India - Rajasthan Canal Command Area Development Project

FILE GD? DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1479-IN REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE RAJASTHAN CANAL COMMAND AREA DEVELOPMENT PROJECT July 3, 1974 This report was prepared for offical use only by the Bank Group. It may not be published, . quoted or cited vithout Bank Group authorization. The Bank Group does not iccept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS (as of June 25, 1974) US$1.00 = Rs. 7.99 Rs. 1.00 = US$0.125 Rs. 1 million = US$125,107 (The Rupee is officially valued at a fixed Pound Sterling rate. As the Pound is now floating relative to the US Dollar, the US Dollar/Rupee exchange rate is subject to change. Conversions in the appraisal report were made at US$1 to Rs. 8.00, which was the rate at the time of the report's completion). FISCAL YEAR April 1 - March 31  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE RAJASTHAN CANAL COMMAND AREA DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Government of India for the equivalent of US$83 million on standard IDA terms to help finance a project for conmand area development in the Rajasthan Canal region. The proceeds of the credit - except for the part allocated to on-farm development (US$22.5 million) and for fertilizer (US$18.7 million) - would be channelled to the Government of Rajasthan in accordance with the Government of India's standard terms and arrangements for the financing of State development projects. For on-farm development, the Government of India would relend the proceeds of the credit to the Agricultural Refinance Corporation (ARC) for 9 to 15 years at 6.25% and 6.75% annual interest, respectively. ARC would in turn on-lend the funds to the Rajasthan State Cooperative Land Development Bank (LDB) and to parti- cipating commercial banks in the project area at not less than 7% annual interest. LDB and the commercial banks would relend the funds to farmers at an interest rate of not less than 9-1/2% per annum. PART I - THE ECONOMY 2. An economic report, "Economic Situation and Prospects of India" (402-IN dated May 7, 1974) was distributed to the Executive Directors on May 20, 1974. A country data sheet is attached as Annex I. 3. India is exceptional among the Bank Group's member countries for its size, diversity, and extreme difficulty of its economic conditions. India's economic policies and performance have their shortcomings, many of which are attributable to the open political system, where the reconciliation of conflicting political views tends to favor less than optimal economic solutions; others are due to the sheer magnitude of the task facing the Government. Governing a country diyided into more than 20 States with a population of some 580 million and over 60 major languages is an extra- ordinary responsibility. The country's poverty and poor natural resource endowment, supplemented by a net transfer of external resources averaging in recent years well below US$1 per head per annum, have imposed sharp limitations on the rate of growth. Any judgment of India's economic per- formance must take these underlying circumstances into account. So, also, must account be taken of two massive uncertainties which overhang India. The first is the availability of water. A bad monsoon, which is inevitable from time to time, has a pervasive influence over the entire economy and wipes out the results of years of effort. The second uncertainty is the availability of external assistance. The vast majority of bilateral aid is committed annually, usually several months after the start of the fiscal year, and with considerable uncertainties about the level of commitments and disbursements of particular donors. Any delay in IDA replenishment  has an !