Indian Business Sentiment Shows Cautious Optimism in Q3 2025 Amid Global Uncertainty

India's business sentiment shows cautious optimism in Q3 2025, with medium enterprises leading investment confidence amidst global uncertainty. The overall Investment Confidence Index (ICI) declined by 1%, while the Financial Confidence Index (FCI) increased by 0.5%. Small businesses show tempered optimism, while medium businesses remain optimistic about the capital-raising environment. Positive domestic indicators support the resilience of small businesses.

India's business sentiment in the third quarter of 2025 reflects cautious optimism amidst global volatility, according to the latest Dun & Bradstreet India Financial and Investment Confidence Indices Report (IFCI). The overall Investment Confidence Index (ICI) declined by 1%, while the Financial Confidence Index (FCI) increased by 0.5% [1].

Medium enterprises continue to lead investment confidence, driven by improving conditions for capital-raising and supportive policy signals. Small businesses also show signs of renewed confidence, supported by rising credit availability and historically low non-performing assets. However, rising labor costs and uncertainty around international trade policy remain significant challenges [1].

The Dun & Bradstreet report highlights the resilience of small businesses in India, despite global trends showing a decline in investment confidence among small businesses. The ICI for small businesses in India declined by 7%, compared to a global drop of 11% [1]. This resilience is further bolstered by positive domestic indicators, such as a 13% year-over-year increase in bank credit to small manufacturing businesses and an 8.7% year-over-year rise in credit to the services sector [1].

In contrast, large businesses remain confident, with the FCI for large businesses remaining high at 4% quarter-over-quarter (QoQ) growth. However, small and medium businesses reflect more cautious trends, with a decline in investment confidence [1].

The U.S. Chamber's Small Business Weekly Forecast echoes similar sentiments, noting that while small business confidence is high, uncertainty over tariffs continues to be a significant concern. The Q2 2025 MetLife and U.S. Chamber Small Business Index indicates that 36% of small business owners expect the economy to improve, while 16% believe it is a good time to expand their business [2]. However, 21% of small businesses reported labor quality as their top concern, and 11% cited inflation as their main challenge [2].

The report underscores the importance of stable domestic fundamentals in sustaining business confidence and unlocking future investment potential. As global risks persist, clarity in external conditions coupled with supportive domestic policies will be crucial for India's businesses to thrive.

References:
[1] https://finance.yahoo.com/news/indias-business-sentiment-shows-cautious-085100697.html
[2] https://www.uschamber.com/small-business/small-business-weekly-forecast