India's Business Confidence Index Climbs to 107.8 in Q2

Business Confidence Makes a Comeback

India's business confidence saw a significant rebound in the second quarter of FY2026-27, according to the latest survey by the National Council of Applied Economic Research (NCAER). After four consecutive quarters of decline, the Business Confidence Index (BCI) rose to 107.8 from 99.8, indicating a revitalized sentiment in anticipation of the festive season.

Despite this positive shift, the current index remains notably lower than the 142.6 recorded in the same quarter of the previous year, reflecting ongoing caution among businesses.

Survey Insights from Major Cities

The NCAER Business Expectations Survey, conducted in September, included responses from 502 firms across six major cities: Delhi-NCR, Bengaluru, Chennai, Kolkata, Mumbai, and Pune. This diverse sampling provides a comprehensive view of the business landscape across various sizes and sectors.

Positive Indicators Across the Board

The rise in the BCI was underlined by improving expectations across four key indicators. These metrics assess overall economic conditions, firms’ financial circumstances, the current investment climate, and capacity utilization levels.

• The proportion of businesses anticipating better economic conditions over the next six months grew to 50% from 43% in the previous quarter.
• Beliefs regarding improved financial situations also rose, moving up from 37% to 41%.
• Regarding investment conditions, the positive outlook increased from 26% to 30%.
• Capacity utilization saw a slight rise, with companies reporting levels nearing or above optimal increasing from 91% to 94%.

MSMEs and Larger Firms Share in the Optimism

Both micro, small, and medium enterprises (MSMEs) as well as large corporations displayed improved confidence this quarter. The index for MSMEs surged from 93 in Q1 to 100 in Q2. Conversely, large firms saw their BCI increase from 111.6 to 120.3.

Professor Bornali Bhandari, who led the survey, emphasized that the findings reflect a broad recovery across different firm categories, noting that both domestic and international business prospects have perked up while concerns regarding rising costs are on the decline.

Encouraging Projections for Sales and Exports

The survey pointed to heightened expectations for activity over the next six months, particularly in terms of production, sales, and exports.

• Companies predicting increased production rose from 66% to 68%.
• Domestic sales expectations climbed from 67% to 71%.
• For exporters, the percentage expecting higher finished product shipments grew from 55% to 62%.
• Anticipations regarding raw material imports surged significantly, with expectations rising from 35% to 55%.

Cost Pressures and Employment Outlook

While business confidence grew, many firms reported a reduction in cost pressures, especially concerning raw materials. The number of companies forecasting an increase in raw material costs fell from 67% to 60%. Similar moderation was seen regarding electricity and labor costs.

However, employment expectations remain tepid, with most businesses indicating no significant changes in hiring plans over the next six months. This suggests that while confidence is improving, it has yet to translate into robust recruitment strategies.

Overall, the latest NCAER survey indicates a positive shift in business confidence and expectations for economic growth, yet the stark disparity from last year's levels highlights ongoing challenges businesses face amid global uncertainties.