NCAER Business Confidence Index Rises to 107.8
Why in News?
- On 23 October 2026, News On AIR reported that the National Council of Applied Economic Research said Indian business sentiment improved in the July-September quarter.
- The Business Confidence Index rose to 107.8 from 99.8 in the previous quarter.
- The index had fallen for four consecutive quarters before this rise, according to the report.
- The survey was conducted in September 2026 among 502 firms across six cities.
Key Terminologies
- Business Confidence Index
- A composite number that summarises how business firms view the economy, their finances, the investment climate and capacity use.
- NCAER
- The National Council of Applied Economic Research, an independent economic research institution in New Delhi that runs a quarterly Business Expectations Survey.
- MSME Index
- A sub-index for micro, small and medium enterprises, which shows whether smaller firms feel the same confidence as large firms.
- Capacity Utilisation
- The share of a firm's productive capacity that it actually uses. A high value suggests firms expect enough demand to keep plants working near their best level.
Key Issues
- Headline Rise: The Business Confidence Index rose from 99.8 to 107.8 in July-September 2026, ending four straight quarters of decline, News On AIR reported on 23 October 2026.
- Firm Size: The MSME index rose from 93 to 100 and the large-firm index from 111.6 to 120.3, so recovery was broad across firm sizes, though large firms remain more confident.
- Economic Outlook: Firms expecting overall economic conditions to improve over the next six months rose from 43 per cent to 50 per cent, according to the NCAER survey.
- Finance And Investment: Firms expecting better financial positions rose from 37 per cent to 41 per cent, and those seeing a positive investment climate rose from 26 per cent to 30 per cent.
- Capacity Use: Firms expecting capacity utilisation near or above the optimal level rose from 91 per cent to 94 per cent, which shows a stronger demand outlook.
Key Implications
Positive/Pros/Merits
- Turning Point: A rise after four quarters of decline suggests that the weakest phase of business sentiment may have passed, an analytical reading of the 99.8 to 107.8 move.
- Small Firms Back To 100: The MSME index returning to 100 matters because small firms employ many workers and are sensitive to cost and demand shocks.
- Better Demand View: Business prospects improved in both domestic and external markets, according to the report, which supports investment decisions.
- Cost Relief: The report noted that cost sentiment moderated, which helps margins and may support hiring and capital spending.
Negative/Cons/Demerits
- Low Investment Climate: Only 30 per cent of firms viewed the investment climate positively, so most firms still hold a neutral or negative view despite the rise.
- Small Sample: The survey covered 502 firms in six cities, so it may not reflect smaller towns or informal enterprises, which is a limit of the index.
- Sentiment Is Not Output: A confidence index measures expectations and not production or investment itself, so official data must confirm the recovery.
- Uneven Strength: Large firms scored 120.3 while MSMEs scored 100, so the gap between large and small firms remains 20 points.
Key Initiatives
- NCAER Business Expectations Survey: The research body measures business confidence each quarter, and the July-September 2026 round covered 502 firms in six cities in September 2026.
- Financial Stability and Development Council, 23 October 2026: Finance Minister Nirmala Sitharaman chaired its 30th meeting, which reviewed macro-financial trends and called for safeguards for the financial system.
- GST Council, 8 October 2026: It recommended simplified registration for small e-commerce sellers and faster automatic refunds, which are aimed at easing compliance for small firms.
NCAER says business prospects improved in domestic and external markets and that cost sentiment moderated. The Finance Ministry has recently held the Financial Stability and Development Council meeting and the GST Council has recommended compliance relief for small firms. The reports reviewed do not link any specific policy measure to the rise in the index.
Director's Perspective
Way Forward
- Read the index together with official data on industrial output, credit growth and investment, so that sentiment is checked against real activity.
- Target the weakest signal, the investment climate, with steady rules on taxes and approvals, because only 30 per cent of firms rate it positively.
- Widen survey coverage to smaller towns and informal firms over time, so the index reflects more of the economy.
- Publish MSME-specific support and compliance relief on a fixed calendar, because the MSME index has just reached 100 and needs support to stay there.
The rise to 107.8 is an encouraging sign, but one quarter does not make a recovery. Strengths are the broad-based gain across MSMEs and large firms and better outlook on demand and capacity use, while weaknesses are the weak investment climate view and a small survey base. In a Mains answer, credit the turnaround after four falls, then conclude that real output and investment data must confirm that confidence is turning into growth.
GS Relevance
Frequently Asked Questions
What did the NCAER Business Confidence Index show for July-September 2026?
The National Council of Applied Economic Research said the Business Confidence Index rose to 107.8 in July-September 2026 from 99.8 in the previous quarter, ending four straight quarters of decline, News On AIR reported on 23 October 2026. The survey covered 502 firms across six cities.
How did small and large firms differ in the NCAER survey?
In the NCAER survey, the MSME index rose from 93 to 100 and the large-firm index rose from 111.6 to 120.3 in July-September 2026. Both groups improved, but large firms remained more confident than micro, small and medium enterprises.
What does the Business Confidence Index measure?
The Business Confidence Index summarises how firms view the economy, their finances, the investment climate and capacity use over the next period. In the NCAER survey, 50 per cent of firms expected economic conditions to improve over six months, up from 43 per cent.
PYQ Practice — Statement Analysis
1 The NCAER Business Confidence Index is based on a survey of business firms.
The July-September 2026 survey covered 502 firms across six cities in September 2026.
2 The NCAER Business Confidence Index fell in July-September 2026 compared with the previous quarter.
It rose to 107.8 from 99.8, according to the report.
3 A confidence index measures actual industrial production directly.
It measures firms' expectations and views, so official output data must be used to confirm real activity.