Business confidence among Indian industry has risen for the third consecutive quarter, reaching a five-quarter high of 66.5 in the October-December period (Q3 FY26), according to the Business Outlook Survey released by the Confederation of Indian Industry (CII) on Sunday.
The uptick from 66.0 in Q2 FY26 reflects sustained optimism driven by resilient domestic demand, improved profitability, and positive expectations around investment and capacity expansion, even as global uncertainties persist due to geopolitical tensions and trade disruptions.
Domestic Demand & GST Relief
Domestic demand has emerged as the primary anchor of growth. Close to two-thirds of respondents reported an increase in domestic demand in Q2 FY26 compared to the previous quarter, with around 72% expecting further strengthening in Q3 FY26. This momentum is supported by recent GST rate cuts and buoyant festive-season consumption, with 56.3% of firms anticipating sales growth of 5-20% in the third quarter due to the tax relief.
The survey highlights robust private sector activity, including higher investments and hiring plans. A majority of firms (63%) reported increased domestic investment in the second half of 2025 compared to the first half, while 67% plan to step up investments in the first half of 2026. Employment intentions remain healthy, with 42% of respondents expecting workforce expansion of 5-10% in H1 2026.
Profit margins have also improved, with many firms reporting gains in Q2 FY26 and expecting continued benefits in the current quarter. Capacity utilisation levels are trending higher, with over 57% of firms exceeding 75% in H2 2025 and 64% anticipating the same in the first half of 2026.
Monetary policy expectations are optimistic, with 69% of respondents foreseeing a repo rate cut by the Reserve Bank of India by the end of Q4 FY26 (March 2026), largely due to a benign inflation outlook.
“The steady rise in business confidence shows industry’s ability to navigate external headwinds, anchored by resilient domestic demand and a robust reform agenda,” noted Chandrajit Banerjee, Director General, CII. He further added that industry anticipates the growth momentum to strengthen further in the months ahead.
Budget 2026 Roadmap
CII has expressed confidence that the reform momentum will continue in the forthcoming Union Budget and has made several recommendations. A central pillar of CII’s recommendations is sustaining capital expenditure, wherein a revitalised, Rs 150 lakh crore, National Infrastructure Pipeline (NIP) 2.0 could be launched. CII also suggested a Rs 1,000‑crore Digitisation Fund, to accelerate India’s regulatory digitisation, advancing the Unified Enterprise Identity, Entity Locker, API‑based compliance, upgraded e‑Gazette and India Code.
To unlock liquidity and attract global capital, CII recommended accelerating asset tokenisation across real estate, infrastructure, and financial assets.
According to the government’s first advance estimates, India is projected to grow at 7.4% in FY26. The nominal growth is projected at 8%, below the 10.1% assumed in the Union Budget.