The Federation of Indian Chambers of Commerce & Industry (FICCI) in its latest edition of Manufacturing Survey has said that India's manufacturing sentiment improved in the July-September quarter of fiscal year 2026-27 (Q2FY27) as factories reported higher capacity utilisation and higher or same levels of production as compared to the previous quarter. The survey, which covered around 225 firms, assessed the performance and sentiment of manufacturers for nine major sectors -- namely automotive & auto components, capital goods, chemicals and allied products, electronics & electricals, glass, machine tools, metal & metal products, textiles, apparels & technical textiles and miscellaneous. The survey covered respondents from manufacturing units from both large and SME segments with a combined annual turnover of over Rs 2 lakh crore.
According to FICCI, the findings reflect a rebound in the sentiment for production in Q2 2026-27 compared to the previous quarter, indicating signs of recovery from the West Asia crisis. In comparison to Q1 FY 2026-27, when 77 per cent of respondents reported higher or same production levels, around 95 per cent of respondents reported either higher or same production levels for Q2. This positive outlook was also evident in demand, as 90 per cent of respondents reported higher or same orders in Q2 FY 2027 as compared to 77 per cent in the previous quarter. It added that a positive impact was seen on the capacity utilisation vis-a-vis the previous quarter. The existing average capacity utilisation in manufacturing was close to 75 per cent, which is higher than 72 per cent in the previous quarter.
The survey said the investment outlook is steady for the next six months. Challenges faced by respondents in expanding capacities include uncertainty due to current geopolitical situation (tariffs, trade restrictions, demand uncertainty), and operational issues (skill/labour availability, raw material shortages, increasing logistic costs, regulatory challenges). In Q2 2026-27, around 89 per cent of the respondents reported higher or same level of inventory and for Q1, around 91 per cent of the respondents reported higher or same level of inventory.
Regarding exports, about 74 per cent of respondents reported higher or same level of exports in Q1 FY 2026-27 and in Q2, around 80 per cent of the respondents reported exports to be higher or same as compared to previous year's similar quarters. Export diversification efforts by the government and industry seem to be yielding results, the FICCI survey noted. It revealed that 43 per cent of the respondents are looking at hiring an additional workforce in the next three months as compared to 35 per cent in the last quarter. However, the average interest rate paid by manufacturers was reported to be 9.1 per cent for Q2 as compared to 8.9 per cent reported for the last quarter. As many as 90 per cent of the respondents reported sufficient availability of funds from banks for working capital or long-term capital. Production costs for manufacturers seem to remain on higher side.
