Indian Business Sentiment Improves in Q2 FY27: Surveys

Business sentiment among Indian manufacturers improved in the second quarter of FY27, with stronger expectations for production, demand, exports and hiring, according to the latest FICCI Quarterly Survey on Manufacturing. Around 95 percent of respondents reported higher or unchanged production levels in Q2 FY27, up from 77 percent in the previous quarter. A separate survey by the Confederation of Indian Industry (CII) showed business sentiment improving across the wider economy: its Business Confidence Index rose to 66 from 60.8, a three-quarter high. The business confidence survey was published in early September and the manufacturing survey in early October.

The FICCI survey points to a recovery in business sentiment despite global geopolitical uncertainties, supported by stable domestic economic conditions. Demand conditions also improved, with 90 percent of manufacturers reporting higher or stable order books, up from 77 percent in Q1. Capacity utilisation rose to about 75 percent in Q2 from 72 percent in the previous survey.

Exports and hiring lift business sentiment

Export sentiment also strengthened. About 80 percent of respondents reported higher or unchanged exports compared with the year-earlier period, against 74 percent in the previous quarter. FICCI attributed the improvement partly to export diversification efforts by both the government and industry.

Manufacturing firms also reported stronger hiring plans, with 43 percent indicating they expect to recruit additional workers over the next three months, compared with 35 percent in the previous quarter. Among sectors, automotive and auto components showed the strongest growth outlook, while machine tools and metal products were expected to record strong-to-moderate growth. Capital goods, chemicals, glass, electronics, electrical equipment and textiles were projected to post moderate growth.

CII business sentiment hits a three-quarter high

The CII Business Confidence Index rose 5.2 points to 66 in Q2 FY27 from 60.8 in the preceding quarter, returning to the levels seen in the second and third quarters of FY26. The survey, conducted among 238 firms between July 23 and August 24, showed the improvement was driven mainly by expectations for the quarter ahead rather than current operating conditions. The survey is the 136th round of the Quarterly Business Outlook Survey.

The Expectation Index, which measures the business environment expected in July-September, jumped to 67.7 in Q2 FY27 from 60.6 in Q1 FY27. The Current Situation Index, which captures conditions in April-June, rose more modestly to 62.6 from 61.2. About 61 percent of respondents expect demand to increase in Q2 FY27, while only 9.6 percent foresee a decline. The share expecting demand to grow by more than 20 percent rose to 16 percent from 12.9 percent in the previous quarter.

What still worries Indian business sentiment

The industry's investment outlook for the next six months remained broadly stable, although respondents continued to cite geopolitical tensions, tariffs, trade restrictions, demand uncertainty, skill shortages, raw material constraints, logistics costs and regulatory issues as challenges to expansion. Geopolitical tensions, changing trade conditions, commodity prices and external demand remain areas of concern for companies. Domestic demand remained a key source of optimism for business sentiment in both surveys. About 40.7 percent of respondents said macroeconomic strength was fully or largely reflected in their business performance, while only 13.4 percent said strong macroeconomic performance had not translated into better on-ground conditions.