Auto and Electrical Machinery Drive Sales Surge for Private Firms

India's private manufacturing sector demonstrated robust momentum in the final quarter of FY26, with sales seeing a significant jump driven by core industrial sectors. New data from the Reserve Bank of India (RBI) reveals a strengthening trend across both manufacturing and services, despite rising input cost pressures.

Manufacturing Sector Sees Accelerated Sales Growth

According to the RBI report, which analyzed the financial performance of 3,266 listed non-government non-financial companies, sales for 1,817 listed private manufacturing companies expanded by 14.5% year-on-year (YoY) during the fourth quarter of 2025-26. This represents a notable acceleration from the 11.4% growth recorded in the previous quarter.

The primary engines of this industrial growth were the automobiles, electrical machinery, and non-ferrous metals industries. This surge suggests a strong recovery and demand in capital goods and consumer durables, marking a positive trajectory for India's industrial backbone.

Services Sector: IT and Non-IT Divergence

The services sector also showcased resilience, though the drivers differed between technology and traditional services. Information Technology (IT) companies saw their sales growth improve to 9.9% YoY in Q4, up from 8.8% in the preceding quarter.

Meanwhile, the non-IT services segment experienced a substantial expansion, with sales growth climbing to 20.3% from the previous quarter. This high-octane growth in non-IT services was largely fueled by the wholesale and retail trade industries, indicating robust domestic consumption and efficient supply chain movements.

Rising Input Costs and Margin Pressures

While top-line growth remains strong, the RBI data highlights emerging challenges regarding profitability and cost management. Amidst global uncertainties, raw material expenses for manufacturing companies surged by 18.3% YoY during the January-March quarter.

This spike in costs has directly impacted efficiency metrics. The raw material-to-sales ratio rose to 58.5% in Q4FY26, up from 57.5% in the previous quarter, signaling heightened input cost pressure on manufacturers. Despite these rising expenses, the operating profit margins for manufacturing companies remained stable on a sequential basis. In contrast, the services sector witnessed a moderation in operating profit margins during the same period.

The data also shed light on expenditure related to human capital. Staff cost growth for manufacturing companies moderated to 9.8% YoY in Q4FY26 compared to the previous quarter. Within the services landscape, the trends were split: non-IT services companies saw a higher pace of staff cost growth, whereas costs for IT companies remained relatively steady compared to the prior quarter.

Key Takeaways