India’s manufacturing sector maintained strong momentum in the third quarter of FY26, with the FICCI Manufacturing Index reaching its highest level on record, reflecting sustained business confidence and steady operational performance across industries.
According to the latest FICCI survey, 91% of participating manufacturers reported either higher production or stable output during the quarter, an improvement from 87% in the previous quarter. This trend highlights the resilience of industrial activity despite a challenging global environment.
Domestic Demand and Capacity Utilisation Remain Supportive
Domestic market conditions remained favourable, with 86% of respondents indicating steady or improved order books. Recent GST rate reductions played a supportive role by enhancing cost competitiveness and stimulating demand across several manufacturing segments.
Capacity utilisation in the sector averaged around 75%, a level that continues to support investment interest. Many companies indicated plans to pursue capacity expansion and capital expenditure over the next six months, underpinned by healthy demand outlooks.
Key Challenges and Export Outlook
Despite the positive momentum, the survey flagged several headwinds that could impact growth prospects. External risks such as geopolitical tensions, tariffs, and trade barriers were cited as major concerns for capacity expansion and supply chain stability. Manufacturers also highlighted operational challenges, including labour availability, raw material costs, and regulatory constraints.
On the export front, sentiment remained cautiously optimistic. Nearly 70% of surveyed companies expect exports to either remain stable or grow compared with last year, suggesting confidence in global demand despite ongoing trade uncertainties.
Sector-wise Growth Expectations
Growth expectations across manufacturing segments remained positive, led by electronics and electricals, which emerged as the strongest-performing category. Capital goods and textiles are expected to witness moderate growth, supported by steady domestic demand and improving investment activity.
Summary
The FICCI Manufacturing Index reached an all-time high in Q3 FY26, signalling robust performance in India’s manufacturing sector. Strong domestic demand, stable production levels, and healthy capacity utilisation supported business confidence, while electronics and electricals led growth expectations. However, geopolitical risks, trade barriers, and operational constraints remain key challenges, even as export sentiment stays cautiously positive.
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