The Reserve Bank of India (RBI) in its latest industrial outlook survey of the manufacturing sector has said that manufacturing firms expect demand conditions to soften in Q1:2026-27 as reflected in their lower optimism regarding production, order books and capacity utilisation. Besides, in the quarter, cost pressures are also anticipated to remain elevated, with a partial pass-through onto consumers, while profit margins are likely to remain under strain.

The survey report further noted that manufacturers’ optimism on demand conditions moderated in Q4:2025-26 compared to the previous quarter, with weaker sentiments on production and exports amid the West Asia conflict. Besides, in Q4:2025-26, manufacturing firms reported increased cost pressures and some rise in selling prices with pressure on profit margins. Overall, the Business assessment index remained stable in Q4:2025-26.

Going forward, manufacturing firms expect demand conditions to improve during Q2 and Q3:2026-27, while input cost pressures are likely to persist, but the firms are optimistic about selling prices. Meanwhile, a total of 1,256 companies responded in this round of the survey conducted during January-March 2026.