New Delhi: India's manufacturing sector is expected to post slower growth in the April-June quarter of FY27, largely due to the impact of the West Asia conflict, according to the latest quarterly survey by the Federation of Indian Chambers of Commerce and Industry (FICCI), released on Tuesday.About 77% of respondents reported higher or unchanged production levels in Q1FY27, down from 93% in Q4FY26. Demand also moderated, with 77% of manufacturers reporting higher or stable order books, compared with 89% in the previous quarter.Production costs remained elevated. Nearly 79% of respondents said production costs as a percentage of sales increased during Q1FY27, up from 70% in the previous quarter. "The rise in cost of production is mainly due to higher raw material costs, energy costs, currency depreciation and increased logistics and utility costs," the report said.Capacity utilisation remained broadly stable at around 72%, unchanged from the previous survey. The investment outlook for the next six months also remained steady.Among sectors, metals recorded the highest average capacity utilisation at 80%, followed by chemicals, fertilisers and pharmaceuticals (76%), machine tools (75%), capital goods (72%), electronics and electricals (70%), textiles, apparel and technical textiles (69%), and automotive and auto components (65%).Manufacturers cited the geopolitical environment, including tariffs, trade restrictions and demand uncertainty, as the main constraints on capacity expansion. They also highlighted labour availability, raw material shortages, rising logistics costs and regulatory challenges.Inventory levels remained stable, with 85% of respondents reporting higher or unchanged inventories in Q1FY27, compared with 86% in the previous quarter.Export sentiment improved during the quarter. About 74% of respondents said exports were higher or unchanged from the corresponding quarter a year earlier, up from 61% in Q4FY26. "Export diversification efforts by government and industry seem to be yielding results," the report said.The 70th edition of the survey assessed manufacturing performance and business sentiment during the April-June quarter across eight sectors: automotive and auto components; capital goods; chemicals, fertilisers and pharmaceuticals; electronics and electricals; machine tools; metals and metal products; textiles, apparel and technical textiles; and miscellaneous industries.The survey covered large enterprises as well as small and medium-sized manufacturers with a combined annual turnover of more than ₹4 lakh crore.Hiring intentions weakened, with 35% of respondents planning to add workers over the next three months, down from 41% in the previous survey.