Today, the Reserve Bank released the results of 112th round of its quarterly industrial outlook survey (IOS). The survey ¹ encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q3:2025-26 and their expectations for Q4:2025-26 as well as outlook on select parameters for the subsequent two quarters. A total of 1,453 companies responded in this round of the survey² conducted during October-December 2025.

Highlights:

A. Assessment for Q3:2025-26

• Manufacturers’ optimism on demand conditions improved for Q3:2025-26 as compared to the previous quarter, as reflected in their assessment on production, order books and capacity utilisation (Table A).
• Responding firms reported higher pressure from raw material costs and wage bill.  Manufacturers’ sentiments turned pessimistic with regard to growth in selling prices and profit margins.
• Overall business sentiments in the manufacturing sector moderated; the business assessment index (BAI) decreased to 107.8 in Q3:2025-26 from 110.6 in the previous quarter (Chart 1).

B. Expectations for Q4:2025-26

• Manufacturers outlook for Q4:2025-26 remains positive, albeit with some moderation, reflecting a weaker outlook on production, order books, capacity utilisation and exports.
• Manufacturing firms expect cost pressures to ease, selling prices to rise at a lower rate and profit margin to soften.
• Business expectations index moderated in Q4:2025-26, reflecting guarded sentiment among manufacturers (Chart 1).

C. Expectations for Q1:2026-27 and Q2:2026-27

• Demand conditions are expected to improve during H1:2026-27 (Table B).
• Manufacturers expect input cost pressures to persist, but they also anticipate better pricing power in terms of higher growth in selling prices.

Note: Please see the excel file for time series data

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

²Results of the previous survey round were released on the Bank’s website on October 01, 2025.

³Net 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.

⁴For 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.