India Business Confidence Improves in Q2 After Four Quarters of Decline

India's Business Confidence Index rose to 107.8 in Q2 FY2026-27, driven by positive expectations for production and sales across both large firms and MSMEs, marking a recovery after four consecutive quarters of decline in the country.

India Business Confidence Rebounds

New Delhi [India], October 23 (ANI): Business confidence in India improved in the second quarter of the current fiscal year after declining for four consecutive quarters, with firms reporting better expectations for production, domestic sales and exports despite continued global tensions, according to a survey by the National Council of Applied Economic Research (NCAER).

The Business Confidence Index (BCI) rose to 107.8 in Q2 FY2026-27 from 99.8 in the first quarter, according to NCAER's latest Business Expectations Survey. However, the index remained below the 142.6 recorded in the corresponding quarter of the previous fiscal year. The survey was conducted in September and covered 502 firms of different sizes across six cities: Delhi NCR, Bengaluru, Chennai, Kolkata, Mumbai and Pune.

Growth Drivers and Sectoral Outlook

The improvement in business confidence was driven by better expectations across all four components of the index, which measures firms' views on overall economic conditions, their financial position, the investment climate and capacity utilisation. The share of firms expecting overall economic conditions to improve over the next six months increased to 50 per cent in Q2 from 43 per cent in Q1. Similarly, the share of firms expecting their financial position to improve rose to 41 per cent from 37 per cent. Firms also reported greater confidence in the investment climate. The share of respondents who considered the present investment climate positive increased to 30 per cent from 26 per cent. Meanwhile, the share of firms reporting that capacity utilisation was close to or above optimal levels rose to 94 per cent from 91 per cent.

NCAER Professor Bornali Bhandari, who led the survey, said, "The data indicate a broad-based recovery in sentiments across both MSMEs and large firms." She added, "Overall business prospects improved both domestically & externally, and cost sentiments have moderated". The survey showed that firms were more optimistic about production and sales over the next six months. The share of firms expecting production to increase rose to 68 per cent in Q2 from 66 per cent in Q1. Expectations for domestic sales also improved, with 71 per cent of firms anticipating an increase, compared with 67 per cent in the previous quarter.

Performance Across Firm Sizes

Business confidence improved across both small and large firms. The BCI for micro, small and medium enterprises (MSMEs) increased to 100 in Q2 from 93 in Q1, while the index for large firms rose to 120.3 from 111.6.

The survey also indicated a moderation in cost expectations, particularly for raw materials. The share of firms expecting raw material costs to rise over the next six months declined to 60 per cent in Q2 from 67 per cent in Q1. Sentiments regarding unit costs of raw materials, electricity and labour also moderated during the quarter. However, hiring expectations remained subdued, with most firms expecting no change in employment over the next six months. (ANI)

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