New Delhi, Oct 6: Sentiment across India’s manufacturing sector improved sharply in the second quarter of FY27, with stronger production, demand, capacity utilisation, exports and hiring plans pointing to a healthier operating environment, according to the latest FICCI Quarterly Survey on Manufacturing.
Nearly 95 per cent of manufacturers surveyed reported higher or unchanged production during July-September, compared with 77 per cent in the previous quarter. Order books also strengthened, with around 90 per cent of respondents reporting higher or unchanged orders, up from 77 per cent in Q1 FY27.
The improvement was reflected in factory utilisation as well. Average capacity utilisation rose to around 75.5 per cent from 72 per cent in the previous survey, suggesting that manufacturers were making greater use of their existing production capacity.
Hiring and exports gain momentum
Improving business activity is also translating into stronger employment expectations. About 43 per cent of manufacturers said they planned to hire additional workers over the next three months, compared with 35 per cent in the previous quarter.
Export sentiment also strengthened. Around 80 per cent of respondents reported higher or unchanged exports compared with the year-ago period, up from 74 per cent in Q1. The survey attributed part of the improvement to efforts by industry and the government to diversify export markets.
Auto sector leads growth outlook
Among major industries, automobiles and auto components recorded the strongest growth outlook. Machine tools and metal products also showed a relatively positive outlook, while capital goods, glass, chemicals, electronics, electricals and textiles were expected to see moderate growth.
The stronger manufacturing sentiment comes amid signs of improved factory activity. India’s manufacturing PMI also rose to 55.1 in September from 52.8 in August, reaching a seven-month high as new orders, output and employment improved.
Cost pressures remain a challenge
Despite the improvement in production and demand, manufacturers continue to face cost-related pressures. Nearly 83 per cent of respondents reported an increase in production costs as a share of sales, compared with 79 per cent in the previous quarter.
Higher raw-material and energy prices, rupee depreciation, logistics expenses and utility costs were among the factors adding to the cost burden. The average interest rate paid by manufacturers increased to 9.1 per cent from 8.9 per cent in the previous quarter.
At the same time, financing availability remained relatively comfortable, with around 90 per cent of respondents saying banks were providing adequate funds for working capital and long-term requirements.
Manufacturing outlook
The Q2 survey points to improving confidence in India’s manufacturing sector, supported by stronger domestic demand and better production activity. However, geopolitical uncertainty, tariffs, trade restrictions, skilled-labour shortages, raw-material availability and logistics costs remain important challenges for businesses planning fresh capacity expansion.
Overall, the improvement in production, orders, exports and hiring suggests that India’s manufacturing sector is entering the second half of FY27 with stronger business momentum, even as companies continue to navigate cost pressures and an uncertain global trade environment.