The Indian manufacturing sector is seeing sustained growth and "increasing optimism" across scale as the industry's performance index touched an all-time high in the third quarter of FY26, a report has said.

The Federation of Indian Chambers of Commerce and Industry’s (FICCI) latest Quarterly Survey on Manufacturing (QSM) saw 91 per cent of respondents reporting higher or stable production levels, up 4 per cent from the 87 per cent recorded in the previous quarter.

Industrial confidence soared with "86 per cent of respondents anticipating higher or same orders in Q3 FY 2026 compared to the previous quarter and more so after the latest GST rate cuts were announced," the report noted.

The survey records responses from units with a combined annual turnover exceeding Rs 3 lakh crore.

Financial stability also drove the growth as the average interest rate for manufacturers stood at 8.9 per cent. Almost 87 per cent of respondents reported “sufficient availability of funds from banks for working capital or long-term capital."

Electronics and electricals and miscellaneous sectors are expected to see strong growth with auto components, capital goods, and textiles maintaining a steady, moderate growth trajectory. Countering global headwinds, 38 per cent of manufacturers cited plans to hire additional workers in the next three months, up from 35 per cent seen in the prior year.

The average capacity utilisation already hovered near 75 per cent, an indication of sustained economic activity in the sector.

Around 57 per cent of survey participants noted high production costs or an increase in costs as a percentage of sales. The survey attributed this pressure to "higher raw material costs, currency depreciation, and increased logistics, power, and utility costs."

Around 80 per cent of the industry reported sufficient labour supply, but 20 per cent of respondents mentioned the "lack of skilled workforce," calling for intensified skilling efforts from both the government and private industry.

Another recent report said that India is poised to become a global industrial powerhouse by 2047, with manufacturing’s share of gross domestic product (GDP) estimated to rise from about 17 per cent to roughly 25 per cent.