Amidst a gradual easing of disruptions from the West Asia crisis, Indian industry is displaying an optimistic outlook for the second quarter of FY27, driven by expectations of sustained economic momentum. This positive sentiment is reinforced by the CII Business Confidence Index (BCI), which surged to 66.0 in Q2 FY27, up significantly from 60.8 in Q1FY27. This 5.2-point leap forward signals a broad-based strengthening in business expectations.
Commenting on the surge in business confidence, Mr Chandrajit Banerjee, Director General, CII, said: "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.”
The findings are based on the 136th Round of CII's Quarterly Business Outlook Survey, which garnered responses from over 240 companies across sectors, regions and firm sizes.
The survey findings come at an important moment for the economy. The latest estimates by MoSPI showed that India’s real GDP grew by 7.8 per cent in first quarter of current fiscal as compared with 6.9 per cent in same quarter of last fiscal. The survey results reinforce that the better-than-expected GDP numbers are not merely statistical in nature but a real outcome of an on-ground boost in economic activity. While manufacturing sector grew by 9.2 per cent in Q1FY27, services grew by 10 per cent from 8.3 and 8.0 per cent respectively during the corresponding period of last year.
"Industry sentiment has turned a corner, and this is no coincidence”, remarked Mr. Banerjee. “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."
While both components of the BCI improved during the quarter, the increase was led primarily by a sharp rise in the Expectation Index (EI), highlighting growing confidence about future business prospects. The EI climbed to 67.7 in Q2FY27 from 60.6 in Q1FY27, significantly outpacing the Current Situation Index (CSI), which increased more moderately to 62.6 from 61.2. The widening gap between the two indices underlines industry's expectation that business conditions in the coming quarter will be appreciably stronger than those prevailing currently, as firms look beyond near-term challenges and anticipate a more favourable operating environment.
Amidst clear indications that the economy is on a rising growth path, a significant 61 per cent of respondents expect domestic demand to rise in Q2FY27, building upon the broad-based gains seen in quarter before. Conversely, a mere 9.6 per cent foresee a moderation. This widening positive margin over the previous quarter signals sustained confidence in India’s growth story. Furthermore, the share of firms expecting demand growth to exceed 20 per cent rose from 12.9 per cent in Q1FY27 to 16 per cent in Q2FY27, indicating that corporate optimism is not just holding firm, but actively intensifying at the upper end.
This strengthening demand outlook is expected to translate into higher capacity utilisation levels. More than half of the respondents (51.6 per cent) expect their capacity utilisation to exceed 80 per cent in the second half of 2026, compared with 36.6 per cent in the first half. Sustained high levels of capacity utilisation could, in turn, spur fresh private sector investments in the coming quarters.
Meanwhile, while higher input costs continue to remain a concern, the intensity of cost pressures appears to be easing. The share of respondents expecting costs to rise in Q2FY27 has moderated marginally to 61.1 per cent, from nearly two-thirds who reported higher costs in Q1FY27. This buoys well for corporate margins over the coming quarters.
This positive outlook is also translated into confident employment plans. More than half of the respondents, or 53 per cent, expect to increase their workforce in Q2FY27. This suggests that even as firms are preparing for higher production and stronger demand, they remain confident about the medium-term business environment.
At the same time, businesses remain attentive to risks. Global trade uncertainty has been identified as the biggest risk over the next six months followed by volatility in commodity prices. These concerns underline the need for continued policy support and close monitoring of global developments. “Indian industry is entering the second half of the year with greater confidence. While external risks require continued attention, the underlying momentum remains encouraging”, opined Mr Banerjee.
On balance, the message from across the economy is clear. Businesses are more confident, economic growth is strong, company earnings are improving and investment plans are picking up. This suggests that India’s growth is becoming broad based, giving industry greater confidence to create jobs, build capacities and plan ahead.