"Indicating a sharp improvement in investors' sentiments amidst heightened expectations that the new government means business along with some improvement in basic macro indicators, the CII Business Confidence Index (CII-BCI) for the April-June 2014 quarter has moved up to 53.7 from 49.9 in the previous quarter," the CII said Sunday.
The number 50 is the dividing line on the survey's index between positive and weak business confidence.
Modi took oath May 26 at the head of a BJP-led government.
The survey, based on responses from over 150 industry members distributed over large, medium, small and micro firms, and almost equally between manufacturing and services, exuded confidence about prospects of economic growth based on decline in price-rise and deficits, export recovery, buoyant foreign capital inflows and strengthening of the rupee.
"We expect the index to gather momentum in the coming days, riding on improved sentiments and business confidence," CII director general Chandrajit Banerjee said.
According to the survey, while growth is expected to pick up from 4.7 percent in 2013-14 to between 5.5 and 6 percent in fiscal 2015, wholesale price inflation is expected to moderate to between 5.5 and 6 percent in the current fiscal.
CII cited economic uncertainty, low GDP growth and high inflation as its priority concerns, highlighting the need for stepping up efforts to improve business sentiments and removing supply bottlenecks.
"We are pleased to see that the new government is already working in this direction and it is only a matter of time when fundamentals of the economy will start falling in place," Banerjee said.
Reflecting upward trends in demand, the survey found most businesses have started experiencing a rise in capacity utilisation, which augurs well for a turnaround of the economy.
As much as 56 percent of respondents expected sales and new orders to increase in the first quarter of 2014-15, which is much higher than the previous quarter where only 35 percent of respondents expected a rise in sales.