The decline of 40.1 per cent in the BCI came on the back of a 30.4 per cent quarter-on-quarter decline in the BCI in April 2020.
NCAER said the BCI tracks the business sentiments of around 600 Indian companies to compute the composite index.
The NCAER survey elicits responses from firms across six cities to assess business sentiments in the four regions of India: Delhi-NCR represents the north; Mumbai and Pune, the west; Kolkata, the east; and Bengaluru and Chennai represent the south, it said.
The BES has been carried out on a quarterly basis since 1991 by NCAER.
The think-tank said the latest, 113th Round of the BES, was carried out in June 2020, when the country had started slowly opening up after more than two months of lockdown due to the coronavirus pandemic, following which, the spread of the disease accelerated.
According to the survey findings, the proportion of respondents expecting that 'overall economic conditions will improve in the next six months' fell 9 percentage points, from 26.1 per cent to 17.1 per cent between the fourth quarter of FY20 and the first quarter of FY21.
The proportion of respondents expecting that 'financial position of firms will improve in the next six months' decreased 7.7 percentage points, from 27.5 per cent in the March 2020 quarter to 19.8 per cent in the June 2020 quarter, NCAER said.
"There was an across-the-board decline in sentiments on a q-o-q basis in Q1: 2020-21 for all five sectors that the BES covers," NCAER said.
The BCI for the consumer durables sector fell 38.2 per cent, for the consumer non-durables sector by 41.4 per cent, for the intermediate goods sector by 60.3 per cent, for the capital goods sector by 30.7 per cent, and for the services sector by 35.2 per cent.
Further, the BCI for private limited companies fell 34.8 per cent in the first quarter of 2020-21 from the previous quarter, while the BCI for public limited companies dropped a much greater 47.4 per cent. The BCI for partnerships/individually-owned companies plunged by an even larger 48.3 per cent.
Also, also the BES' Political Confidence Index fell from 73.7 in January-March 2020 period to 63.1 in the first quarter of 2020-21, falling by 14.4 per cent on a q-o-q basis and by 50.1 per cent on a year-on-year basis.