Analysis of Business Performance in India's Private Sector for Q2 FY26

Growth in India's Private Sector Sales

India’s private sector experienced a notable increase in business activity during the second quarter of FY26. Sales of listed private non-financial companies surged by 8%, a significant rise from 5.4% in Q2 FY25 and 5.5% in Q1 FY26. This data, published by the Reserve Bank of India (RBI) on November 24, 2025, is derived from quarterly financial results of 3,118 listed non-government, non-financial companies. This upward trend indicates enhanced demand conditions and improved performance across crucial sectors, especially manufacturing, information technology (IT), and wholesale/retail trade.

Manufacturing Sector Leads with Sales Growth

The manufacturing sector, comprising 1,775 companies, recorded a sales growth of 8.5% in Q2 FY26, an increase from 5.3% in the previous quarter. Key contributors to this growth included:

• Automobile companies
• Food products
• Electrical machinery
• Chemical industries

These sectors benefitted from festive demand, effective input management, and enhanced consumer sentiment. However, this growth was accompanied by a rise in raw material costs, which increased by 9%. Consequently, the raw material-to-sales ratio rose to 55.9%, compared to 54.1% in the previous quarter.

Services Sector: Retail Trade Drives Non-IT Growth

The services sector also recorded robust growth, divided between IT and non-IT companies. IT firms achieved a sales growth of 7.8%, an improvement from 6% in Q1. Non-IT services companies saw a remarkable growth rate of 10.6%, a sharp increase from 7.5%. The impressive performance of wholesale and retail trade firms was a significant factor in the non-IT services surge, reflecting the post-pandemic normalization of retail activities and an uptick in consumer spending.

Staff Costs and Profit Margins Show Mixed Trends

Across all sectors, staff costs increased compared to the previous quarter:

• Manufacturing: Up by 9.2%
• IT: Up by 6%
• Non-IT Services: Up by 8.9%

The staff cost-to-sales ratio remained stable at 5.8% for manufacturing and 10.7% for non-IT services, while it decreased to 47.3% for IT from 48.8% in the last quarter, indicating some efficiency gains in the tech sector.

Operating Profit Growth Analysis

In terms of operating profit growth:

• Manufacturing companies rose to 10.6%
• IT companies grew by 7.7%
• Non-IT services dropped slightly to 6.5%

However, the operating profit margin improved only for IT companies, while it moderated for manufacturing and non-IT services due to escalating input and staffing costs.