Kurnool takes centre stage in India’s drone ambitions

Mumbai: India’s growing focus on indigenous defence manufacturing has found a new anchor in Kurnool, Andhra Pradesh, where the government has committed to developing the region into a national hub for drone technology. The announcement came alongside the recent inauguration of an advanced night vision facility in Nimmaluru, Krishna District, by Prime Minister Narendra Modi. Built by Bharat Electronics Limited (BEL) at a cost of ₹360 crore, the factory is designed to produce electro-optical systems including night vision devices, infrared missile seekers and drone guard systems — all intended for both domestic use and export markets.

“Through the drone industry, several new sectors linked to futuristic technologies will emerge in Kurnool and across Andhra,” the Prime Minister said. He also cited the success of drones in Operation Sindoor, a recent military exercise that showcased India’s homegrown capabilities in unmanned aerial systems. The reference was not incidental, it underscored the strategic importance of drones in modern warfare and the government’s intent to position Kurnool as a key player in this evolving landscape.

The decision to invest in drone infrastructure in Kurnool is closely tied to India’s broader push for self-reliance in defence. Over the past five years, the country has steadily increased its defence exports, which reached $2.6 billion in FY2025 according to data from the Ministry of Defence. Facilities like the one in Nimmaluru are expected to accelerate this trend by enabling the production of high-value components that meet international standards. The factory’s flexible production lines and capacity for future upgrades suggest a long-term vision that goes beyond immediate procurement needs.

Kurnool’s emergence as a drone hub also reflects a shift in how India is approaching regional development. By locating advanced manufacturing in smaller cities, the government aims to decentralise industrial growth and create skilled employment outside traditional urban centres. The BEL facility is projected to generate hundreds of jobs over the next two to three years, with additional opportunities likely to arise as the drone ecosystem expands.

While the strategic and economic rationale is clear, the success of Kurnool’s drone ambitions will depend on sustained investment, regulatory support and collaboration with private industry. The integration of drone technology into India’s defence exports offers a promising avenue for growth, but it also demands rigorous quality control and alignment with global standards. As India seeks to strengthen its position in the international defence market, hubs like Kurnool will play a critical role in translating policy into performance. The groundwork has been laid, now the challenge is to build on it.

India’s trade deficit widened sharply as US tariffs took hold

Mumbai: India’s trade deficit, the gap between what the country buys from abroad and what it sells, jumped to $32.1 billion in September 2025, the highest in over a year. This happened because imports rose sharply, especially for gold, fertilisers and electronics. Gold imports alone reached $9.6 billion, a 77 per cent increase from the previous month, driven by festive demand and rising global prices.

At the same time, India’s exports to the United States (US) dropped by about 12 per cent compared to last year. This fall came after the US introduced steep 50 per cent tariffs on several Indian goods, including textiles, leather and cotton fabrics. These sectors were hit hard, and the overall export numbers would have been worse if not for stronger sales to other countries like China, Bangladesh and the United Arab Emirates (UAE).

Even though total exports grew by 6.8 per cent in September, the growth wasn’t enough to balance the surge in imports. As a result, India’s average monthly trade deficit rose to $28.7 billion in the second quarter of the financial year, up from $22.9 billion in the first. According to ICRA, this will likely push India’s current account deficit — a key measure of the country’s financial health — to 1.8 per cent of gross domestic product for the quarter, compared to just 0.2 per cent earlier.

The drop in exports to the US also shrank India’s trade surplus with its biggest trading partner. In September, the surplus fell to $1.5 billion, down from an average of $4.4 billion earlier in the year. While the Indian rupee has weakened against the dollar, which usually helps exports, it hasn’t been enough to offset the damage caused by the tariffs.

If the current US tariffs remain in effect through March 2026, India’s export performance is likely to deteriorate further, placing added strain on the country’s trade balance and broader financial outlook. The ICRA report underscores India’s heavy reliance on the US as a trading partner and points to the importance of strengthening ties with other global markets to reduce vulnerability and support long-term growth.

India bets on Ayurveda Aahara to boost startups and fight non-communicable diseases

Mumbai: The Indian government has unveiled a new initiative aimed at promoting Ayurveda Aahara - traditional Ayurvedic dietary products - as a tool to support health-focused startups and tackle the growing burden of lifestyle diseases. The move, announced on World Food Day 2025 by the Ministry of Ayush in partnership with the Food Safety and Standards Authority of India (FSSAI), includes the release of a validated product list that offers regulatory clarity and market direction for entrepreneurs.

Union Minister of State (IC) for Ayush and Minister of State for Health & Family Welfare, Prataprao Jadhav said the initiative is designed to “break the rising trend of diet- and lifestyle-related disorders” by encouraging preventive nutrition rooted in Ayurvedic principles. He added that the framework will help startups develop products that are both scientifically grounded and culturally relevant, creating new opportunities in the health food sector.

The product list, drawn from classical Ayurvedic texts and released under Category A, provides a formal reference for manufacturers and consumers, helping to standardise Ayurveda Aahara offerings. Officials say this will reduce ambiguity in the market and make it easier for new businesses to innovate without regulatory hurdles.

Non-communicable diseases (NCDs) such as diabetes, heart disease, and obesity now account for more than 70 per cent of global deaths, according to the World Health Organization. Many of these are linked to poor diet and sedentary lifestyles. Ayurveda Aahara, with its emphasis on balance, seasonality, and natural ingredients, is being positioned as a preventive approach to nutrition that could help reverse these trends.

Vaidya Rajesh Kotecha, Secretary, Ministry of Ayush, said, “The growing global interest in Ayurveda-based food systems underscores India’s critical contribution to holistic nutrition. The Ayurveda Aahara framework, now strengthened by the definitive list, brings clarity to manufacturers and trust to consumers. We see this as a major boost for startups and innovation in the health food sector—where Ayurveda’s wisdom can help break the rising trend of diet- and lifestyle-related disorders that lead to non-communicable diseases.”

The Ministry hopes the framework will attract investment and encourage the development of functional foods and nutraceuticals that address NCDs. By aligning Ayurvedic principles with modern food safety standards, officials believe Ayurveda Aahara can become a credible and scalable solution for both domestic and international markets.

India’s broader goal is to position its traditional food systems - including the Indian Thali - as models of nutritional and ecological balance. As global interest in sustainable and health-conscious eating grows, the government is betting that Ayurveda Aahara can offer a compelling alternative that supports innovation while promoting long-term wellness.

Global firms reshape India’s office market through innovation

Mumbai: India’s commercial real estate sector is undergoing a structural transformation, powered by the rapid expansion of Global Capability Centres (GCCs). Once viewed as back-office support units, GCCs are now emerging as strategic hubs for artificial intelligence (AI), research and development (R&D), and digital innovation—reshaping both the nature of work and the demand for office space across the country.

According to a recent ICRA report, GCCs are projected to lease 50–55 million square feet of Grade A office space between FY2026 and FY2027, accounting for nearly 40 per cent of total demand in India’s top six markets viz. Bengaluru, Chennai, Delhi NCR, Hyderabad, Mumbai Metropolitan Region, and Pune. This surge reflects not only the scale of global investment but also a shift in purpose—from cost arbitrage to capability building.

Source: Propequity, ICRA Research; P - Projected

“India’s commercial office sector is at a pivotal juncture, with GCCs driving a structural transformation in demand. As GCCs evolve into innovation and R&D hubs, ICRA expects sustained leasing momentum, especially in tech-enabled and green-certified office spaces,” said Anupama Reddy, Vice President and Co-Group Head, ICRA.

The transformation is visible in the sectors driving this growth. While technology remains dominant, engineering & manufacturing and banking, financial services & insurance (BFSI) have significantly expanded their footprint. Between FY2018 and FY2025, engineering & manufacturing’s share of GCC leasing rose from 12 per cent to 25 per cent, while BFSI climbed from 15 per cent to 21 per cent. This diversification underscores India’s appeal not just for scale, but for specialised talent and innovation.

India’s cost advantage remains compelling. Prime office rentals in top cities range from $1–2 per square foot per month, making them among the most affordable globally. Combined with a deep talent pool and proactive policy support—including subsidies and infrastructure incentives—India offers a rare blend of affordability and capability.

GCCs are now central to global firms’ AI and R&D strategies. Many are leading initiatives in machine learning, cloud computing, and product development from their Indian offices. This evolution is not merely operational—it’s strategic. By embedding innovation functions within GCCs, companies are positioning India as a global centre for future-ready enterprise.

With the number of GCCs expected to grow from 1,700 today to over 2,500 by 2030, and revenue projected to exceed $100 billion, the implications for India’s commercial real estate are profound. The shift from transactional leasing to long-term strategic investment signals confidence in India’s role as a global innovation hub.

Indian chemical companies are debt-free enough to survive trade wars

Mumbai: A report on India's chemical manufacturing industry, released by India Ratings and Research (Ind-Ra), reveals a surprisingly solid financial foundation. Despite facing global challenges like too much supply worldwide and the recent increase in US trade tariffs, the companies’ bank accounts are strong enough to protect them from sudden economic troubles. Think of it this way: the industry has built a thick financial safety cushion.

Their financial health is clearly getting better. A key measure of debt – how much money a company owes compared to its annual operating income – has fallen significantly. It dropped to 0.9x in the last financial year (FY25) from 1.4x the year before. In simple terms, the industry's total debt is now less than what it earns in a single year, showing a low-risk position.

Another important indicator is their ability to pay interest on loans. For every rupee (₹) of interest they had to pay in the first quarter of the current year (Q1FY26), they earned ₹5.4. This high figure proves they can easily handle their loan payments, giving them a large amount of financial ‘headroom’ or breathing space to absorb unexpected costs or drops in sales.

This strong position is not accidental; it's the result of smart, cautious management. The industry has been careful about spending money. Companies have been paying down their debts by gradually reducing the amount of stock they hold and by limiting major construction projects. Overall spending on new factories and expansions (called capital expenditure, or capex) dropped by 4 per cent last year, with factory building efforts slowing down to 7.1 per cent of revenue. This suggests companies are choosing prudence over aggressive expansion.

The timing of this financial strength is crucial because of new external pressures. Siddharth Rego, an Associate Director at Ind-Ra, explained the situation with the new trade rules. “Chemical companies likely witnessed the impact of increased US tariffs in Q2FY26, although the full impact will be visible only in Q3FY26. This is because the tariffs were increased towards the end of August and there was frontloading of orders and deliveries in the previous weeks,” said Rego. This looming tariff threat to export earnings highlights why a secure balance sheet is vital.

Looking ahead, the manufacturers are also being smart about their long-term investments. Instead of starting large, risky new projects, they are concentrating only on essential maintenance and finishing projects they've already started. Even more telling is their focus on building multi-purpose facilities. This means they are creating flexible factories that can easily switch production if the market for one product collapses, effectively diversifying their risk and offering more operational agility when prices change rapidly.

As a result of this careful approach, most of the industry is financially secure. About 84 per cent of chemical companies are considered to have a moderate credit profile, meaning they can pay their loan interest more than three times over. This suggests widespread stability. However, the report cautions that not every company is safe as about 8 per cent are still struggling financially, and those currently building large new plants might feel a temporary squeeze if market conditions worsen.

While the industry faces tough headwinds from global competition and new US tariffs, the Indian chemical sector's low debt levels and strong cash flow provide a powerful foundation. This financial cushion allows them to manage risks and remain stable throughout the current challenging economic cycle.

Manufacturers signal intent to expand despite persistent constraints

Mumbai: India’s manufacturing sector is showing signs of sustained momentum, with average capacity utilisation holding steady at 75 per cent and more than half of surveyed firms planning to invest or expand operations over the next six months. These findings, drawn from the Federation of Indian Chambers of Commerce and Industry’s (FICCI) latest quarterly survey on manufacturing, reflect cautious optimism across industries despite enduring challenges.

The survey, which covered eight major manufacturing sectors and included responses from both large enterprises and small and medium enterprises (SMEs) with a combined annual turnover exceeding ₹3 lakh crore, found that capacity utilisation levels have remained broadly consistent with previous quarters. Sub-sector data reveals minor variations – machine tools and miscellaneous segments reported higher-than-average utilisation at 77 and 78 per cent respectively, while capital goods and electronics hovered around 70 per cent.

This level of activity, according to FICCI, indicates a stable production environment and a willingness among manufacturers to commit fresh capital. ‘The investment outlook is positive’, the report notes, ‘with over 50 per cent of respondents indicating plans for investments and expansions in the next six months’. This sentiment is echoed across sectors such as automotive, metal products, and textiles, where firms are preparing to scale up capacity in anticipation of stronger domestic demand.

However, the path to expansion is not without friction. Respondents cited a range of constraints that continue to impede growth. Global trade uncertainties – including tariffs, supply chain disruptions, and geopolitical tensions – remain a concern, particularly for export-oriented units. Operational bottlenecks such as raw material shortages, labour availability, and high input costs have also been flagged as persistent issues.

Regulatory hurdles, especially those affecting compliance and approvals for new projects, were mentioned by several firms as a deterrent to timely execution. In some cases, manufacturers reported delays in securing industrial land and navigating environmental clearances, which have slowed down planned investments. A respondent from the capital goods sector noted that ‘uncertainty in demand and financial constraints make further investments difficult’, underscoring the need for more predictable policy support.

Despite these challenges, the survey suggests that access to finance is not a major barrier for most firms. Over 81 per cent of respondents reported sufficient availability of funds from banks for working capital and long-term capital needs. The average interest rate paid by manufacturers stood at 8.9 per cent, with some sectors such as capital goods reporting slightly lower rates.

The broader investment intent appears to be driven by a combination of stable production levels, anticipated demand recovery, and sector-specific policy measures. Recent goods and services tax (GST) rate cuts, for instance, have boosted sentiment in consumer-facing segments, while infrastructure-linked sectors are banking on continued public spending to sustain order flows.

Still, the uneven pace of recovery across sub-sectors calls for targeted interventions. While machine tools and automotive are poised for moderate to strong growth, chemicals and textiles remain cautious, citing cost pressures and limited export visibility. The survey also highlights the need for improved labour skilling, with around 20 per cent of respondents indicating a shortage of skilled workforce in their respective sectors.

India’s manufacturing sector is preparing to invest and expand, but the momentum is tempered by structural and external constraints. The next six months will be critical in determining whether this intent translates into tangible capacity additions, and whether policy and infrastructure can keep pace with industry’s evolving needs.

Microalgae-powered air purification device tackles indoor CO₂ with scientific precision

Mumbai: In a city where air quality concerns often focus on traffic and industrial emissions, a 17-year-old student from Mumbai has turned attention to a quieter but equally pressing issue – indoor carbon dioxide levels. Hridank Garodia, a Grade 11 student at Dhirubhai Ambani International School, has developed Aerovive, a microalgae-based air purification device that directly addresses elevated carbon dioxide (CO₂) concentrations in enclosed spaces.

Garodia’s interest in the problem began with a simple observation: students struggled to concentrate during exams. His research revealed that CO₂ levels in classrooms frequently exceeded 1200–1500 parts per million (ppm), well above the threshold of around 945 ppm where cognitive performance begins to decline. The issue extended beyond schools to offices, clinics, gyms and homes – environments where people spend the majority of their time.

Aerovive offers a biologically driven solution. The compact unit uses living microalgae to absorb carbon dioxide and release oxygen, effectively replicating the air-cleaning capacity of approximately 40 houseplants. Unlike conventional air purifiers that rely on filters or chemical treatments, Aerovive leverages photosynthetic organisms to perform continuous gas exchange. The device has undergone three rounds of prototyping and field testing, supported by researchers at IIT Bombay, and has demonstrated measurable reductions in indoor CO₂ levels.

Hridank Garodia

“We obsess over outdoor pollution, but spend 90% of our time indoors breathing air that’s often worse. Aerovive is designed to make homes, schools and offices healthier – so we can breathe better, think better and live better,” said Garodia.

The innovation has attracted attention from both scientific and commercial quarters. Aerovive was recognised at the IRIS National Science Fair and presented at the ICSEAT International Conference. It has also secured a ₹10 lakh Letter of Intent (LoI) for deployment in Mumbai’s largest office park, indicating early interest in scaling the technology for corporate environments.

Garodia’s work extends beyond the device itself. Through The Invisible Heroes Lab, he has developed a 15-session educational programme that introduces students to the unseen biological systems – algae, fungi and bacteria – that underpin environmental health. The initiative has reached over 1,000 students through workshops across Mumbai, with plans to engage hundreds more in the coming year.

The broader ambition is to integrate Aerovive into clinics, schools and corporate campuses, while expanding the educational outreach nationwide. Garodia’s approach combines scientific rigour with a focus on human wellness, positioning clean indoor air not just as a technical challenge but as a public health priority.

His efforts have earned recognition from institutions including National Geographic, where he received the Cultivating Empathy for Earth Award, and the World Science Scholars programme under physicist Brian Greene. Mentorship from experts at IIT Bombay and Harvard has helped refine both the technical and educational dimensions of his work.

Aerovive’s uniqueness lies in its biological foundation. While air purification technologies typically rely on mechanical filtration or ionisation, this device uses a living system to perform gas exchange – a method that is both energy-efficient and scalable. Its design reflects a growing interest in biomimicry and nature-based solutions to environmental challenges, particularly in urban settings where space and energy constraints limit traditional approaches.

Garodia’s innovation arrives at a time when indoor air quality is gaining renewed attention, especially in the context of post-pandemic health and workplace design. By focusing on CO₂, a gas often overlooked in indoor pollution discussions, Aerovive addresses a subtle but significant factor affecting cognitive function and overall wellbeing.

As the device moves toward broader deployment, its success will depend on sustained performance, ease of maintenance and cost-effectiveness. But its early reception suggests that biologically inspired solutions may have a growing role in how cities manage air quality – not just outdoors, but in the spaces where people live, learn and work.

NBFCs expand gold loan portfolios despite losing market share

Mumbai: Non-Banking Financial Companies (NBFCs) are poised to record robust growth in their gold loan portfolios in the current financial year, even as their share of the organised market continues to shrink. According to a recent report by ICRA, NBFCs’ assets under management (AUM) in the gold loan segment are expected to grow by 30–35 per cent in FY2026, driven largely by elevated gold prices and a slowdown in unsecured lending.

The organised gold loan market is projected to reach ₹15 trillion by March 2026, a year ahead of previous estimates. This acceleration is attributed to the sustained rise in gold prices, which has boosted the value of collateral and increased demand for loans secured by gold jewellery. Despite this expansion, NBFCs’ share of the market has declined steadily, falling to 18 per cent as of March 2025 from 22 per cent in March 2021. Banks now dominate the segment, accounting for 82 per cent of total organised gold loan AUM.

ICRA notes that NBFCs have maintained strong growth momentum, with their gold loan AUM reaching approximately ₹2.4 trillion by June 2025, a year-on-year increase of around 41%. However, this growth has not translated into a larger market share, as banks have expanded more aggressively. Over the six-year period from FY2020 to FY2025, bank gold loan AUM grew at a compound annual rate of 26 per cent, compared to 20 per cent for NBFCs.

The concentration of gold loan assets among NBFCs remains high, though it is gradually dispersing. The top four NBFCs accounted for 81 per cent of the segment’s AUM in March 2025, down from 90 per cent in March 2022. This suggests that smaller players are beginning to gain ground, albeit slowly.

One notable trend is the divergence between the growth in AUM and the actual quantity of gold held as collateral. Between FY2020 and FY2025, the tonnage of gold held by NBFCs grew at a modest 1.7 per cent compound annual rate, while AUM rose by 20 per cent. In some cases, NBFCs reported a decline in gold holdings even as their loan books expanded. This discrepancy is partly explained by the increase in average loan ticket sizes, which more than doubled during the same period.

Branch expansion has also been subdued, with the number of NBFC branches growing at a compound annual rate of just 3.3 per cent from FY2020 to FY2025. Despite this, NBFCs have managed to sustain healthy lending spreads, supported by operational efficiencies and moderate credit losses. These factors have helped preserve net earnings, even as competition intensifies.

The competitive landscape is shifting, with banks reclassifying gold-backed loans from agricultural to retail categories. This reclassification has led to a rise in retail gold loans, which accounted for 18 per cent of total gold loans in March 2025, up from 11 per cent a year earlier. At the same time, the share of agricultural and other gold-backed loans declined to 63 per cent

ICRA cautions that NBFCs face increasing pressure on yields due to the entry of new players and the continued expansion of banks in the gold loan segment. To remain competitive, NBFCs will need to further improve operational efficiency and build buffers against margin compression.

While NBFCs are unlikely to regain their former dominance in the gold loan market, their projected growth in FY2026 underscores their resilience and adaptability. The segment remains a key area of focus for these institutions, particularly as they seek alternatives to unsecured lending in a high-risk environment.

Startup accelerator platform WaveX expands national footprint with seven new incubators

Mumbai: WaveX, the startup accelerator platform under India’s Ministry of Information & Broadcasting, has announced the launch of seven new incubation centres aimed at supporting early-stage ventures in the media, entertainment and AVGC-XR sectors. The move marks a significant expansion of the government’s WAVES initiative, which seeks to foster innovation in animation, visual effects, gaming, comics and extended reality technologies.

The new centres will be located at five campuses of the Indian Institute of Mass Communication (IIMC) — Delhi, Jammu, Dhenkanal, Kottayam and Amravati — as well as at the Film and Television Institute of India (FTII) in Pune and the Satyajit Ray Film and Television Institute (SRFTI) in Kolkata. These facilities join the existing flagship incubator at the Indian Institute of Creative Technologies (IICT) in Mumbai, creating a nationwide network of support for creative technology startups.

Each centre will offer access to advanced infrastructure for film production, game development, editing and testing. Startups will be able to use high-end equipment such as 8K cameras, Dolby Atmos preview theatres, virtual production stages, photogrammetry systems and VR testing kits. The IICT Mumbai facility, which serves as the model for the new centres, also includes professional sound and colour-mix theatres, 4K HDR edit suites and the latest gaming consoles. These resources are designed to help startups develop and validate content to global standards.

In addition to physical infrastructure, WaveX will provide structured mentorship, industry and government connections, and opportunities for international exposure. Startups will be eligible to participate in events such as VivaTech in Paris and the Game Developers Conference in the United States. The programme also includes access to cloud services, AI compute resources, and sandbox testing environments across various media formats including OTT, VFX, VR and publishing.

The incubation model operates in two phases. The active phase focuses on business modelling, product development, branding and fundraising, while the passive phase offers lighter mentorship and global showcasing opportunities. Selected startups may also be prioritised for projects outsourced by media units under the Ministry, including Doordarshan, All India Radio and the Press Information Bureau.

Applications for the first cohort are now open, with 15 startups to be selected at each location. A monthly fee of ₹8,500 plus GST will apply. Preference will be given to ventures in the Media-Entertainment and AVGC-XR sectors. Startups can apply via the WaveX portal by selecting their preferred incubation centre.

WaveX’s expansion reflects a broader effort to build a robust ecosystem for creative technologies in India. By partnering with institutions such as IITs and T-Hub, the initiative aims to provide startups with access to wider innovation networks and learning opportunities. The programme’s emphasis on early-stage support, including ventures that are still in conceptual or 'unreal' stages, sets it apart from traditional incubators that typically require market-ready products.

The announcement comes at a time when India’s AVGC-XR sector is gaining momentum, driven by rising demand for immersive content and digital entertainment. With the launch of these new centres, WaveX is positioning itself as a key enabler of growth in this space, offering startups the tools and guidance needed to compete on a global stage.

GST cut on room air-conditioners will ease prices but new star label implementation adds cost

Mumbai: While the recent reduction in goods and services tax (GST) on room air-conditioners (RACs) under two tonnes is expected to lower retail prices, the upcoming implementation of the new Star Label from January 2026 will likely push them back up. According to ICRA, the GST rate cut from 28% to 18%, effective 22 September 2025, could reduce prices by ₹2,000–₹3,000 per unit. However, the new energy efficiency standards under the revised Star Label are projected to increase prices by ₹500–₹2,500 per unit, depending on the model.

The timing of these regulatory changes is expected to influence consumer behaviour in the coming months. ICRA anticipates a wave of pre-buying in the third quarter of FY2026, as consumers seek to take advantage of lower prices before the new label takes effect. This may offer some relief to manufacturers, who are currently grappling with a sharp drop in demand and a significant build-up in inventory.

Sales volumes in the RAC industry are forecast to decline by 10–15% year-on-year in FY2026, falling to 11.0–11.5 million units from a record 12.5–13.0 million units in FY2025. The downturn has been attributed to unseasonal and above-average rainfall during the peak summer months of April to July 2025, particularly in North and Central India. The extended wet spell reduced the number of heatwave days, leading to a 15–20% drop in sales during that period.

As a result, channel inventory has doubled to around 2.5 million units as of July 2025, placing pressure on original equipment manufacturers (OEMs) to clear stock. A partial recovery is expected in the second half of FY2026, especially in Southern and Western regions, where forecasts point to a warmer summer in 2026.

The RAC industry is also preparing for broader regulatory changes beyond the Star Label. The phased implementation of the Quality Control Order (QCO) over the next 12 months will require compliance with Indian Standards and mandate the Bureau of Indian Standards (BIS) quality mark on products. This move is expected to increase indigenisation and reshape manufacturing strategies.

Currently, 65–70% of India’s RAC manufacturing capacity is held by OEMs, with the remaining 30–35% concentrated among contract manufacturers. Nearly 80% of total capacity is controlled by the top seven OEMs, while contract manufacturing is limited to three or four major players. To meet growing domestic demand and adapt to regulatory shifts, manufacturers have announced capital expenditure plans of ₹4,500–₹5,000 crore over the next two to three years. This investment is expected to increase total capacity by 40–50% from the current 24–26 million units.

The Government of India’s production-linked incentive (PLI) scheme for components manufacturing in the consumer durables sector is also playing a role in boosting localisation. ICRA estimates that indigenisation in the RAC industry will rise to 70–75% by FY2028, up from the current 50–60%, as companies pursue backward integration and respond to policy incentives.

Despite the short-term challenges posed by weather variability and regulatory transitions, the long-term outlook for the RAC industry remains positive. Rising temperatures, low household penetration, urbanisation and growing replacement demand for energy-efficient models continue to support structural growth.