Business confidence among Indian companies rebounded to a three-quarter high in the ongoing July-September quarter (Q2), with the Confederation of Indian Industry's (CII's) Business Confidence Index (BCI) rising 5.2 points to 66 from 60.8 in the preceding quarter (Q1). According to reports from Business Standard, the index returned to the levels seen in the second and third quarters of FY26 after falling thereafter. The survey, conducted among 238 firms between July 23 and August 24, showed that the improvement was driven primarily by expectations for the quarter ahead rather than current operating conditions. The latest data from IANS confirms this multi-quarter high, underscoring India's strong growth momentum as Indian industry displays an optimistic outlook amid a gradual easing of disruptions from the West Asia crisis.
The Expectation Index, which measures the business environment expected in July-September, jumped to 67.7 in Q2FY27 from 60.6 in Q1FY27, while the Current Situation Index, which captures conditions in April-June, rose more modestly to 62.6 from 61.2. As reported by Business Standard, CII noted that the rebound marks a decisive turnaround in sentiment, driven primarily by the easing of disruptions from the West Asia conflict that had weighed on the previous quarter's reading. The recovery signals renewed optimism about the operating environment and strengthens the outlook for economic activity and investment in the coming quarters. The latest survey findings reflect this broad-based economic momentum, with companies anticipating stronger demand, higher capacity utilisation and improved operating conditions in Q2FY27.
Nearly 61 per cent of respondents reported an increase in demand during Q1FY27, while 61 per cent expect demand to rise in Q2FY27 as well. According to the survey findings reported by Business Standard, the share expecting demand growth of more than 20 per cent rose to 16 per cent from 12.9 per cent in Q1. Only 9.6 per cent expected demand to moderate. Improving demand is also translating into expectations of higher capacity utilisation, with more than half of respondents expecting capacity utilisation to exceed 80 per cent in the second half of 2026, compared with 36.6 per cent reporting such levels in the first half of the calendar year. However, as reported by IANS, 50% of Indian firms say macro growth isn't fully translating to their business performance, indicating that while overall confidence is high, companies are not seeing complete benefits from the economic momentum.
The improving business outlook is reflected in hiring intentions, with 53 per cent of respondents planning to increase their workforce in Q2FY27, while only 8.4 per cent expect a reduction. As reported by Business Standard, cost pressures remain a concern, with 61.1 per cent of firms expecting costs to rise in Q2FY27, although this is marginally lower than the proportion reporting cost increases in Q1. The share expecting costs to rise by more than 20 per cent declined to 13.3 per cent from 14.6 per cent. About 42.5 per cent of respondents expect their margins to improve in Q2FY27, while around 20 per cent anticipate a moderation. The latest survey findings show that cost pressures also showed some moderation, with the share of companies expecting input costs to rise falling to 61.1 per cent in Q2FY27 from nearly two-thirds in the previous quarter, potentially offering some relief to corporate margins.
Global trade uncertainty was identified as the biggest macroeconomic risk over the next six months by 34.3 per cent of respondents, followed by commodity price volatility at 19.5 per cent. Weak domestic demand and weak or uneven monsoons were cited by 16.1 per cent and 15.7 per cent, respectively. According to the survey findings reported by Business Standard, more than half of respondents also expect the Reserve Bank of India to cut its policy rate within the next six months, with 56.3 per cent anticipating an easing, compared with only 8 per cent expecting a rate hike. The latest data from IANS confirms this monetary policy outlook, with the survey showing that business confidence is gaining further strength as companies anticipate stronger demand and improved operating conditions in the second quarter of FY27.
The stronger business confidence comes against the backdrop of robust economic growth, with India's real GDP expanding 7.8 per cent in Q1FY27, compared with 6.9 per cent in the corresponding quarter of the previous fiscal, according to MoSPI. Manufacturing grew 9.2 per cent, while services recorded 10 per cent growth. Chandrajit Banerjee, Director General of CII, stated that "The optimism shown by businesses, as reflected in the BCI, is a clear testament to the inherent resilience of the Indian economy even as the geopolitical uncertainty continues. The steady improvement in business activity, backed by robust domestic demand and stable macroeconomic indicators, reinforces the perception that the government's facilitative policies will support a faster expansion in output and new orders, creating fresh opportunities for firms in India and abroad." As reported by The Times of India, industry sentiment has turned a corner, and this is no coincidence, when business confidence, macroeconomic indicators and ground-level activity move in tandem, they point to a growth cycle that is increasingly broad-based, durable and sustainable.
