India's Business Confidence Bounces Back in Q2 Despite Global Tensions
India's Business Confidence Index jumped to 107.8 in Q2, showing a recovery in production and sales expectations despite global tensions.
After a challenging streak of four consecutive quarters of decline, India business confidence Q2 data shows a refreshing turnaround. According to the latest Business Expectations Survey conducted by the National Council of Applied Economic Research (NCAER), Indian firms are once again optimistic about production, domestic sales, and exports, standing resilient even amidst ongoing global instabilities.
The Numbers: A Significant Jump in Confidence
The Business Confidence Index (BCI) witnessed a notable climb, rising to 107.8 in the second quarter (Q2) of FY2026-27, up from 99.8 in the first quarter. While this marks a positive shift in sentiment, the index is still trailing behind the 142.6 recorded during the same period in the previous fiscal year.
The survey, carried out in September, gathered insights from 502 firms of varying sizes across six major Indian hubs: Mumbai, Delhi NCR, Bengaluru, Chennai, Pune, and Kolkata.
What is Driving the Recovery?
The improvement isn't limited to one area but is spread across the four core components that make up the index. Firms have expressed a more positive outlook regarding:
- Overall Economic Conditions: The percentage of firms expecting the economy to improve over the next six months jumped to 50 per cent, compared to 43 per cent in Q1.
- Financial Position: Optimism regarding financial health rose from 37 per cent to 41 per cent.
- Investment Climate: More businesses now view the investment environment as positive, with the share increasing from 26 per cent to 30 per cent.
- Capacity Utilisation: A staggering 94 per cent of firms reported that their capacity utilisation is either at or above optimal levels, up from 91 per cent.
"The data indicate a broad-based recovery in sentiments across both MSMEs and large firms. Overall business prospects improved both domestically & externally, and cost sentiments have moderated," stated Professor Bornali Bhandari of NCAER, who led the survey.
Production and Sales on the Rise
The survey highlights a growing appetite for growth. More companies are planning to ramp up their operations over the next six months:
- Production: 68 per cent of firms expect an increase in production, up from 66 per cent.
- Domestic Sales: Expectations for domestic sales grew, with 71 per cent of firms anticipating a rise, compared to 67 per cent in the previous quarter.
MSMEs vs. Large Firms
The recovery is inclusive, benefiting both the giants of industry and smaller enterprises. The BCI for Micro, Small, and Medium Enterprises (MSMEs) rose to 100 from 93 in Q1. Meanwhile, large firms saw their index climb from 111.6 to 120.3.
Costs Cooling Down, But Hiring Stalls
One of the most encouraging findings is the moderation in cost expectations. The fear of rising raw material costs has dipped, with the share of firms expecting an increase falling from 67 per cent in Q1 to 60 per cent in Q2. Additionally, sentiments regarding the costs of labour and electricity have also moderated.
However, this optimism hasn't yet translated into a hiring spree. Despite the rise in production and sales expectations, hiring remains subdued, with the majority of firms predicting no change in their employment levels over the coming six months.