalling steady economic activity. The investment climate remains positive, with over 50 per cent of manufacturers planning new investments or capacity expansions within the next six months.

However, companies cited several challenges to expansion, including global geopolitical tensions, trade restrictions, rising operational costs, and labour shortages in specific sectors.

The survey highlights that production costs remain elevated, with over 50 per cent of respondents reporting higher costs compared to last year. The rise is attributed to higher raw material prices, particularly of metals, bulk chemicals, and energy inputs, alongside increased labour and logistics expenses.

But despite these cost pressures, financial conditions appear favourable. The average lending rate for manufacturers stands at 8.9 per cent, and 81 per cent of respondents reported adequate access to bank funds for both working and long-term capital needs.

On the export front, more than 70 per cent of manufacturers expect their exports to be higher or at least similar to last year's levels. The positive outlook is shared across major sectors, including automotive, electronics, and chemicals, where production and export orders are showing strong momentum.

Hiring sentiment also remains upbeat, with 57 per cent of respondents planning to expand their workforce in the next quarter. While 80 per cent of manufacturers report no shortage of labour, about one-fifth indicated a need for more skilled workers, urging enhanced industry and government collaboration in skill development.

Sector-wise, strong to moderate growth is expected across industries, with particularly robust projections in automotive, electronics, machine tools, and metals. The sustained optimism reflects India's manufacturing resilience amid global headwinds and indicates that the sector is on track for a strong expansion in FY2025-26.

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FICCI report noted that continued policy support, investment facilitation, and infrastructure improvements will be crucial to maintaining this growth trajectory, as India aims to reinforce its position as a global manufacturing hub.