India Inc. upbeat on resilient economy despite global disruptions: CII Business Outlook Survey

Business confidence among Indian companies strengthened sharply in the second quarter of FY27, with the CII Business Confidence Index (BCI) rising 5.2 points to 66.0 from 60.8 in Q1FY27, according to the 136th CII Business Outlook Survey.

The rebound brings the index back to its Q2FY26 level and comes as disruptions linked to the West Asia conflict ease. The survey, conducted between July 23 and August 24, covered 238 firms across sectors and regions.

“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,” CII director general Chandrajit Banerjee said.

“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,” he added.

The improvement was driven primarily by expectations for the months ahead. The Expectation Index jumped to 67.7 in Q2FY27 from 60.6, while the Current Situation Index increased to 62.6 from 61.2. CII said the gap indicates that companies expect business conditions in the coming quarter to be materially better than those in the quarter just completed.

“Industry sentiment has turned a corner, and this is no coincidence,” Banerjee said. “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.”

Demand and capacity utilisation point to capex revival

Domestic demand remains a key source of optimism. 61% of respondents expect domestic demand to increase in Q2FY27, while only 9.6% expect moderation. More significantly, the share expecting demand growth of more than 20% has risen to 16% from 12.9% in Q1FY27.

The stronger demand outlook is also translating into expectations of higher capacity utilisation. More than half of respondents expect utilisation to exceed 80% in the second half of 2026, compared with 36.6% in the first half. CII said this could mark the point at which stronger demand begins to trigger fresh private-sector investment.

“Indian industry is entering the second half of the year with greater confidence,” Banerjee said. “While external risks require continued attention, the underlying momentum remains encouraging.”

Margins, hiring outlook improve

Cost pressures remain elevated, but there are early signs of moderation. The proportion of firms expecting costs to rise in Q2FY27 has eased to 61.1%, from nearly two-thirds in Q1. Meanwhile, 42.5% expect profit margins to improve, compared with around 20% anticipating a moderation.

Employment plans are similarly positive, with 53% of respondents expecting to increase their workforce in Q2FY27. Nearly one in five plan to expand headcount by more than 10%.

The survey also showed a clear easing bias on monetary policy. 56.3% of respondents expect an RBI rate cut within the next six months, with 27.7% expecting a 25-basis-point reduction and 28.6% anticipating cumulative cuts of 50 bps or more.

Still, external risks remain. Global trade uncertainty, cited by 34.3% of respondents, was the biggest risk over the next six months, followed by commodity-price volatility at 19.5%.

“While external risks require continued attention, the underlying momentum remains encouraging,” Banerjee said.