Manufacturing growth in India likely to moderate in Q1FY27 amid West Asia crisis: FICCI Survey

01 Jul 2026 Evaluate

FICCI in its latest edition of the Quarterly Survey on Manufacturing (QSM) has said that manufacturing growth in India is likely to moderate in the quarter ended June 2026 (Q1FY27) compared with the preceding quarter, primarily due to subdued business sentiment amid the ongoing West Asia crisis. The survey indicates a cautious outlook for production activity in Q1FY27 compared to the previous quarter. However, manufacturers’ responses continue to reflect overall positive sentiment, supported by stable domestic fundamentals, which are expected to underpin the sector’s growth trajectory.

As per the survey, in comparison to Q4FY26, when 93 per cent of respondents reported higher or same production levels, approximately 77 per cent respondents reported either higher or same production levels in Q1FY27. This moderation was also evident in demand, as 77 per cent of respondents reported higher or the same orders in the first quarter of FY27 as compared to 89 per cent in the previous quarter. However, there was no major impact seen on the capacity utilisation as compared to the previous quarter. The existing average capacity utilisation in manufacturing stood at close to 72 per cent, which is similar to the capacity utilisation in the previous survey.

FICCI said ‘The future investment outlook is steady for the next six months. Challenges faced by respondents in expanding capacities include the current geopolitical situation (tariffs, trade restrictions, demand uncertainty), operational issues (labour availability, raw material shortages, increasing logistic costs, regulatory challenges)’. It noted that about 61 per cent of respondents reported a higher or the same level of exports in Q4 of FY 2025-26, whereas for Q1 of FY 2026-27 around 74 per cent of the respondents reported their exports to be higher or the same as compared to the same periods in the preceding fiscal.

It further said export diversification efforts by the government and industry seem to be yielding results. Nearly 79 per cent of respondents reported an increase in the cost of production as a percentage of sales, as against 70 per cent in the previous quarter, indicating that cost pressures were higher in this quarter. The increase in the cost of production compared to last year is mainly due to higher raw material costs, energy costs, currency depreciation, and increased logistics and utility costs.

FICCI's latest QSM, which is the 70th edition of the survey, assessed the performance and sentiments for the April-June period of FY 2026-27 of manufacturers for eight major sectors such as Automotive & Auto Components, Capital Goods, Chemicals, Fertilisers & Pharmaceuticals, Electronics & Electricals, Machine Tools, Metal & Metal Products, Textiles and Apparels & Technical Textiles. Responses have been drawn from manufacturing units from both large and SME segments with a combined annual turnover of over Rs 4 lakh crore.

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