Business sentiment rebounds in Q2, but remains below year-ago levels: NCAER survey

New Delhi: Business confidence in India improved in the July-September quarter of FY2026-27 after declining for four consecutive quarters amid prolonged geopolitical tensions, with expectations of higher production, domestic sales and exports lifting sentiment ahead of the festive season, according to a survey by the National Council of Applied Economic Research (NCAER).The Business Confidence Index (BCI) rose to 107.8 in the second quarter from 99.8 in the preceding quarter, the latest NCAER Business Expectations Survey showed. However, the index remained significantly below the 142.6 recorded in the corresponding quarter of the previous fiscal year.Conducted in September, the survey covered 502 firms of varying sizes across six cities — Delhi-NCR, Bengaluru, Chennai, Kolkata, Mumbai and Pune.The improvement was broad-based, with the share of firms expecting economic conditions to improve over the next six months rising to 50% from 43% in Q1. Similarly, the proportion expecting their financial position to improve increased to 41% from 37%, while firms viewing the investment climate positively rose to 30% from 26%.Capacity utilisation sentiments also strengthened, with 94% of firms expecting utilisation to remain close to or above optimal levels, compared with 91% in the previous quarter.Confidence improved among both micro, small and medium enterprises (MSMEs) and large firms. The BCI for MSMEs increased to 100 from 93, while that for large firms rose to 120.3 from 111.6.“The data indicate a broad-based recovery in sentiments across both MSMEs and large firms,” said NCAER professor Bornali Bhandari, who led the survey.Growth expectations strengthened across key business indicators. The share of firms expecting production to increase over the next six months rose to 68% from 66%, while expectations of higher domestic sales climbed to 71% from 67%.Among exporting firms, the proportion anticipating an increase in finished-product exports rose to 62% from 55%. Expectations of higher raw material imports also jumped to 55% from 35%, signalling a possible pickup in business activity.Cost pressures showed signs of easing, with the share of firms expecting raw material costs to rise declining to 60% from 67%. However, hiring intentions remained subdued, with most firms expecting no change in employment over the next six months.You use AI every day. Now get your AI Quotient. Take the AIQ test.