NCAER Index Rebounds to 107.8 in Q2 FY27

What happened

India's business sentiment rebounded in the July-September quarter of fiscal year 2026-27, breaking a four-quarter streak of declines ^[2][15]. According to survey data released by the National Council of Applied Economic Research (NCAER), the Business Confidence Index climbed to 107.8 in the second quarter, up from 99.8 in the first quarter ^[2][15]. Despite the quarterly increase, the index remained below the 142.6 recorded in the same period of the previous financial year ^[15].

The September survey covered 502 firms across six cities, spanning micro, small, and medium enterprises (MSMEs) as well as large corporations ^[2][15]. The recovery was broad-based, with the index for MSMEs rising from 93 to 100, and the index for large firms increasing from 111.6 to 120.3 ^[2][15]. NCAER researcher Professor Bornali Bhandari noted that business prospects improved across domestic and international markets while cost sentiments moderated ^[2][15].

Why it matters

The survey tracked improvements across all four core indicators used to measure business sentiment ^[15]. The proportion of firms anticipating better overall economic conditions over the next six months grew to 50 percent from 43 percent, while those expecting improved financial positions rose from 37 percent to 41 percent ^[2][15]. Optimism regarding the investment climate increased to 30 percent from 26 percent, and firms reporting capacity utilization near or above optimal levels edged up to 94 percent from 91 percent ^[2][15].

Additionally, expectations for production, domestic sales, and exports strengthened ahead of the festive season ^[15]. The share of companies expecting increased production moved from 66 percent to 68 percent, while those anticipating higher domestic sales rose from 67 percent to 71 percent ^[15]. Exporting firms expecting higher shipments grew from 55 percent to 62 percent ^[15]. Raw material cost pressures eased, with firms expecting higher costs dropping from 67 percent to 60 percent ^[15]. However, hiring expectations remained subdued, with most companies anticipating no immediate change in recruitment ^[15].

What to watch

Observers will monitor whether the improvement in business confidence translates into actual capital expenditure and employment growth in subsequent quarters. Analysts are also watching how global economic uncertainties influence future index prints, given that the index remains below prior-year levels despite the recent quarterly rebound ^[15].

Sources

1. Economic research says Indian business sentiment improved in 2nd Qrt of this fiscal | Akashvani News newsonair.gov.in
2. Business confidence in India bounces back to 107.8 in 2nd quarter of FY27, NCAER finds - The Canadian Media thecanadianmedia.com