India's manufacturing sector is expected to witness stronger demand in the third quarter of FY27, even as firms flag elevated cost pressures, the Reserve Bank of India's latest Industrial Outlook Survey found.
The 115th round of the quarterly survey, conducted between July and September 2026 with responses from 1,224 manufacturing companies, assessed business conditions in Q2FY27 and captured firms' expectations for Q3FY27 and the following two quarters.
Conditions improved in Q2FY27
Demand conditions improved in the quarter gone by compared with the previous quarter, supported by stronger production, order books and capacity utilisation, the survey found. The Business Assessment Index (BAI) rose to 104.4 in Q2FY27 from 100.4 in Q1FY27, indicating an improvement in overall business conditions.
However, raw material cost pressures remained elevated, while sentiment regarding selling prices moderated, the survey noted.
Optimism for Q3FY27 and beyond
Looking ahead, manufacturing firms remained optimistic about demand in Q3FY27, expecting improvements in "production, order books, capacity utilisation and exports." The Business Expectations Index (BEI) also improved for Q3FY27, reflecting stronger business confidence.
At the same time, cost pressures are anticipated to remain elevated, alongside expectations on selling prices and profit margins, the survey said.
For Q4FY27 and Q1FY28, manufacturers expect healthy demand conditions to continue, with a positive outlook on overall business conditions, production, order books and capacity utilisation. Input cost pressures are likely to persist, the survey found, prompting firms to pass on higher costs through increased selling prices.
Sources: The Tribune — Manufacturing sector demand outlook improves for Q3FY27, input cost concerns persist: RBI
The 115th round of the quarterly survey, conducted between July and September 2026 with responses from 1,224 manufacturing companies, assessed business conditions in Q2FY27 and captured firms' expectations for Q3FY27 and the following two quarters.
Conditions improved in Q2FY27
Demand conditions improved in the quarter gone by compared with the previous quarter, supported by stronger production, order books and capacity utilisation, the survey found. The Business Assessment Index (BAI) rose to 104.4 in Q2FY27 from 100.4 in Q1FY27, indicating an improvement in overall business conditions.
However, raw material cost pressures remained elevated, while sentiment regarding selling prices moderated, the survey noted.
Optimism for Q3FY27 and beyond
Looking ahead, manufacturing firms remained optimistic about demand in Q3FY27, expecting improvements in "production, order books, capacity utilisation and exports." The Business Expectations Index (BEI) also improved for Q3FY27, reflecting stronger business confidence.
At the same time, cost pressures are anticipated to remain elevated, alongside expectations on selling prices and profit margins, the survey said.
For Q4FY27 and Q1FY28, manufacturers expect healthy demand conditions to continue, with a positive outlook on overall business conditions, production, order books and capacity utilisation. Input cost pressures are likely to persist, the survey found, prompting firms to pass on higher costs through increased selling prices.
Sources: The Tribune — Manufacturing sector demand outlook improves for Q3FY27, input cost concerns persist: RBI
