India’s factories power up as demand, output and hiring improve in Q2: FICCI survey

New Delhi: Indian manufacturing sentiment rebounded in the second quarter of FY27, with a sharp improvement in expectations for production and demand, while capacity utilisation and hiring intentions also strengthened, according to the latest FICCI Quarterly Survey on Manufacturing.

Around 95 per cent of respondents reported higher or unchanged production levels in Q2 FY27, up from 77 per cent in the previous quarter. The improvement was also visible in demand, with 90 per cent of respondents reporting higher or unchanged order levels, compared with 77 per cent in Q1. FICCI said the responses indicate signs of recovery from the prevailing geopolitical situation, supported by positive sentiment and stable domestic fundamentals.

Capacity utilisation also improved, with average utilisation rising to around 75 per cent from 72 per cent in the previous survey. The future investment outlook remained steady for the next six months, although manufacturers continued to flag geopolitical uncertainty, tariffs, trade restrictions, demand uncertainty, skill gaps, raw material shortages, logistics costs and regulatory challenges as constraints to capacity expansion.


The outlook for exports strengthened, with around 80 per cent of respondents reporting higher or unchanged exports in Q2 compared with the year-ago period, against 74 per cent in Q1. FICCI said export diversification efforts by the government and industry appear to be yielding results. Hiring intentions also improved, with 43 per cent of manufacturers planning to hire additional workers over the next three months, up from 35 per cent in the previous quarter.

Among sectors, automotive and auto components recorded a strong growth outlook, while machine tools and metal and metal products were expected to see strong-to-moderate growth. Capital goods, glass, chemicals and allied products, electronics and electricals, and textiles were expected to record moderate growth.

However, cost pressures remain a key concern. 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, citing higher raw material and energy costs, currency depreciation, logistics and utility expenses.

The survey also showed that financing availability remains relatively comfortable, with 90 per cent of respondents reporting sufficient bank funds for working capital or long-term capital, although the average interest rate paid by manufacturers rose to 9.1 per cent from 8.9 per cent in the previous quarter.