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India's Manufacturing Growth Holds Strong Despite Rising Cost Pressures

India's manufacturing sector maintained growth momentum in Q4 FY26, with 93% of firms reporting higher or unchanged production. However, rising costs affected 70% of respondents, driven by raw material prices and currency depreciation. Capacity utilization dipped to 72%, while textiles and automotive sectors outperformed. The hiring outlook improved, with 41% of firms planning to add workforce in the next quarter.

Key Points: Manufacturing Growth Positive in Q4 FY26 Despite Rising Costs

  • 93% of manufacturers report higher/unchanged production in Q4 FY26
  • 70% face rising production costs due to raw materials, currency, logistics
  • Capacity utilization dips to 72%, with textiles leading at 76.4%
  • 41% of firms plan to hire in next 3 months, up from 38%
2 min read

Manufacturing growth sentiment remains positive despite rising costs in Q4 FY26: FICCI Survey

FICCI survey shows 93% of manufacturers report higher or unchanged production in Q4 FY26, but rising costs and capacity utilization dip pose challenges.

"93 per cent of respondents reported higher or unchanged production in Q4, up from 91 per cent in the previous quarter - FICCI Survey"

New Delhi, May 6

India's manufacturing sector remained on a steady growth path in the fourth quarter of FY 2025-26, supported by strong domestic demand and a stable export outlook, according to a survey by the Federation of Indian Chambers of Commerce and Industry.The survey said about 93 per cent of respondents reported higher or unchanged production in Q4, up from 91 per cent in the previous quarter, indicating continued growth momentum across sectors.

Domestic demand remained firm, with 89 per cent of respondents expecting higher or similar orders compared to the previous quarter.However, rising costs continued to weigh on manufacturers. Nearly 70 per cent of respondents reported an increase in production costs as a share of sales, compared to 57 per cent in the previous quarter, driven by higher raw material prices, currency depreciation, and increased logistics, power, and utility expenses.However, capacity utilisation saw a marginal dip, with overall manufacturing utilisation levels at around 72 per cent in Q4 FY26. Among key sectors, utilisation stood at about 76.4 per cent in textiles, apparels and technical textiles, 76 per cent in metal and metal products, 75.7 per cent in automotive and auto components, and 75 per cent in chemicals, fertilisers and pharmaceuticals, while capital goods (69 per cent), electronics and electricals (68 per cent), machine tools (70 per cent), and miscellaneous segments (65 per cent) reported relatively lower utilisation levels.Companies also highlighted challenges in expanding capacity, citing global uncertainties, trade restrictions, labour availability issues, raw material shortages, and regulatory hurdles.On the export front, sentiment remained stable, with around 80 per cent of respondents expecting exports to be higher or unchanged compared to the same period last year, up from 74 per cent in Q3.

The hiring outlook improved, with 41 per cent of firms planning to add workforce over the next three months, compared to 38 per cent in the previous quarter.Access to finance remained adequate, with over 86 per cent of respondents reporting sufficient availability of funds from banks. The average interest rate paid by manufacturers stood at 8.85 per cent.Overall, the survey indicated that despite persistent cost pressures and a slight moderation in capacity utilisation, strong domestic demand, steady exports, and improved hiring intentions continue to support growth in India's manufacturing sector.

- ANI

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Reader Comments

P
Priya S
Good to see hiring intentions improving. Manufacturing sector is backbone of our economy. Hope the cost pressures don't lead to job cuts in smaller units. The 8.85% interest rate is manageable but need more MSME-friendly policies.
J
James A
Impressive stability. But 70% reporting cost increases is concerning. Currency depreciation and logistics costs are squeezing margins. Need more competitive export infrastructure to offset these.
V
Vikram M
The textile sector at 76.4% capacity utilisation is promising. But the capital goods and electronics segments at 68-70% show we still have untapped potential. More PLI schemes needed for these sectors.
S
Sarah B
Positive numbers overall. But the 72% average capacity utilisation is still below pre-pandemic levels. Global uncertainties and trade restrictions are real hurdles. Hope the new FTAs help boost exports.
R
Rohit P
Sahi hai! Domestic demand is our strength. But why is the survey not mentioning the impact of rising electricity costs on small manufacturers? Power expenses are killing us in tier-2 cities. Need more focus on renewable energy for captive consumption.
K
Kavya N
41% planning to hire is great news for youth employment. But I worry about the 6% drop in capacity utilisation in some sectors. Government should relax

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