India’s services and infrastructure sectors are expected to remain optimistic about business activity in the coming quarters, although companies have become more cautious about selling prices and profit margins. According to the Reserve Bank of India’s (RBI) latest Services and Infrastructure Outlook Survey, businesses anticipate continued demand but expect cost pressures to follow different trends across the two sectors.
The survey indicates that services companies experienced improvements in business conditions, turnover and full-time employment during the second quarter of FY2026-27 (Q2FY27). However, rising input costs and subdued sentiment around profit margins remained areas of concern.
Services Sector Outlook: Demand Remains Positive
The RBI survey found that services sector companies continued to expect favourable demand conditions in Q3FY27, although their optimism was lower than in the preceding quarter.
Businesses anticipated a moderate easing of cost pressures but expressed less confidence about the outlook for selling prices and profit margins. During Q2FY27, companies reported higher input costs alongside some increases in selling prices, while expectations regarding profitability remained subdued.
Looking further ahead, the outlook remained positive through the first quarter of FY2027-28 (Q1FY28). However, the RBI noted that input cost pressures were likely to persist, with selling prices expected to remain broadly stable in the coming quarters.
The survey also found that services sector firms had the capacity to provide 8.7% more services during Q1FY27 using their existing resources.
Infrastructure Sector Outlook: Business Confidence Continues
Infrastructure companies also reported positive business conditions during Q2FY27. According to the RBI survey, firms remained optimistic about overall business activity, turnover and employment.
At the same time, companies reported some moderation in cost pressures. Sentiment surrounding selling prices and profit margins, however, weakened during the quarter.
For Q3FY27, infrastructure firms continued to express confidence in overall business conditions and turnover, although their expectations for selling prices and profit margins became less favourable.
The outlook for Q4FY27 and Q1FY28 remained positive in terms of business conditions and turnover. Unlike the services sector, infrastructure companies expected input costs to increase, accompanied by corresponding increases in selling prices.
What the RBI Survey Indicates for FY2026-27
The survey points to continued optimism across both sectors, but it also highlights differences in how businesses expect costs and prices to develop.
Services companies anticipate some relief from input cost pressures, while infrastructure firms expect costs to rise and selling prices to increase alongside them. In both sectors, expectations regarding profit margins remain an important consideration.
The findings provide an indication of business sentiment and expectations for the coming quarters. Actual outcomes will depend on how demand, input costs and selling prices evolve.
Disclaimer: This article is for general informational purposes only and is based on the findings described in the RBI’s Services and Infrastructure Outlook Survey. Survey responses reflect business expectations and do not guarantee future economic outcomes. Readers should refer to the RBI’s official publications for the complete survey findings and methodology.
