India - Second Population Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2692-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE SECOND POPULATION PROJECT January 24, 1980 | This document bas a restricted disributon and may be used by recipients only In the performance of their official duies. Its contents may not otherwise be disclosed without World Bank autborIztion.  CURRENCY EQUIVALENTS (As of January 22, 1980) US$1.00 = Rs 7.95878 Rs 1.00 = US$0.12565 Rs 1,000,000 = US$125,650 (Since September 24, 1975, the Rupee has been fixed against a "basket" of currencies. As these currencies are now floating, the US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 to Rs 8.60, which represents the projected exchange rate over the disbursement period.) FISCAL YEAR April 1 - March 31 ABBREVIATIONS ANM - Auxiliary Nurse Midwife AP - The State of Andhra Pradesh CHW - Community Health Worker GOI - Government of India IEC - Information, Education and Communication IUD - Intra-Uterine Device LHV - Lady Health Visitor MCH - Maternal and Child Health NPW - Multipurpose Workers PHC - Primary Health Center SIDA - Swedish International Development Authority UP - The State of Uttar Pradesh  FOR OFFICIAL USE ONLY GLOSSARY Crude Birth Rate: Number of live births per year per 1,000 population. Crude Death Rate: Number of deaths per year per 1,000 population. Rate of Population Rate of natural increase adjusted for (net) migration Growth: expressed as a percentage of the total population in a given year. Total Fertility Rate: The average number of children that would be born per woman if she were to live to the end of her childbear- ing years, and bear children according to a given set of age-specific fertility rates. The Total Fertility Rate often serves as an estimate of the average number of children per family. Infant Mortality Rate: Annual number of deaths of infants under one year per 1,000 live births during the same year. Equivalent Steril- An index of overall family planning performance izations: calculated by adding the number of sterilizations performed over a period of time, one-third the number of IUDs inserted, one-eighteenth the number of equiv- alent conventional contraceptive users, and one-ninth the number of equivalent oral contraceptive users. These weights are derived from an assessment of number of births averted by different contraceptive methods in India. This document has a mtricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   INDIA SECOND POPULATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiaries: The States of Uttar Pradesh and Andhra Pradesh. Amount: US$46 million. Terms: Standard. Relending As part of Central assistance by the Government of Terms: India (GOI) to the States for development projects on terms and conditions applicable at the time. At present, Central assistance for health and family welfare activities is provided on a grant basis. GOI will bear the exchange risk. Project The project would spearhead implementation of an Description: integrated family welfare strategy model which the Government plans to carry out throughout India by 1988. The project would have the following major components: (a) service delivery; (b) training; (c) information, education and communications activ- ities; (d) monitoring, evaluation and operational research; and (e) program and project management. It would also provide support for a number of inno- vative activities. The proposed project would cover six districts of Uttar Pradesh and three districts of Andhra Pradesh. The project would have as its major objectives the lowering of infant and child mortality and morbidity, improvement in the health status of mothers and children, and the lowering of the birth rate. The risks under the proposed project are those associated with programs involving thousands of staff in attempts to change the attitudes of millions of people. Organizational arrangements have been designed to minimize the risks to an acceptable level.  Estimated Costs: Local Foreign Total ---(US$ Millions)---- Service Delivery 49.90 10.50 60.40 Training 4.40 0.70 5.10 Information, Education & Communication 5.10 0.90 6.00 Research and Evaluation 0.75 0.05 0.80 Project Management 1.10 0.10 1.20 Innovative Activities 1.20 0.30 1.50 Total Base Cost 62.45 12.55 75.00 Physical Contingencies 1.40 0.60 2.00 Price Contingencies 15.00 4.00 19.00 TOTAL 78.85 17.15 96.00 Total net of taxes and duties 74.85 17.15 92.00 Financing Plan: Local Foreign Total ---(US$ Millions)---- IDA 28.85 17.15 46.00 GOI /a 50.00 - 50.00 /a This includes a possible co-financing by the Kingdom of Sweden of US$23 million equivalent. The amount includes taxes and duties of US$4 million equivalent. Estimated (US$ Million) Disbursement: FY80 FY81 FY82 FY83 FY84 FY85 Annual 0.4 5.4 10.7 15.1 10.7 3.7 Cumulative 0.4 5.8 16.5 31.6 42.3 46.0 Rate of Return: Not applicable. Appraisal Report: No. 2668-IN dated January 15, 1980.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE SECOND POPULATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to India in an amount equivalent to US$46 million on standard IDA terms to help finance a project designed to spearhead implement- ation of an integrated family welfare program. The Government of India (GOI) would channel the proceeds of the credit to the States of Uttar Pradesh and Andhra Pradesh in accordance with GOI's standard terms and arrangements for financing state development projects. The exchange risk would be borne by GOI. PART I - THE ECONOMY 2. An economic report, "Economic Situation and Prospects of India" (2431-IN dated April 9, 1979), was distributed to the Executive Directors on April 13, 1979. Country data sheets are attached as Annex I. Background 3. India is a large, low-income country with 652 million people (in mid-1979) whose average income is US$150 per annum. The agricultural sector dominates the economy, employing over two-thirds of the labor force and con- tributing over 40% of value added. Although smallholder agriculture provides a fullsome subsistence to many, the land base is inadequate to provide all families in rural areas with an adequate livelihood under current conditions, and many who are landless or nearly landless have only an insecure grasp on the means of existence. Industrialization in India has not been rapid enough to bring about the economic transformation that has led to higher productivity and rapid urbanization in some other countries. The urban population was 18% of the total in 1960, 20% in 1970 and is 21% now. The share of manufacturing has grown slowly and since the late 1960s has remained roughly constant at 16% of GDP. 4. Economic growth has been slow in the past, with GDP growing at a trend rate of 3.6% per annum from 1950 to 1975. Agricultural output grew at 2.4% per annum over the same period. Slow growth in agriculture acted as a drag on overall growth, not only because of its sheer weight in the total, but also because of the need to use scarce foreign exchange to import food. Growth in industrial output has been higher at 5.2% per annum between 1950 and 1975, but not as high as in many other developing countries nor as high as can be expected. 5. This slow growth has persisted despite a quite creditable domestic saving and investment performance. Domestic saving has grown from 9% of GDP in 1951 to the current high level of 22%. Gross domestic investment has risen from 10% to 21% of GDP over the same period. Foreign savings have never  financed a large portion of domestic investment and have financed no more than 5% of investment since 1970. Foreign savings have been important in financing imports, and a shortage of foreign exchange has acted as a constraint on the economy for most of the period. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance is less than 2% of GDP now, has never risen above 3% and fell to less than 1% in the early 1970s. Exports have grown relatively slowly--5.4% per annum in US dollar terms and 2.8% per annum in volume terms between 1950/51 and 1975/76. So far during the 1970s, exports have grown much more rapidly, by 18% per annum in US dollar terms and 8% in volume terms over the period 1970/71 to 1976/77. During the same period imports grew by 17% per annum in US dollar terms but only by 2% per annum in volume terms, reflecting a 28% fall in India's terms of trade over the period. 6. India has the capacity to grow and develop at a more rapid pace than has been achieved so far. Although the industrial sector is small compared to the size of the total economy, it nevertheless has a highly diversified struc- ture and is capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure--irrigation, railways, telecommunications, roads and ports--is extensive compared to many countries, although considerable gaps remain. India is rich in human resources and institutional infrastruc- ture, although there is much scope for improvement. India is reasonably well-supplied with natural resources, not only land and water but minerals, including oil, gas and coal. With good economic policies and sufficient access to foreign savings, India should be able to manage these considerable resources to accelerate the longer-term growth trend. Recent Trends 7. India has managed faster growth during the recent past. Growth of GDP in 1978/79 is estimated to be between 3% and 4%; this is a strong perform- ance coming on top of the previous year's 7.2% growth in GDP and considering agricultural output grew less than 2%. Even this agricultural growth is highly creditable given the previous years' record harvests in most crops. Industrial output grew by 8-10% in 1978/79. Over the four years, 1975/76 to 1978/79, growth in real GDP, agricultural output and industrial output has averaged 5.3%, 4.4% and 6.9% per annum, respectively. Although these rates represent growth over the depressed base of the early 1970s, they are signi- ficantly higher than the longer-term past trend and comparable to the target growth rates for the medium-term future. Buoyant domestic demand, upward adjustment of depressed agriculture prices and world inflation have lead to significant increases in prices during the first half of 1979. The wholesale price index increased by 16% between mid February and September. Together, food, food products, crude petroleum and mineral oils contributed over two- thirds of this increase. However, prices of almost all commodities have moved up significantly during the first months of 1979/80. Although in part reflecting a seasonal rise in food and food products, the trends observed do indicate a distinct departure from the relative price stability of the past four years. The inflationary trend is likely to continue during the second half of 1979/80, although at a slower rate, given the recent price increases in oil, steel and coal and continuing world inflation. Although the current inflationary pressures need not seriously impair medium-term growth prospects,  given available aggregate resources and production capacity, significant improvements are likely to be required in the organization of key sectors if an economic slowdown is to be avoided. 8. The 1978/79 foodgrain crop exceeded the 1977/78 record crop of 126 million tons, and many non-food crops did well. The 1978 monsoon rains were timely and adequate, although severe flooding in some areas destroyed both lives and property and ruined some crops. The basic inputs into agricul- tural production continued their rapid growth of the recent past. Additions to area under irrigation have doubled from 1.3 million hectares a year during the five-year period ending 1973/74 to 2.6 million hectares a year during 1977/78 and 1978/79. Fertilizer consumption in 1978/79 reached 5 million nutrient tons, an increase of 18% over 1977/78. This growth has been impres- sive, particularly since it followed two successive years of very high growth-- 18% in 1976/77 and 26% in 1977/78--so that fertilizer consumption in 1978/79 was 75% higher than in 1975/76. However, prospects for agricultural produc- tion in 1979/80 are not good. India experienced a severe drought in 1979. The monsoon was delayed and subsequent rainfall was deficient throughout the country. Consequent damage to the kharif crop has been substantial. Tenta- tive estimates indicate a shortfall of 13-15 million tons in kharif crop from last year's level of 78.7 million tons. Delayed sowing, lack of soil moisture, low levels of water in tanks and wells as well as power cutbacks and recent shortages in diesel fuel for irrigation pumps are adversely affecting the rabi crop. Depending on the performance of the rabi crop, total shortfall in grain crop is expected to be 17-20 million tons below the 1978/79 level. 9. The growth of industrial output in 1978/79 came from a sharp rise in the output of food industries, particularly sugar, a modest increase in textiles, important increases in the hitherto depressed engineering sector and the revival of demand for consumer durables. Production would have been still higher but for recurring shortages of steel, coal, railway wagons and electric power and capacity constraints in fertilizer, cement, vegetable oils and petroleum products. Labor unrest also constrained output in some indus- tries, particularly in textiles, steel and mining; man-days lost in 1978 ex- ceeded the high level of 1977 and only in 1974 were the number of days lost higher. Power production increased by 12% but continuing shortages in many States necessitated power cuts and curbs on new demand. During the first half of 1979/80 supply bottlenecks in basic industrial inputs began to retard overall industrial production. In addition to coal and steel, cement, sugar, cotton textile and cotton yarn output fell below last year's levels. Strong demand has continued to sustain other important industries such as fertilizers and chemicals, but it appears increasingly unlikely that these can counter- balance the constrained sectors. 10. The trade deficit grew and both the current account surplus and the balance of payments surplus of recent years shrank in 1978/79. The import bill is expected to reach US$8.4 billion, which brings the average rate of increase in US dollar terms to 19% per annum since 1976/77. Non-foodgrain imports rose even more dramatically by 28% per annum over the past two years. The growth of imports and the liberalization of import control policies represents a desirable adjustment to enhanced foreign resources. Although exports grew much faster during the 1970s through 1976/77 than earlier, export growth  - 4 - in 1977/78 and 1978/79 has slowed somewhat. After rising by 12% in 1975/76 and 23% in 1976/77 in US dollar terms (virtually all growth in export volume), export earnings rose by only 9% in 1977/78 (with little or no volume growth) and an estimated 8% in 1978/79 (with 5-8% volume growth). Although part of the decline is attributable to unfavorable conditions in foreign markets, export profitability has been allowed to deteriorate somewhat. With net invisible receipts in 1978/79 estimated the same as in 1977/78--US$2 billion-- the widened trade deficit resulted in a significantly reduced current account surplus, from US$1 billion in 1977/78 to US$400 million in 1978/79. Despite some increase in net aid disbursements from their low level in 1977/78, the increase in reserves declined from about US$2 billion in 1977/78 to about US$1.5 billion in 1978/79 to reach US$7.4 billion. Exports during the first three months of this fiscal year are 32% higher than the same quarter of last year. Although part of the increase is due to the dollar depreciation and recovery in coffee prices, the prospects of sustaining a volume growth of at least 7% during 1979/80 appear good. Imports in the first quarter of 1979/80 are around 7% higher than the same period of the previous year. How- ever, the impact of recent increases in petroleum prices are only partially reflected in this figure. India's total POL import bill for 1979/80 is likely to reach $3.2 billion, $800 million higher than earlier estimates. As a result, there should be a sharp deceleration in the rate of growth of reserves sufficient to significantly reduce the number of months of imports covered by reserves during 1980. Development Prospects 11. The faster growth of the recent past has been made possible by the much-increased inward flow of foreign exchange from increased exports, workers' remittances and external assistance; greatly improved agricultural performance; the impressive saving effort; the liberalization of import controls; and ex- panded public expenditure on development programs. Although sustaining the high growth rates of the recent past in the medium-term is by no means assured, especially if there is a repeated drought in 1980, India has a level of re- sources with which to manage the economy that had not existed before. The comfortable foreign exchange position, and the large foodgrain stocks have greatly eased the pressures to deal with short-term crises and freed India's economic managers to continue planning a more ambitious course for the economy. The policy improvements needed to achieve the better performance now possible have begun in some important areas but in others have yet to be initiated. 12. The Draft Plan, which was released in March 1978 and is expected to be finalized and approved by the National Development Council later this year, sets out India's development strategy for the five years 1978/79 to 1982/83. The principal objectives of the Draft Plan are to achieve within a period of ten years: (i) the removal of unemployment and significant underemployment, (ii) an appreciable rise in the standard of living of the poorest sections of the population, and (iii) provision by the Government of some of the basic needs of the people in these low-income groups. While the Plan recognizes the importance of achieving more rapid expansion of the economy than in the past to meet the employment and welfare objectives, the targeted rate of growth at 4.7% per annum is lower than projected in most earlier Plans. According to the planners, this reflects in part the increased emphasis given  to the distribution rather than the level of income generation, and in part the need for greater realism in the macro-economic assumptions underlying the Plan. While the trade-off between growth and distribution is not immediately obvious from the Plan model, the adoption of a more realistic growth target is in itself well justified -- even at 4.7% per annum, the targeted growth rate is higher than actually achieved during any of the previous Plan periods, and is substantially above the longer-term trend growth rate. 13. In agriculture, despite the 1979 drought, economic policies, dev- elopment programs and secular trends all seem favorable for resuming a period of sustained high growth after 1979/80. Fertilizer prices have been reduced progressively from their very high level in early 1975 and despite some fall in market foodgrain prices, the fertilizer: foodgrain price ratio has fallen to a clearly profitable range. Good harvests and higher farm incomes provide the money to finance higher fertilizer purchases, creating something of a virtuous circle. Pricing policies for many crops--rice, wheat, sugarcane, pulses and others--have concentrated recently on supporting prices to maintain incentives to farmers rather than trying to administratively control prices to contain inflation. The ambitious irrigation and rural electrification investment program in the new Five-Year Plan, if fully funded, will help pro- vide the water control needed to increase yields directly and to induce further productivity-increasing investments. The effective reorganization of the agricultural extension service will raise yields as it takes hold gradually across India. Finally, there are several heartening trends in foodgrain pro- duction: one is the steady growth of area planted to high-yielding varieties of rice; another is the growing adoption of summer rice cultivation in the traditional wheat-producing areas (Punjab and Haryana). These two trends along with the other favorable developments have caused rice production to rise impressively in the last two years. Another good omen for foodgrain production is the rapid growth of winter wheat cropping in traditional rice areas (West Bengal, Assam and Orissa). 14. In industry, despite some uncertainty in industrial policy and the lack of strong policy stimulus to improve efficiency in the industrial structure, recently strengthened demand forces, increase in planned invest- ment along with adroit input supply management should allow the industrial sector to continue to grow at the improved rate of the recent past, at least for the near- and medium-term future. Over the longer term, growth of indus- trial production at or above the rate experienced in the recent past--e.g., 7% per annum during the last four years--will require some changes in policy to induce a more efficient industrial structure. Recent industrial policies have sent mixed signals to private manufacturers and investors. Some, such as reserving certain lines of production for small-scale enterprises or prohibit- ing the location of new firms in municipal areas, have been restrictive. Others have been stimulative, such as the raising of the exemption limit of industrial licensing for capital investment or favorable adjustments in the pricing and production controls in several major industries, including cement, steel, and textiles. In addition the liberalization of import controls is of considerable benefit to increasing industrial production. However, there are some worrisome supply shortages that are currently threatening continued rapid industrial growth. Many can be handled through imports, if needed, as long  -6- as India maintains a healthy foreign exchange position. However, two supply constraints likely to persist in the future -- namely, rail transport and power -- cannot be eased through imports. The new Plan contains a major power investment program to increase capacity rapidly. The railway investment pro- gram is more modest. Another crucial input into both of these sectors, and into most other major sectors, is coal, whose supply needs careful management. 15. The main reason for expecting sustained growth in industrial pro- duction is improvement in demand prospects for each of the four major sources of industrial demand. The first is market demand for manufactured consumption goods, which is expected to pick up in response to the increase in disposable income due in particular to improvement in agricultural output. Although its effect has been delayed somewhat, this broad-based demand is finally making itself felt and is expected to continue into the future unless the growth in agricultural output is constrained by repeated droughts. Another source of demand is public expenditure on development projects, which has grown in a major way in the last few years and is scheduled to continue to grow under the new Five-Year Plan. A third source of growth is export demand for indus- trial goods. There has been a sustained growth in the export of manufactures such as engineering goods, garments, gems, finished leather and some chemical products. This export growth should continue in the future with proper policy support. A final source of growing demand is private investment by both the household and corporate sectors. There are as yet only a few signs of this growth, such as increased disbursement by term lending institutions and in- creased use of inputs; investments should become stronger as growth in the other sources of demand continues and as capacity limitations begin to con- strain production in more industries. The net result of increasing demand should be continued high growth in industrial production in the near and medium term within existing policies. 16. Import policy is an area where there has been significant improve- ment in the recent past; but some improvement in export policy is required to raise incentives to export. India has liberalized import control policy significantly in the past two years and imports have responded. Future growth in imports, and in the benefits of price stability, enhanced production and increased efficiency which imports bring, will depend to a great extent on how the now liberalized policy is administered. A delicate touch is required to yield the benefits without bringing about undesirable damage to vulnerable industries. India has the foreign resources to allow imports to grow at the rapid rates of the past two years for a few more years and continue to relax the very severe restraints imposed on the economy during the early 1970s by suppression of imports. But, given the import liberalization undertaken so far and the expected growth of imports, by the end of the Plan period (1982/ 83), foreign exchange reserves will have fallen to six months of imports, or less, and some adjustment in the balance of payments will be required. Part of the adjustment will very likely be a reduction in the growth rate of imports; the import bill need not grow 15% in volume terms indefinitely to sustain the target growth in GDP. Part of the adjustment must come from the achievement of a growth rate of exports in the vicinity of 7-8% or higher in volume terms. Faster export growth is needed not only to provide the foreign exchange to sustain the rapid growth in imports but also to allow foreign demand and competition to improve the efficiency of Indian industry. Finally,  -7- part of the adjustment should come from an increased net transfer of external assistance. 17. India's population policy continues to aim at reducing the birth rate to 30 births per thousand people by 1983 through completely voluntary acceptance of fertility control methods supplied by a family welfare system integrated with the supply of basic health, maternal and child health and nutrition services. Since 1977, the family planning achievements in terms of number of acceptors have been below that needed to achieve the 1983 goal or even to keep the birth rate from rising above its current level. The low performance is primarily the result of the reaction to the harsh birth control policies introduced during 1976. Since then family planning performance has been gradually returning to the rising trend which was discernible before it was disrupted by the intensive drive of 1976/77. Given continued support for the program of family welfare, Bank estimates indicate that India's rate of population increase should remain below 2% per annum and fall to 1.5% by about the year 2000. Despite the declining trend in the rate of population increase, a net reproduction rate (NRR) equal to one (replacement level) would only be achieved around the year 2020. At this time, the total population is estimated to reach 1.2 billion persons, an increase of about 84% over the mid-1979 level of 652 million. 18. In addition to stimulating overall economic growth and constraining population growth, reduction of poverty in India requires special attention to ways of raising the income and productivity of low-income groups. More than one-third of the world's poor live in India and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. The prospects for alleviating their poverty by providing these families with more land are not good because of the virtual absence of uncultivated arable land, the slow progress in implementing land reform and the limited amount of land that would be available if land reform were carried out. Estimates of the amount of land that would be available if land reform were carried out vary greatly. One estimate is that there would be about 9 million hectares avail- able for distribution. This compares to roughly 45 million families in the two poorest groups in rural India: landless families and families owning less than one hectare of land, whose average holding is 0.31 hectares. An approach to the amelioration of poverty more promising than land reform is the creation of more employment opportunities for the landless and small farmers in rural areas. Although the basic thrust must come from the market by a more rapidly increasing agricultural output, there will be a role for employment-intensive rural works programs. The new Plan provides for increased rural employment both through direct employment schemes and through ambitious programs of investment in rural infrastructure in addition to the more general rural development programs. PART II - BANK GROUP OPERATIONS IN INDIA 19. Since 1949, the Bank Group has made 57 loans and 118 development credits to India totalling US$2,529 million and US$7,445 million (both net of cancellation), respectively. Of these amounts, US$1,025 million had been  - 8 - repaid, and US$3,252 million was still undisbursed as of November 30, 1979. Annex II contains a summary statement of disbursements as of November 30, 1979, and notes on the execution of ongoing projects. 20. Since 1959, IFC has made 17 commitments in India totalling US$64.0 million, of which US$17 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$32.5 million, US$24.5 mil- lion represents loans and US$8.0 million equity. A summary statement of IFC operations as of November 30, 1979, is also included in Annex II (page 5). 21. 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 financing 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 capacity utilization in industry. The Bank Group has also been active in supporting infrastructure development for power, telecommunications, and railways. Family planning, water supply development, and urban investments have also received Bank Group support in recent years. 22. 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, improved water management and intensification and stream- lining of extension systems, form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to proj- ects 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 infra- structure and industrial investments will focus on agriculture-, export- and energy-related projects. 23. 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- fully 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.  - 9 - 24. 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 small in relation to India's needs for external support, and India may be regarded as creditworthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was 12% in 1978/79 and is projected to remain below 20% through 1995/96. As of November 30, 1979, outstanding loans to India held by the Bank totaled US$1,537 million, of which US$622 million remained to be disbursed, leaving a net amount outstanding of US$915 million. 25. 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 62%, 27% and 38%, respectively, in 1978/79. On March 31, 1979, India's outstanding and dis- bursed external public debt was US$15.3 billion, of which the Bank Group's share was US$4.6 billion or 30% (IDA's US$4.0 billion and IBRD's US$0.6 bil- lion). Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1978/79, about 17.5% of India's total debt service payments were to the Bank Group. PART III - THE POPULATION SECTOR IN INDIA Population and Health Situation 26. With 652 million in mid-1979, the size of India's population is surpassed only by the People's Republic of China. Fertility is moderate by standards of low-income developing countries as a whole; the average crude birth rate for this group was 40 per thousand in 1977 1/ while for India it was 35 per thousand. The crude death rate in India in the same year was 14 per thousand, slightly less than the average of 15 for all low-income devel- oping countries. Fertility trends have also been quite encouraging; the crude birth rate per thousand population declined from 41.1 in 1961 to 36.9 in 1971 to 34.4 in 1976. Fertility is lower in urban areas but the rate of urbanization is slow; about 21% of the population lived in the cities in mid- 1978 as compared to 17% in 1951. India's current rate of population growth is estimated at 2.1 percent in 1979, and is expected to decline to 1.5 by about the year 2000. However, in absolute terms, this does not represent much of a reduction in the population growth. Even with a fairly optimistic fertility decline, India will have to live with a monthly population growth of over one million persons during the next 30 years. This will be larger than the annual population growth in any other country in the world, including that in China. 1/ See World Development Report, 1979, P. 160.  - 10 - 27. There is a long-run downward trend in the mortality rate although the rate of decline has been slower in recent years. Official statistics show a crude death rate of 19 per thousand in 1961, 15 in 1971 and 14 in 1977. Earlier declines were mainly due to the control of communicable diseases, but further gains depend upon various forms of socio-economic developments like improved nutrition, sanitation and housing. Since these improvements are occurring slowly, the present decline in mortality is not surprising. It is estimated that about 30% of all children die before the age of five. During the past 50 years infant mortality rates have dropped by half while adult mortality dropped by two-thirds. 28. The decline in mortality has not always been associated with a corresponding decline in morbidity. It is estimated that in any given week in India, over a quarter of the nation's population is afflicted with dysen- teries, diarrheas, or respiratory diseases reflecting inadequacy of potable water supplies, sanitation facilities and housing. A 1969 Government survey listed diseases linked to gastro-intestinal and respiratory illnesses as responsible for over half of the deaths in that year. Preventable diseases like diphtheria, whooping cough, polio, tetanus, and measles account for nearly 10% of deaths. Malnutrition is another major cause of adult morbidity and child mortality. The Project States 29. The project would cover six districts in Uttar Pradesh (UP) and three districts in Andhra Pradesh (AP). The State of UP had an estimated population of about 99.3 million in March 1979, which makes it by far the most populous State in India. In 1976, UP's crude birth rate was estimated at 40 per thousand as compared to 34.4 for all-India. The crude death rate in 1976 was 20.5 per thousand in UP compared to 15 for all-India. Almost all socio-economic indicators show the State behind national averages and the six project districts behind the State average. The population in the six project districts was 15.9 million in March 1979 and the population density was 415 per square kilometer as compared to UP's average of 337 and the all-India average of 194. 30. The State of Andhra Pradesh (AP) had an estimated population of 49.7 million in March 1979, and ranked sixth in population size among the Indian States. The official estimate of the crude birth rate was 33.8 per thousand in 1976, and the estimated death rate was 14.5; these figures are very close to the national averages. The population of the three project districts was estimated at about 6.8 million in March 1979. The density per square kilometer in the project districts amounted to 136 as against 179 for the whole State. History of Family Planning in India 31. The first official national family planning program in the world started in India as early as 1952, when Rs 6.5 million was allocated in the First Five-Year Plan. The initial activities were limited to a few pilot projects and some studies. Under the second Five-Year Plan (1956-61), Rs 50 million was allocated for the establishment of rural and urban family  - 11 - planning clinics and the provision of grants to States, local bodies and voluntary organizations for family planning work. This clinical approach was modified in the early 1960's by the establishment of a nationwide program for the extension of health services provided in rural areas. A program goal of reducing the birth rate to 25 per 1,000 by 1973 was proposed to accelerate the adoption of family planning. To carry out this new program approach, a Commissioner for Family Planning was appointed in 1965 and a Department of Family Planning established in the Ministry of Health in 1966. A "cafeteria approach" providing a broad choice of contraceptive methods, including steril- ization, various mechanical and chemical methods, and the rhythm method was a key element of the program. The Intra-Uterine Device (IUD) became an important program method and, in 1968, condom distribution was started through the retail channels of leading distributors of consumer goods. 32. Family planning performance statistics are incomplete for years before 1966. The intensified activity of the late 1960s resulted in signifi- cant increases in the number of acceptors. From just under 1 million equiva- lent sterilizations 1/ in 1965/66, 2.1 million were recorded in 1967/68. As a result of occasional major initiatives followed by periods of slack, the performance has varied widely between different years and between methods of contraceptives used. For example, IUD insertions declined rapidly from a peak of 910,000 in 1966/67 to 355,000 in 1972/73. The number of sterilizations also fell from a peak of 1.84 million in 1967/68 to 1.33 million in 1970/71. In response to this decline, mass vasectomy camps were organized resulting in 3.1 million sterilization cases in 1972/73. However, administrative shortcomings, poor quality of services, and questionable practices led to a discontinuation of the camps within the year, which caused a dramatic decline to 942,000 sterilizations in the following year. The following table summarizes the performance during the following years. (In millions) Family Planning Methods 1973-74 1974-75 1975-76 1976-77 1977-78 1978-79 Sterilizations 0.94 1.35 2.67 8.26 0.95 1.48 - Vasectomies (0.40) (0.61) (1.44) (6.20) (0.19) (0.39) - Tubectomies (0.54) (0.74) (1.23) (2.06) (0.76) (1.09) IUD insertions 0.37 0.43 0.61 0.58 0.33 0.55 Equivalent conventional contraceptive users /a 3.01 2.52 3.53 3.69 3.24 3.60 Eligible couples effec- tively protected (%) 14.9% 15.1% 17.2% 23.9% 22.8% 22.8% Equivalent sterilizations 1.2 1.6 3.1 8.7 1.2 1.9 /a Mainly condoms 1/ Equivalent sterilizations is an index designed to measure changes in family planning performance; it is calculated by adding the use of various methods adjusted by their respective weights (see Glossary). Although the "percentage of eligible couples effectively protected" is more widely used measure to show cumulative performance of family plan- ning, "sterilization equivalent" is used to indicate changes in perform- ance in the short-term.  - 12 - 33. The program had lost its momentum by 1975. In April 1976, the Min- istry of Health and Family Planning produced a formal statement of national population policy listing 16 specific measures. These included increasing the minimum age of marriage, making the volume of Central Government financial assistance to State governments partly dependent on family planning performance, freezing the representation in the Central and State legislatures on the basis of the 1971 census, according higher priority to female literacy, sharply increasing financial incentives to sterilization acceptors, and permitting individual States to propose legislation for compulsory sterilization. 34. The dramatic increase in family planning performance between 1975 and early 1977 was a result of a vigorous, and sometimes over-zealous, pursuit of acceptors by the machinery of the Government. Out of the 8.3 million persons sterilized in 1976/77, some 6.3 million were sterilized between July and December of 1976 alone. However, substantial resistance to this family planning drive started to build up before the end of 1976, and the reported excesses became an issue in the elections which led to a change in Government in March 1977. Despite early assertions by the Government of its support for a completely voluntary family planning program, the program came virtually to a halt in the North where the drive had been most severe. The performance in 1977/78 declined to 1.2 million equivalent sterilizations, which was lower than the 1967/68 level of 2.1 million. Vasectomies, the main method pursued during the emergency, totalled only 190,000 in 1977/78 which was the lowest in 14 years. Present Strategies 35. Following the elections of March 1977, the Government acted to dispel the concerns about the family planning program. The strategy has been to make steady efforts for provision of integrated health and family planning services in rural areas while encouraging public support for a voluntary program to reduce fertility. The policy statement of June 1977 states that the concept of family planning should embrace all aspects of family welfare, particularly those which are designed to protect and promote the health of mothers and children. The Government has emphasized long term program devel- opment and has avoided short-term major initiatives that cannot be sustained and have, in the past, resulted in damaging cycles in performance. Voluntary sterilization has been retained as a terminal method but equal emphasis is to be placed on promotion of all methods, leaving each family to make its own choice of contraceptive method. Increased emphasis is also placed on State initiatives rather than on centralized programs. In March 1978, an act increasing the minimum marriage age to 21 for males and 18 for females was passed. The past year's performance holds out the hope that the demand for family planning services and the capacity to deliver these services is return- ing to the pre-1975 level. This return establishes a stable base on which to build an effective program to lower fertility and mortality levels. 36. The emphasis on improving primary health care in rural areas, especially maternal and child health (MCH) services, is based on the assump- tion that the rural population will choose to limit family size only when  - 13 - the rate of infant mortality declines. This emphasis has resulted in imple- mentation of three schemes which are being phased in gradually throughout India: the multipurpose workers scheme, the community health workers scheme, and the scheme of training of dais (traditional birth attendants). These schemes were included in the guidelines issued by the Planning Commission to the states in 1978 and they constitute a major thrust to correct the existing imbalance between health services for urban and rural areas. The multipurpose workers scheme, which was first introduced in 1975, provides an integrated approach to delivering a package of primary health care services, including family planning, MCH and nutrition services to the community. Under this scheme, comprehensive services are provided by a team comprised of one male and one female worker at the sub-center level at a rate of one sub-center for 5,000 persons to be achieved by the end of the Sixth Plan (1983). In October 1977, the GOI introduced the community health worker (CHW) scheme, which by the end of 1978 already covered about 18% of the total rural population. CHWs are appointed by village communities at an average ratio of one CHW to 1,000 people. The community is also responsible for supervising the CHW's work. This is in line with a major assumption underlying present family welfare strategy: that community involvement is an important element in widening the acceptability of the small family norm in rural areas. The CHW works part time after three months of training and is expected to treat minor ailments, motivate the community towards acceptance of family planning, encourage the use of basic health services, report communicable diseases and vital statis- tics, and be concerned with improving environmental sanitation. Also in 1977, the GOI intensified the training of dais (traditional birth attendants) with the objective of training at least one dai per village of about 1,000 people. Dais' training emphasizes hygienic deliveries, the need for immunization, family motivation, and case referral to the PHC or sub-center. The CHWs and dais also serve as a link between multipurpose workers and the community. 37. All three schemes are steps in the right direction for evolving a primary health care system in India. Preliminary evaluations indicate a favorable impact in terms of increased coverage of health and family welfare services. Problem areas constraining the effectiveness of the schemes include selection, training and supervision of personnel; ambiguities in job descrip- tions; and attitudes of medical officers on preventive versus curative work. Other earlier concerns, however, have not materialized; those concerns inc- luded the possibility of neglect of certain key activities by the multipur- pose workers in view of their unipurpose background in vertical programs such as Malaria or family planning, selection of community health workers biased towards higher caste groups, and unwillingness of dais to participate in training. The Government plans to continue to evaluate these schemes as implementation proceeds. Family Welfare Organization 38. In India, policy-making for population matters, including family planning, is the joint responsibility of the States and the Central Govern- ment, but program implementation is a State responsibility. The family wel- fare program (which comprises, basically, family planning plus maternal and  - 14 - child health care), however, is of national importance and all expenditures incurred by the States are met from Central funds. The GOI's Ministry of Health and Family Welfare is responsible for overall program direction, guidance and evaluation. At the national level, the Central Health and Family Welfare Council, headed by the Union Minister of Health and Family Welfare, meeting annually, advises on broad policy issues. The Council's membership comprises all State Health Ministers, representatives of selected voluntary and labor organizations, some members of Parliament and eminent personalities active in the field of family welfare. The Secretary to the Ministry of Health and Family Welfare, GOI, is in overall charge of the Department of Family Welfare. The Additional Secretary and Commissioner of Family Welfare coordinates the activities of five major divisions dealing with policy, technical matters, information activities, family welfare activities in the organized sector (industries and major national organizations such as the railways), and evaluation. Throughout India, stationed in the capitals of the major States, are 16 Regional Directors of Health and Family Welfare responsible to the Center for liaising with and advising State Governments on program implementation and feeding back information. 39. In UP, the health and family welfare functions are under the overall guidance of the Health Minister. He is supported by a Commissioner-cum-Health Secretary and staff in the State Secretariat. Program implementation is the responsibility of the Director of Medical, Health and Family Welfare Services, who reports to the Health Secretary. An Additional Director is responsible for Family Welfare. His office (known also as the State Family Welfare Bureau) has five divisions dealing with operations, education and information, train- ing, demography and evaluation, and maternal and child health (MCH). Two State-level committees are responsible for providing policy guidance for the family welfare program. One of these is a sub-committee of the Cabinet with the Chief Minister as Chairman, and is the most important policy making body. A second committee, chaired by the Commissioner-cum-Health Secretary, is the State Family Welfare Publicity Coordination Committee, which takes decisions on information and media campaigns. At divisional level (above the districts), the program is supervised by a Joint Director. At the district level, program implementation is the responsibility of the District Chief Medical Officer. Districts are now divided into three areas, in each of which a Deputy Chief Medical Officer is responsible for all health and family welfare activities. Throughout India, three deputies are posted per district regardless of the size of the district, its population or number of health facilities. In the project area in UP, districts vary in population from 3.3 million to 1.8 million and in the number of primary health centers (PHCs), for example, from 32 to 16. 40. The administration of health and family welfare services in AP is similar to that of UP. In the Directorate of Medical and Health Services, there are two Directors, one dealing with medical education, large teaching hospitals and specialized hospitals, and the other responsible for all other health and family welfare services. The latter is assisted by six Additional Directors, one of whom is responsible for Family Welfare and MCH services. There are four administrative regions in AP, each having a Regional Director of Medical and Health Services to whom have been delegated functions relating to finance and staff. In the districts, the District Medical and Health Officer administers a structure similar to that in UP.  - 15 - 41. Delivery of Family Welfare Services. The base from which basic health and family welfare services are delivered is the PHC, which covers a community development block with an average population of 100,000. The medical officer in charge of the PHC is supported by a second doctor, both of whom are heavily involved with curative services. These doctors are almost exclusively male and the treatment of women and, to a lesser extent, children is frequently left to a Lady Health Visitor (LHV) or an Auxiliary Nurse Midwife (ANM). A third doctor is being posted to all PHC in anticipation of demand for services expected to be generated by the community health worker (CHW) scheme (see paragraph 36). The doctors share the supervision work and hold clinics in the sub-centers attached to the PHC. The sub-center, staffed by an ANM, serves a population averaging about 10,000. The ANM's most important functions concern the health of mothers and children, delivering babies, providing family planning advice and distributing condoms, supporting CHWs and dais (traditional birth attendants), and arranging for clinics run by the PHC doctor and LHV. 42. GOI has recognized that the major constraints in the present service delivery system include low levels of coverage, inadequately trained staff and limited and poor quality of information, education and communication (IEC) activities. The system also suffers from an overly centralized organizational structure, insufficient involvement of community and other government depart- ments, inadequate managerial capabilities at the district and PHC level, and lack of feedback on performance. In recognition of the constraints and weak- nesses, GOI has prepared guidelines as to the level of facilities and staff- ing, and supporting activities such as training, IEC and monitoring and eval- uation. The planned system, under the organizational base of PHC, includes: provision of one dai and one community health worker per 1,000 rural popula- tion; and the establishment of one health sub-center staffed by a male and a female multipurpose worker for every 5,000 population (see paragraph 36). There will also be a male and a female health supervisor to oversee every four male and every four female multipurpose workers. The referral services are to be provided by upgraded PHC's which will have 30 beds each and the staff will include specialists such as pediatricians and obstetricians/gynecologists. The urban areas are served by centers providing MCH and family welfare services. The new structure and facilities which are planned are sound but, when com- plete, a PHC can effectively serve only about 50,000 people or about half the population it is expected to cover. However, expansion of the number of PHCs is constrained for the time being due to lack of resources. Bank Group Activities in the Sector 43. Th.e first Population Project (Credit 312-IN) was approved in May 1972 to finance experimental activities in selected districts of Uttar Pradesh and Karnataka, for which IDA made available US$21.2 million and the Kingdom of Sweden a grant of US$10.6 million. It was designed to test the efficacy of various program inputs, and to evolve, through experimentation, ways and means for attaining better performance of the family planning program. The project was intended to complete the health infrastructure in the project dis- tricts to GOI target levels and to provide training facilities and equipment to implement the program. Additional inputs for an urban program, an inten- sive rural program and a supplementary nutrition program were provided to  - 16 - assess their impact on fertility within the existing socio-economic conditions. Population Centers in each of the two State capitals, Lucknow and Bangalore, were established to refine experimental designs, develop a management informa- tion and evaluation system, evaluate performance and recommend changes in the program for improving performance. The project supported development of health management units at the Indian Institute of Management, Ahmedabad, and the Administrative Staff College of India, Hyderabad. Project inputs included the construction and equipment of facilities (including paramedical training schools), the provision of transport, equipment, technical assistance for over- seas training, and the provision of staff salaries, which constituted the incremental costs of supplementing the Government's program. 44. Implementation of project infrastructure has proceeded steadily; virtually all of a total of 1,545 buildings have now been completed without significant delays. Staffing patterns are also complete and vehicles were procured by the end of 1976. After some initial staffing problems and prob- lems relating to their integration with other State Government programs were resolved, the Population Centers gradually built up an institutional capability. In 1976/77, just as the project infrastructure was completed, and the support- ing institutes were becoming functionally effective, intensive family planning drives were launched. These drives affected the research work and experimental strategies, masking the result of the project inputs and inhibiting evaluation. The project was, therefore, extended by two years to June 30, 1980. Available information suggests substantially higher levels of performance in the project districts, as compared with non-project districts, even during the serious slack immediately following the emergency. Experience with the nutrition com- ponent showed that, while it was feasible to establish a supplementary food distribution system in the context of the family planning delivery services, improvements in nutritional status were negligible, mainly due to widespread sharing of food supplements, and the model tested was too costly to be replica- ble. By December 31, 1979, US$20.2 million had been disbursed. The present Closing Date is June 30, 1980. 45. The Bank Group has also supported maternal and child health care programs through two of its urban development projects -- the Madras Urban Development Project (Cr. 687-IN) and the Second Calcutta Urban Development Project (Cr. 756-IN). The Madras project supports the establishment, in slums and sites and services areas, of child welfare centers which deliver basic health services, conduct immunization campaigns, and provide nutritional supplements to undernourished children and nutrition, health and family plan- ning education to their mothers. Similarly, the Calcutta project supports a series of primary health centers and health subcenters in low-income areas, which provide preventive care as well as treatment and operate outreach health, nutrition, and family planning services. PART IV - THE PROJECT 46. The project was proposed by the Ministry of Health and Family Wel- fare of the Government of India (GOI) and the States of Andhra Pradesh (AP)  - 17 - and Uttar Pradesh (UP). The project appraisal was concluded in October 1979 and negotiations were held in December 1979. The Indian negotiating team was led by Mrs. S. Grewal, Additional Secretary and Family Welfare Commissioner, Ministry of Health and Family Welfare, GOI, and the team included representa- tives of the GOI Ministry of Finance and the States of AP and UP. The Staff Appraisal Report (No. 2668a-IN dated January 15, 1980) is being circulated to the Executive Directors separately. A Supplementary Project Data Sheet is attached as Annex III. Project Objectives 47. The project has been designed to assist the Government of India (GOI) in the development of its family welfare structure and strategy which is expected to be implemented throughout India by the end of the Seventh Five-Year Plan (March 1988). The project would spearhead the first batch of 32 districts in seven States, selected according to criteria which indicate their relative backwardness in terms of socio-economic development, the shortage of health services infrastructure, and high fertility and mortality levels. For these area-specific programs, GOI has sought external assistance from various multilateral and bilateral agencies. The proposed project would cover six districts of UP and three districts of AP. The project would have as its major objectives the lowering of infant and child mortality and morbid- ity, the improvement in the health status of mothers and children and the lowering of fertility. 48. To improve coverage and quality of services as well as to increase efficiency of resource use, both of which are required to achieve project objectives, the project provides support for the service delivery system according to GOI guidelines (see paragraph 36) and for the supporting activ- ities such as training, information and motivation, monitoring and evaluation. The GOI has also emphasized, in its policy statement of June 1977, the fol- lowing points regarding the family welfare program: (a) Family planning will be an integral part of a program embracing all aspects of family welfare, particularly those which are designed to protect and promote the health of mothers and children; (b) Efforts will be entirely voluntary in respect of contra- ceptive acceptance; (c) All methods of contraception, both male and female, will be promoted with equal emphasis and it will be left to every family to decide which method of contraception, if any, it would wish to adopt; and (d) The family welfare program will be primarily directed towards those currently underserved, particularly in the rural areas. 49. The project would have five major functional components correspond- ing to the five major areas of the program: (a) service delivery; (b) train- ing; (c) information, education and communications (IEC) activities; (d) mon- itoring, evaluation and operational research; and (e) program and project  - 18 - management. It would also make provision to carry out a number of innovative activities during the project period. Lessons learned under the first project (Credit 312-IN) were fully taken into account in designing this project. Project Description 50. Service Delivery. The project would bring the nine project dis- tricts in two States under the multi-purpose worker (MPW) scheme (see para- graph 36). Under this scheme a sub-center would be established for every 5,000 people staffed by one female and one male MPW. So far, only one of the nine districts (Chittoor in AP) has been brought under such a scheme. To implement this program, the number of female MPWs would have to be doubled, male MPWs would have to be increased by one-third and supervisory staff for females increased by about 65% and for males by about 35%. In UP, of the about 3,150 female MPWs required, about 1,350 are now available, leaving nearly 1,800 to be posted during the project period. In AP, about 550 female MPWs would be needed to be posted to achieve the necessary strength of about 1,200. These deficits would be met by training at the local level as a part of the project. The position regarding male MPWs is less serious; about 450 are needed in AP and 900 in UP. UP's requirements for male MPWs would be met by transferring presently surplus health supervisors and AP's by training additional recruits. To supervise the MPWs, one Health Supervisor (HS) would be posted for every four MPWs; additional HSs required to be posted after training would be about 120 males and about 140 females for AP and about 220 males and 490 females for UP. 51. To extend further the availability of primary health services, all districts will be covered by the community health workers (CHWs) and dai schemes immediately. In UP, 15,660 CHWs would be required, of whom about 9,850 are already trained and available, leaving about 5,800 to be selected and trained. In AP, there are already about 2,600 CHWs and a further 3,400 would be selected and trained. CHWs are recruited by the community to which they belong. Dais (traditional birth attendants) are also to be recruited on the same scale as CHWs. In UP 2,800 dais remain to be recruited and in AP an additional 4,780 need to be recruited and trained. This will make one trained dai available for every 1,000 people. In addition, the project would provide for an additional 100 medical officers for primary health centers, 120 medical specialists in gynecology and obstetrics, and staff for management at various levels. 52. Due to financial constraints, there is a considerable shortage of facilities for sub-centers in both AP and UP. In light of current and anti- cipated available funds, the provision of facilities for all sub-centers India-wide would be difficult to achieve at a scale of 1:5,000 people. The GOI has, therefore, decided that the program should aim to cover about 50% of the required facilities by the end of the Seventh Plan (1989). The project thus provides for the construction, furnishing and equipping of nearly 2,000 sub-centers in the project districts, sufficient to raise the number of sub- centers with suitably designed buildings to the targeted coverage. The remain- ing sub-centers would function in rented buildings at present, although this is a less desirable alternative, and would be supplied with necessary equip- ment. The States would ensure that the sub-centers would be sited within the inhabited area of the villages in which they are located. To ensure that the  - 19 - facilities are properly maintained, the States shall make appropriate alloca- tions of funds and facilities for the maintenance of all buildings used for PHCs and sub-centers in the project area (Sections 2.06 and 2.08(a) of Project Agreement). 53. The project also provides for upgrading and equipping of various other rural and urban health facilities including facilities for maternal and child health care, for family planning services, and for training. Of the 210 primary health centers (PHCs) in project districts, 117 are functioning in inadequate, often rented accommodations. The project would provide for the construction and furnishing of facilities to overcome this deficiency. In support of the GOI program to strengthen referral facilities in rural areas (see paragraph 42), about 60 PHCs would be upgraded by addition of 10-bed wards and facilities for minor surgery. In addition, seven obstetrical/gynecological centers attached to rural women's hospitals would be constructed under the project. The project would also finance construction of two maternity homes in urban areas and one maintenance workshop for vehicles and one for equipment. 54. One of the major problems in the program is the lack of staff mobility. To alleviate this situation in the project districts, the project would provide some 170 jeeps and 65 ambulances mainly for primary health centers, 14 minibuses for training activities, 40 vans for IEC activities and 10 cars for project management. The States would make appropriate alloca- tion of funds to ensure adequate operations and maintenance of all vehicles used for health and family welfare purposes in the project area (Section 2.08(b) of Project Agreement). To improve the mobility of health workers in rural areas, the project would provide for advances to the staff willing to use their own bicycles. The project also provides for vehicle maintenance facilities. 55. Training. To provide staff for the extended coverage of family wel- fare services and to improve their quality, training is an important element of program activities. The project would provide both for basic pre-service training facilities and for upgrading of professional skills. Once selected by the community, community health workers would be trained for three months at the nearest primary health centers. Training of the 5,800 CHWs required in Uttar Pradesh and the 3,400 in Andhra Pradesh would be completed at the PHCs in project districts within the first year. Dai training would also be carried out by the PHC doctor and health specialists at PHC for a period of 30 working days. PHCs would also be the focus for retraining of auxiliary nurse midwives and male health workers for their new role in the multi-purpose worker scheme. Female MPWs would receive 18 months' training including six months practical training in the field. About 1,500 of the required number of female MPWs in Uttar Pradesh will be trained by improving the six basic training schools located in the project districts, the remainder will be trained elsewhere in the State. Since there are no schools in the Andhra Pradesh districts, five temporary schools would be created to train some 800 female MPWs. Health supervisors would be trained in the Government facilities in the two States. Additional staff required for all training is expected to be available locally.  - 20 - 56. The most important cadre requiring reorientation are the medical officers, from the District Chief Medical Officers to the PHC doctors. The Uttar Pradesh doctors would be trained in management and MCH/family planning service delivery techniques in Ahmedabad by the Indian Institute of Management based on courses introduced under the first project (Credit 312-IN), but doubled in length to three weeks' duration. A total of about 520 Uttar Pradesh doctors would be trained in batches of 30. In addition, 150 PHC doctors would be trained in the State's medical schools for four weeks with primary focus on maternal and child health and family planning. In Andhra Pradesh such training courses would be conducted at the Regional Health and Family Welfare Training Center in Kurnool with assistance from the Adminis- trative Staff College of India, Hyderabad. In UP, the project would provide for construction and equipping of a training wing for the Lucknow Population Center, and equipping and furnishing for other centers. In AP, the project would provide for 5 hostels for training female multipurpose workers, and improvements, equipping and furnishing of other facilities. 57. Information, Education and Communication Activities (IEC). The main objective of this component is to improve the demand for and utilization of family welfare services. To achieve this objective, the project would aim to improve the effectiveness of field staff by developing their communi- cation skills; increase the involvement of the community in family welfare activities; reorient mass communication activities by decentralization and by development of an effective monitoring and evaluation system. Mass communi- cations would be improved by means of feature films, audio-visual aid, cultural programs, slides, video service and extension education in other development agencies. The project would provide the necessary vehicles, equipment and materials. 58. Monitoring, Evaluation and Operations Research. In India, there is an extensive system of collection and collation of family welfare data and several agencies are used for the evaluation of these data. At present, there is little feedback to operational units and analysis of program performance data is inadequate. The approach under the proposed project takes into account the shortcomings of the existing system and experience under the first project. Under the proposed project, data collection and analysis in the project dis- tricts would be the responsibility of the State demographic and evaluation cells into which the vital statistics cells of the two States would be merged. The demographic and evaluation cells in UP would be guided and assisted by the Lucknow Population Center and in AP by the Bangalore Population Center. Monitoring and evaluation capability at the center would also be strengthened by provision of additional staff and equipment. 59. The expansion and improvement of family welfare services and support activities are expected to lead to significant improvements in health status and fertility reduction. The project, therefore, makes provision to monitor, not only the progress of project inputs, but also its impact on the population. Various performance indicators would be monitored annually and the experience gained would be used to refine predictions as to the impact of the services on the health and contraceptive status of the population. They would also be  - 21 - used for a final project evaluation. The project would also provide for operational research through a number of studies to assist program managers in an ongoing evaluation of project implementation and program performance. The States would each undertake a mid-term review of the progress of the Project activities in the respective areas including health and family wel- fare data collection systems under the project and would make the results of such review available to the Association not later than March 31, 1983 (Section 2.09 of Project Agreement). 60. Program and Project Management. To strengthen the program manage- ment in the project areas, the project would effect a number of organizational changes in addition to those proposed for the IEC and monitoring and evalua- tion activities. At present, three Deputy Chief Medical Officers (in UP) or Deputy Medical and Health Officers (in AP) are posted in each district regardless of the size of population or number of PHCs. Under the proposed project the number of the officers would be increased to provide for a ratio of one to about eight primary health centers (PHCs) so that the supervision of all the health matters vested under the Medical Officers receive due attention. Secondly, in view of the broader implications of the family welfare policy, the responsibility for the coordination of the program would be vested in the District Magistrate (or Collector in Andhra Pradesh). To enable the latter to cope with this increased responsibility, a district project officer would be appointed with supporting staff. The responsibility of the District Chief Medical Officers for delivery of all health services would not be affected. Finally, the project would provide for upgrading and strengthening of the positions of Joint Directors and their staff in Uttar Pradesh. These posi- tions have been created to relieve the supervisory load in the State Health Department in UP because of the State's huge size and population. 61. Innovative Activities. The proposed project would set aside funds (US$1.5 million) to undertake a number of innovative activities related to program objectives. Examples of the type of innovative activities which may be funded are schemes to: support the activities of a voluntary agency in the family welfare field in a particular village; introduce family planning topics in regular training programs of non-health extension workers. The proposals would have to meet the following criteria: (i) relevance to the program objectives; (ii) innovativeness; (iii) feasibility of administration and eva- luation; and (iv) replicability. The proposals for such activities would require approval of the respective State Committees (see para 63). IDA approval of the relevant proposal would be a condition of disbursement for each activity to cost over $50,000 (paragraph 3(b) of Schedule 1 of the Development Credit Agreement). 62. Implementation. The project implementation organization would sub- stantially follow the pattern of the first Population Project (Credit 312-IN) which proved to be effective. GOI's Ministry of Health and Family Welfare would coordinate the activities in the two States and oversee the implementa- tion of this project. The implementation responsibility for the program in the project areas would be the same as in the non-project areas, except for appropriate strengthening as described in paragraph 60. At the State level, the responsibility for implementation of the project would lie with the respective Directors of the Medical, Health and Family Welfare Services. The  - 22 - Directors are assisted by several Additional Directors who, in turn, are assisted by Joint Directors at divisional or regional levels. At the district level, Chief Medical Officers would remain in charge of all medical, health and family welfare programs, assisted by their deputies. Medical Officers are in charge of the primary health centers at the block level. 63. In Uttar Pradesh, under the first project, a Governing Board has been established under the State's Chief Secretary, and a Steering Committee has been established under the Health Secretary. These Committees, which have been effective in removing bottlenecks in the administration and ensuring co- ordination of various project activities, would be retained for the proposed project with appropriate expansion to include the functioning of new compo- nents. In Andhra Pradesh, the problems of size and distance are much less and existing machinery is modest compared to UP. A separate committee struc- ture is not envisaged in AP; the existing Family Welfare Committee at the State and District levels would also serve for the project. The project construction works would be the responsibility of the Project Director of Works in UP and the Chief Engineer of the Public Works Department in AP. These agencies would be strengthened, particularly the architectural aspects, to undertake the large civil works proposed under the project. 64. Project Cost and Financing. The total project cost is estimated at US$96 million equivalent (including taxes and duties of US$4 million), of which the foreign exchange component is about US$17 million or 18% of total costs. Included in the cost is about US$60.4 million for strengthening of service delivery, US$5.1 million for training, US$6.0 million for information, education and communication, US$0.8 million for research and evaluation, US$1.2 million for project management, US$1.5 million for innovative activ- ities, and US$21.0 million for contingencies. 65. Recurrent expenditures of the Department of Medical, Health and Family Welfare of UP amounted to US$103 million in FY 1978/79. This repre- sented about 7.6% of total state recurrent expenditures in that year. In AP, recurrent expenditures of the Directorate of Medical and Health Services amounted to about US$68 million in the same year. This represented about 6.9% of the total State recurrent expenditures. The proposed project would add about US$7.7 million at May 1979 prices to recurrent expenditures in UP in FY 1984/85, the last year of the project. This represents about 7.5% of the State's recurrent expenditures in the health sector in FY 1978/79. In AP, the corresponding increase in recurrent expenditures would be US$3.3 million, or 4.7% of the state's recurrent expenditures in the health sector in FY 1978/79. This implies an annual growth rate of about 1.5% in UP and about 0.9% in AP in recurrent expenditures on health in real terms over the project period which, given the priority assigned to family welfare, should be well within the capacity of each State's budgetary resources. The planning and finance ministries in both States have reviewed and approved the proposed project. 66. The proposed IDA credit of US$46 million equivalent would finance about 50% of the total project cost, excluding taxes and duties. Of the balance, SIDA has expressed an interest in providing co-financing to the possible extent of US$23 million equivalent. Nevertheless, GOI would provide  - 23 - all remaining funds required for the project even if SIDA or other co-financing does not materialize. The project would provide retroactive financing of up to US$1 million, for expenditures after July 1, 1979, for essential start-up activities such as the establishment of construction units, project staffing, training, preparation for baseline surveys and IEC activities. Procurement and Disbursement 67. Contracts for civil works (US$30.1 million) would be awarded on the basis of local competitive bidding in accordance with procedures of the State concerned, which are satisfactory to the Association. Civil works contracts, including additions to existing buildings, would be individually small and spread geographically and over time, and would not be suitable for international competitive bidding. A small portion of the civil works, not exceeding 30% of the total, would be carried out departmentally in isolated areas where suitable contractors would not be available. In the interest of ensuring adequate maintenance and spares, vehicles (US$2.4 million) would be procured by local competitive bidding. Furniture, equipment and materials (US$5.8 million) would be procured under local competitive procedures satis- factory to the Association. The balance of the project costs consists incre- mental operating and maintenance costs (US$35.2 million) including staff salaries, innovative activities (US$1.5 million) and contingencies (US$21 million). 68. As in the first Population Project (Credit 312-IN), all disburse- ments would be made against certified statements of expenditures to be sup- plied by the GOI Ministry of Health and Family Welfare. Supporting documents would be retained by GOI for inspection by IDA during project supervision. The project accounts would be audited annually and the audit reports made available to the Association within nine months after the close of each fiscal year. Project Benefits and Risks 69. The major benefit of the project would be to provide improved family welfare services to a population of about 23 million as the first part of a comprehensive program that would gradually cover the whole country. These services include both family planning and maternal and child health services. The project is expected to help raise the contraceptive use rate in the project districts of UP from its present level of 11-13% of eligible couples to 24-26% by 1985. For AP, the comparable expected increase is from 25-27% to 35-37%. The percentage of mothers provided with pre-natal services is expected to increase, over the same period, from 10% to 50% in the project districts of UP and from 20% to 50% in the project districts of AP. The percentage of deliveries attended by trained personnel is expected to increase from 15% to 75% in the project districts of both States. Finally, the immu- nization coverage of children aged 1 to 5 years is expected to increase from 5% to 50% in the project districts of both States. 70. The major risks in the proposed project lie in the implementation of the strategies which will be adopted to improve the health status of the  - 24 - population and provide the basis for sustained contraceptive practice. Their implementation involves thousands of staff and millions of people and, as in all attempts to change attitudes on a mass scale, the outcome is not easily predicted. Organizational arrangements have been designed to minimize these risks. PART V - LEGAL INSTRUMENTS AND AUTHORITY 71. The draft Development Credit Agreement between India and the Association, the draft Project Agreement, between the Association and the States of Andhra Pradesh and Uttar Pradesh, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement are being distributed to the Executive Directors separately. 72. Special conditions of the project are listed in Section III of Annex III. 73. An additional condition of disbursement, specified in paragraph 4 of Schedule I to the Development Credit Agreement, would be the Association's prior approval of the schemes expected to cost over US$50,000 under the Innovative Activities. 74. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 75. I recommended that the Executive Directors approve the proposed credit. Robert S. McNamara President by Ernest Stern January 24, 1979  ANNEX I iNDIA - 83OC. 13008 DTA sun Page 1 of 5 TMD 11 IOLAAO O.f6 -- ionD CIT (V Z atoT. I 3217.4 U- 1 S 11 Ia 3ICULTUIAL 1SI 63 'a MEET CJDtMC toCll s 80m 1u0 L 1970 / UTSIAIS A It0108 . CUD Ollt A = at U CAPITA 1M8) 40.0 90.0 180.0 191.1 209.6 467.5 883! OUSIWIO MP CAPflL E WOGMBO COAT IqIVAL) 142.0 11l.0 211.0 6.1 83.9 262.1 IOI&IUAM VITAL 8E2Sf rowl (Ki POFUlAXIOU. oAlLt m-YU& ( 01) 44.9 547.6 31.IL 0 r8 ?OVMA2IU (P3U Of tOTAL) 17.9 1i.7 20.7 13.2 16.4. IOMATUX noso8r NPULAnfoU U TME 2000 (131.09) 973.0 51AT1O0U8 POPIUXlAO ("183IS) 1643.0 Tr StATIOURY rOLO UAD 215 Pm SQ. M. 132.0 1U7.0 192.0 86.6 49.4 4563 PU SQ. DI. AGRICU16TUMAL LOW 247.0 3W-.0 367.0 330.2 252.0 149.0 PPolWAUOI Am8 SWUCOCUS (PERCENT) 0-14 TM:. 40.6 42.5 42.0 46.3 43.1 45.2 15-64 YT. 55.7 54.6 55.0 52.4 53.2 51.9 65 TIE. AID uon0 3.5 2.4 3.0 3.1 3.0 2.8 POPMLATIOU GW3tI 342 (1308!) TOYAuL 1.9 2.3 2.1 2.6 2.4 2.7 ELAN 2.5LL 3.3 3.1 4.1 4.6 4.3 C1UDE awn RATE (PU IWUSAID) 43.0 40.0 35.0 44.4 42.4 39.4 ClUDE DUIII U6Tt (PR TWUISID) 21.0 17.0 14.0 16.4 15.9 11.7 Csoss itocnoio UTZ 3.2 2.9 2.4 3.2 2.9 2.7 PhtlL. S.PAIUIUG ACCEFTOIS. AiUnL (UOUSAMDS) 64.0 37t2.0 4518.0 usD5 (FUCDT OF 111D0 Y) *- IZ.0 16.9 7.9 12.2 13.2 OOD AND ImrTion DltX or 1O0D PROVDCT10 M CAPITAW (t969-71-100) 100-0 102.0 101.0 ".4 98.2 99.6 PM CAPITA SWUPLY O CALORItS (PtlCEST 0f 3EQOI3EIS) 95.0 92.0 89.0 93.0 93.3 94.7 PtlTEINS (GRAMS PTA DAT) 51.0 53.0 41.0 56.1 52. 1 54.3 0o WICH ANML AID PUL11 19.0 16.0 12.6 10.4 13.6 17.4 CRI1 (AG1S 1-4) 408TALT! UATt 28.0 22.0 18.0 19.2 18.5 11.4 RULTII LIFE E2NITANCT AT 8IM (lYEAS) 45.0 41.0 51.0 49.1 49.3 54.7 INrANT SOLTALLT IATE (PI T)USA1D) .. 134.0 .. .. 105.4 68.1 AccEss 0o sAn! YA (PULcT OP POP