<p>There is something odd about the latest findings of IMA’s Business Confidence and Performance Index. Ask business leaders about the economy and the mood darkens. Ask about their own companies and there is cheer on their faces. Either everyone believes they can outrun the rain, or something more interesting is happening beneath the surface. Our October 2026 survey, drawing on over 150 CEOs and CFOs, suggests that the distinction warrants scrutiny. The headline BCPI slipped from 60.1 to 57.3. Its economy component, on the other hand, was clobbered, falling from 62.5 to 45.7, below the neutral mark of 50. Yet business expectations rose from 60.2 to 62.1, while the investment index edged upwards. Companies seem reasonably chuffed with the orders on their books, but a lot less sure about the world in which they will have to fulfil them. These are different judgments and both can be sensible. </p><p>There is, however, a wrinkle. Much of the improvement strangely comes from fewer companies expecting things to get worse. The proportion anticipating stronger orders barely changed, from 47% to 46.8%. Those expecting weaker orders fell from 12.6% to 10.4%. Hiring tells an even clearer story. Fewer firms expect to increase recruitment, 27% against 28.6% previously, but the proportion expecting it to decline dropped sharply, from 27.3% to 17.1%. Fewer firms are on the back foot, but whether more are ready to step on the accelerator is another question. This distinction is important because stabilisation and expansion produce different economic outcomes. While fewer struggling businesses protect existing jobs and spending, a wider recovery creates newer ones, additional salaries, customers and capacity. The first is welcome, but it does not automatically deliver the second. Consequently, the next few surveys should tell us whether companies begin expanding their ambitions or merely stop trimming them. That is where the BCPI’s value as a lead indicator becomes particularly useful. </p><p> The investment picture creates another puzzle. Among companies with revenues below Rs 500 crore, the profitability balance stands at 35.9, against just 5.3 for those above Rs 2,500 crore. Yet their investment balances are almost reversed, minus 8.8 for smaller firms and plus 66.7 for larger ones. These figures measure the difference between respondents saying up and down, rather than the size of their profits or investments. Nevertheless, the contrast is blatant. Better earnings are not prompting everyone to reach for the chequebook. Perhaps smaller companies are rebuilding cash reserves or paying down debt. Perhaps larger ones can afford to wait longer for a return. Industry differences may also explain part of the gap. But if this pattern persists, today’s investment decisions could determine tomorrow’s market shares. Businesses with the means to absorb uncertainty may emerge stronger, while otherwise capable competitors hesitate. National growth could remain respectable even as the opportunities within it become more uneven. </p><p>Industrial firms illustrate the hesitation beautifully. Their sales balance is 64.3 and new orders stand at 50, yet investment stands at minus 14.3. Existing factories may have room to accommodate demand. Alternatively, managers may doubt its durability. A busy production line this quarter does not necessarily justify building another one for the next five years. Nor does investment necessarily mean abundant new jobs. Large companies report a hiring balance of only 5.3 alongside that substantial investment appetite. Spending may go towards automation or replacement equipment. Some recruitment may follow later. Consumer goods firms already report a negative hiring balance of 20 points and no positive balance on profitability. The wider world complicates matters. An Indian company may gain an order because an overseas customer wants an alternative supplier. The same geopolitical uncertainty can raise its freight bill, disrupt inputs or make its customer reluctant to sign a longer contract. Winning business and worrying about the economy are perfectly compatible. If these pressures persist, the new year will begin with a headache, even for companies carrying healthy order books into it. Our reading is cautiously encouraging. Corporate distress appears to be easing and investment intentions retain some strength. But a durable expansion needs the improvement to spread into smaller companies, employment and household purchasing power. Watch the breadth of rising orders, the purpose of investment and the willingness to hire. </p><p>The next chapter will depend less on whether executives sound cheerful than on whether their confidence becomes a commitment they cannot easily reverse. </p>
<p>There is something odd about the latest findings of IMA’s Business Confidence and Performance Index. Ask business leaders about the economy and the mood darkens. Ask about their own companies and there is cheer on their faces. Either everyone believes they can outrun the rain, or something more interesting is happening beneath the surface. Our October 2026 survey, drawing on over 150 CEOs and CFOs, suggests that the distinction warrants scrutiny. The headline BCPI slipped from 60.1 to 57.3. Its economy component, on the other hand, was clobbered, falling from 62.5 to 45.7, below the neutral mark of 50. Yet business expectations rose from 60.2 to 62.1, while the investment index edged upwards. Companies seem reasonably chuffed with the orders on their books, but a lot less sure about the world in which they will have to fulfil them. These are different judgments and both can be sensible. </p><p>There is, however, a wrinkle. Much of the improvement strangely comes from fewer companies expecting things to get worse. The proportion anticipating stronger orders barely changed, from 47% to 46.8%. Those expecting weaker orders fell from 12.6% to 10.4%. Hiring tells an even clearer story. Fewer firms expect to increase recruitment, 27% against 28.6% previously, but the proportion expecting it to decline dropped sharply, from 27.3% to 17.1%. Fewer firms are on the back foot, but whether more are ready to step on the accelerator is another question. This distinction is important because stabilisation and expansion produce different economic outcomes. While fewer struggling businesses protect existing jobs and spending, a wider recovery creates newer ones, additional salaries, customers and capacity. The first is welcome, but it does not automatically deliver the second. Consequently, the next few surveys should tell us whether companies begin expanding their ambitions or merely stop trimming them. That is where the BCPI’s value as a lead indicator becomes particularly useful. </p><p> The investment picture creates another puzzle. Among companies with revenues below Rs 500 crore, the profitability balance stands at 35.9, against just 5.3 for those above Rs 2,500 crore. Yet their investment balances are almost reversed, minus 8.8 for smaller firms and plus 66.7 for larger ones. These figures measure the difference between respondents saying up and down, rather than the size of their profits or investments. Nevertheless, the contrast is blatant. Better earnings are not prompting everyone to reach for the chequebook. Perhaps smaller companies are rebuilding cash reserves or paying down debt. Perhaps larger ones can afford to wait longer for a return. Industry differences may also explain part of the gap. But if this pattern persists, today’s investment decisions could determine tomorrow’s market shares. Businesses with the means to absorb uncertainty may emerge stronger, while otherwise capable competitors hesitate. National growth could remain respectable even as the opportunities within it become more uneven. </p><p>Industrial firms illustrate the hesitation beautifully. Their sales balance is 64.3 and new orders stand at 50, yet investment stands at minus 14.3. Existing factories may have room to accommodate demand. Alternatively, managers may doubt its durability. A busy production line this quarter does not necessarily justify building another one for the next five years. Nor does investment necessarily mean abundant new jobs. Large companies report a hiring balance of only 5.3 alongside that substantial investment appetite. Spending may go towards automation or replacement equipment. Some recruitment may follow later. Consumer goods firms already report a negative hiring balance of 20 points and no positive balance on profitability. The wider world complicates matters. An Indian company may gain an order because an overseas customer wants an alternative supplier. The same geopolitical uncertainty can raise its freight bill, disrupt inputs or make its customer reluctant to sign a longer contract. Winning business and worrying about the economy are perfectly compatible. If these pressures persist, the new year will begin with a headache, even for companies carrying healthy order books into it. Our reading is cautiously encouraging. Corporate distress appears to be easing and investment intentions retain some strength. But a durable expansion needs the improvement to spread into smaller companies, employment and household purchasing power. Watch the breadth of rising orders, the purpose of investment and the willingness to hire. </p><p>The next chapter will depend less on whether executives sound cheerful than on whether their confidence becomes a commitment they cannot easily reverse. </p>
