India's factories show strong momentum as output, demand and hiring pick up in Q2
Indian manufacturing sentiment rebounded sharply in the second quarter of FY27, driven by improved expectations for production and demand, according to the latest FICCI Quarterly Survey on Manufacturing. Around 95 per cent of respondents reported higher or unchanged production levels in Q2 FY27, a significant jump from 77 per cent in the previous quarter. Demand also strengthened considerably, with 90 per cent of manufacturers reporting higher or unchanged order levels compared with 77 per cent in Q1. FICCI attributed the improvement to signs of recovery from the prevailing geopolitical situation, supported by positive sentiment and stable domestic fundamentals.
Capacity utilisation improved to around 75 per cent from 72 per cent in the previous survey, reflecting enhanced operational efficiency. The export outlook also strengthened, with approximately 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 noted that export diversification efforts by the government and industry appear to be yielding results. Hiring intentions strengthened further, with 43 per cent of manufacturers planning to hire additional workers over the next three months, up from 35 per cent previously. Automotive and auto components recorded a strong growth outlook, while machine tools and metal products were expected to see strong-to-moderate growth.
However, cost pressures remain a concern, with nearly 83 per cent of respondents reporting increased production costs as a share of sales, citing higher raw material and energy costs, currency depreciation, and logistics expenses. Manufacturers also continued to flag geopolitical uncertainty, tariffs, trade restrictions, demand uncertainty, and skill gaps as constraints. Financing availability remained relatively comfortable, with 90 per cent reporting sufficient bank funds, though average interest rates paid by manufacturers rose to 9.1 per cent from 8.9 per cent.
