India’s manufacturing growth sentiment positive in Q4 despite rising raw material costs: FICCI survey

Growth sentiment in India’s manufacturing sector stays positive during the fourth quarter of FY26 despite rising input costs and geopolitical uncertainties, according to a survey released on Wednesday. The only impact seen was in the capacity utilisation, which saw a little dip at nearly 72 per cent compared to the previous quarter. However, the future investment outlook is steady for the next six months, showed the latest FICCI survey for the January-March period of FY26.

The survey assessed the performance and sentiments for January-March 2025-26 of manufacturers for eight major sectors, including automobile, capital goods, chemical, fertilizer & pharmaceuticals, electronics & electricals, machine tools, metal, and textiles. Responses have been drawn from over 250 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 8 lakh crore.

“The survey continued to reflect sustained growth and increasing optimism for India’s manufacturing sector in Q4. In comparison to Q3 FY 2025-26, when 91 per cent of respondents reported higher or same production levels, approximately 93 per cent of respondents reported either higher or same production levels in Q4 FY 2025-26. This optimism was also evident in domestic demand, as 89 per cent of respondents anticipated higher or the same orders in Q4 FY 2026 compared to the previous quarter,” FICCI stated. Production costs for manufacturers in this quarter seem to remain on the higher side, the survey observed.

Nearly 70 per cent of respondents reported an increase in the cost of production as a percentage of sales, as against 57 per cent in the previous quarter, indicating that costs pressures were higher in this quarter.

The increase in cost of production is mainly due to higher raw material costs, currency depreciation, and increased logistics, power, and utility costs. More than half of the respondents reported that they are planning to expand their capacity in the next 6 months. According to the survey, the challenges faced by the respondents in expanding capacities include the current geopolitical situation (tariffs, trade restrictions, economic uncertainty) and operational issues related to labour availability, raw material shortages and regulatory challenges.

Some major constraints restricting the manufacturing sector’s growth include a lack of domestic demand, low exports, unavailability of raw materials and unavailability of skilled manpower.

The survey also found that 60 per cent of manufacturers expect high growth, and they have suggested encouraging technology partnerships and R&D grants for machinery manufacturers, support for local manufacturing clusters, and export incentives to promote new investment.

In the third quarter, 89 per cent of the respondents reported a higher or the same level of inventory, while similar expectations were shared by 86 per cent of the respondents during the fourth quarter, the survey showed.

Most of the sectors covered in the survey are not facing a shortage of labour at factories, with around 79 per cent of respondents saying that they do not have any issues with workforce availability. The remaining 21 per cent said that there is still a lack of skilled workforce in their sectors, and there is a need to step up efforts both at the Government and the industry level.