GST reform have boosted optimism among the manufacturing sector. A recent survey by FICCI highlighted expectations of domestic demand picking up pace. 83% of the respondents in FICCI Survey are expecting an increase in orders after the rate restructuring. The report also noted that GST waiver on key raw materials, such as allied steels, will lower production costs. The Survey also highlighted improvement in the hiring outlook.
The FICCI survey from July–September 2025 quarter found that 87% of manufacturers reported higher or the same production levels, compared to 77% in the previous quarter.
Hiring outlook improves, labour shortage eases
Even though most sectors are not facing a shortage of labour at factories, the hiring outlook is improving. Around 57% of the survey respondents are looking to hire additional workers in the next three months. The hiring outlook is improving across sectors, particularly in auto, machine tools, and metals. However, many respondents flagged the shortage of skilled labour as a continuing challenge.
Manufacturing capacity utilisation steady at 75%
The average capacity utilisation in the manufacturing sector stood at around 75%, indicating healthy and sustained economic activity. Over half of the respondents also plan to invest in capacity expansion in the next six months, reflecting confidence in business conditions.
Tariff, raw material shortage persist as challenges
However, some challenges persist. Respondents cited global and geopolitical factors such as trade restrictions and tariffs, as well as domestic operational issues including labour availability, raw material shortages, and regulatory bottlenecks as hurdles to expansion.
Production costs remain elevated, exports steady
Production costs continued to remain high in Q2 FY26. About 52% of manufacturers reported higher costs, mainly due to expensive 88.13 materials such as bulk chemicals, metallurgical coke, and iron ore, as well as higher labour and logistics costs.
The outlook for exports is also positive with more than 70% of respondents expecting higher or same export levels compared to the previous year’s quarter.