US tariffs to hurt Indian leather industry, revenue may drop by 12%

Mumbai: The Indian leather and allied products industry is bracing for a 10–12% revenue decline this fiscal year, driven by the United States’ (US) imposition of a 50% tariff – comprising a 25% reciprocal tariff and a 25% penalty for purchasing Russian oil. The tariffs, which came into effect in August 2025, are expected to reduce export volumes by 13–14%, with export revenue projected to fall by 14–16% to $3.9–4 billion.  Finished leather products such as shoes and accessories, which fetch higher realisations of approximately $14 per unit, are particularly affected, further exacerbating the revenue loss.

“With loss of orders from the US, the export volume is expected to drop 13–14% this fiscal,” said Jayashree Nandakumar, Director at Crisil Ratings. “Revenue will be hit harder as the bulk of exports to the US is of finished leather products, which fetch higher realisations.”

The industry, which generated approximately ₹56,000 crore in revenue in fiscal 2025, relies heavily on exports, with the US accounting for 22% of the total and the European Union over 50%. The higher tariffs have placed Indian exporters at a disadvantage compared to competitors from countries like Cambodia, Italy, Vietnam, and France, where US tariffs are lower at 15–20%. Many Indian tanneries and small leather product manufacturers with significant exposure to the US market have already shut down operations.

The decline in export demand is expected to compress operating profitability by 150–200 basis points, with exporters struggling to absorb fixed costs such as salaries, leases, and maintenance. “Lower revenue and weak fixed cost absorption will compress the operating profitability of exporters by 250–300 basis points this fiscal,” said Athul Sreelatha, Associate Director at Crisil Ratings. “However, growth in domestic revenue will restrict the decline in the operating profitability of the overall industry to 150–200 basis points.”

Financial metrics are also set to weaken, with the net cash accrual to total debt ratio and interest coverage projected to drop to 0.1 times and 2.5 times, respectively, from 0.2 times and 3.7 times last fiscal. Leverage levels, however, are expected to remain stable due to reduced GST rates on intermediate leather goods and the absence of major debt-funded capital expenditure plans.

To mitigate the impact of the tariffs, exporters are exploring diversification into markets with favourable duty structures and relocating production to other regions. However, these measures are still in their early stages and will take time to yield results. The recently signed Free Trade Agreement with the United Kingdom (UK) and sustained demand from non-US markets may help limit the decline in export revenue.

In the domestic market, the reduction in goods and services tax (GST) rate on leather products from 18% to 12% is expected to enhance affordability and drive premiumisation. Combined with lower income taxes, stable inflation, and reduced interest rates, these factors are likely to boost domestic consumption. Meanwhile, the decline in export demand is expected to exert downward pressure on raw material prices, providing some relief to exporters, though not enough to offset the impact of the tariffs.

Crisil Ratings, which analysed 34 leather companies representing 12.5% of the industry’s revenue, highlighted four key factors to monitor: the evolving tariff environment, the ability to offset US revenue losses by targeting other markets, the impact of re-exported goods to Europe, and potential forex volatility.

Artificial Intelligence adoption in SMEs hinges on trust, relevance and support

Mumbai: Small and medium enterprises (SMEs) in India are increasingly aware of the potential benefits of artificial intelligence (AI), yet many remain hesitant to adopt it. Their concerns are not unfounded. For business owners operating on tight margins, the promise of AI must be matched by clear, practical value. A report titled Transforming Small Businesses: An AI Playbook for India’s SMEs, by the World Economic Forum in partnership with IndiaAI, the Office of the Principal Scientific Adviser to the Government of India, and BCG X, offers a detailed account of these concerns and outlines a framework to address them.

The report draws on extensive consultations with SME owners, entrepreneurs, industry bodies and government representatives. It reveals that while many SMEs are curious about AI, they lack the guidance to move forward. Owners often ask not what AI can do in theory, but what it can do for them specifically. They want to know which use cases are most relevant, how ready their business is, and where to find affordable solutions. Without answers to these questions, AI remains an abstract concept rather than a practical tool.

Cost is a major barrier. Many SME owners believe that AI solutions are designed for large enterprises and priced accordingly. They worry that customisation for small-scale operations is either unavailable or prohibitively expensive. As one manufacturer put it, “We need AI that plays by my margins because value is what keeps my lights on.” This sentiment is echoed across sectors, from textiles to automotive components. For SMEs, the cost of experimentation is high, and the risk of failure can be severe.

Another concern is the lack of implementation support. SME owners often feel they cannot adopt AI without expert guidance. They want professionals who can assess their operations, identify suitable processes for AI integration and help with deployment. However, hiring such experts is rarely feasible. The report suggests that a centralised AI platform could help bridge this gap by connecting SMEs with solution providers, equipment vendors and funding options. It also recommends showcasing successful early adopters to build trust and encourage broader uptake.

Digital readiness is another challenge. Many SMEs operate with minimal digital infrastructure. Their data is often recorded manually or stored in basic spreadsheets. Without reliable, structured data, AI systems cannot function effectively. The report highlights the need for foundational digital tools and training before AI can be introduced. It also notes that SMEs vary widely in their digital maturity, and any intervention must be tailored to their specific stage in the digital journey.

Workforce concerns further complicate adoption. Shopfloor workers often view AI as a threat to their jobs. They fear surveillance and replacement, and are unsure whether they can learn the necessary skills. The report emphasises the importance of responsible AI use and transparent communication. If workers see AI as a tool that simplifies tasks and enables upskilling, they are more likely to support its integration. Training programmes must be accessible and designed with the workforce in mind.

The role of government is critical. SME owners want the government to act as an ecosystem curator rather than just a subsidy provider. They call for platforms that facilitate knowledge-sharing, connect stakeholders and evaluate the effectiveness of AI solutions. Some also point to the reluctance of original equipment manufacturers (OEMs) to experiment with new processes. Without support from larger partners, SMEs struggle to implement AI even when they are willing.

Start-ups and industry representatives echo these concerns. They stress the need for AI solutions that are easy to integrate and tailored to Indian realities. Many SMEs lack the digital foundation required for advanced AI tools. Start-ups must meet each enterprise where it is, offering phased approaches and helping build basic capabilities. They also highlight the importance of clear goals. SMEs must define what they want to improve—whether it is reducing defect rates or shortening production times—before selecting tools.

The report proposes the IMPACT AI framework to accelerate adoption. It focuses on three pillars: awareness, action and recognition. Awareness involves bridging knowledge gaps and building trust. Action provides tools such as an AI maturity index and a solutions marketplace. Recognition celebrates early adopters to inspire others. This structured approach aims to guide SMEs through their AI journey, from initial curiosity to full integration.

Ultimately, the transformation of India’s SME sector through AI will require collaboration across stakeholders. Policy-makers must create enabling environments. Entrepreneurs must be willing to explore new technologies. Solution providers must offer affordable, relevant tools. And workers must be supported through training and transparent communication. The report does not promise quick fixes, but it does offer a realistic path forward—one that respects the constraints and aspirations of SMEs.

If AI is to serve inclusive growth, it must work not only for large enterprises but also for the millions of small businesses that drive India’s economy. By addressing their concerns with empathy and precision, stakeholders can help SMEs unlock the value of AI and build a more resilient, competitive future.

GST rate cuts offer timely boost to Uttarakhand’s economy

Mumbai: The recent rationalisation of Goods and Services Tax (GST) rates is set to deliver tangible benefits across Uttarakhand’s diverse economic landscape. By reducing tax burdens on key sectors such as agriculture, tourism and manufacturing, the reforms are expected to improve affordability, support small producers and stimulate investment in the state’s hill and plain regions alike.

In agriculture, the revised GST rates target traditional hill crops that form the backbone of local farming systems. Pahari Toor Dal, cultivated across 13 districts including Chamoli, Almora and Pithoragarh, now attracts a 5% GST rate, down from 12%. This pulse, grown under the Barahnaja mixed cropping system, is valued for its organic quality and cultural significance. The rate cut is likely to enhance its competitiveness in health-conscious markets, offering better returns to small and marginal farmers.

Similarly, Uttarakhand Red Rice, grown in Purola and Mori, benefits from the same reduction. Known for its contribution to agro-biodiversity and local diets, the crop supports around 4,000 livelihoods. Lower taxation could help expand its reach in packaged food segments, reinforcing sustainable hill agriculture. The GI-tagged Lakhori Mirchi from Almora also sees its GST rate halved, a move that strengthens its market presence and benefits approximately 5,000 people involved in its cultivation.

Tourism, which contributes over 13% to the state’s Gross State Domestic Product, stands to gain from reduced GST on hotel tariffs. Accommodation priced up to ₹7,500 will now be taxed at 5% instead of 12%, making travel more affordable for visitors. This change is expected to benefit nearly 80,000 people employed directly and indirectly in tourism, particularly in destinations such as Nainital, Mussoorie, Auli and Rishikesh. The reform is likely to support small hotels and homestays, which form a significant part of the state’s hospitality sector.

Traditional crafts and cottage industries also receive a boost. Aipan art, practised in the Kumaon region and adapted into decorative items, now attracts a 5% GST rate. This benefits around 4,000 artisans, many of whom are women. Hand-knitted woollen garments, a seasonal industry led by hill women, are expected to become 6–7% cheaper, supporting around 10,000 livelihoods. Ringal bamboo craft, prevalent in Pithoragarh and Champawat, is another beneficiary. A study in the Garhwal Himalaya found that nearly half of hill families earn some income from bamboo craft, underscoring its economic relevance.

The manufacturing sector sees notable relief, particularly in food processing and automobiles. Uttarakhand hosts 383 registered food processing units, mainly in Rudrapur, employing around 30,000 people. The GST rate cut from 12% to 5% is expected to improve margins and encourage value addition in fruit, herbal and organic products. In the automobile belt spanning Pantnagar, Rudrapur and Haridwar, GST on vehicles up to 1200cc (petrol) and 1500cc (diesel) has been reduced from 28% to 18%. This could lower prices by 8–10%, supporting demand and sustaining around 50,000 jobs.

The Medical Device Park in SIDCUL’s industrial area also benefits from the rate cut. With GST reduced from 12% to 5% on medical devices, production costs are expected to fall, enhancing competitiveness and attracting investment. Around 4,000 people are employed in this sector, which forms part of the state’s growing MedTech ecosystem.

Taken together, these reforms reflect a targeted approach to economic development. By easing tax burdens on sectors with high employment potential and cultural significance, the GST changes align with Uttarakhand’s vision of inclusive and sustainable growth. The measures support small producers, artisans and entrepreneurs, while also strengthening industrial hubs in the plains. They bridge the gap between traditional livelihoods and modern markets, offering a more resilient foundation for the state’s future.

Consumer helpline facilitates over ₹2.7 crore in refunds across 7,256 cases, with e-commerce and travel sectors leading

Mumbai: The National Consumer Helpline (NCH) has emerged as a vital tool for resolving everyday grievances, with over ₹2.72 crore in refunds facilitated in July 2025 alone. The helpline addressed 7,256 complaints across 27 sectors that month, marking a sharp rise from ₹62 lakh in April. The e-commerce sector accounted for the largest share, with 3,594 cases resulting in ₹1.34 crore in refunds, followed by travel and tourism at ₹31 lakh. This growth reflects not only rising consumer awareness but also the increasing efficiency of digital grievance redressal.

The helpline’s reach has expanded dramatically over the past decade. Monthly complaint registrations have grown from 37,062 in 2017 to 1,70,585 in 2025, with nearly 65 per cent of grievances now submitted through online channels. WhatsApp, in particular, has seen a surge – from just 3 per cent of complaints in March 2023 to 20 per cent by March 2025. This shift signals a broader trend in how consumers interact with public services, favouring speed and accessibility over traditional methods.

The helpline’s integration with recent policy reforms has further strengthened its role. Following the launch of the Next-Gen GST Reforms in September 2025, a dedicated category was added to the INGRAM portal to handle tax-related complaints. Within two weeks, NCH logged 3,981 GST-related calls, of which 69 per cent were formal grievances. 

Many involved confusion over milk pricing, electronic goods and liquefied petroleum gas (LPG) cylinders. For instance, consumers expected price drops on fresh milk, unaware it was already GST-exempt. Others questioned why laptops and refrigerators hadn’t become cheaper, not realising these items were already taxed at the reduced rate of 18 per cent. These cases highlight the helpline’s dual role – not only resolving disputes but also clarifying policy changes.

Beyond retail and taxation, the helpline has also made a difference in education. As of February 2025, it helped secure ₹1.56 crore in refunds for over 600 students who faced cancelled classes or unfulfilled promises from coaching centres. These interventions prompted several institutes to revise their refund policies, making them more transparent and student-friendly. The success of these cases shows how the helpline can influence business practices, especially in sectors where consumer protection has traditionally been weak.

The NCH’s growing network of convergence partners – now numbering over 1,100 companies – has been key to its effectiveness. These firms voluntarily commit to resolving complaints within 30 days, allowing for quicker, more amicable outcomes. As consumer expectations evolve, such partnerships will be essential in maintaining trust and accountability.

India’s consumer protection framework is still a work in progress, but the National Consumer Helpline offers a clear example of how technology, policy and public engagement can come together to deliver tangible results. Whether it’s a refund for a faulty product, clarity on a tax rate or justice for a misled student, the helpline is proving that resolution need not be a distant promise — it can be a phone call or a message away.

Registering a grievance with the National Consumer Helpline (NCH) is designed to be straightforward and accessible to all. Consumers can begin by calling the toll-free number 1800 11 4000 to speak directly with an agent. For those who prefer regional languages, the helpline also operates through 1915, offering support in 17 languages. Alternatively, complaints can be submitted online via the portal consumerhelpline.gov.in.

After a simple one-time registration and email verification, users receive login credentials that allow them to file complaints and upload any supporting documents.

For those who prefer mobile-based communication, the helpline accepts grievances through SMS sent to 8800001915, with the team following up directly. WhatsApp has become an increasingly popular option, reflecting the shift towards digital convenience. Complaints can also be lodged through the dedicated NCH mobile app or accessed via the government’s UMANG platform.

To ensure the system continues to evolve with consumer needs, a feedback mechanism has been introduced. Suggestions submitted through the portal’s feedback section are carefully reviewed and analysed, helping shape future improvements in service delivery and responsiveness. This multi-channel approach reflects the helpline’s commitment to making consumer protection both efficient and inclusive.

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.