Manufacturing sector demand outlook improves for Q3FY27, input cost concerns persist: RBI

During Q2FY27, India's manufacturing sector witnessed an improvement in demand conditions compared with the previous quarter, supported by stronger production, order books and capacity utilisation.

However, raw material cost pressures remained elevated, while sentiment regarding selling prices moderated, it noted.

Pressures from raw material costs remained elevated, while sentiments on selling prices showed moderation.

At the same time, the Business Assessment Index (BAI) rose to 104.4 in Q2FY27 from 100.4 in Q1FY27, which further indicates an improvement in overall business conditions.

Looking ahead to Q3FY27, manufacturing firms remained optimistic about demand, expecting improvements in production, order books, capacity utilisation and exports.

However, cost pressures are likely to remain elevated, alongside expectations regarding selling prices and profit margins.

Cost pressures are anticipated to remain elevated and so are the sentiments on selling prices and profit margins, it said.

At the same time, it noted that the Business Expectations Index (BEI) also improved for Q3FY27, reflecting stronger business confidence.

The survey indicated an improvement in the Business Expectations Index (BEI), a quarterly composite indicator published by the central bank through IOS of the manufacturing sector.

For Q4FY27 and Q1FY28, manufacturing firms expect healthy demand conditions to continue, with a positive outlook on overall business conditions, production, order books and capacity utilisation. However, input cost pressures are likely to persist, prompting firms to pass on higher costs through increased selling prices.

Input cost pressures are likely to persist, with accompanying pass-through in selling prices.

The Reserve Bank of India (RBI) released the results of the 115th round of its quarterly Industrial Outlook Survey (IOS), which assessed business conditions in India's manufacturing sector during Q2FY27 and captured firms' expectations for Q3FY27 and the following two quarters. The survey, conducted between July and September 2026, covered responses from 1,224 manufacturing companies. (ANI)