India Manufacturing Tracker 2026

India Briefing brings you the new Manufacturing Tracker for 2026, establishing the essential parameters of industrial growth, sectoral updates, and economic progress.

The trends across 2025 suggest that India’s manufacturing sector is demand-supported and investment-driven, but operationally uneven. The numbers point to a transition phase, where policy momentum and capital inflows are building a foundation for long-term growth, but short-term performance remains subject to volatility and structural bottlenecks.

India’s manufacturing CAPEX outlook (2025-27)

Private corporate CAPEX trends indicate that manufacturing remains the largest recipient of investment, accounting for over 50 percent of total CAPEX in 2025-26, though its share is expected to moderate to 44.35 percent in 2026-27.

Source: Ministry of Statistics and Program Implementation

This decline does not signal weakening fundamentals but rather a rebalancing toward infrastructure, particularly a sharp rise in energy-sector investments, reflecting growing industrial power requirements.

In absolute terms, manufacturing CAPEX rises significantly in 2024-25 and 2025-26 before easing in 2026-27.

This trend suggests that the sector is reaching the peak of its investment cycle, followed by a phase of normalization rather than contraction, in line with a broader moderation in overall CAPEX.

India’s Purchasing Managers’ Index (PMI)

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Business sentiment in India’s manufacturing sector remains firmly positive, providing a forward-looking signal of continued industrial expansion into the upcoming financial year. The Manufacturing PMI has consistently stayed above the 50-point threshold, indicating sustained growth in production, new orders, and overall business activity.

Source: HSBC India Manufacturing PMI

Early 2026 data reflects a gradual moderation in momentum. While the PMI remains in expansion territory, the slight decline suggests a normalization following strong growth in late 2025, rather than any structural slowdown.

India’s IIP trends – 2026

In India, the Index of Industrial Production (IIP) tracks the growth rates of three key sectors—mining, manufacturing, and electricity—on a month-on-month basis.  

Source: National Statistics Office (NSO); MoSPI

January 2026

Industrial activity moderated in January 2026 after a strong December, largely due to base effects. Manufacturing growth remained steady at 4.8 percent, in line with overall IIP, indicating continued resilience.

Manufacturing expansion was selective, with 14 of 23 industry groups growing. Output was driven by infrastructure-linked sectors such as metals, automobiles, and cement, reflecting sustained industrial and construction demand.

Role of the manufacturing sector in India’s GDP

As of 2025-26, manufacturing accounts for around 14 percent of GDP, making it the largest component within the industrial sector. While this share remains modest compared to services, the sector’s importance lies in its ability to anchor industrial output and provide a base for diversified economic activity.

Recent macro indicators point to a strengthening manufacturing cycle. The sector recorded gross value added (GVA) growth of 7.72 percent in Q1 and 9.13 percent in Q2 FY 2025–26, highlighting strong expansion supported by infrastructure spending, capital investment, and policy support. This growth is accompanied by a gradual shift toward higher-value production, with medium- and high-technology industries contributing 46.3 percent of manufacturing value added, indicating improving industrial sophistication.

Policy support 

India’s manufacturing ecosystem is supported by a comprehensive set of central government schemes, aimed at boosting domestic production, attracting investment, enhancing competitiveness, and building industrial infrastructure. These schemes can be grouped into key strategic areas:

Source: Expenditure profile 2026-27; Central sector schemes

Budget allocations indicate a clear prioritization of high-impact sectors, including automobiles, electronics, and pharmaceuticals. The expansion of schemes like ECMS and continued Production Linked Incentive (PLI) support reflect a shift toward technology-intensive and value-added manufacturing.

Taxation reforms shaping India’s manufacturing landscape in 2026

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India’s taxation framework for 2026 reflects a clear strategic pivot toward cost competitiveness, investment facilitation, and global integration of its manufacturing sector. The Union Budget 2026-27 and the Income Tax Rules, 2026, together introduce a mix of fiscal incentives, compliance reforms, and sector-specific support measures aimed at accelerating industrial growth.

Linkage with broader industrial strategy

Tax reforms are being reinforced by parallel policy initiatives, including:

• Continued push through PLI schemes
• Increased public capital expenditure to drive industrial demand
• Dedicated funding support such as the INR 100 billion (US$1.05 billion) MSME Growth Fund

This alignment ensures that fiscal incentives are complemented by investment and infrastructure support.

ALSO READ: India’s Union Budget 2026-27: Industrial Growth, Infrastructure Spending & Tax Reforms

Overall assessment: Manufacturing in transition

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The combined data across growth, investment, and policy signals that India’s manufacturing sector is:

1. Investment-led, supported by strong CAPEX and infrastructure expansion
2. Structurally upgrading, with increasing share of high-technology industries
3. Operationally uneven, with sector-specific growth patterns
4. Policy-backed, with targeted incentives and ecosystem development

(US$1 = INR 94.73)

Entering or expanding in India requires careful assessment of market conditions, regulatory frameworks, and sector competitiveness. Business intelligence insights help companies evaluate opportunities, benchmark competitors, and align investment strategies with India’s evolving economic landscape.

Koushan Das

Manager

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