Strong demand, rate cut hopes, investment push: What CII survey says about FY26

CII Business Outlook Survey: India’s business sentiment continued to strengthen in the third quarter of FY26, with the Confederation of Indian Industry’s (CII) Business Confidence Index rising for the third consecutive quarter to 66.5—its highest level in five quarters—reflecting a sustained improvement in business sentiment.

The sequential uptick in confidence is indicative of improving demand conditions, greater clarity on policy direction, and continued optimism around investment and capacity expansion plans, the survey said.

Rate cut expectations remain strong

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There is a growing consensus among companies that the central banks will be easing the monetary policy more. Around 69 per cent of the respondents expect that the Reserve Bank of India (RBI) will reduce the repo rate by the end of Q4FY26, while more than half are expecting a total of cuts over 25 basis points that would push the growth and borrowing conditions further.

Domestic demand shows clear momentum

Domestic demand is showing signs of sustained recovery, and almost 58 per cent of companies foresee a 5-20 per cent demand increase in Q3FY26. The prediction is based on the consumer being able to spend more, the wages being raised and the government making policies aimed at the economic growth.

Export outlook resilient despite global headwinds

Despite global uncertainties and concerns around US trade policies and tariffs, export sentiment remains resilient. About 48.6 per cent of firms expect export demand to rise, indicating that Indian exporters continue to find opportunities in global markets.

GST cuts seen boosting sales and consumption

The reduction in GST rates is expected to play a key role in lifting sales. Around 56.3 per cent of firms anticipate sales growth of 5–20 per cent in Q3FY26 due to the tax cut. On the consumption front, 43 per cent of respondents believe the GST-led boost will last for 6–12 months, while nearly 30 per cent expect the positive impact to extend beyond a year.

Profitability and capacity utilisation are getting better

Profitability of corporations is getting better, as approximately 39 per cent of companies have stated that their profit margins have increased by 1-5 percentage points. The positive trend is expected to continue as the demand gets stronger and the cost pressures get lighter. The capacity utilisation is also increasing, with 64 per cent of companies predicting that the utilisation levels will go above 75 per cent in the first half of FY26, thus indicating the readiness for capacity expansion.

Private investment and hiring gain traction

Private investment is still going strong, and 67 per cent of companies are planning to raise their domestic investments in H1FY26. The hiring intentions are also very promising, with 42 per cent of the companies intending to grow their workforce by 5-10 per cent during the same timeframe.

Wage growth is expected to be a support for consumption, as the majority of the respondents (more than 50 per cent) are forecasting a wage increase of 5-10 per cent.

Industry policy priorities

The industry is still optimistic, but at the same time, it continues to point out the main policy needs like further reforms for ease of doing business, assistance for MSMEs, export competitiveness, labour, and public capital expenditure to keep the growth momentum going.