The improved outlook has also prompted companies to expand plans for capital expenditure and research and development (R&D).
However, a separate note from Nomura warned that higher crude oil prices and fuel shortages arising from tensions in West Asia could challenge India’s strong growth and low inflation.
The HSBC India Business Outlook survey, compiled by S&P Global, showed a net balance of 35% of companies expect business conditions to improve over the next 12 months, up from 28% in October. The reading marks the highest level of private sector optimism in a decade.
“Both service providers and manufacturers contributed to higher confidence, with employment and capital expenditure intentions among the highest globally,” said Pranjul Bhandari, chief India economist at HSBC. Among the 12 countries for which comparable data was available, only Ireland (37%) and the UK (36%) reported higher readings.
The survey was conducted from February 9 to February 25, before the outbreak of war in the Middle East, the report said.
In a separate assessment, Nomura lowered its forecast for India’s FY27 gross domestic product (GDP) growth by 0.1 percentage points to 7%, compared with 7.6% expected in FY26, citing potential spillovers from fuel supply shocks. The brokerage also raised its inflation forecast to 4.5% from 3.8%, assuming petrol and diesel prices remain unchanged and oil marketing companies absorb the cost increase. “However, if oil prices were passed through, every 10% increase could add 0.5pp to inflation,” it noted.Nomura added that higher crude prices and energy disruptions pose upside risks to inflation, the fiscal deficit and the current account deficit, and a downside risk to growth. “Upside risks include an influx of capital flows, an export recovery and a continued focus on reforms,” it added.
Companies surveyed by HSBC said a greater focus on agriculture, irrigation and farm productivity, alongside energy and water infrastructure projects, supports the positive outlook. Expansion into digital solutions and their ability to reach wider audiences is also expected to help.
The biggest improvement in confidence was among service providers, where the output net balance rose to 36% from 28% in October. Confidence among goods producers also strengthened, rising to 34% from 29%.
A net balance of 29% of Indian firms expect higher earnings in the year ahead, pushing positive sentiment to its highest level in nearly a year and a half. India ranked first globally on this measure, with similar levels of confidence among goods producers and service providers.