India’s manufacturing sector sees strong growth momentum in Q2 FY26: Report

New Delhi, Oct 9 India’s manufacturing sector is witnessing sustained growth and expansion, supported by robust domestic demand and upbeat investment sentiment in the second quarter of the current financial year (Q2 FY26), a new report has said.

As much as 87 per cent of manufacturers reported higher or steady production levels during July–September 2025, compared to 77 per cent in the previous quarter, according to the latest FICCI quarterly survey on manufacturing.

According to the report, the optimism is primarily driven by rising domestic orders, with 83 per cent of respondents expecting increased demand in the coming months, further boosted by recent GST rate cuts.

Around 75 per cent of the sector's capacity was being used, which suggests consistent activity.

A favourable investment climate is demonstrated by the fact that over half of the respondents stated they intended to increase capacity or invest in new projects over the next six months, the report highlighted.

Meanwhile, manufacturers still face difficulties, though, including high input costs, unstable geopolitics, trade barriers, and a lack of skilled workers in some markets.

Costlier metals, bulk chemicals, energy, logistics, and labour were the primary causes of the more than 50 per cent of businesses that reported higher production costs than the previous year.

Financial conditions are stable in spite of cost pressures. While 81 per cent of respondents said they had sufficient access to bank credit for both working capital and long-term needs, the average lending rate for manufacturers was 8.9 per cent, the report noted.

With over 70 per cent of manufacturers anticipating shipments to increase or stay the same over the previous year, export sentiment appears to be positive as well.

This export momentum is being driven by industries like chemicals, electronics, and automobiles, and the hiring outlook is also positive, with 57 per cent of manufacturers saying they intend to hire more people in the upcoming quarter.

At the same time, many firms emphasised the pressing need for more skilled workers and called for greater industry-government cooperation on skill development, even though 80 per cent of manufacturers said there was no labour shortage.

The report was prepared based on inputs from eight key sectors, including capital goods, automobiles, chemicals, electronics, machine tools, metals, textiles, and others, highlights how resilient Indian manufacturing has remained in the face of global uncertainty.

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