India’s Business Confidence Index Rebounds to 107.8 as Industry Sentiment Improves in Q2 FY 2026–27

India’s business confidence recovered during the second quarter of financial year 2026–27, ending four consecutive quarters of declining sentiment. According to the latest Business Expectations Survey conducted by the National Council of Applied Economic Research (NCAER), the Business Confidence Index (BCI) increased from 99.8 in April–June 2026 to 107.8 in July–September 2026, reflecting improving expectations among Indian enterprises.

The survey, released on 23 October 2026, covered 502 firms across six major Indian cities. Businesses reported greater optimism about economic conditions, financial performance, investment opportunities and production activity. Both micro, small and medium enterprises (MSMEs) and large companies recorded improvements, although the recovery varied across regions and business indicators.

Despite the quarterly increase, the index remained below the 142.6 recorded during July–September 2025. The findings therefore indicate a recovery from the recent decline in confidence rather than a return to the more optimistic business environment observed a year earlier.

Business Confidence Recovers After Four Consecutive Quarterly Declines

The eight-point increase in the Business Confidence Index marks a change in the direction of business sentiment after a prolonged period of moderation. Companies entered the second quarter with greater confidence in economic conditions and their ability to sustain commercial activity over the following six months.

NCAER constructs the index using four indicators covering expectations about the overall economy, companies’ financial positions, investment conditions and capacity utilisation. All four components improved during the July–September quarter, indicating that the recovery extended across several aspects of business activity rather than emerging from a single favourable indicator.

The improvement occurred against a backdrop of international economic uncertainty, geopolitical developments and changing trade conditions. Although these factors continued to influence business decisions, the survey indicated that participating companies had become more positive about their immediate operating environment.

The latest index reading also highlights the distinction between quarterly improvement and longer-term business confidence. While sentiment strengthened compared with April–June, it remained considerably weaker than during the corresponding quarter of the previous financial year.

Half of Surveyed Firms Expect Economic Conditions to Improve

Business expectations concerning India’s overall economic environment improved during the second quarter. Approximately 50% of surveyed companies anticipated better economic conditions over the following six months, compared with 43% in the preceding quarter.

The increase suggests that more businesses expect a favourable environment for sales, production and commercial expansion. Expectations about the broader economy influence decisions involving inventory, procurement, capital expenditure and the development of new business opportunities.

Companies also reported greater optimism about their own financial positions. The proportion expecting an improvement in financial performance increased from 37% to approximately 41%, indicating that a larger share of firms anticipated stronger business results.

These expectations provide useful insights into how enterprises assess their immediate prospects. However, they represent forward-looking assessments rather than confirmed changes in revenue, profitability or economic output.

Investment Sentiment Improves as Capacity Utilisation Strengthens

The survey recorded an improvement in businesses’ assessment of the investment environment, with the proportion of companies viewing prevailing investment conditions positively increasing from 26% to approximately 30%.

Investment decisions depend on expectations about demand, financing costs, infrastructure, operating expenses and the potential returns from expanding production. A more favourable outlook can encourage companies to consider investments in machinery, technology, additional facilities and new markets.

Nevertheless, the survey showed that a substantial majority of participating firms did not yet describe the investment environment as positive. This indicates that businesses continued to exercise caution despite the improvement in overall confidence.

Capacity utilisation provided another indication of stronger operating conditions. The proportion of firms reporting utilisation close to or above their optimal levels increased from 91% to 94%. This measure reflects the share of participating companies operating near or beyond their preferred capacity levels, rather than the percentage of India’s total installed industrial capacity being used.

Higher utilisation can encourage investment when businesses expect demand to remain strong. Companies approaching their preferred production limits may eventually need additional machinery, infrastructure or technological improvements to expand output.

MSMEs and Large Enterprises Report Higher Confidence

Business sentiment improved among enterprises of different sizes, with both MSMEs and large companies recording higher confidence during the second quarter.

The Business Confidence Index for MSMEs increased from 93 in April–June to 100 in July–September. This improvement is significant because smaller enterprises contribute extensively to India’s manufacturing, services, employment and industrial supply chains. Their operating conditions are often influenced by changes in domestic demand, financing availability, raw material prices and payment cycles.

Large enterprises recorded a stronger absolute confidence reading, with their index increasing from 111.6 to 120.3. These companies often operate across multiple domestic and international markets, making their expectations relevant to investment planning, industrial production and broader commercial activity.

NCAER Professor Bornali Bhandari, who led the survey, described the findings as indicating a broad-based improvement across MSMEs and large enterprises. She also highlighted improving business prospects in domestic and international markets alongside moderation in expectations concerning operating costs.

The increase across both business segments suggests that the recovery was not confined to major corporations. However, the difference between their index readings indicates that large enterprises remained more optimistic than smaller businesses.

Domestic Sales, Production and New Orders Show Positive Expectations

Companies expressed greater confidence in domestic demand during the July–September quarter. The proportion expecting domestic sales to increase over the following six months rose from 67% to approximately 71%.

Production expectations also strengthened, with the share of businesses anticipating higher output increasing from 66% to 68%. Meanwhile, approximately 63% of firms expected an increase in new orders, compared with 59% in the previous quarter.

These indicators are closely connected because businesses generally adjust production schedules, procurement and inventory according to expected demand. Stronger order books can encourage manufacturers to increase output, while improving sales expectations can support decisions concerning capacity utilisation and operational expenditure.

The survey’s findings suggest that participating firms anticipated more favourable conditions in domestic markets. However, actual production and sales growth will depend on the extent to which these expectations translate into realised demand during subsequent months.

The improvement in new-order expectations is particularly relevant to manufacturing and business services, where confirmed commercial demand influences production planning and the allocation of resources.

Indian Exporters Anticipate Stronger International Demand

Export-oriented businesses also reported improving expectations, despite continuing uncertainty in the international economic environment.

According to the survey, approximately 62% of exporting firms expected their shipments to increase over the following six months, compared with 55% in the preceding quarter. The proportion anticipating a decline in exports also decreased.

The improvement indicates greater confidence among participating exporters regarding international demand and their ability to secure overseas business. Export expectations can influence manufacturing schedules, investment decisions, logistics arrangements and supply-chain planning.

India’s export-oriented industries operate within an environment shaped by global demand, trade policies, currency movements and transportation costs. Consequently, stronger expectations among exporters are encouraging, although actual performance will depend on international market conditions.

The survey’s findings point to greater optimism about overseas opportunities without establishing that export volumes have already increased.

Businesses Expect Some Moderation in Operating Cost Pressures

The NCAER survey indicated that expectations concerning certain operating costs moderated during the second quarter.

The proportion of firms anticipating an increase in raw material prices declined from approximately 67% to 60%. Businesses also reported a moderation in expectations concerning electricity costs.

Changes in input prices influence production expenses, product pricing and profit margins. Companies that expect more stable costs may find it easier to prepare budgets, negotiate supply contracts and plan future investments.

The decline in the proportion anticipating higher raw material costs suggests some easing of concerns about future expenditure. However, most participating firms still expected these costs to increase, indicating that inflationary pressures remained an important consideration.

The findings concern anticipated cost movements rather than actual reductions in prices. They nevertheless provide an explanation for part of the improvement in business sentiment, particularly among companies whose profitability depends heavily on material and energy expenses.

Regional Business Confidence Shows Uneven Recovery

The Business Expectations Survey covered firms in Delhi NCR, Bengaluru, Chennai, Kolkata, Mumbai and Pune, allowing NCAER to assess differences in sentiment across major business centres.

Northern India recorded a substantial improvement, with its Business Confidence Index increasing from 64 to 102. Western India also reported stronger sentiment, as the regional index rose from 84.8 to 92.2.

However, confidence declined in eastern and southern India during the same period. The index for eastern India moderated from 136.4 to 129, while southern India’s reading decreased from 115.4 to 108.6.

These differences indicate that the national recovery did not extend uniformly across all regions. Local industrial activity, market conditions, sectoral composition and business expectations can influence how companies assess their prospects.

Although eastern and southern India recorded quarterly declines, their index readings remained above those of northern and western India. The findings therefore show both differences in the direction of change and variations in overall confidence levels.

The regional results also demonstrate the importance of examining economic sentiment beyond national averages. Business conditions can differ considerably across industrial centres, making regional indicators valuable for understanding the broader economic environment.

Employment Expectations Remain Cautious

Despite improving expectations concerning sales, production and investment, businesses remained relatively cautious about expanding their workforces.

The survey indicated that many participating companies expected employment levels to remain broadly unchanged over the following six months. This suggests that stronger commercial confidence had not yet produced a corresponding increase in recruitment intentions.

Businesses often respond to improving demand by increasing the utilisation of existing resources before committing to additional hiring. Recruitment decisions also depend on labour costs, productivity, technological requirements and confidence that higher demand will continue.

The subdued employment outlook highlights an important distinction between business optimism and actual expansion plans. Companies may anticipate improving market conditions while remaining cautious about increasing their fixed operating expenses.

Sustained improvements in demand, investment and production could provide a stronger basis for employment growth. The latest survey, however, indicates that firms had not yet translated their improving outlook into widespread plans for workforce expansion.

NCAER Survey Provides an Important Indicator of Economic Sentiment

The National Council of Applied Economic Research is an independent economic policy research institution that conducts studies and surveys covering different aspects of India’s economy.

Its Business Expectations Survey evaluates how companies assess their current operating environment and their prospects over the following months. The September 2026 survey covered 502 firms across six major cities and examined expectations concerning economic conditions, financial performance, investment, production, sales and employment.

Business confidence surveys complement economic indicators such as industrial production, employment statistics, investment data and national income estimates. While official statistics measure economic activity that has already occurred, sentiment surveys help identify how businesses expect conditions to develop.

The findings are therefore useful for understanding potential changes in commercial behaviour, including investment intentions and production planning. However, higher confidence does not automatically translate into equivalent increases in economic output or capital expenditure.

The latest NCAER results provide evidence of improving business expectations during the second quarter of FY 2026–27, while also identifying areas where caution and uncertainty remain.

India’s Business Outlook Shows Renewed Momentum

India’s Business Confidence Index rising to 107.8 marks an improvement in economic sentiment after four consecutive quarters of decline. The recovery was supported by stronger expectations concerning economic conditions, company finances, domestic sales, production, exports and investment.

Both MSMEs and large enterprises recorded higher confidence, demonstrating that the improvement extended across different business segments. At the same time, regional differences, subdued recruitment intentions and continued concerns about operating costs indicate that the recovery remains uneven.

The index also remains below its level during the corresponding quarter of FY 2025–26, underscoring the importance of sustained improvement in demand and investment conditions.

Nevertheless, the survey provides encouraging evidence that Indian businesses entered the second half of FY 2026–27 with a more positive outlook. Improving commercial expectations, stronger anticipated orders and greater confidence among enterprises provide a foundation for continued industrial activity and economic development.

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References

1. National Council of Applied Economic Research (NCAER). Business Expectations Survey, Second Quarter FY 2026–27. Findings released 23 October 2026.
   https://www.ncaer.org/
2. Akashvani News, Prasar Bharati. Economic Research Says Indian Business Sentiment Improved in 2nd Quarter of This Fiscal. Published 23 October 2026.
   https://newsonair.gov.in/economic-research-says-indian-business-sentiment-improved-in-2nd-qrt-of-this-fiscal/
3. Press Trust of India. Despite Global Tensions, Business Sentiment Looks Up Again in Q2 FY27: NCAER. Published 23 October 2026.
   https://theprint.in/economy/despite-global-tensions-business-sentiment-looks-up-again-in-q2-fy27-ncaer/3079766/
4. Business Standard. Business Confidence Rebounds in Q2 FY27 After Four Quarters: NCAER. Published 23 October 2026.
   https://www.business-standard.com/industry/news/business-confidence-rebounds-in-q2-fy27-after-four-quarters-ncaer-126102301484_1.html

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