India - Second National Seed Project

FILE COPY Document of The World Bank FOR OFFMCIAL USE ONLY Reqpt No. P-2149-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE SECOND NATIONAL SEED PROJECT May 17, 1978 This docet km a restrcled itbibut. and my be ud by recipients oly in the performce of their oflcia duties. Its cntes may not strise be disclsed withot World Bank a.tboflation.  CURRENCY EQUIVALENTS (as at April 24, 1978) Rs 1.00 Paise 100 US$1.00 Rs 8.50 Rs 1.00 US$0.1176 Rs 1 million US$117,600 (Since September 24, 1975, the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/Rupee ex- change rate is subject to change. Conversions in the Appraisal Report were made at US$1 to Rs 8.75.) F:[SCAL YEAR April 1 - March 31 ABBREVIATIONS ARDC - Agricultural Refinance and Development Corporation GOI - Government of India HYV - High Yielding Varieties ICAR - Indian Council of Agricultural Research NSC - National Seeds Corporation NSP - National Seeds Program SFCI - State Farms Corporation of India SSC - State Seeds Corporation GLOSSARY Breeder Seed - seed of high genetic purity, produced by the plant breeder. Foundation Seed - progeny of breeder seed (or of first genera- tion foundation seed), produced to statutory quality control standards. Certified Seed - progeny of foundation seed, produced to statutory quality control standards.  FOR OFFICIL USE ONLY INDIA SECOND NATIONAL SEED PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President (GOI). Beneficiaries: National Seeds Corporation (NSC); State Seeds Corporations (SSC) and Agricultural Universities in Rajasthan, Uttar Pradesh, Karnataka, Bihar and Orissa; Indian Council of Agricultural Research (ICAR) ; and State Farms Corporation of India (SFCI). Amount: US$16 million equivalent. Terms: Standard. Relending Terms: (i) GOI to ICAR, NSC and the State Governments Financing in accordance with the Borrrower's standard arrangements for development assis- tance to these Central Government agencies and the State Governments. (ii) From GOI to Agricultural Refinance and Development Corporation (ARDC) Repayable over 9 years at interest of 6-3/4% per annum and over 15 years at 7-1/4% per annum, with rebate of 1/4% for prompt repayment. (iii) ARDC to Banks Interest at 8% per annum; repayment to coincide broadly with payments by ultimate borrowers; refinance of up to 90% of banks' loans. (iv) Banks to Borrowers Interest at 11% per annum; grace period on principal not to exceed 5 years; no grace period on interest; repayment periods not exceeding 15 years; loans to finance up to 70% of SSC/SFCI investments and up to 75% of the agricultural universities' investment. Project Description: The proposed project would be the second phase in the development of India's National Seed Program to increase the availability of high quality seed. The first phase project covered four states. The proposed project extends This document has a retricted distribution and may be used by recipients only in the performance of their official dutis. Its contents may not otherwise be disclosed without World lank authorization.  - II - the coverage to five more states--Bihar, Karnataka, Orissa, Rajasthan and Uttar Pradesh. This project, like the first, would be concerned mainly with major cereal crops and would increase seed output by about 125,000 tons. Project components would include: establishment of State Seeds Corporations (SSC) in each of the participating states for the coordination of production and for processing and marketing of certified seed grown by farmers who would be shareholders of SSC; assistance to the state agricultural universities for seed technology research and for the pro- duction and processing of breeder and foundation seeds; farm development for State Farms Corporation of India; development of quality control facilities; technical assistance; and training. Estimated Costs: US$ millions Local Foreign Total State Seeds Corporations 9.45 2.47 11.92 Incremental Working Capital 6.37 - 6.37 Large Farm Development 2.72 1.21 3.93 Agricultural Universities Breeder Seed 0.23 0.06 0.29 Foundation Seed 2.12 0.69 2.81 Seed Technology Research 0.39 0.08 0.47 Subtotal 2.74 0.83 3.57 Quality Control Seed Certification 0.53 0.19 0.72 Seed Testing 0.18 0.10 0.28 Subtotal 0.71 0.29 1.00 Training and Technical Assistance 0.08 0.32 0.40 Incremental Reserve Stocks 0.13 - 0.13 Total Before Contingencies 22.20 5.12 27.32 Contingencies - Physical 1.23 0.31 1.54 - Price 5.42 0.58 6.00 Subtotal 6.65 0.89 7.54 Total Project Costs 28.85 6.01 34.86  - iii - Financing Plan: US$ millions Local Foreign Total IDA 10.0 6.0 16.0 Local Sources: GOI 5.4 - 5.4 State Governments 2.7 - 2.7 ARDC/Participating Banks 8.4 - 8.4 Seed Growers 2.4 - 2.4 Total 28.9 6.0 34.9 Estimated Disbursement: US$ millions FY79 FY80 FY81 FY82 FY83 Annual 1.0 4.8 6.0 3.2 1.0 Cumulative 1.0 5.8 11.8 15.0 16.0 Rate of Return: 158%. Appraisal Report: No. 1725a-IN, dated May 16, 1978.   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE SECOND NATIONAL SEED PROJECT 1. I submit the following report and recommendation on a proposed development credit to India for the equivalent of US$16 million on standard IDA terms to help finance the expansion and development of India's seed in- dustry. The proceeds of the credit would be channeled two ways. The bulk of proceeds (US$14.5 million) would be channeled through the Agricultural Refinance and Development Corporation to commercial banks for financing sub-borrowers' investments in foundation and certified seed production, processing and marketing. The balance, which would finance breeder seed production and processing, research, technical assistance and training, would be channelled by GOI to the institutions and State Governments in- volved. Relending terms are discussed in the Credit and Project Summary. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (2008-IN dated April 17, 1978), was distributed to the Executive Directors on April 18, 1978. Country data sheets are attached as Annex I. Background 3. India is a vast, continental country with over twenty States divided on linguistic and ethnic grounds with a population of over 620 million people, almost as many as live in Africa and Latin America combined. It has a dual economy. While 79% of its population lives in rural areas their productivity is low. Agriculture's share in value added declined only gradually from about 50% to 43% over the last twenty years. The share of manufacturing has in- creased slowly and, since the late 1960s, has remained approximately constant at about 16%. Industry has a highly diversified structure with import substi- tution and self-sufficiency pushed to the point where India has the capacity to produce virtually every type of consumer and capital good required for a modern economy. As in the case of many other large economies, the foreign sector plays a relatively minor role; both exports and imports represent about 7% of GDP; foreign saving has supplied only about 5% of gross investment in the recent past. 4. Even though growth has been slow in the past, the economy enjoys many of the prerequisites for sustaining faster growth and development. Although literacy is far from universal, India has large resources of well trained 1/ Parts I and II of this report are the same as Parts I and II of the President's Report for the Gujarat Irrigation Project (Report No. P-2285-IN),,dated May 10, 1978.  - 2 - si-ministrative, scientific and technical manpower and a dynamic entrepreneural Liass. Per capita consumption of commercial energy is low by international comparison and power shortages are a way of life; but India is relatively well- placed with regard-to primary fuel sources. There are very large reserves of coal and nuclear ores, and considerable hydro-electric potential. Recent petroleum and gas discoveries have begun to be exploited and prospects are bright for further discoveries. The basic elements of the infrastructure needed to serve the economy have been established; in absolute terms the irrigation, railway, telecommunication, road and power systems are each among the largest in the developing, and in some cases the developed, world. However, cornsiderable gaps remain as the situation varies greatly from state to state. 5. Given the size of India's population, its annual increase of 13 mil- lion people is such as to absorb a large portion of any provision to increase standards of living. It is not possible to discern any significant increase in the incomes of the vast mass' of the rural and urban poor, who number 200 million with a per capita income of US$70 per annum or less. Although food- grain production may be persistently underestimated, there has been no perma- nent increase in per capita foc,dgrain consumption recorded in aggregate statistics since 1960/61. Many years after the initial target, primary educa- ticn is still not universal. T'he labor force has grown faster than employment and a considerable backlog of unemployed exist. Nevertheless, there has been progress, with per capita income increasing on trend 1%-1.5% per annum; birth rates falling to below 37 per thousand from levels of 45-50 per thousand at the start of the 1950's; life expectancy increasing from about 32 years in the 1940's to 45-50 years in the 1970's; school enrollment rising from 32% to 65% of children in primary school ages and from 5% to 29% of children in secondary school ages since 1950/51. 6. The rate of growth of GDP has been 3.5% per annum over the period since Independence and 2.8% per annum over the period 1969/70 to 1976/77. These low rates of growth are only partly due to low availability of inves- tible resources, although there have been times that foreign exchange was a severe bottleneck. The net transfer of resources from abroad has never been above 3% of GDP and fell to as little as 0.8% between 1969/70 and 1973/74. India's saving effort has grown steadily since the beginning of planning in 1951, when it was 9% of GDP, to its recent level of 20% of GDP, which compares well with other countries' saving performance at the same level of per capita incomes. Despite a doubling in the rate of investment, from about 10% of GDP in the early 1950's to about 20% at present, the trend rate of GDP growth has not increased. This marks a decline in the efficiency of capital use which transcends fluctuations due to weather, war or international terms of trade shifts. Recent Trends 7. In many respects economic conditions during the last three years have been significantly different from those prevailing in previous years. In the late 1960's and early 1970's, the economy faced several shortages-- foodgrains, agricultural and industrial inputs and foreign exchange--which retarded production and investment and often led to price increases. An  - 3 - adverse shift in terms of trade starting with the oil price hike in 1973 and continuing with the foodgrain and fertilizer price rises in the following year greatly increased the cost of acquiring these essential commodities abroad. These external shocks combined with a spate of bad weather played havoc with the economy through 1974/75, causing slow growth in production and investment and a record level of inflation. 8. Since the excellent monsoon in the summer of 1975, a new situation has arisen. The period 1975 to 1978 has been characterized by much greater price stability, enhanced agricultural and industrial output and comfortable foodgrain and foreign exchange reserves. The new situation was a combined result of domestic policies and fortuitous circumstances. The increase in foodgrain stocks was only in part due to improved policies and programs. The more decisive factor has been the three good-to-excellent monsoons coming on top of substantial foodgrain imports in 1975 and 1976. Industrial output increased on average by 7% a year in 1975-1978 compared to 3% in 1970-75, due to greater power availability, better management in the public sector, improved labor relations, better transport and some increase in demand derived from increased incomes due to improved harvests, greater exports and higher levels of public investment. The most dramatic turnaround ocurred in the balance of payments, with a sharp real reduction in the import bill helped by good harvests and increased domestic production in iron and steel, fertilizer and oil, which reduced demand for imports The supply of foreign exchange was also greatly increased by a significant step-up in the volume of exports, an increase in foreign aid and a substantial jump in remittances from Indians working in the Middle East, Europe and America. 9. In 1977/78, the growth of GDP was about 5%, a recovery over the rate of 1.6% in 1976/77 but less than the 8.5% reached two years earlier. Prices, which had been rising during 1976/77 after a decline in 1975/76, were stabilized; wholesale prices at the end of March 1978 stood at about the same level as in March 1977, and the yearly average was only 5.4% above that of the previous year. Exports in 1977/78 are estimated at US$6.4 billion and imports at US$6.6 billion. The inflow of invisibles from abroad at US$1.4 billion and net aid disbursements of US$1.2 billion more than offset the small trade deficit of US$200 million and IMF repurchases of US$330 million to in- crease reserves by US$2.1 billion to US$5.8 billion by end of March 1978. 10. The 1977/78 foodgrain crop may exceed the 1975/76 record level of 121 million tons due to very good weather and increased input use. Support purchases could result in peak foodgrain stocks as high or even higher than in 1977, when they were 21 million tons. In addition to ample and evenly distributed rainfall, more intensive and widespread use of three crucial inputs--irrigation water, fertilizer and extension advice--contributed to the bumper harvest. Fertilizer consumption surged 30% in 1977/78, continuing its recovery from the depressed level of 1974/75. Annual additions to irri- gated area have been on average of 2 million hectares since 1975/76 compared with 1.3 million hectares per annum achieved from 1969 to 1975. An improved extension system, which has been getting heartening results, has been intro- duced in several states and is slated for further coverage.  -4- Development Prospects 11. India faces the future with large stocks of foodgrains, high and rising external reserves, excellent rabi crop expectations, price stability and good prospects for sustaining the improved supply of foreign exchange. The circumstances present a great opportunity for further promoting the devel- opment of the Indian economy. The Draft Five Year Plan for 1978-83, discussed though not yet approved by the National Development Council, responds to this challenge by projecting a rapid growth in real terms of both overall investment and public plan expenditures. Investment is to rise on average by 10.7% per annum and the economy is expected to grow on average by 4.7% per annum during the years 1978-83. 12. The new Draft Plan reveals an intention to reorient the country's development towards improving the living conditions of the poor. This is reflected in its principal objectives: (i) the removal of unemployment and significant underemployment; (ii) an appreciable rise in the standard of living of the poorest sections; and (iii) the provision of basic needs to low income groups. To achieve these objectives, the Government proposes to emphasize agricultural development, cottage and small scale industries, area planning for integrated rural development and the provision of minimum needs. As a first step towards complet,e removal of unemployment, the Plan envisages the creation of a large number of new jobs through a considerable expansion of construction activity as well as a boost in the consumption levels of the poor--which in turn would require the production of the necessary wage goods, largely in small-scale, labor-intensive units. Specific programs to achieve these objectives are still in the making. 13. In order to achieve a sizable rise in the income of the poorest classes of society, the Draft PLan--in conformity with the Janata Party policy-- places prime emphasis on the development of rural areas. A major impulse for agricultural development will bea provided by the expansion of irrigation and related agricultural inputs, such as fertilizers and better farming techniques. The Draft Plan argues that efforts to increase productivity should be sup- plemented by measures with a redistributive impact such as supporting small farmers and small industry with institutional credit and material supplies and assistance for marketing. The Draft Plan also intends to complement the creation of employment and the increase in rural productivity by providing basic services to those groups which have so far been unaffected. For this purpose, the minimum needs program launched at the onset of the Fifth Plan is being revitalized and accelerated. 14. The allocation of the Draft Plan outlay for the next five years refLects these priorities. Out of a total expected spending of US$81 billion, US$35 billion--43%--have been earmarked for rural development programs includ- ing agriculture, irrigation, fertilizer and social infrastructure expenditures directly benefitting the rural areas. The share of these sectors amounted to 37% during the Fifth Plan period and to 40% in the Annual Plan for 1978-79. It can thus be expected to rise further during the next four years. Similarly, spending on the minimum needs program in 1978-83 will absorb 6% of the plan resources, as compared to less than 3% in the Fifth plan. On the other hand, the shares of industry and of transport and communication have been reduced.  - 5 - 15. There is considerable scope for stepping up growth in agriculture. The most promising development is the sharp increase in government outlays and improved project implementation for irrigation. There are also indica- tions that private investment in tubewells is picking up again after a slump in the early 1970's. Other favorable indicators include the spread of an improved system of extension of more states and the recovery of fertilizer demand. With regard to more productive use of existing capacity, there is an increased awareness in the Government that the benefits of irrigation projects can be much increased not only through command area development, but also through improved design standards in major surface irrigation infrastructure. Nevertheless, comprehensive improvement in water management remains a distant goal, particularly in existing systems and where farms are small and frag- mented. The bulk of the increase in private tubewell development in the last few years has come from the Eastern Region, where more and more farmers are sinking wells to enable them to grow a winter crop of wheat in addition to providing better water control for the summer rice crop. Improved water man- agement would make such investments even more productive. Increased farmer incomes from the recent good harvests, somewhat lower fertilizer prices and grain prices supported at incentive levels have encouraged farmers to apply considerably more fertilizer. Finally, the reorganized and improved extension and research system which has been introduced recently in several states in northern and eastern India holds out the hope that sound advice will reach many more farmers in both irrigated and rainfed areas and will raise their productivity significantly. The improved extension system is an excellent example of how the growth effort can and must be structured so as to increase the incomes of small and marginal farmers, who work 25% of the cultivated land and account for somewhat more than 25% of production; more importantly, these farmers make up about 70% of the rural population and constitute the majority of those living below the poverty level in India. 16. Industrial prospects are somewhat more difficult to discern. Moderate growth in 1977/78 after an excellent year in 1976/77 suggests the persistence of problems plaguing the sector since the mid 1960's--large unutilized capacity, stagnant capital formation in the private sector and low productivity growth. Lower investment than expected, of course, is one of the reasons for low capacity utilization in capital goods industries, which make up a significant portion of the sector. Low buoyancy of demand for industrial products from all sources--not only from investments but also from agriculture, exports and import substitution--has been a basic constraint. Further import substitution cannot be a major source of growth for manufac- tured goods in the future because most opportunities for efficient import substitution have been exploited. Higher effective demand from increased growth of real incomes from greater productivity in both agriculture and manufacturing, sustained increases in exports and increased investment, particularly from the public sector, all can raise demand for industrial production. 17. The new industrial policy of the Janata government and the orienta- tion of the Draft Five-Year Plan emphasize small scale industry over heavy industry and have accordingly promoted such measures as product reservation, credit rationing, and, within the small scale sector, plans to initiate special efforts for the growth of the "tiny" sector. While the priority accorded to  - 6 - the small scale sector is laudable, there are doubts about the efficacy of IE policy measures chosen. Past experience indicates that other factors are also crucial to its development, particularly effective demand, quality control, prices and marketing techniques. Some small scale industry is cap- ital intensive and not well suited to as'rapid employment generation as is hoped; nor can all goods be efficiently produced using small scale technology. 18. India's population growth rate of about 2% is not high in comparison with that of most developing countries. Moreover, the rate is on the decline, after growing steadily census to census from 1920 through 1970, both because the birth rate continues to fall and because mortality will not fall as steeply as in the past. Family planning acceptor rates slowed down in the wake of the abandonment of the 1976 population policy after the 1977 general elections and the momentum of the program has yet to be recaptured, particu- larly in Northern India. However, the new Government has reaffirmed its com- mitment to a voluntary family planning program and has budgeted the resources to carry it out. Over the longer term, with a sustained family planning effort, it should be possible to bring the birth rate down from its 1970-75 level of about 37 per thousand to about 23 thousand to the end of the century, implying a population growth rate somewhat under 1.1%. Our "best guess" pro- jection of India's population in the year 2000 is 885 million. Many of the benefits of family planning policy will only be felt beyond the turn of the century; the decline in fertility will, however, bring about an earlier change in the age structure of the population. The school age group will grow more slowly or not at all after 1981, thereby reducing the pressures on the primary and secondary education systems. However, the labor force will continue to grow at a faster rate -- 2.5% per annum -- until well into the 1990's, result- ing in an increasing proportion of the population in the labor force from 40.8% to 45% in 1991. 19. The government's goal to eliminate unemployment in 10 years implies an expansion of the number of jobs at the rate of 9 million per annum -- 7 million new entrants to the labor force and the absorption of 2 million or so formerly unemployed. The majority of these will have to continue to be absorbed -- judging from the prevailing composition of the labor force -- in agriculture and the unorganized small scale sector. The absorptive capacity of the modern organized sector is unfortunately low; its employment elasticity is expected to be no more than 0.5. Given its low current share of output, even rapid growth of this sector would not make much of a dent in the backlog of the unemployed. Employment in the organized sector has been growing at about 2.2% per annum in the past ten years, less than the labor force growth rate, and all of this in the public sector. Private sector employment has not grown at all since 1966. While the labor absorption elasticities of the small scale sector may be higher in some cases than that of the large scale sector, a major effort to expand production must succeed before an appreciable employ- ment impact will materialize. 20. In the short run India's balance of payments should not be a con- straint on growth and development in the next few years. With good medium- term prospects for India's exports, the expected continuation of growth in invisible receipts and the potential for an increase in net aid disbursments,  - 7 - the net availability of foreign exchange to finance merchandise imports is projected to rise over the next five years, in current prices, from US$8.7 billion in 1977/78 to US$16.7 billion in 1982/83, an average of 14% per annum. Given the unlikely need to increase rapidly imports of some traditionally important items -- e.g., petroleum, fertilizer, foodgrains, edible oil and cotton -- other imports can increase at the rate of 20% a year over the next five years. 21. Altogether, these currently favorable circumstances present the opportunity to double India's trend rate of growth of per capita income from the average annual rate of 1.5% that prevailed for the last thirty years to 3% over the next five, and thereafter. This requires a continued fall in the rate of population growth below 2% per annum and a rise in the growth of GDP from the historical rate of 3.5% to 5.0% per annum. Both of these targets are within reach. The first should be achieved barring a total abandonment of the family planning program. The second requires improved efficiency and increased investment by both the public and private sectors; it also means more fully harnessing the gains from trade through international specializa- tion implying a strong export effort and continued easier access to imports. In addition to enabling a faster rate of per capita income, the present situation allows for increasing the coverage of the population's minimum needs. This requires formulating and administering effective, efficient programs of public investment and, of course, requires larger public outlays. 22. With the enhanced resources at India's disposal, the economy is poised for a higher rate of economic growth. The Government is moving to take advantage of this opportunity with increased public expenditure envi- sioned over the next five years, and the liberalized trade policies recently announced. It is yet too early to know whether the moves made so far will be sufficient to achieve the desired targets or whether additional steps will be necessary. Assured international support for India's development effort will be an important factor in moving the Government to take greater risks in pursuing a dynamic development program directed at meeting the huge needs of its large and impoverished population. PART II - BANK GROUP OPERATIONS IN INDIA 23. Since 1949, the Bank Group has made 53 loans and 97 development credits to India totalling US$2,013 million and US$4,934 million (both net of cancellation), respectively. Of these amounts, US$890 million has been repaid, and US$2,120 million was still undisbursed as of March 31, 1978. Annex II contains a summary statement of disbursements as of March 31, 1978, and notes on the execution of ongoing projects. 24. Since 1957, IFC has made 14 commitments in India totalling US$58.4 million, of which US$14.5 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$29.4 million, US$22.9 mil- lion represents loans and US$6.5 million equity. A summary statement of IFC operations as of March 31, 1978, is also included in Annex II (page 2).  - 8 - 25. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit opera- tions. Major irrigation, marketing, seed development, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in finencing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capac- ity utilization in industry. The Bank Group has also been active in support- ing infrastructure development for power, telecommunications, and railways. Family planning, education, water supply development, and urban investments have also received Bank Group support in recent years. 26. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, industry, power, urban development and water supply remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs such as credit for on-farm investments, command area development of existing irrigation schemes, intensification and streamlining of extension systems, and seed production form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefitting small farmers. Projects supporting water supply, sewerage, and urban development also form an integral part of the Bank's Lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on agriculture-, export- and energy-related projects. 27. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has success- ful'Ly adjusted to the changed world price situation. However, the basic need for foreign assistance, to augment domestic resources, stimulate investment and accelerate economic growth, remains. As in the past, Bank Group assist- ance for projects in India shouLd include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Con- sequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high priority sectors as agriculture, irrigation, rural water supply and medium and small scale industry. 28. Although the growth prospects of the economy have improved, India's poverty and needs are such that as much as possible of India's external capi- tal requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains smal'L in relation to India's needs for external support, and India may be regarded as creditworthy for some supplemental Bank  - 9 - lending. As of March 31, 1978, outstanding loans to India totaled US$1,159 million, of which US$594 million remained to be disbursed, leaving a net amount outstanding of US$565 million. 29. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 58%, 24% and 29%, respectively, in 1975/76. On March 31, 1977, India's outstanding and dis- bursed external public debt was US$13.3 billion, of which the Bank Group's share was 28%. Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1976/77, about 14% of India's total debt service payments were to the Bank Group. PART III - AGRICULTURE AND SEED IN INDIA General 30. Agriculture is the mainstay of India's economy; it engages 70% of the labor force and contributes 43% of GNP. Consequently, investments in agriculture, particularly to increase the output of foodgrains, have been given priority by GOI and the State Governments, especially since the mid- 1960s, and deserve continued emphasis in the future. 31. Since independence, the overall growth rate of agricultural pro- duction has averaged about 3%. Although the major determinant of year-to- year production remains the weather, continued expansion of irrigation and greater use of improved technology have given India greater immunity to the vagaries of weather and have contributed towards a steeper upward trend in production. The success of high yielding varieties of wheat produced in- creases in wheat production of about 20% per annum between 1967 and 1971. Other foodgrain crops have enjoyed less success but increasing progress is being made in the use of high yielding varieties of rice and of other grains. 32. In recent years, high quality seed has been more and more recog- nized as a necessary input to sustain the growth of crop production. India has made substantial progress in developing disease and pest resistant varieties, improving seed quality and increasing the availability of quality seed. To increase production levels further, new efforts are required to make high quality seeds available to the farmers. Seed Industry 33. The seed industry was little developed until the early sixties when plant breeding breakthroughs made the production of high yielding variety (HYV) seed possible. In 1961, the first maize hybrids adapted to Indian conditions were released, followed by hybrids of sorghum and pearl millet, high yielding  - 10 - dwarf rice varieties and finally by the high yielding dwarf wheats. These a seeds were highly responsive to higher input use, gave greater profits and created a strong demand for quality seed. 34. In response, there was a rapid ,growth of private sector seed com- pariies. These could not fully meet the demand and had to be supplemented with seed production and processing facilities in the public sector. In most states, small public seed farms; were established. However, the Government of India (GOI) soon recognized that a wide scatter of small seed farms was inappropriate to the technological needs of seed production, particularly for hybrids, and decided to create a central seed organization. GOI also recog- nized there was a need for legislation to establish seed quality control. Thus in 1963, the National Seeds Corporation (NSC) was established and in 1966 a Seeds Act was passed. N[SC was charged with promoting seed industry development and establishing a system of quality control. 35. Through the mid-sixties, seed output expanded rapidly. During this period, NSC was concerned mainly with foundation seed production 1/ and, after the passing of the Seeds Act in 1966, with seed certification. The certi- fied seed producing area increased from 360 ha to 35,000 ha between 1963/64 and 1968/69. This was mainly in the private sector, with the Bank-supported Tarai Seeds Project (Loan 614-IN) coming in towards the end of the period. 36. Demand for seed grew more slowly than expected in the late sixties. In the self-pollinated crops - wheat and rice - farmer retention and farmer- to-farmer transfer accounted for much of the seed used; some of the HYV were inferior in grain quality to traditional types and thus lost favor. Sub- stantial overproduction occurred and large stocks accumulated with State Governments. Thus, 1968-71 was a period of retrenchment with State Govern- ments curtailing their seed prciduction and many private companies withdrawing from seed production. 37. After the good crop year of 1970/71, demand for certified seed, as for other purchased inputs, began to pick up again. The industry, however, lacked the resources and confidlence to meet it. NSC stepped in and developed a program which in 1974/75 produced 73,000 tons of seed (about 50% of national output), making NSC by far the largest seed producer in the country. Seed was produced almost entirely through contracts with progressive farmers. A feature of this NSC program was the introduction of scientific seed processing. Pre- viously seed had little or no processing, to the detriment of quality. National Seeds Program 38. Against this background, GOI decided in late 1974 to reorganize and improve the seed industry to make it more responsive to the growing requirements of Indian agriculture. In 1975, a nationally coordinated seed development program was prepared by the Government to support all facets of 1/ See Glossary for a definition of the different terms for seed used in this report.  - 11 - seed production, from production of breeder and foundation seed through pro- duction, processing, storage and marketing of certified seed. 39. In June 1976, GOI initiated with Bank assistance the first phase of the National Seeds Program in four states. The main features of the pro- gram include a change in NSC's role from that of a seed producer to an agency responsible for overall coordination and development of the seed industry. NSC has also been given responsibility for interstate marketing of certified seed. NSC's seed production activities devolve upon State Seeds Corporations (SSC) established in states with a comparative advantage for producing certain crops. Agricultural universities are closely integrated into the program to produce improved quality breeder and foundation seed. The program also addresses problems in seed technology research, quality control, and buffer stocks. In addition to the public sector, seed processing in the private sector receives assistance under the program. The private sector is also to be represented in all major institutions involved in the program. Tarai Seeds Project 40. The design of the National Seeds Program reflected the experience gained under the Tarai Seeds Project (Loan 614-IN), signed in 1969. The Tarai Development Corporation (TDC) has been successful in establishing itself as a producer of quality seed and its products are in wide demand. Many of the concepts which have proved successful in the case of Tarai have been incorpo- rated in the National Seeds Program. These concepts include a compact area approach under which seed is produced in compact areas around each processing plant by growers with a shareholding in the SSC. This approach improves effi- ciency in quality control, supervision and transport. Quality also benefits from the vested interest which shareholder growers have in the success of the program. The agricultural universities of the states also hold shares and be- come responsible for breeder and foundation seed production. The Tarai Seeds Project itself has been successfully completed, although the Closing Date had to be extended twice (to December 31, 1977) due to delays in delivery of equipment and a general slowing down of TDC's investment program as a result of cautious TDC management. Under the proposed project, the TDC is being incorporated into the framework of the National Seeds Program and will form the basis for the establishment of the Uttar Pradesh State Seeds Corporation. The First National Seed Project 41. The First National Seed Project (Loan 1273-IN of June 1976) covers four states--Andhra Pradesh, Haryana, Maharashtra and Punjab. It is designed to put into effect the reorganization of the National Seeds Corporation (NSC) along the lines proposed under the National Seeds Program, and to create and develop basic organizations at the state level such as state seeds corpora- tions and state seeds certification agencies. The project also covers devel- opment of seed technology research capabilities; all facets of seed pro- duction, from breeder and foundation seed production through certified seed production, processing, quality control, storage and marketing; expansion of private sector seed operations; establishment of a reserve stock for certi- fied and foundation seed; technical assistance; and training.  - 12 - 42. The project was declared effective according to schedule, and insti- tutional development and managerial arrangements, particularly at the state level, proceeded reasonably satisfactorily. Project implementation lagged behind schedule subsequently, however, mostly because of coordination problems at the Centre. These resulted mainly from delays in finding a suitable re- placement for the Chairman of NSC whose service with the Corporation termin- ated in December 1976; objections of some NSC staff to the proposed reduction in the Corporation's role as a producer in favor of SSC; and reluctance of the Indian Council for Agricultural Rlesearch (ICAR) to play its role of coordinat- ing foundation seed production and processing investments. However, progress under the project, although still behind schedule, has begun to pick up and the major problems which hamlpered initial progress have been resolved. The more important steps taken include: strong endorsement to the basic concept of the national program and the project was given by the new Govern- ment in September 1977; NSC is to take over all activity regarding foundation seed production and processing, relieving ICAR of this responsibility; and appointment by GOI of a chairman of NSC, who would be assigned full time responsibility before credit effeactiveness (Section 5.01(e) of the Develop- ment Credit Agreement). PART IV - THE PROJECT 43. The project was prepared by a GOI/Bank working group with assistance from FAO/IBRD Cooperative Program. It was appraised in April/May 1977. The appraisal report (No. 1725a-IN, dated May 16, 1978) is being distributed separately to the Executive Directors. Negotiations were held in Washington in April 1978. The Borrower's delegation was headed by Mr. R. K. Rath, Joint Secretary, Ministry of Agriculture, GOI. Project Description 44. The main purpose of the proposed project is to increase foodgrain production through increased availability of high quality cereal seed. The project would be the second phase in India's seed industry development under the National Seeds Program (see paras 38 and 39). The project would cover five additional seed producing states: Bihar, Karnataka, Orissa, Rajasthan and Uttar Pradesh. It would increase the production, processing and market- ing of certified seeds of wheat, paddy, maize, sorghum, pearl millet, pulses, potato and groundnut, and lesser quantities of oilseeds, cotton and jute. Project components would be similar to those provided at state level under the first project and would include: - establishment and equipment of a State Seeds Corporation (SSC) in each of the five states; - assistance to State Agricultural Universities and research stations for breeder and foundation seed production and processing, and seed technology research;  - 13 - development of university farms for foundation seed production; development of 4,000 ha of State Farms Corporation farms for certified seed production; development of State Seed Certification Agencies and seed testing laboratories; provision of incremental permanent working capital required by the universities and SSC and NSC's reserve stock operation; and technical assistance and training. 45. Annual incremental seed production at the end of the five-year project period would be about 125,000 tons--wheat about 45,000 tons, paddy 20,900 tons, maize 5,600 tons, sorghum 3,900 tons, pearl millet 2,800 tons, groundnut 4,600 tons, potato 30,900 tons and other crops 10,800 tons. The proposed size and scope of the project have been determined on the basis of expected national demand for seed and the production capabilities of the participating states. Project Implementation 46. Overall responsibility for the National Seeds Program and the pro- jects under the program lies with the GOI Ministry of Agriculture. A Project Management and Monitoring Committee, chaired by the Secretary of Agriculture, GOI, has been created to monitor and coordinate project activity, including procurement, and report progress to the Government and the Association. NSC's planning cell, of which the Deputy Secretary (Seeds), GOI, is the ex-officio director, provides the Committee's Secretariat. A National Seed Development Council, also chaired by the Secretary of Agriculture, GOI, has been estab- lished to provide continuous policy guidance to GOI, state governments and the private sector for the development of the seed industry. These arrange- ments, created under the first project, would also be used for the proposed project. In addition, GOI would make arrangements, within the Ministry of Agriculture, to evaluate the impact of the project (Section 3.14(a) of the Development Credit Agreement). 47. Experience with the first project has shown the need for a more effective arrangement at the state level for project coordination and moni- toring. Under the proposed project, each participating state has, therefore, set up a State Project Coordination Committee comprising representatives of all project participants in the state. The Committee is chaired by the Agri- cultural Production Commissioner or the Agriculture Secretary of the state. No one below the rank of Deputy Secretary would act as its chief executive and necessary support staff would be provided. National Seeds Corporation (NSC) 48. NSC would continue to be responsible for overall coordination of the national seed industry. NSC's functions would include: active guidance and  - 14 - assistance to the State Seeds Corporations (SSC) by equity participation and ouard representation; estimation of seed demand, and coordination of market research and sales promotion; interstate marketing; coordination of foundation seed production; operation of the reserve seed stock scheme; training; and provi- sion of technical and common services to the seed industry. GOI would continue to hold all NSC equity, and provide additional equity as required. Partici- pation by NSC in the share capital of SSC, and NSC representation on every SSC board of directors would strengthen NSC/SSC relationships. Signing of agreements embodying such relaitionships would be a condition of disburse- ment for the respective states (Paragraph 4(b) of Schedule 1 to the Develop- ment Credit Agreement). State Seeds Corporation (SSC) 49. There would be one SSC in each of the five participating states, in the pattern of the SSC's established under the first project, with a full time Managing Director in each SSC. SSCs have already been established in all the project states except lJttar Pradesh, where the Tarai Development Corporation is being restructured to become that state's SSC. Full-time Managing Directors of SSCs have been appointed in Bihar, Orissa and Karnataka, and formal appointment in Rajaisthan is expected in June 1978 and in Uttar Pradesh in October 1978. Memoranda and Articles of Association for SSCs have been finalized in consultation with IDA, and any amendment would require prior consultation with the Association (Section 2.10 of each State Project Agreement). Under the project, SSC would organize and supervise production of certified seed by SSC's shareholder growers. The SSC would buy the seed from growers and process it for marketing. Intrastate marketing of certi- fied seed would be handled by SSC; interstate marketing would be handled by NSC on a commission basis. 50. The State Government, NSC and seed growers would subscribe to the capital of the SSC approximately in the proportion of 35:30:35. Given the profitability of seed growing and the successful experience with the share- holder grower concept under the Tarai Seeds Project, no difficulty is expected in attracting farmers to participate. Initial funds required by the SSCs have already been provided through the NSC's and State Government's equity contributions in all states except Orissa, where arrangements are being completed. Seed Production 51. Breeder seed production would be carried out by six agricultural universities located in the participating states. ICAR would coordinate the production of these universities and assist in preparing their investment plans. A senior official, already appointed under the first project with full-time coordination responsibility, would also cover the additional insti- tutions included in the proposesd project (Section 3.04 of the Development Credit Agreement). As shortages in supply of breeder seed could be detri- mental to the subsequent stages in seed multiplication and adversely affect food production, a reserve stock of breeder seed would be carried over each season in controlled environment storage.  - 15 - 52. Responsibility for foundation seed production would rest with the agricultural universities. NSC would estimate the demand for, and coordinate production and distribution of foundation seed of, national varieties; seeds of local varieties would be handled directly between the universities and State Seeds Corporations. Some of the participating state agricultural universities possess adequate farm land which would be brought under founda- tion seed production. The universities in Rajasthan, Orissa and Uttar Pradesh would, however, require additional lands, and the respective State Governments have agreed to provide adequate additional land suitable for this purpose (Section 2.06 of each State Project Agreement). The university lands would require development, mainly land levelling, improvement in irrigation, farm machinery and buildings. Technical criteria for developing these farms would have to be agreed with the Association (Section 2.07 of each State Project Agreement). 53. Certified seed production would be organized by the SSC of each participating state through shareholder growers. The growers would be mostly private farmers with farm sizes ranging between 1 and 10 ha. Although a large number of seed growers would be involved in each state, they would be concen- trated in a number of compact areas to increase organizational and operational efficiency. Concentration of well-developed farms and progressive farmers were two important factors considered in project area selection, since production of quality seed depends on use of inputs and good farming technique. On-farm development needs, to the extent required, would be financed under existing agricultural credits, in particular the Second Agricultural Refinance and Development Corporation Credit (Cr. 715-IN). In some areas certified seed would be produced on large institutional farms, the largest of which would be the Suratgarh farm in Rajasthan belonging to State Farms Corporation of India. Development of about 4,000 ha of the Suratgarh farm would be financed under the project; technical criteria to be applied for its development would have to be agreed with the Association (Section 3.12 of the Development Credit Agreement). Quality Control 54. Primary responsibility for quality control and seed certification would be at the state level, with monitoring and coordination at the national level. Seed certification at the state level would be undertaken by indepen- dent State Seed Certification Agencies (SSCAs) which have been established in all participating states. For national level coordination, a Central Seed Certification Board has already been established. GOI operates a Central Seed Testing Laboratory to develop and standardize seed testing procedures and monitor performance of the laboratories located at the state level. States are to intensify seed inspections under the project. Seed Technology Research 55. Applied research in seed technology is essential to the systematic development and increased efficiency of the seed industry. Provision was made in the first project to support the development of interdisciplinary programs at the universities in the states included in that project. Provision has been  - 16 - made in the proposed project to support such programs at Kanpur and Faizabad universities in Uttar Pradesh and at the Bihar, Karnataka, Orissa and Rajasthan state universities. Project costs include capital as well as operating costs of the seed technology departments through the project period. Seed technology programs thereafter could be financed out of contributions from the State Seeds Corporations. Seed Processing and Storage 56. State Seeds Corporations would be responsible for certified seed processing. They would construct processing plants with adequate storage in each project state and would take over all processing activities (excluding vegetables) from the National Seeds Corporation together with processing equipment. Transfer arrangements between NSC and SSC satisfactory to IDA would be a condition of Credit Effectiveness (Section 5.01(a) of the Development Credit Agreement). Incremental seed processed annually at full development would amount to about 79,000 tons of cereals, 31,000 tons of potato, 5,000 tons of groundnut and small quantities of other seeds. Potato seeds would require cold storage facilities; additional cold storage for 14,500 tons potato seed would be provided under the project. Drying yards and storage required for groundnut seed would also be provided. As in the first project, SSCs would contract with NSC for plant design, for assistance in procurement, and installation of equipment. Design of each processing plant satisfactory to IDA would be a condition of Credit disbursement (paragraph 4(c) of Schedule 1 to the Development Credit Agreement). Until the new processing plants come on stream by the end of 1979, existing plant capacities would be temporarily increased by purchasing new equipment which would be subsequently transferred to the new plants. Retroactive financing of tip to US$200,000 has been provided (see paragraph 60) mainly to facilitate the urgent procurement of this equipment. Training and Technical Assistance 57. The project would provide advanced study programs on seed technol- ogy research to one person from each participating agricultural university in selected overseas institutions. Short overseas study tours would also be provided, as under the first project, for key staff of the State Seeds Corporations and Seed Certification Agencies. Local and on-the-job training would also be provided in production, processing and marketing aspects in order to provide an adequate number of high caliber staff for the seed industry's expansion. Technical assistance provided under the first project for processing plant design would cover this project as well. Pro- visions for technical assistance would, however, be made under the proposed project to help the seed certification agencies, and for designing seed technology research programs for the additional agricultural universities participating in the project. Additional funds would also be provided for marketing consultancy services in the areas of market research, sales pro- motion and distribution logistics. GOI has agreed to recruit the consultants provided under both projects by December 31, 1978 (Sections 3.02 and 3.16 of the Development Credit Agreement).  - 17 - Project Cost and Financing 58. The total project cost is estimated at about US$34.9 million equi- valent (including duties and taxes of about US$2.9 million), of which the foreign exchange component is US$6 million. The proposed credit of US$16 million would finance 50% of project costs net of duties and taxes, and cover the whole of foreign exchange costs plus about US$10 million of local costs. The remaining local costs would be financed by GOI (US$5.4 million), State governments (US$2.7 million), ARDC and participating banks (US$8.4 million), and seed growers (US$2.4 million). 59. The bulk of IDA funds (US$14.5 million) would be channelled by GOI through ARDC to participating banks for financing investments in production, processing and marketing of foundation and certified seeds and for farm development by agricultural universities. The preparation by ARDC of a banking plan satisfactory to the Association is a condition of Credit Effec- tiveness (Section 5.01(d) of the Development Credit Agreement). IDA funds for research, breeder seed production, quality control, training and technical assistance (US$1.5 million) would be channelled through the Indian Council of Agricultural Research, State governments, and the National Seeds Corporation. (See Credit and Project Summary for further details of cost estimates and financing). 60. In order to ensure timely start of project implementation and, in particular, to facilitate urgent procurement of seed processing equipment (see para 56), it is proposed to provide retroactive financing of up to US$200,000 for expenditures made after December 1, 1977. Procurement and Disbursement 61. Major items of seed processing machinery, laboratory equipment, farm machinery and office equipment (US$12.1 million) would be procured by interna- tional competitive bidding (ICB) in accordance with IDA guidelines. Local manufacturers would receive a margin of preference in bid evaluation of 15% or prevailing customs duty, whichever is lower. It would not be practical to bulk all machinery and equipment because of the many and varied individual items and the large number of institutions involved. Contracts for minor items of equipment, not exceeding US$50,000 each and estimated not to exceed a total of US$1.5 million for the entire project, would therefore be procured on the basis of competitive bidding advertised locally and in accordance with local procedures which are satisfactory to IDA. Urgent purchases of minor equipment costing up to US$10,000 each and up to a total of US$1 million would be procured by prudent shopping. 62. Bulking would not be practical for civil works and building con- struction (US$10.3 million) because of their small and varied sizes, and scattered locations. Contracts for these would therefore be let after com- petitive bidding advertised locally. On-farm development (US$1.3 million) by State Farms Corporation of India (SFCI) and agricultural universities would be carried out by the respective institutions on force account or on contract to be let after competitive bidding advertised locally. The small size of the  - 18 - contracts would not warrant int:ernational bidding. Vehicles (US$1.2 million) \.ould also be procured by compoetitive bidding advertised locally since small numbers of different types of vehicles would be purchased throughout the project pe-od. Motorcycles (US$0.4 million), which would be owned by staff and not as part of institutional fleets, would be purchased by the individuals concerned according to their p(ersonal preferences. Technical assistance serv- ices and arrangements for overseas training (US$0.5 million) would be on terms and conditions satisfactory to IDA. The balance of project costs (US$8.2 million) would cover reserve stocks, working capital and operating costs not involving procurement. 63. The proceeds of the credit would be disbursed as follows: (i) 100% of foreign expenditures, 100% of ex-factory cost or 60% of total costs of locally procured equipment and material; (ii) 100% of technical assistance and overseas training; and (iii) 60% of expenditures for civil works, building construction and engineering and on-farm development by agricultural univer- sities and SFCI. Disbursements would be made against full documentation except for on-farm development for which disbursements would be made against certificates of expenditure, based on documents which would be available for inspection by IDA during the course of project supervision. Economic Benefits and Risks 64. The main project benefit. would be increased crop yields resulting from improved availability of better quality seed. At full development, the annual increase in production of commercial grain and other crops would be 245,000 tons wheat, 325,000 toiis paddy, 85,000 tons maize, 60,000 tons sorghum, 85,;000 tons pearl millet, 40,000 tons potato, 15,000 tons groundnut and 90,000 tons of other crops including jute, pulses and oilseeds. The incremental vaLue of these crops would be about US$158 million per year against the incre- mental costs of US$17.5 million per year for seed production and processing. It is estimated that 1.35 million farm families would derive direct benefit from the project which would provide adequate seed for 2.7 million ha. In addition, 13,500 man-years of seasonal employment would be created for har- vesting the incremental crops produced. Based on quantified costs and bene- fits, the economic rate of return would be 158%. A sensitivity analysis to test the effects of different investment costs, operating costs and benefit levels indicates that the project is economically viable under any realistic set of assumptions. 65. The most significant risk to the project is that seed demand might be lower than expected. Safeguards have, therefore, been taken by planning the production and processing on the basis of conservative demand estimates and by emphasizing the marketing function, improvement in demand studies, and market research and sales promotion. Another significant risk lies in the fairly complex organizational arrangements involved in project implementation which, unless carefully managed, could delay some aspects of the project. Experience gained so far under the first project and the provision of a Project Coordination Committee in each state under the proposed project should help minimize this risk. A further risk lies in the fact that the long term suc- cess of the project depends upon gaining consumer confidence in the quality  - 19 - and reliability of seed. This requires control of quality at every stage of seed production so that the seed industry develops and maintains sound tech- nical standards. Careful consideration has been given to this matter and the project focusses on strengthening of quality control organizations, technical standards and provision of related technical assistance and training. PART V - LEGAL INSTRUMENTS AND AUTHORITY 66. The draft Development Credit Agreement between India and the Association, the draft ARDC Agreement between the Association and ARDC, the draft State Project Agreements between the Association and the States of Bihar, Karnataka, Orissa, Rajasthan and Uttar Pradesh and the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement are being distributed to Executive Directors separately. 67. The features of the draft agreements of special interest are listed in Section III of Annex III. 68. The additional conditions of effectiveness, specified in Section 5.01 of the Development Credit Agreement, would be: (a) completion of arrangements for transfer of plant and equipment by NSC to SSCs; (b) preparation of a banking plan by ARDC; and (c) functioning of the Executive Chairman of NSC in that capacity on a full time basis. 69. The conditions of disbursements specified in Schedule 1 to the Development Credit Agreement would be: (a) for expenditures against the development cost of State Agricultural Universities, that adequate land suitable for foundation seed production is transferred by the States to the Universities; (b) for expenditures against the cost of each seed processing plant, that the design of such plant is approved by the Association; and (c) for expenditures against any category made by a State, that the agreement between NSC and SSC setting out their respective responsibilities under the project has been executed.  - 20 - 70. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 71. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President May 17, 1978  ANNEX I Page 1 INDIA - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) --------------- INDIA REFERENCE COUNTRIES (1970) TOTAL 3280.5 MOST RECENT AGRIC. 1797.5 1960 1970 ESTIMATE INDONESIA PHILIPPINES BRAZIL** GNP PER CAPITA (US$) 60.0 lQ0.0 150.0 130.0 230.0 550.0 POPULATION AND VITAL STATISTICS POPULATION (MID-YR. MILLION) 434.9 547.6 620.4 /a 117.6 36.9 92.8 POPULATION DENSITY PER SQUARE KM. 133.0 167.0 189.0 62.0 123.0 11.0 PER SQ. KM. AGRICULTURAL LAND 247.0 308.0 345.0 411.0 375.0 49.0 VITAL STATIStICS CRUDE BIRTH RATE (/THOU. AV) 43.2 41.0 37.0 45.9 44.2 38.4 CRUDE DEATH RATE (/THOU,AV) 23.9 19.0 17.0 20.6 13.2 9.9 INFANT MORTALITY RATE (/THOU) 139.0/a .. 130.0 *- 81.0 110.0 LIFE EXPECTANCY AT BIRTH (YRS) 41.7 47.2 49.5 .. 55.6 59.4 GROSS REPRODUCTION RATE 3.2 2.9 2.8 3.2 3.3 2.6 POPULATION GROWTH RATE (%) TOTAL 2.0 2.3 2.1 2.0 3.0 2.9 URBAN 2.5/b 3.2 3.1 3.7/a 4.0 5.0 URBAN POPULATION (% OF TOTAL) 17.9 19.8 20.6 t7.5 27.6 56.0 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 41.0 41.6 40.1 44.0 45.6 42.0 15 TO 64 YEARS 55.9 55.3 56.7 53.5 51.6 55.0 65 YEARS AND OVER 3.1 3.1 3.2 2.5 2.8 3.0 AGE DEPENDENCY RATIO 0.8 0.8 9.8 0.9 0.9 0.8 ECONOMIC DEPENDENCY RATIO :1 1/C I./a L L/, *- 1.5 1.5 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) 71.0 14585.0 37658.0 259.3 320.0 250.0 USERS (% OF MARRIED WOMEN) .. .. 18.7 .. 2.0 1.6 EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 175000.0 218000.0 261000.0/a 12400.0 29400.0 LABOR FORCE IN AGRICULTURE (%) 71.0 69.0 69.0 55.OLa 40 4 UNEMPLOYED (X OF LABOR FORCE) 4.8 /d 4.4 /b 4.4/c,d 7.6 7.5 INCOME DISTRIBUTION % OF PRIVATE INCOME REC'D BY- HIGHEST 5% OF HOUSEHOLDS 26.7 25.0 IC .. .. .. 35.0/a HIGHEST 20% OF HOUSEHOLDS 51.7 53.1 I * .. 540 62.o7ia LOWEST 20% OF HOUSEHOLDS 4.1 4.7 3R .. , .- 3.6 3.0 LOWEST 40% OF HOUSEHOLDS 13.6 13.1 3 6 .. 1.7 DISTRIBUTION OF LANO OWNERSHIP % OWNED BY TOP 10% OF OWNERS .. .. .. .. .. 45.0 % OWNED BY SMALLEST 10% OWNERS .. .. .. .. .. 1.5 HEALTH AND NUTRITION POPULATION PER PHYSICIAN 5B40.0 L!. 4890.0 4220.0 26370.0 .. 1910 0 POPULATION PER NURSING PERSON 5310.0MA05220.0/d 3680.0]e 7630.0/C *- 3220.0jL POPULATION PER HOSPITAL BED 2590.0 Z 1610.0 . 1640.Z 850.0 260.0 PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 95.0 92.0 89.0 91.0 93.0 109.0 PROTEIN (GRAMS PER DAY) 55.0 53.0 48.0 43.0 45.0 64.0 -OF WHICH ANIMAL AND PULSE 19.o0/ 16.0 12.6 14.0 22.0 39.0 DEATH RATE (/THOU) AGES 1-4 44.0 .. .. .. 6.6 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHDOL 41.0 63.0 65.0 75.0 113.0 87.0 SECONDARY SCHOOL 23.0 30.0 29.0 15.0 49.0 68.0 YEARS DF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12.0 12.0 11.0 12.0 10.0 11.0 VOCATIONAL ENROLLMENT (% OF SECONDARY) 8.0 .. .. 29.0 6.0 /b 17.0 ADULT LITERACY RATE (%) 24.0 33.0 36.OA. 59.0 .. 64.0 HOUSING PERSONS PER ROOM (URBAN) 2.6 2.8 .. .. 2.1 1.0 OCCUPIED DWELLINGS WITHOUT PIPED WATER () .. .. .. .. 76.0 73.0 /C ACCESS TO ELECTRICITY (X OF ALL DWELLINGS) .. .. .. .. 23.0 48.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (X) .. .. .. .. 7.0 8.0 CONSUMPTION RADIO RECEIVERS (PER THOU POP) 5.0 21.0 25.0 114.0 39.0 60.0 PASSENGER CARS (PER THOU POP) 0.7 1.0 1.0 2.0 8.0 25.0 ELECTRICITY (KWH/YR PER CAP) 46.0 114.0 143.0 20.0 235.0 491.0 NEWSPRINT (KG/YR PER CAP) 0.2 0.3 0.3 0.3 2.0 2.7 SEE NOTES AND DEFINITIONS ON REVERSE  ANNEX I Pagte 2 NOTES Ilnesooterwsenoted, d.t. for 1960 refer to coy year between 1959 and 1961, for 1970 b--xo 1967 -00 1971, end for Most Re..ent Estimate betw..n 9 73 nd 1976. BraJIl h.. been *.leoted as an objective Country bocause of its ci.e and comparabl. probleuc of regional inequality. 1960 /a 1951-61 average; /b 1951-601 /c Ratio of popuiction under 15 and 65 ond over to labor forCe aga 15 and over; /d Estimated by Niational Sample Survey, in terws of the average numnber of preron/weeks of unemploymoent a. pert.etge of total persom/weeka in the lab or force; /a 1962: /f Registered, not oil practicing in the country; /& Including msidwives; /h 1958; If I960-62. 1970 L.R Ratio of pop.lation under 15 end 65 and over to total labor -force age 15 and over; /b Eatio,at.d by RNneti 1 SmPl. Survey, in terms of the aevrage number of person/week. of unsoployment an percentage o-ftotal person/week. in the total labor force: /c 1967-68; Id Including midwives. MO-ST RECENT ESTIKtATE: Ia 1978 mid-year population end labor forte estim,ated at 640.4 and 261 millions respectively, /b Ratio of population under 15 &ed 65 and over to total labor force; /c 1977; /d Estimaated by National Sample Survey, in terms of the average number of pereon/weeke of unem~ploymentt as peorcentage of total person/weeks in the labor force; I. Including midwivee; If Population 10 years and over. INDONESIA 1970 /c 1961-71; /b 1971; /c Including midwives. PSHILIPP NES 1970 Ia As percentsag of amploymunt; /b Not including private vocational schoole. BRAZIL 1970 /e Econnically active population; /b Hospital personnel; /c Inside only. R13, May 2, 1976 DIEF3tTI(U Oly SOCIAL INDICATORS led ~Area~ kro.)j Populstlo per nureina parson - Popustion divided by nomber of praticing 7.t.1 Total surface area c-prising land area and inland water, male end female graduate nurosa, "tra.ined" or "certified" nur..e, and jgic Most recan.t estimate of agricultural ares "ed temporrily or perm- -uoli.ry peronnel with training or experienc... nently for -rpa, pastures, market & bitcban gardens or to li. fall... Population per hospital bed - Population divided by .,mber of hospital beds available in public and private genera -1sod p-ciali..d ho-pi-al sod GN oapr ..pit. (US$) - OR? per c.pita estlmate. at current markat pricaa, rehabilitation. cantr.; esolude nursing homcs and .at.blihln..nt. for C.lcu1ated hp sam conversion method a. World Sank Atlas (1974-76 basis); cutodi.1 and preventive Care. 1960; 1970 cad 1976 data. Per capita supply of caloriea 17 of reoutrome.ts) - Computad from enegy equivalent: of oat food supplies avilable in Country par capita per day; Popu~lation end vital atati.tijs avail.ble supplies comprise domeatic Production, imports I.a. exports, and Itopclation (.id-year Illion) - A. of July first: if not availshl., average Changesa in stock; net supplies exclude snimal feed, eceds, quatities used o- two and-ysor as timetee; 1960, 1970 and 1976 data, in food procesaing and l-osse in distributin; req.iramnte were estimated by FAO baoed on physiological needs for normal activity and health -onid- 1-pocultion density panr squsr. ma - Mid-year population per square kilomter eriog evirooete1 tempertur, body weights, age and sax dietributione of (1.00 hectaree) of total area, population, snd al11uing 107. for waste st house hold level. P. IClaion denaity peor square kmof agri.. land - Computed .e shove for Per capita supply of protein (ea.m p-r dcv) - Protein context of Pec capita .erlcullur.1 land only. not supply of food per day; nat supply of food is dafined aso above; require- ma.te for elI Countries astebliahod by USDA iconomic Research Servic.s YVicsl etatiatics. provide for a miniamum allowance of 60 grossa of total protein per d.p, end Crude birth rete par thousand. sy-sea - Ansnual liv. birth. per th .ound of 20 gas- of animal and pules protain, of whic,h 10 groea should be .nimal .td-yea poplaftion; tem-year arithmasti averages ending in 1960 and 1970, protein; these ata.dards are lower thea those of 75 grats, of total protein erAd fiva-yesr average ending in 1975 for most r-cst estimate, and 23 grem of sotimal protisi as an average for the world, proposed by FAO cru,de death rats per thodsond. avoralte - Annual deaths per thousand of mid-y.ar in the Third World Food Survey. po,pla.tion; ten-y.sr arithastic averages a.ding in 1960 and 1970 and five- Per capita protein supply from animal and pulse - Protein supply of food year everage endIng in 1975 for moa t r ....t estimate, derived from animals and pulses in gras per day. Infant mortality rate I/thou) AnBnual deaths of infants under oneyeasr of age Death rate I/thou) ages. 1-4 - Annual deatha per thouaand in age groop 1-4 p tr ihcad liebirtha. years, to Children in this age group; suggested as an indicator of Liferexpcan, at hir th fyrs) -Average aebar of years of life remaining et malnutrition. birth; usally five-year ovarage. ending in 1960, 1970 end 1975 for develop- ing countries. Education Ironsrsprouctrateis- Averga comber of lire daughters asom 11il hear Adjusted enr olloent ratio - pri-ay ..h-!i - nEollamn.t of all ages as per- in her normal reproductive period if she aeperiencee preasent ag-s-pecific cetage of primacy school-age p.pulationi includes children aged 6-11 years f.rtility retes; usually fiva-yar -vrages a"ding in 1960, 1970 and 1971 but adjusted for different lengtha of priLmary education; for countries with for developing Couatries. universal education, e-ollaent may aeceed 1507. since som pupils cr, below tplotion growth rats 17.) - tot.1 - Compound aunual growth ratee of mid-year or above the official achool age. populetion fur 1950-60, 1960-70 and 1970-75. Adjusted enrollment ratio - secondarr school - Computed asabsove; secondary Population oroth reta1.5 urban - Computed lika growth ret. of total education requires at least four years of epproved primary isatruction; population; iiff.r*ct deinitionsa of urban cress may affect Comparability of providea genteral, vocational or teacher trsining imsatructiona for pupila dote anong couctrise. of 12 to 17 ysere of age; rorespondanos courses ar generaly eatlud.d. Urbac pupulatio - ( of total) - Ratio of urban to total population; different Yearn of schwoliua provided (first and second levels) - Total yeara of definitione of urban areas- mapffect comparbility of data amog countries, schooling; at ssrondcry leve, vocational instruction may be partially or Completely exclded. Age as tructLure (percent) - Children (I-l4 yesse) , working-age (15-64 years), Vocational ..rallmant Cl of aecomdery; - VoCatlunal institutions iInclde end retIred (65 yeara and ovsr) as parcen.itsge of mid-year population. technical, industrial or ocher progrm whih operae independentlyora Axoo d.p..d.ncy ratio - Ratio of population under 15 and 61 sad ove,r to those deperbmatsot of secondary instit.tiona. of ages 15 through 64. Adu1t literac rate (%) - Literate adults (able to read and -lits) as por- E-onoic dep.ndency ratio - Rlatio of population under 15 and 65 and over to centege of total adult population aged 11 years and over. the labor force in ago group of 15-64 pears. Eai_ly ol-oin - ceo .u catl.tis., thou) - Cuxulti-a nuber of acceptors gowain of birth-control devices under usupices of national family planning program Persona per room (urban) - Average -b-s of parsons Per roo in oocupied am... i-cption, conventional dwellings in urbao areas; dwellings exclode non-permanet F-I._I_R. plning-usera (7. of married woa) Percentages of married wome of atrotura.soad unoccupid parts. child-hearing age (15-A- years) who use birth-control d-vicee to all married Occ.oi.d dwellinca withouat piped ..ter Cl; - Occupied convetional ds.elings coeti- n age gro,tp. to urban end rura areaa without inside or octaids piped -eter f-cilities as Percen tage of all oncupied dwellings. E.flofm5t Access tO electricity Cl of .ii dwelinjgs) - Convantiona1 dwellings with ItOcc Inhor ~fort (thousend) - EconomIcaly cotiva persona, including armd electricity in living quater as peccant of tcora dwellings in urban and fortaa and -uteployed but excluding houasw,ive., s tudents , etc. ; definitions rualar1 a i,, verioca Countries are nonr comparable. Rural dwellings conected to electricity (%) - Computed s above for rur1 Lo.bco forte in agriculture C75 - Agricultural labor force (in farmIng, forestry, dwellings only. bun.ting and fishing) as perentage of total labor fore.. Unexplorad (% of labor farcm) - Iemplpad are usually defined as person who Consumption are able and willing to take job, ont of c Job on a given day, Committed out Radio receivers (par thou pop) - All types of rciesfor radio brosdt... t of a job, and seeking work f or a specified minimum period not excee..ding one to general public Per thou.snd of population; sec ludes omlicen.ed rece.ivers -ok; may not he comparable be,ween Countries du. to different definitions in ountri.a and in yeara when registration of radio ..te was in effect; of ucemployed and source of data, e.g. , employment office statiatic, sample data for recent years my not be comparble since most countries abolished ."rv.Y., compola-y anemplepaont inaur-nce. licensing. PM ...nAer osre (par thou pop) - Passeengr cars Comprise motor car.s easting Intam di.trib,ution - Parcentsge of privete incom (both in cash end kind) less than eight peroons; ..tludee embulanr-, h..rs.. and nilitary r.-et-d by rich-o 57, rirh-a 207., pooes 201, and pooreet 407. of howee- vehicle.. holds. Electricity fkwb/vr per cap) - Aannual Coneomption of industrial, Coom.r.ia1, public and private electricity in kilowtt hours per capita, gener.Ily RLietribution of land oowrerhip - Percentages of land owned by wealthiest 107. based on production data, without allowece for losses in grids but allo-- sd pooreat 107. of land owners. ing f-o imprta cod exports of electricity. Ngeeepri.t: (kx/yr per Cap) - Per capita an.nual contauption in kilograms Health and Nutrition *stimeced from domastic production plus net Imports of -awprint. Ppopultion par physician - Population divided by n..sr of practicing physiriena qualified from c mdical school at university leve.1  ANNEX I Page 3 ECONOMIC DEVELOD(T DATA GNP PER CAPITA IN 1976 USS 1t0 GROSS NATIONAL PRODUCT IN 1976/77 _2/ ANNUAL RATE OF GROWTH (N. oonetant priose) USS Bln. 9 1960/61-1964/6S 1965/66-1969/70 1970/71-1975/76 GNP at Market Prices 86.04 100.0 3.9 3.8 2.9 Gross Domestic Investment 16.62 19.3 Gross National Saving 18.18 21.1 Current Account Balance 1.56 1.8 Resource Gap 0.95 1.1 OUTPUT. LABOR FORCE AND PRODUCTIVITY IN 1975/76 Value Added (at faotor cost) abor For VA. Per Worker USS Bln. % Mil, V of ationl Averae Agrioulture 30.2 43 179.0 69 169 63 Industry 16.7 24 33.9 13 494 193 Services 23.4 33 48.0 18 488 133 Total/average 70 3 100 261 100 277 100 GOVERNMENT FINANCE General Govermentm Central Government B(Rs.Bln) : of GDIP (Rs. E'n'% of GDP 1976/77 1976/77 1974/75-1976/77 1976/77 1976/77 1974/75-1976/77 Current Receipts 147.46 19.1 17.9 83.78 10.9 10.4 Current Fxpenditures 140.18 18.2 16.2 84.2S 10.9 9.6 Current Surplus/Deficit 7.28 0.9 1.7 - 0.47 - 0.8 Capital Elxpenditures ./ 59-05 7.6 7.1 40.39 5.2 5.0 External Assistance (net) 11.21 1.5 1.7 11.2i 1.5 1.7 MONEY. CREDIT AND PRICES 1970/71 X12L4/n R 973/74 1974/75 1975L6 1976/J77 September 1976 September 1977 (Billion Rs outstanding at end of period Money and Quasi Money 105.7 142.2 169.0 186.9 215.0 262.6 238.2 284.8 Bank Credit to Public Sector(net) 56.9 82.5 92.9 102.6 109.1 117.3 112.7 130.7 Bank Credit to Private Sector 56.7 76.0 90.1 109.5 127.5 161.0 144.0 170.0 (Peroentage or Index Numbers) Janurv 1977 January 1978 Money and Quasi Money as % of GDP 24.3 27.3 26.4 25.5 27.6 31.3 Wholesale Price Index (1970/71 = 100) 100.0 116.2 139-7 174.9 173.0 176.6 178.8 183.3 Annual percentage changes ins Wholesale Prioe Index 7.7 10.0 20.2 25.2 -1.1 2.1 7.5 2.5 Bank Credit to Public Sector (net) 8.6 19.6 12.6 10.4 6.3 7.5 4 71/ 15 8 _ Bank Credit to Private Sector 17.3 18.0 18.5 21.5 16.4 26.3 24.9J 11.9.E/ y' The per capita GNP estimate is at market prioes, calculated by the conversion technique used in the World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. / Quick Estimates. S/ Computed from trend line of GNP at factor cost series, including one observation before first year and one observation after last year of listed period. g Transfers between Center and States have been netted out. / All loans and advances to third parties have been netted out. 1/ Net bank credit to Government Sector. g/ Bank credit to Commercial Sector.  ANNEX I Page 4 lkTCz or PAMDS 1974/75 19 6s t7h i7VI7 1976/L7 1977/78 MCRCNDISE EXPORTS (AJLG 1974/75 - 1976/77) Export. of Goods 4,174 4,665 5,760 6,400 Engineering Goods 515 t1 Isporta of Goods -5,665 -6,084 -5,950 -6,600 Sugar 379 8 Trade B 1m -1,491 -1,419 - 190 - 200 Tea 296 6 IFS (not) 215 310 46' 500 Jute Usnufactures 294 6 Leather end Leather Resouroe Ga; -1,278 -1,109 215 300 Products 268 5 Intt Pamnts (not) V - 198 - 216 135 _ 130 Clothing 257 5 Other Paotor Pa"ments (not) - - Cotton Textiles 223 5 Net Trsfer 1/ 257 470 73T 1,000 Others 2396 49 Total 4866 1 00 Bal