Just 1.39 per cent of the CEOs surveyed echoed Sinha’s view that there would be no effect on the economy.

The CEOs also sent out another gloomy signal when they predicted that the recovery in the recession-roiled economy could now be expected well beyond 2002. In the earlier survey conducted in July 2001, the majority of the CEOs had felt that a recovery was possible within a year’s time — that is, by July 2002.

The survey said the “US effect” was, perhaps, the most important factor responsible for this change in perception. The CEOs were asked to assess the impact on three critical areas — foreign direct investment, foreign institutional investment, and trade. Fifty-five per cent of the CEOs felt that FDI flows would come down significantly, while 34 per cent saw the effect as moderate.

In the case of foreign institutional investment (FII), 56 per cent felt that the impact on the inflows had already begun and would only worsen in the days ahead.

This is in keeping with the actual trends that have been witnessed after the attacks.

FIIs have been net sellers in equity almost every day since the attacks on September 11 ($ 77.5 million), except for a few days that witnessed marginal net buying activity. The recent announcement of a hike in FII limits has not been reflected in daily trading as yet.

There was, however, one encouraging signal: 65 per cent of the CEOs felt that there would only be a moderate impact on trade.

Although the poll was conducted before the lifting of the US trade sanctions against India, its anticipation did perhaps influence expectations of a pick-up in trade in sectors affected by the sanctions. Twenty-five per cent of the respondents felt that the trade relations with America would not improve at present.

The poll, which covered 72 CEOs across all the industries, shows that the most-affected segments would be software services, airline tourism and aviation, garment export, gems and jewellry, engineering goods and consumer goods. Fifteen per cent of the CEOs feel their company will be hit by the blasts.

The CEOs fear that the economy that had been riding the service sector for past five years will be impacted much more than expected. The service sector contributes nearly 30 per cent to exports.

The respondents felt that a few short term measures that can revive the economy were implementation of infrastructure projects, divestment proposals and reduction in interest rates.

Secondary stock market growth is not on priority list for them.

The need to reintroduce badla to infuse liquidity to the secondary market for stocks was emphasised by most of the respondents.

The ostensible reason being trotted out is that the government wants to ride out the economic slowdown with a spending flurry. The decision, it is being explained, is a fallout of the meeting the Prime Minister convened last month to increase public spending.

What has prompted these efforts is the anxiety that the government has disbursed only Rs 11,595 crore in capital spending on its plan account till August-end out of a total expenditure of Rs 1,18,097 crore. The figure is less than 10 per cent of the government expenditure in the first five months, and not even a third of the total budgeted expenditure on this account. The shortfall forced economists and planners to suggest an increase in plan expenditure to create a ripple effect in the economy, boosting demand and creating new jobs.

Planning Commission advisors have told the government that the best way to get the maximum spin-offs from every rupee spent is to kick off infrastructure projects like highways. The reasoning is that though these plan may not end in six months, they would soak up massive amounts of cement and steel, generating demand through all sectors of the economy.

Many believe the plan to zero in on what officials have called “quickie” projects is aimed partly at presenting concrete evidence of the government’s economic achievements in election-bound Uttar Pradesh.

Several ministries are not sure which projects will qualify for the priority status. The ministry of water resources, for instance, has even listed plans being executed by states, but which it feels can be completed soon.

However, the Prime Minister’s Office and department of economic affairs — the agencies behind the move to hasten key projects — feel the emphasis is justified. “Our main fear is the escalating fiscal deficit. If we are able to complete certain projects fast enough, we will actually be saving money. Otherwise, they will start suffering from cost escalation, the malaise common to all plan initiatives,” said a senior DEA official.

“What is worrying is that costs have risen considerably since projects were sanctioned afresh. The increase is as high as 21 per cent,” they said. Finance ministry officials are spooked by the thought that the fiscal deficit might zoom to a record Rs 1,40,000 crore.

Following a meeting with finance ministry officials, the bank has chalked out a restructuring plan, under which it will have to close down 100 branches by the year 2003. The bank now has 1,765 branches across the country.

Senior bank officials said employees of the 50 branches to be shut down this fiscal will be redeployed to other branches. “With more than 5,000 people leaving on account of the voluntary retirement scheme, the bank needs people in all its branches. The bank’s branches in Gujarat, Maharashtra and southern India urgently need people,” they said.

However, the bank is yet to come up with a redeployment policy for existing employees. “Negotiations with the unions are on and will take some more time,” the officials said.

The bank, which projected a deposit growth of around Rs 25,300 crore this fiscal under the restructuring plan, has witnessed a rise in deposits in the first five months of the current financial year. “We are in the right direction and expect to achieve the target,” officials said.

However, it has not been able to meet targets as far as recovering non-performing assets (NPAs) is concerned. “We have intensified our efforts, but recovery takes place mostly at the close of the financial year,” the officials said.

The gross NPAs of the bank stood at 11.71 per cent on March 31, 2001, while net NPAs stood at 6.35 per cent.

The bank, which earned a net profit of Rs 33 crore in the previous financial year, has invested mostly in the call market and government securities this year.

Though the markets were spooked by talk of foreign institutional investors (FIIs) scurrying out of the country, data released by the Securities and Exchange Board of India (Sebi) reveals that they remain very much bullish on Indian stocks, preferring equities to debt instruments.

Net FII inflows in the first-half of this fiscal have registered a whopping growth 116.22 per cent at Rs 4,281.2 crore as against Rs 1,980 crore in the previous corresponding period. If anyone is selling, it is the mutual funds. This runs contrary to their image of being saviours providing the much needed support to the equity markets when the FIIs supposedly pressed the ‘sell’ button.

While the FIIs preferred not to take much exposure to debt, mutual funds were the major sellers, with net sales in equities at Rs 1,567.99 crore. The way the wind was blowing was further exemplified by a net investment of Rs 4,593.2 crore that the mutual funds made in the debt market.

In fact, a major eye-opener is the fact that mutual funds have been making a steady shift from equity to debt over the past two years.

In 1999-2000, mutual funds made net investments of Rs 900.43 crore in debt, which increased by more than five times to Rs 5,023.49 crore in 2000-01. At the same time, net sales in equity were Rs 421.65 crore in 1999-2000.

As against this, the net investment by FIIs in equities amounted to Rs 4,275.1 crore during April-September 2001 as against Rs 2,286 crore in the same period of the previous fiscal. The total net investment of FIIs in the debt market during the first-half of this fiscal stood at just Rs 6 crore, which is a small amount, but a vast improvement over net outflows of Rs 306.2 crore from the debt markets in the first-half of the 2000-01.

Analysis shows that FIIs remained net buyers for the first five months of this fiscal with the highest net investment of Rs 1,769.9 crore made in April this year.

These requirements include maintenance of the cash reserve ratio (CRR), statutory liquidity ratio (SLR) and priority sector lending, among others.

Senior RBI officials indicated that the central bank is unlikely to allow any major relaxations.

The apex bank’s stance on the issue is crucial in view of ICICI’s plans of a universal banking foray via a reverse merger with ICICI Bank. However, ICICI officials declined to comment on whether the institution will discuss the reverse merger at its board meeting scheduled to be held late in October. “No comments,”’ was all that Kalpana Morparia, executive director, told The Telegraph.

Both the leading FIs—ICICI Ltd and the Industrial Development Bank of India (IDBI)—have been demanding that statutory requirements like CRR and SLR be levied only on their incremental deposits, but both the RBI and the government have not been amenable to the idea.

Banking sector analysts weighing the implications of ICICI’s board meeting next month to discuss the reverse merger, said much would depend on the attitude of the RBI as far as adhering to various norms is concerned.

“One has to watch out for the RBI’s stand on norms relating to CRR and SLR vis-a-vis these FIs’ universal banking plans,” said Manish Kharwa, senior banking analyst at Pranav Securities. He added in the event of the central bank disallowing ICICI’s plea of maintaining CRR/SLR only on incremental deposits, the institution’s bottomline may take a beating.

Besides being told to adhere to the CRR and SLR norms, the FIs have also been asked to alter the composition of their boards. Moreover, an institution, after its conversion into a bank, would be covered by the branch licensing policy of the RBI under which at least 25 per cent of the total number of their branches will have to be in semi-urban and rural areas. However, institutional circles say that these issues are relatively minor and can be complied with.