Manufacturing Sentiment Moderates but Fundamentals Stay Strong
India's manufacturing sector is projected to maintain a stable growth trajectory over the coming quarters, even amid heightened geopolitical tensions and escalating input costs, according to the latest quarterly survey by the Federation of Indian Chambers of Commerce and Industry (FICCI). The FICCI Quarterly Survey on Indian Manufacturing Sector for Q1 FY2026-27 indicates that while manufacturing sentiment has moderated compared to the previous quarter due to global uncertainties, domestic fundamentals remain robust. The survey notes that it "reflects moderated sentiment for production compared to the previous quarter indicating the potential impact of the ongoing geopolitical situation," yet manufacturers continue to express "overall positive sentiments and stable domestic fundamentals for manufacturing growth."
Machine Tools, Metals, and Auto Lead Optimism
Despite the moderation, FICCI expects several industries to outperform. According to the survey, Machine Tools and Metal & Metal Products have a "Strong to Moderate" growth outlook, while Automotive & Auto Components is anticipated to witness "Moderate to strong" growth. Electronics & Electricals and Capital Goods are projected to register moderate growth. The metals sector emerged as a standout performer: FICCI reported that "on average, the sector is utilizing more than 80% of its capacity," and "nearly 80% of the respondents reported that they are planning to expand their capacity in the next 6 months." Additionally, 60% of respondents in the sector plan to hire additional workers over the next three months, underscoring sustained investment confidence despite external headwinds.
Electronics and Electricals Show Confidence
Electronics and electricals also remain relatively optimistic. The survey found that "over 67% of the respondents reported that they are planning to expand capacity in the next 6 months," reflecting continued confidence in domestic demand and the long-term manufacturing ecosystem. At the aggregate level, FICCI observed that geopolitical developments have impacted production and demand indicators. The report noted that "the existing average capacity utilization in manufacturing is close to 72%, which is similar to the capacity utilization in the previous survey. The future investment outlook is steady for the next six months." However, challenges to expansion persist, including the "current geopolitical situation (tariffs, trade restrictions, demand uncertainty)," labour availability, raw material shortages, increasing logistics costs, and regulatory challenges.
Cost Pressures Mount Across Industries
The survey also highlighted mounting cost pressures. It stated that "nearly 79% of respondents reported an increase in the cost of production as a percentage of sales," compared with 70% in the previous quarter, with higher raw material, energy, logistics, and utility costs emerging as the principal drivers. Meanwhile, Chemicals, Fertilizers & Pharmaceuticals and the Miscellaneous manufacturing segment remain relatively cautious, with FICCI assigning them a "Moderate to Low" growth outlook amid geopolitical volatility, elevated input costs, supply-chain disruptions, and weaker investment and hiring intentions. Capital Goods and Textiles, Apparels & Technical Textiles are expected to post moderate growth, although expansion and recruitment plans remain subdued.
Overall Outlook: Cautious but Resilient
Overall, the survey suggests that while India's manufacturing sector continues to face challenges from global trade uncertainties and rising production costs, sectors linked to industrial capex, engineering, and advanced manufacturing remain well-positioned to support growth. Manufacturers are largely prioritising operational stability while retaining confidence in India's medium-term manufacturing prospects, underpinned by resilient domestic fundamentals.
