Publications

PDF - Industrial Outlook Survey of the Manufacturing Sector for Q1:2026-27 ()
Date : Aug 05, 2026
Industrial Outlook Survey of the Manufacturing Sector for Q1:2026-27

Today, the Reserve Bank released the results of 114th round of its quarterly industrial outlook survey (IOS). The survey1 encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q1:2026-27 and their expectations for Q2:2026-27 as well as outlook on select parameters for the subsequent two quarters. A total of 1,202 companies responded in this round of the survey2 conducted during April-June 2026.

Highlights:

A. Assessment for Q1:2026-27

  • Manufacturing firms’ optimism on demand conditions weakened in Q1:2026‑27, with sentiments on production, order books, capacity utilisation and exports turning subdued amidst the West Asia conflict (Table A).

  • Firms reported intensified cost pressures, particularly on raw materials, alongside some increase in selling prices.

  • Profit margins came under significant strain, reflecting limited pass‑through of costs.

  • The Business Assessment Index (BAI) dropped sharply to 100.4 in Q1:2026‑27, from 108.8 in Q4:2025‑26, marking the lowest level in the post Covid-19 period, even as it stayed within expansionary territory (Chart 1).

B. Expectations for Q2:2026-27

  • Manufacturers outlook for Q2:2026-27 remains positive, albeit with some moderation, reflecting a cautious outlook on production, order books, capacity utilisation and exports.
  • Cost pressures are anticipated to remain elevated, with only partial pass‑through, keeping profit margins under strain.
  • Business expectations index moderated in Q2:2026-27, reflecting guarded sentiment among manufacturers (Chart 1).
Chart 1: Business Sentiments

C. Expectations for Q3:2026-27 and Q4:2026-27

  • Demand conditions are expected to improve during H2:2026-27 from Q2 (Table B).

  • Responding firms expect the input cost pressures to continue.

Table A: Summary of Net responses3 on Survey Parameters
(per cent)
Parameters Assessment period Expectation period
Q4:2025-26* Q1:2026-27 Q1:2026-27* Q2:2026-27
Production 18.3 3.4 38.2 26.7
Order Books 19.2 2.9 38.1 27.0
Pending Orders 9.9 15.7 2.1 3.3
Capacity Utilisation 16.9 3.5 32.3 21.5
Inventory of Raw Materials -2.1 8.1 -9.4 -3.4
Inventory of Finished Goods -1.3 8.6 -7.7 -3.2
Exports 1.6 -2.9 19.7 8.9
Imports 6.9 2.1 20.5 7.2
Employment 10.8 6.8 17.1 8.4
Financial Situation (Overall) 23.3 4.5 41.0 25.4
Availability of Finance (from internal accruals) 24.2 11.0 32.9 14.4
Availability of Finance (from banks & other sources) 17.1 9.9 22.7 10.9
Availability of Finance (from overseas, if applicable) 6.9 2.0 15.0 3.5
Cost of Raw Material -53.7 -78.1 -50.9 -52.9
Cost of Finance -8.3 -15.4 -16.9 -13.4
Salary/ Other Remuneration -17.7 -35.0 -37.6 -19.8
Selling Price 5.8 22.3 16.3 15.8
Profit Margin -8.6 -28.8 9.0 -6.1
Overall Business Situation 21.9 1.8 41.1 27.4
*: Based on the previous round’s response.

Table B: Business Expectations on Select Parameters for extended period – Net response
(per cent)
Parameters Round 113 Round 114
Q1:2026-27 Q2:2026-27 Q3:2026-27 Q4:2026-27
Overall Business Situation 41.1 27.4 31.8 35.6
Production 38.2 26.7 33.3 34.7
Order Books 38.1 27.0 32.3 34.2
Capacity Utilisation 32.3 21.5 30.0 30.9
Employment 17.1 8.4 12.4 12.7
Cost of Raw Materials -50.9 -52.9 -51.7 -48.3
Selling Prices 16.3 15.8 21.9 19.6

Note: Please see the excel file for time series data

Table 1: Assessment and Expectations for Production
(Percentage responses)@
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 33.6 12.1 54.3 21.4 41.4 4.6 54.0 36.9
Q2:2025-26 30.1 12.3 57.6 17.9 56.8 3.6 39.6 53.3
Q3:2025-26 37.7 15.9 46.4 21.7 50.5 2.6 47.0 47.9
Q4:2025-26 36.0 17.7 46.3 18.3 48.9 4.3 46.8 44.6
Q1:2026-27 29.1 25.8 45.1 3.4 45.6 7.4 47.1 38.2
Q2:2026-27         35.5 8.8 55.8 26.7
‘Increase’ in production is optimistic.
@:Due to rounding off Percentage may not add up to 100.

Table 2: Assessment and Expectations for Order Books
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 32.3 12.4 55.3 19.9 40.7 5.1 54.2 35.6
Q2:2025-26 27.9 13.1 59.0 14.8 56.1 3.9 40.0 52.1
Q3:2025-26 36.2 16.7 47.1 19.5 48.5 2.8 48.7 45.7
Q4:2025-26 36.1 16.9 47.0 19.2 48.1 4.4 47.5 43.7
Q1:2026-27 28.3 25.3 46.4 2.9 45.6 7.5 46.9 38.1
Q2:2026-27         35.5 8.5 56.1 27.0
‘Increase’ in order books is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 3: Assessment and Expectations for Pending Orders
(Percentage responses)
Quarter Assessment Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q1:2025-26 4.4 16.8 78.8 12.3 4.3 6.8 88.9 2.5
Q2:2025-26 3.4 17.0 79.6 13.5 3.5 5.2 91.4 1.7
Q3:2025-26 4.3 16.4 79.2 12.1 3.6 3.8 92.6 0.2
Q4:2025-26 4.9 14.8 80.2 9.9 3.8 5.5 90.7 1.7
Q1:2026-27 4.7 20.5 74.8 15.7 4.2 6.3 89.4 2.1
Q2:2026-27         5.0 8.3 86.7 3.3
Pending orders ‘Below Normal’ is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 4: Assessment and Expectations for Capacity Utilisation (Main Product)
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 27.4 11.4 61.2 16.0 35.4 4.4 60.1 31.0
Q2:2025-26 23.3 9.1 67.6 14.2 49.0 5.1 45.9 43.8
Q3:2025-26 29.0 12.9 58.1 16.1 45.8 2.5 51.7 43.3
Q4:2025-26 30.4 13.5 56.1 16.9 42.1 3.7 54.2 38.4
Q1:2026-27 23.7 20.3 56.0 3.5 38.8 6.5 54.7 32.3
Q2:2026-27         29.7 8.1 62.2 21.5
‘Increase’ in capacity utilisation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 5: Level of capacity utilisation (compared to the average in preceding 4 quarters)
(Percentage responses)
Quarter Assessment Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q1:2025-26 18.2 14.0 67.8 4.2 9.7 4.6 85.6 5.1
Q2:2025-26 20.1 14.3 65.6 5.8 18.8 5.1 76.1 13.7
Q3:2025-26 12.2 17.7 70.1 -5.5 19.2 3.5 77.3 15.7
Q4:2025-26 16.5 15.7 67.8 0.8 12.0 5.5 82.5 6.5
Q1:2026-27 7.7 23.7 68.6 -16.0 15.4 6.5 78.1 9.0
Q2:2026-27         7.3 8.4 84.3 -1.1
‘Above Normal’ in Level of capacity utilisation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 6: Assessment and Expectations for Assessment of Production Capacity (with regard to expected demand in next 6 months)
(Percentage responses)
Quarter Assessment Expectations
More than adequate Less than adequate Adequate Net response More than adequate Less than adequate Adequate Net response
Q1:2025-26 9.0 10.2 80.8 -1.1 12.1 1.7 86.2 10.4
Q2:2025-26 8.5 10.8 80.7 -2.3 18.6 2.7 78.8 15.9
Q3:2025-26 10.1 10.4 79.4 -0.3 18.7 2.8 78.4 15.9
Q4:2025-26 12.6 10.2 77.2 2.3 14.5 4.4 81.1 10.1
Q1:2026-27 8.1 16.1 75.8 -8.0 17.4 4.7 77.9 12.7
Q2:2026-27         10.0 7.8 82.3 2.2
‘More than adequate’ in Assessment of Production Capacity is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 7: Assessment and Expectations for Exports
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 22.5 11.6 65.9 10.9 23.4 5.0 71.6 18.4
Q2:2025-26 21.8 11.8 66.5 10.0 38.8 4.0 57.2 34.7
Q3:2025-26 22.3 17.5 60.3 4.8 42.2 4.5 53.3 37.7
Q4:2025-26 20.0 18.4 61.6 1.6 35.1 7.4 57.5 27.8
Q1:2026-27 17.6 20.5 62.0 -2.9 30.9 11.2 57.9 19.7
Q2:2026-27         18.2 9.3 72.5 8.9
‘Increase’ in exports is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 8: Assessment and Expectations for Imports
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 18.4 7.7 73.9 10.7 19.4 3.3 77.2 16.1
Q2:2025-26 18.9 7.0 74.1 12.0 36.2 3.0 60.8 33.2
Q3:2025-26 19.1 10.6 70.3 8.5 38.8 2.5 58.7 36.2
Q4:2025-26 18.2 11.3 70.5 6.9 29.9 5.4 64.7 24.5
Q1:2026-27 14.3 12.2 73.5 2.1 26.8 6.4 66.8 20.5
Q2:2026-27         13.5 6.2 80.3 7.2
‘Increase’ in imports is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 9: Assessment and Expectations for level of Raw Materials Inventory
(Percentage responses)
Quarter Assessment Expectations
Above average Below average average Net response Above average Below average average Net response
Q1:2025-26 7.9 10.9 81.2 3.0 11.0 2.3 86.7 -8.7
Q2:2025-26 9.6 11.1 79.3 1.5 14.9 2.9 82.2 -12.1
Q3:2025-26 12.0 10.1 77.9 -1.9 16.7 1.3 82.0 -15.5
Q4:2025-26 13.4 11.3 75.3 -2.1 10.5 2.3 87.2 -8.2
Q1:2026-27 11.0 19.1 69.9 8.1 12.5 3.1 84.4 -9.4
Q2:2026-27         7.5 4.1 88.4 -3.4
‘Below average’ Inventory of raw materials is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 10: Assessment and Expectations for level of Finished Goods Inventory
(Percentage responses)
Quarter Assessment Expectations
Above average Below average average Net response Above average Below average average Net response
Q1:2025-26 8.5 11.1 80.4 2.6 10.9 1.7 87.4 -9.1
Q2:2025-26 10.7 11.1 78.2 0.5 15.3 2.9 81.8 -12.5
Q3:2025-26 12.1 11.1 76.8 -0.9 17.5 1.7 80.8 -15.7
Q4:2025-26 13.3 12.0 74.8 -1.3 10.3 2.8 86.9 -7.5
Q1:2026-27 11.0 19.6 69.5 8.6 11.3 3.6 85.1 -7.7
Q2:2026-27         7.5 4.4 88.1 -3.2
‘Below average’ Inventory of finished goods is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 11: Assessment and Expectations for Employment Outlook
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 16.8 6.3 76.9 10.6 14.6 1.7 83.7 12.9
Q2:2025-26 15.8 7.8 76.4 8.0 25.4 1.8 72.8 23.7
Q3:2025-26 16.1 8.5 75.5 7.6 26.2 1.0 72.8 25.2
Q4:2025-26 17.6 6.8 75.6 10.8 19.5 2.3 78.2 17.2
Q1:2026-27 16.0 9.2 74.8 6.8 20.7 3.5 75.8 17.1
Q2:2026-27         11.5 3.0 85.5 8.4
‘Increase’ in employment is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 12: Assessment and Expectations for Overall Financial Situation
(Percentage responses)
Quarter Assessment Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q1:2025-26 31.8 10.8 57.4 21.0 39.0 2.6 58.4 36.3
Q2:2025-26 28.8 11.3 59.8 17.5 57.0 3.0 40.0 53.9
Q3:2025-26 34.3 13.1 52.7 21.2 49.8 1.9 48.3 47.9
Q4:2025-26 35.7 12.4 51.9 23.3 45.0 3.2 51.8 41.8
Q1:2026-27 26.8 22.3 50.9 4.5 45.5 4.4 50.1 41.0
Q2:2026-27         33.1 7.8 59.1 25.4
‘Better’ overall financial situation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 13: Assessment and Expectations for Working Capital Finance Requirement
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 21.0 4.5 74.5 16.4 25.5 2.7 71.8 22.9
Q2:2025-26 19.7 5.8 74.5 13.9 33.4 1.9 64.6 31.5
Q3:2025-26 22.8 5.0 72.2 17.8 34.1 1.5 64.4 32.6
Q4:2025-26 20.6 4.8 74.6 15.8 26.4 1.7 71.9 24.7
Q1:2026-27 21.9 5.3 72.8 16.7 22.6 2.8 74.6 19.9
Q2:2026-27         17.1 2.7 80.2 14.4
‘Increase’ in working capital finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 14: Assessment and Expectations for Availability of Finance (from Internal Accruals)
(Percentage responses)
Quarter Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q1:2025-26 25.5 5.4 69.1 20.1 31.7 1.3 67.0 30.4
Q2:2025-26 21.0 5.3 73.7 15.7 47.8 1.3 50.8 46.5
Q3:2025-26 26.9 5.6 67.5 21.4 40.1 0.8 59.0 39.3
Q4:2025-26 29.7 5.5 64.8 24.2 37.5 1.5 61.0 36.0
Q1:2026-27 17.9 6.9 75.2 11.0 36.0 3.1 60.9 32.9
Q2:2026-27         17.7 3.3 78.9 14.4
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 15: Assessment and Expectations for Availability of Finance (from banks and other sources)
(Percentage responses)
Quarter Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q1:2025-26 20.3 3.9 75.8 16.4 23.0 1.3 75.7 21.7
Q2:2025-26 16.4 4.9 78.8 11.5 41.2 0.5 58.3 40.7
Q3:2025-26 21.8 4.5 73.7 17.2 35.4 0.6 64.1 34.8
Q4:2025-26 20.6 3.5 75.9 17.1 27.9 1.2 70.8 26.7
Q1:2026-27 14.4 4.5 81.1 9.9 25.0 2.3 72.7 22.7
Q2:2026-27         13.5 2.7 83.8 10.9
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 16: Assessment and Expectations for Availability of Finance (from overseas, if applicable)
(Percentage responses)
Quarter Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q1:2025-26 11.6 3.9 84.5 7.6 10.7 1.0 88.3 9.7
Q2:2025-26 11.7 5.5 82.9 6.2 32.9 0.5 66.5 32.4
Q3:2025-26 9.7 4.9 85.4 4.7 29.5 0.7 69.8 28.8
Q4:2025-26 11.0 4.0 85.0 6.9 18.2 1.0 80.7 17.2
Q1:2026-27 5.4 3.4 91.2 2.0 16.8 1.8 81.4 15.0
Q2:2026-27         5.1 1.6 93.2 3.5
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 17: Assessment and Expectations for Cost of Finance
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 16.5 9.2 74.3 -7.2 15.5 2.7 81.8 -12.8
Q2:2025-26 14.5 8.4 77.1 -6.1 26.1 13.6 60.2 -12.5
Q3:2025-26 13.0 7.8 79.2 -5.2 30.2 2.3 67.4 -27.9
Q4:2025-26 15.8 7.6 76.6 -8.3 20.1 3.9 76.0 -16.2
Q1:2026-27 19.1 3.7 77.2 -15.4 20.9 4.0 75.1 -16.9
Q2:2026-27         15.7 2.3 82.0 -13.4
‘Decrease’ in cost of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here. The column heads, namely ‘Increase’ and ‘Decrease’ in data releases for rounds 82-87 were interchanged and should be read as above.

Table 18: Assessment and Expectations for Cost of Raw Materials
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 50.8 4.2 44.9 -46.6 41.6 1.6 56.8 -40.1
Q2:2025-26 42.1 4.1 53.8 -38.1 56.2 1.2 42.6 -54.9
Q3:2025-26 47.6 5.3 47.1 -42.3 46.6 1.0 52.4 -45.6
Q4:2025-26 56.5 2.8 40.7 -53.7 43.9 1.7 54.4 -42.2
Q1:2026-27 79.3 1.2 19.6 -78.1 52.6 1.7 45.7 -50.9
Q2:2026-27         54.2 1.3 44.5 -52.9
‘Decrease’ in cost of raw materials is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 19: Assessment and Expectations for Salary/Other Remuneration
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 29.3 2.2 68.5 -27.1 37.7 0.9 61.5 -36.8
Q2:2025-26 15.9 3.2 80.9 -12.7 32.1 0.5 67.3 -31.6
Q3:2025-26 17.9 2.8 79.3 -15.0 30.7 0.7 68.6 -29.9
Q4:2025-26 19.1 1.4 79.5 -17.7 22.2 1.3 76.5 -20.9
Q1:2026-27 35.9 0.9 63.3 -35.0 38.5 0.9 60.5 -37.6
Q2:2026-27         20.4 0.6 78.9 -19.8
‘Decrease’ in Salary / other remuneration is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 20: Assessment and Expectations for Selling Price
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 15.7 8.8 75.5 6.8 15.7 3.2 81.2 12.5
Q2:2025-26 13.2 10.8 76.0 2.4 26.4 2.6 71.1 23.8
Q3:2025-26 13.2 14.8 72.0 -1.6 26.7 2.6 70.7 24.1
Q4:2025-26 15.6 9.9 74.5 5.8 17.8 4.3 77.9 13.5
Q1:2026-27 30.0 7.8 62.2 22.3 19.8 3.6 76.6 16.3
Q2:2026-27         19.5 3.7 76.8 15.8
‘Increase’ in selling price is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 21: Assessment and Expectations for Profit Margin
(Percentage responses)
Quarter Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2025-26 12.0 17.0 70.9 -5.0 14.5 7.5 78.0 7.0
Q2:2025-26 11.9 18.3 69.8 -6.4 26.2 6.2 67.6 20.1
Q3:2025-26 12.6 22.0 65.4 -9.4 28.9 4.3 66.9 24.6
Q4:2025-26 13.5 22.2 64.3 -8.6 19.8 7.3 72.9 12.4
Q1:2026-27 8.5 37.4 54.1 -28.8 19.4 10.4 70.2 9.0
Q2:2026-27         9.9 16.0 74.1 -6.1
‘Increase’ in profit margin is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 22: Assessment and Expectations for Overall Business Situation
(Percentage responses)
Quarter Assessment Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q1:2025-26 31.7 13.7 54.6 18.0 42.3 3.5 54.3 38.8
Q2:2025-26 29.7 11.7 58.6 18.0 56.7 5.2 38.2 51.5
Q3:2025-26 36.9 14.0 49.1 22.9 51.5 2.2 46.4 49.3
Q4:2025-26 37.0 15.2 47.8 21.9 49.7 3.3 46.9 46.4
Q1:2026-27 27.8 26.0 46.2 1.8 47.3 6.2 46.5 41.1
Q2:2026-27         36.4 9.0 54.7 27.4
‘Better’ Overall Business Situation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 23: Business Sentiments4
Quarter Business Assessment Index (BAI) Business Expectations Index (BEI)
Q1:2025-26 109.6 117.5
Q2:2025-26 110.6 126.2
Q3:2025-26 107.8 126.3
Q4:2025-26 108.8 122.8
Q1:2026-27 100.4 118.8
Q2:2026-27   111.1

1 The survey results reflect the respondents’ views, which are not necessarily shared by the Reserve Bank.

2 Results of the previous survey round were released on the Bank’s website on April 08, 2026.

3 Net Response (NR) is the difference between the percentage of respondents reporting optimism and those reporting pessimism. It ranges between -100 to 100. Any value greater than zero indicates expansion/optimism and any value less than zero indicates contraction/pessimism. In other words, NR = (I – D), where I is the percentage response of ‘Increase/optimism’, and D is the percentage response of ‘Decrease/pessimism’ and E is the percentage response as ‘no change/equal’ (i.e., I+D+E=100). For example, increase in production is optimism whereas decrease in cost of raw material is optimism.

4 For each survey round, two summary indices are computed – one based on assessment [viz., Business Assessment Index (BAI)] and another based on expectations [viz., Business Expectations Index (BEI)]. Each index is a composite indicator calculated as a simple average of nine business parameters, where each parameter is derived as a weighted net response, weights being the share of industry groups in gross value added (GVA). The nine parameters considered are: (1) overall business situation; (2) production; (3) order books; (4) inventory of raw material; (5) inventory of finished goods; (6) profit margins; (7) employment; (8) exports; and (9) capacity utilisation. BAI/BEI gives a snapshot of the business outlook in every quarter and takes values between 0 and 200, with 100 being the threshold separating expansion from contraction.