India - Second Railway Modernization and Maintenance Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-3396-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN AND CREDIT IN AN AMOUNT OF US$200 MILLION AND SDR 184.7 MILLION (EQUIVALENT TO US$200 MILLION) TO INDIA FOR THE SECOND RAILWAY MODERNIZATION AND MAINTENANCE PROJECT OCTOBER 25, 1982 This document has a restricted 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.  CURRENCY EQUIVALENTS (As of October 1982) US$1.00 = Rs 9.686157 Rs 1.00 = US$0.103240 Rs 1 million = US$103,240 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were, except as otherwise noted, made at the rate of US$1 to Rs 9.0, which represents the projected exchange rate over the disbursement period. FISCAL YEAR April 1 - March 31 ABBREVIATIONS AC - Alternative Current BG - Broad Gauge DC - Direct Current DCW - Diesel Component Works DSP - Durgapur Steel Plant GOI - Government of India IR - Indian Railways kv - kilovolts MG - Metre Gauge MW - megawatt NG - Narrow Gauge NTPC - National Transport Policy Committee OIS - Operating Information System RTEC - Rail Tariff Enquiry Committee Ton-km - Ton-kilometer  FOR OFFICIAL USE ONLY INDIA SECOND RAILWAY MODERNIZATION AND MAINTENANCE PROJECT Loan, Credit and Project Summary Borrower: India, acting by its President (GOI). Beneficiary: Indian Railways (IR). Amount: Bank Loan: US$200 million, including capitalized front end fee. IDA Credit: SDR 184.7 million (US$200 million equivalent) Terms: Bank Loan: Repayment over 20 years, including 5 years' grace at the applicable rate of interest; front end fee of 1.5% of the base loan amount. IDA Credit: Standard. Relending Terms: The Government of India (GOI) will on-lend the proceeds as GOI's capital-at-charge to IR in accordance with its standard arrangements for financing IR capital expenditure programs. IR pays a dividend on the total capital-at-charge at a rate determined by GOI, currently about 6%. per annum. GOI is to carry the exchange risk. Purpose: The purpose of the proposed project is to upgrade the maintenance and reliability of the fleet of existing diesel and electric locomotives in the IR network; to continue a program of modernization of IR's electric locomotives; and to improve the technology, design and operation of IR's bulk freight movements. The project consists of: (a) the construction and equipping of a maintenance facility, the Diesel Component Works (DCW), for remanufacturing diesel electric locomotives and locomotive components and assemblies, and the import of wheels, axles, and components for expanding the unit exchange system in the major maintenance workshops and running repair facilities; (b) the import of up to 20 complete prototype AC electric locomotives for testing under Indian operating conditions preparatory to choosing the new generation of mainline locomotives and establishing a manufacturing facility in collabora- - tion with the selected supplier; | This document has a restricted distribution and may be used by recipients only in the performance of | their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.  -ii- 4 . (c) the acquisition of components for the construction of about 11,300 high-capacity wagons; and, (d) the provision of technical assistance and training for IR staff in the operation of the DCW plant and for testing new wheel/axle/suspension (bogie) configurations to be used in future IR fleet expansion efforts. Estimated Project Costs: a/ US$ Millions Local Forelgn Total A. Maintenance Improvements: Diesel Component Works (DCW) 63.9 55.3 119.2 Unit Exchange System Expansion: (i) Locomotive components 180.3 82.5 262.8 (ii) Wheels and Axles 69.7 174.2 243.9 Subtotal 313.9 312.0 625.9 B. Prototype AC Electric Locomotives for Testing 22.5 45.0 67.5 C. High-Capacity Wagon Manufacture: (i) Components 116.8 145.0 261.8 (ii) Fabrication and Misc. 240.4 - 240.4 Subtotal 357.2 145.0 502.2 a/ Including an estimated US$200 million in taxes and duties.  -iii- US$ Millions Local Foreign Total D. Technical Assistance and Training: (i) DCW 0.5 0.9 1.4 (ii) Bogie Testing 1.4 2.0 3.4 (iii) Fuel Conservation and Train Operation Improvement 6.0 6.3 12.3 Subtotal 7.9 9.2 17.1 Total Project Cost 701.5 511.2 1,212.7 Front end fee on Loan - 3.0 3.0 Total Financing Required 701.5 514.2 1/ 1,215.7 1/ Financing Plan: IBRD - 200.0 200.0 IDA - 200.0 200.0 GOI 701.5 114.2 815.7 701.5 514.2 1,215.7 Estimated Disbursements: IBRD/IDA FY FY83 FY84 FY85 FY86 FY87 FY88 Annual 7.0 37.0 112.0 145.0 89.0 10.0 Cumulative 7.0 44.0 156.0 301.0 390.0 400.0 Rate of Return: Weighted average 24%. Appraisal Report: No. 3431-IN, dated October 26, 1982. 1/ Including payment of front-end fee of US$3 million.   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN AND CREDIT TO INDIA FOR THE SECOND RAILWAY MODERNIZATION AND MAINTENANCE PROJECT 1. I submit the following report and recommendation on a proposed loan and development credit to India for US$200 million and SDR 184.7 million (US$200 million equivalent) respectively on standard terms to help finance the upgrading of the Indian Railways (IR) rolling stock and motive power. The Government of India (GOI) would channel the proceeds of the loan and credit to Indian Railways in accordance with GOI's standard terms and arrangements for financing Indian Railways. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (3872-IN, dated April 7, 1982), was distributed to the Executive Directors on April 19, 1982. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 700 million (in mid-1982) and an annual per capita income of US$240. Economic growth has been slow in the past, averaging about 3.6% per annum over the past 30 years. The economy is dominated by agriculture which employs more than two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to everyone engaged in agricultural activities, especially those with little or no land. Consequently the latter have only an insecure grasp on the means of existence. Growth of value-added in agriculture -- 2.3% per annum over the past 30 years -- has been slower than growth of industrial value-added (5.0% per annum). As a result, there has been a gradual decline in the share of agriculture in GDP (at factor cost measured in 1970/71 prices) from 60% to about 40%, while the share of industry rose from 15% to around 24%. But industrialization has not been rapid enough to absorb the growing labor force, or to bring about a rapid economic transformation, with significantly higher productivity and income levels. 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Report for the Krishna-Godavari Petroleum Explora- tion Project (No. P-3386-IN), dated September 16, 1982.  -2- 4. Nevertheless, there has been steady progress on several fronts. In the face of a large and rapidly growing population, India has been able to increase agricultural output faster than total population while eliminating persistent dependence on foodgrain imports. Savings and investment have increased markedly since 1950/51: gross domestic savings more than doubled from 10.8% of GDP (at factor cost) to 24.8%, while gross domestic investment rose from 12.5% of GDP to 26.2%. Foreign savings (balance of payments deficit on current account) have never financed a major portion of domestic investment: a peak of about 20% was reached during the early 1960s; for a few years in the late 1970s, surpluses arose, and at the present time, foreign savings are about 10% of investment. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of GDP, and was less than 1% at the end of the 1970s. 5. Before the 1970s, India placed relatively less emphasis on export promotion and more on import substitution. The volume growth of exports between 1950/51 and 1979/80 averaged only 3.5% per annum, only marginally higher than the volume growth of imports over the same period. In the early to mid-1970s, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. As a result, the volume of India's exports grew on average about 7.6% per annum for the 19i0s as a whole, a performance which demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. 6. Moving into the second half of the 1970s, the Indian economy was buoyed by relatively rapid export growth and an expanding level of foodgrain output, which culminated in a record 132 million tons of foodgrain production in 1978/79. As a result, growth in real GDP, agricultural and industrial value-added, substantially exceeded the historical 30-year trends (paragraph 3). In 1979/80, however, this momentum was broken when the worst drought in recent years, combined with a doubling of international oil prices and domestic supply shortages, led to a sharp fall in foodgrain production, a decline in GDP, and the opening up of a large trade deficit. Severe inflationary pressures also emerged after several years of virtual price stability. The impact of these setbacks is still being felt in the Indian economy, particularly in the balance of payments, and adjustments will be needed for some years to come. However, the short-term recovery process is almost completed and the economy has regained its growth momentum. Recent Trends 7. In 1980/81, the economy substantially recovered with real GDP growing by 7.5%. While industrial output expanded by 4%, recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15%. Increased foodgrain production, along with judicious use of Government buffer stocks built up in earlier years, also helped moderate price rises.  -3- Inflation remained a serious problem with the annual average wholesale price index rising 18%, although the second half of the year provided clear evidence of a deceleration in inflation. 8. 1981/82 was a year of solid growth after the rebound in 1980/81 and GDP grew by 5.5%. While foodgrain production rose only modestly over its 1980/81 level, other crops including oilseeds and sugarcane performed well and total agricultural output grew by 4%. The availability of power, coal and rail transport, already improved in 1980/81, was even better in 1981/82, recording growth rates of about 10%, 9.4% and 15% respectively. As constraints on the supply of infrastructure and basic commodities continued to ease, industrial output responded with an 8% increase. The downward trend in inflation continued. Wholesale prices rose by about 9% on an average annual basis, while the increase on a March 1981 to March 1982 basis was less than 2%, showing a continued deceleration. Easier supply conditions, combined with a more restrictive monetary policy, contributed to the sharp decline in the rate of inflation. 9. The performance of the agriculture sector in 1981/82 ensured that supply conditions in the country remained quite favorable. It also provided continuing evidence of the positive effects of large investments and appropriate policies in past years. Foodgrain production reached between 132 and 134 million tons, thus matching or perhaps surpassing the previous record. Irrigated area expanded by 2.5 million hectares, while fertilizer consumption improved over its 1980/81 level by more than 7%, despite substantial price increases. Recent performance and probable future trends suggest that on average foodgrain supplies will exceed demand. However, the balance remains delicate with some imports likely to be required from time to time. Indeed, the effects of the severe 1979/80 drought were still being felt in 1981/82 when 2.25 million tons of wheat were imported to rebuild depleted stocks. Nevertheless, the relatively low import requirement, the ability of the Government to delay imports for as long as two years after the production shortfall, and the decline in foodgrain prices in real terms demonstrate the flexibility and resilience provided by the public foodgrain system. 10. Shortages of basic commodities and infrastructural services were major contributors to industrial stagnation and the onset of high inflation in 1979/80. This was the culmination of several years of declining capacity utilization in important, interrelated sectors such as power, coal, and rail transport. A major cause of the improved economic climate over the last two years has been a much improved level of output in these sectors, due mainly to greater efficiency and utilization of installed capacity. Expansion of coal output by about 10 million tons for the second successive year and of rail freight traffic to a record level were particularly noteworthy features of the 1981/82 economic performance. The shortfalls in domestic energy production which contributed so heavily to the poor 1979/80 performance have also been reduced. However, even though there remains large scope for improving efficiency, further improvements in capacity utilization will become increasingly difficult, and increases in capacity are needed to meet increasing demand.  -4- 11. Despite a brief phase in the late 19709, when savings rates exceeded investment rates and foreign exchange reserves actually increased, recent experience shows that the needs of the Indian economy continue to outstrip the availability of resources, both internal and external. Investment exceeds domestic savings. The latter, at nearly 25% of GDP, are already high and further increases, particularly from the household sector, will be increasingly difficult to obtain. However, over the last two years, the Government has taken a number of measures to generate higher savings in the public sector. Principal among these were price and tax increases, and subsidy reductions, on a range of commodities produced mainly in the public sector. 12. The shortage of resources is even more apparent in the foreign sector. Problems became serious after 1979/80 when the cost of India's POL imports rose sharply and the terms of trade deteriorated. Coupled with domestic supply shortages and a slowing down in export growth, these factors caused India's current account deficit to rise from only 0.6% of GDP in 1979/80 to 2% of GDP in 1980/81. In 1981/82, the current account deficit rose to US$4.3 billion, representing 2.7% of GDP. Unfavorable movements in export prices and the terms of trade threatened a worse outcome. However, the much improved performance of basic import-substituting industries and a resumption of healthy export volume growth (8.3%) prevented this. To finance this gap in the face of inadequate concessional aid flows, the Government drew down a record US$2.36 billion in foreign exchange reserves, withdrew almost US$700 million under the recently negotiated 1IF Extended Fund Facility, and turned increasingly to other non-concessional sources of finance. In 1980/81 and 1981/82 for example, new government guaranteed commitments for commercial borrowing totalling over US$1.3 billion were contracted for major projects. 13. The trends in the volume and terms of India's trade indicate that significant adjustments will need to be made in the economy to bring India's external accounts into reasonable balance at an acceptable level of growth. In particular, there is a need to increase the growth of exports, to increase production of commodities such as fertilizer, cement and steel which India can produce efficiently, in order to reduce imports of these items, to moderate the rise in oil imports through greater domestic production and slower demand growth, and to further reduce the constraints in transportation and other infrastructural facilities which are retarding growth in a wide range of activities, including exports. It is encouraging that, in response to the present balance of payments difficulties, the Government has not reacted by placing more stringent controls on imports, but rather has maintained and extended the more liberal policies evolved in the past several years. Recent improvements in the availability of power, a major constraint facing exporters, and the adoption of several new export and industrial policy measures have improved the prospects for accelerating export growth.  -5- Development Prospects 14. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, power, roads and ports -- is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institutional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and reasonable access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 15. The medium-term framework for advancing India's development objectives is the Sixth Five Year Plan (1980/81-1984/85), which is now about halfway completed. The Plan assigns priority to agriculture, energy development, the growth of exports and domestic import substitutes where appropriate, and the removal of infrastructural bottlenecks. Overall performance has so far been encouraging, although the likelihood of continued bottlenecks in key sectors such as power and transport is growing. Moreover, fulfillment of the Plan targets will require an acceleration of domestic savings rates. The efforts of the Central Government to raise resources have so far been impressive and are likely to be broadly sufficient to meet the financing requirements of the Central Government's share in plan investment, if inflation can be kept in check. However, a significant shortfall in savings is likely to occur in some states unless further measures are introduced. There will be a need also for continuous efforts to maintain and raise further the already high level of private savings. Recent increases in interest rates and tax concessions on time deposits should stimulate such savings. The further dampening of inflationary expectations, the prospects for which look bright, will be an important part of this effort. 16. The higher capital formation rates of the past few years augur well for future income growth. Thus far, however, output growth has not matched the size of India's investment programs. Much of this phenomenon relates to India's stage of development, in which a large and growing proportion of investment has been needed to build up basic infrastructure. These services, such as power, transport and irrigation, have inherently high capital output ratios. However, at least some of the rise in the sectoral capital output ratios has been due to a deterioration in efficiency and is avoidable through better management. Bottlenecks in these basic sectors clearly can prejudice growth in other sectors where large investments have been made. As demonstrated in the last two years, performance in the basic service sectors can be improved through better planning and management, thus leading to higher productivity and capacity utilization, throughout the economy. At the same time, programs to expand domestic capacity are vital. In the case of  -6- tradeable commodities like coal, steel and cement, this is justified on the grounds of comparative advantage. For sectors such as power and transportation, expansion of planned capacity in accordance with the requirements of the rest of the economy will be vital to overall medium- and long-term prospects. At present rates of development, however, an adequate balance b-tween supply and demand in these sectors will be difficult to sustain. Performance in the power sector to date suggests that India's power deficit will continue into the early 1990s, although more rapid project implementation and efficiency could narrow the size of the gap. For railways, real investment levels may be inadequate to meet demand projections and will need to be monitored closely and adjusted upward as necessary if serious bottlenecks are to be avoided in the next few years. 17. Under the Sixth Plan, India has an ambitious energy production program backed by substantial financial commitment. While the gap between domestic consumption of petroleum and production remains large, the prospects for progressive substitution of domestic petroleum for imports are quite bright. In 1981, resources for exploration were raised by successive price increases for petroleum products. On the production side, scheduled expansion is expected to raise domestic production of crude from the current 46% to about 64% of demand by 1984/85. The rapidly expanding level of exploratory activity, combined with the possibilities for accelerated offtake from known fields offer much encouragement for India's longer term energy prospects. 18. The continuation of India's balance of payments difficulties has been marked by the progressive use of foreign exchange reserves and non-concessional borrowing to finance the deficit. Use of reserves reached a record level in 1981/82, leaving less than four months of import coverage by the end of the year. At the same time, India also made use of the IMF Extended Fund Facility. Entering this period with a favorable debt service profile, India has so far also been able to tap commercial capital markets at favorable spreads (over, of course, relatively high underlying rates) and in the last two years commercial borrowing has been stepped up. These sources will be important in the future since India's current account deficits, though not large relative to the size of the economy, will nevertheless be large in absolute terms and will necessitate external borrowing beyond levels expected to be available from normal concessional sources. 19. India's development prospects over the next few years will hinge on the extent to which the economy can be brought into both internal and external balance, while at the same time maintaining reasonably high growth. In the longer term, income growth represents the best strategy for achieving these needed adjustments, both by generating higher savings for further investment, and by fostering the development of export and import-substituting industry to realign the balance of payments. In the short-term, significant external borrowing, including an increased emphasis on commercial borrowing, will be necessary to cope with the balance of payments consequences of such a growth strategy. However, an important element in providing India with the capacity to adjust flexibly will be adequate flows of concessional assistance. Although India is currently in a  -7- position to increase borrowing on commercial terms from the very low levels of the past, there are limits to India's creditworthiness in world markets. Maintaining an adequate rate of growth while adjusting the structure of the Indian economy to a more open and efficient environment as intended by the Government requires foreign resources in addition to the level of commercial borrowing available to India. Indeed, along with increasing exports, higher levels of investment to support an adequate rate of growth is a key element in maintaining India's recently improved creditworthiness. India is still a very poor country with a large rural sector and enormous investment requirements for human development and basic infrastructure. The fact that India has been able to maintain over the past seven years a rate of growth above the long term trend, despite the severe setbacks of 1979/80, lends substance to the hope that a more open trade policy and concerted efforts to remove constraints on the growth of productive capacity, supported by adequate mobilization of savings both foreign and domestic, can sustain a rate of growth closer to 5.0% per annum than the long run trend of 3.6% per annum. Combined with a reduction in the rate of population increase to below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trend rate of growth of per capita income of less than 1.4% per annum. Success in these efforts would make a significant difference to the prospects of easing poverty in India. 20. A large and growing population and severe poverty underline the need for India's development efforts to be protected and accelerated if possible. The 1981 Census placed India's population at 683.4 million, or about 12 million higher than official projections. The fact that there was no decline in inter-census rates of population growth, equivalent to about 2.2% per annum, is a cause for concern. While further analysis may suggest this rate of growth to be slightly overestimated, the expectation of a measurable decline in the population growth rate has not materialized. Until full details of the Census are released, firm judgements about the reasons for this outcome are not possible. However, the results re-emphasize the need for continuing efforts to strengthen the family planning program in a broad range of activities and services. These efforts are given high priority in the Sixth Plan which aims at a rise in the proportion of protected couples in the reproductive age group from its estimated 1979/80 level of about 23% to over 35% by 1984/85. 21. Reduction of poverty remains the central goal of Indian economic growth. 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. About 51% of the rural population and 38% of the urban population subsist below the poverty line. Improvements in the living standards of the poor will depend to a large extent on the overall growth of the economy, particularly on increases in agricultural production and employment, in non-farm rural employment, and also in employment opportunities in urban areas. These developments will have to stem in large part from market forces which, however, must be encouraged and reinforced by appropriate Government policies and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1981 resulting from India's sustained effort to raise agricultural  -8-- production, reflects such developments. There is also a role for direct Government action in faster implementation of land reform (though the scope for significant reduction in poverty through land redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans, and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program, which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary education, the extension of rural health facilities and the provision of secure village water supplies. Operations such as the community health volunteer program and the national adult literacy campaign provide encouraging evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India-s poor. PART II - BANK GROUP OPERATIONS IN INDIA 22. Since 1949, the Bank Group has made 68 loans and 153 development credits to India totalling US$4,095 million and US$10,956 million (both net of cancellation), respectively. Of these amounts, US$1,280 million has been repaid, and US$5,291 million was still undisbursed as of September 30, 1982. Bank Group disbursements to India in the current fiscal year through September 30, 1982 totalled US$287 million, representing an increase of about 76 percent over the same period last year. Annex II contains a summary statement of disbursements as of September 30, 1982, and notes on the execution of ongoing projects. 23. Since 1959, IFC has made 28 commitments in India totalling US$219.6 million, of which US$26.4 million has been repaid, US$55.6 million sold and US$7.5 million cancelled. Of the balance of US$130.1 million, US$121.9 million represents loans and US$8.2 million equity. A summary statement of IFC operations as of September 30, 1982, is also included in Annex II (page 5). 24. The thrust of Bank Group assistance to India has been consistent with the country s development objectives in its support of agriculture, energy and infrastructure. Of particular importance have been investments in irrigation, extension and on-farm development designed to increase agricultural productivity, and efforts to improve the availability of basic agricultural inputs to farmers through credit, fertilizer, marketing, storage, and seed projects. Major elements of the lending program have also been directed at helping to meet the energy needs of the economy while curbing the growth of oil imports, and to ease the infrastructure bottlenecks which have hampered economic growth in India, particularly through power generation and distribution, and railways and telecommunications projects. The Bank Group has also provided financing for a broad range of medium- and small-scale industrial enterprises, primarily in the private sector, through its support of development finance institutions. Recognizing the importance of improving the ability to satisfy the essential needs of urban and rural populations, the Bank Group has supported nutrition and family planning  -9- programs, a rural roads project, as well as water supply and sewerage and other urban infrastructure projects. 25. This pattern of assistance remains highly relevant, and consonant with Government priorities, as reflected in the Sixth Plan. The continued active involvement of the Bank Group in agriculture, energy and infrastructure development will appropriately contribute to India's adjustment and growth prospects. Irrigation will need continuing support, with emphasis on improved efficiency in water conveyance systems to ensure reliable delivery to farmers' fields. In addition, major investments to develop the large Narmada River basin will be vital to India's efforts to increase agricultural production. Important complements to these efforts, such as fertilizer production and distribution, agricultural credit and extension, will continue to receive support. A continued program of investments aimed at rapidly increasing the domestic supply of energy will clearly be necessary if India is to curb the cost of oil imports and alleviate the critical power shortages which constrain output in both the agricultural and industrial sectors. Exploitation of oil and gas resources is a central element of this program, which should be supplemented by investments in hydro and thermal power generation, and in the expansion of the transmission and distribution networks. Industrial projects to increase the domestic production of basic commodities, which have been in short supply and which India has a comparative advantage in producing, should also receive high priority. Finally, raising the efficiency and levels of transportation infrastructure would mitigate a key constraint to achieving higher levels of economic growth so that further support of the railways and for ports development will be particularly appropriate. 26. 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 part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, there is now a need for increased foreign assistance to adjust to an even greater deterioration in balance of payments anticipated during the 1980s by augmenting domestic resources and stimulating investment. As in the past, Bank Group assistance for projects in India should aim to include the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, and water supply. 27. India's poverty and needs are such that whenever possible, external capital 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. Therefore, India should be eligible and regarded as creditworthy for supplemental Bank lending. The ratio of India's debt service to the level of exports was about 11% in 1981/82 and is projected to  -10- remain below 20% through 1995/96. As of September 30, 1982, outstanding loans to India held by the Bank totalled US$2,922 million, of which US$1,308 million remain to be disbursed, leaving a net amount outstanding of US$1,614 million. 28. Of the external assistance received by India, the proportion contributed 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 54%, 42% and 52%, respectively, in 1981/82. On December 31, 1981, India's outstanding and disbursed external public debt was about US$17.4 billion, of which the Bank Group's share was US$6.6 billion or 38% (IDA's US$5.6 billion and IBRD's US$1.0 billion). In 1981/82, about 16.0% of India's total debt service payments were to the Bank Group. PART III - THE TRANSPORT SECTOR General 29. Road and rail transport are the dominant modes of transport throughout India, with the railways system providing mainly trunk services and the highway system functioning mainly as a feeder system to the railways or for short-haul transportation needs where there are comparative cost advantages over the railways. Other modes of transport are, at present, of minor importance as general goods and passenger carriers: coastal shipping and pipelines each carry about three percent of the total freight traffic in terms of ton-kilometers, and air transport about one percent of total passenger-kilometers. These modes are, however, important within their specialized areas and there is scope for considerable expansion within each mode. 30. The transport sector plays a vital role in India. Virtually all the other sectors are dependent on efficient and reliable transport services and the railway system is a key determinant in the efficient operation of each of these sectors. It is, therefore, of paramount importance that the transport sector generally, and the railway system in particular, does not become an obstacle to development and that the vital production activities of the economy are not hindered by inefficiencies in this sector. 31. There has been, in the last two decades, a decline in investments for the development of the transport system relative to development investments elsewhere in the economy. Expressed as a percentage of total investment by Plan period, GOI investment in the transport sector decreased from a very substantial 24% in 1956/57-1960/61 to 14% in 1974/75-1977/78, although in absolute terms the investment increased from Rs 11,040 million to Rs 41,370 million (in current terms) during this time. However, actual expenditures did not reach this level because the 1974-79 Plan was cut short when the Congress Government was defeated in 1978. The Sixth Five Year Plan calls for a 10% allocation for the period 1980/81-1984/85, amounting to over Rs 100 billion, of which Rs 51 billion (US$5,667 million) is targeted for railways.  -1 1- 32. There have also been significant shifts in the volume, origin and destination of traffic flows over the past two decades. There is more movement of foodgrain traffic in the north-south direction as imports of these items have virtually ceased and restrictions on foodgrain transport have been lifted. Fertilizer imports through the cities of Madras and Bombay have increased, as have cement movements in the east-west direction. These changes have had a significant impact on the railway's operations where, inter alia, average leads 1/ for most freight movements have increased. In the case of foodgrains, the lead has increased by 42% in the past five years, thus tying up freight wagons and motive power for longer periods per movement and thereby decreasing effective freight capacity. Furthermore, the road transport system, which was never designed to carry bulk traffic volumes over long distances, is being forced to carry-some freight that the rail system cannot carry, at a higher cost to the economy. All of these factors have contributed to supply shortages of vital commodities such as coal, cement and fertilizer and, coupled with freight congestion in the main ports, the result has been a series of dislocations in critical economic sectors in the past few years. 33. The Indian transport sector is under the jurisdiction of various Ministries: ports, shipping and roads are under the Ministry of Shipping and Transport; railways are under the Ministry of Railways; civil aviation is under the Ministry of Tourism and Civil Aviation; and pipelines are under the Ministry of Petroleum. A number of Committees at the Cabinet and Secretarial level are involved in transport coordination, but no single unit below the Prime Minister has complete responsibility for coordination. While railways are exclusively under the Central Government, highways and road transport, minor ports and inland water transport are the joint responsibility of Central and State Governments. Given the importance of coordinated policy formulation, the National Transport Policy Committee (NTPC), supported by a study group within the Planning Commission, has prepared a framework for overall transport planning and coordination in India. The Committee's report, presented to the GOI in 1980, contains sound recommendations that will provide a framework for better development of the country's transport sector. GOI approved most of NTPC's recommendations in a Cabinet Resolution in March 1982 and the country is now beginning to implement them. GOI has emphasized its commitment to the continued expansion of the transport sector, with particular emphasis on facilitating road transport in rural areas, the encouragement of increased efficiency of railway transport, and discouragement of growth and congestion of the central business districts of large metropolitan areas. The Railway Sector 34. The backbone of India's internal freight and passenger transportation system is the railway, which carries two-thirds of the total freight traffic 1/ "lead" - the average distance travelled.  -12- and nearly one-half of the passenger traffic. The railway has the crucial responsibility of moving traffic over long hauls from the few concentrated centers of manufacture and trade, from the localized production centers of commodities such as steel, cement and coal and from the (essentially northern) foodgrain surplus centers to all domestic markets throughout India. Agricultural and mineral products account for an estimated 70% of total freight movements. Transport capacity to be planned and provided by the railway is therefore closely tied to foodgrain requirements and to the needs of the coal, power, steel, and cement sectors and related heavy industries as well as to passenger movement requirements. 35. GOI owns and operates the railway system through Indian Railways (IR). IR's operations are large, with assets of some Rs 75 billion and 1.7 million employees, and are controlled and directed by a board of five members headed by a chairman who is, ex-officio, a Principal Secretary to the Government, reporting to the Minister of Railways. The Board performs the dual functions of a Secretariat to the Minister of Railways and of an executive body responsible for railway operations. The quality of senior staff is excellent and their knowledge of modern railway technology is good. 36. The last 25 years of planned development of the IR has brought about extensive changes in the mode of traction from steam to diesel and electric. About 3,000 diesel and electric locomotives introduced since 1960 now carry about 80% of the total freight traffic. During the same period, the number of freight wagons in the fleet has grown two and a half times to about 400,000 wagons and the passenger stock has doubled to about 35,000 coaches. About 7,500 steam locomotives remain in service. The network is divided into nine Zonal Railways, each with its own General Manager and staff. There are two factories manufacturing locomotives, one manufacturing rolling stock, and a fourth is under construction for the manufacture of wheels and axles (which is partly financed under Credit 844-IN, see para 40); IR also owns 41 workshops undertaking regular or unscheduled heavy repairs of IR's locomotives and rolling stock. There are also some 200 smaller repair/maintenance workshops throughout the network. IR's track network is split into three gauges: 62% of total track is broad gauge (BG), 34% is metre gauge (MG) and the remaining 4% is narrow gauge (NG). About 15% of BG track and 1% of MG track is electrified. 37. The rail network performance over the past decade has been mixed. For freight, originating tonnage has increased from 197.8 million tons to 244.7 million tons--but includes two years (1973/74 and 1974/75) when originating tonnage was below the 1971/72 figure and two other years (1977/78 and 1978/79) when tonnage dropped below the 1976/77 performance. Passenger traffic has grown in a similar stop/start pattern from 1275 million originating suburban and 1261 million originating non-suburban passengers to 2100 and 1720 million passengers, respectively. The reasons for the variable growth in freight and passenger traffic (with its corresponding adverse effect on IR's profitability) are many, and include "external" factors - those that are outside IR's control - such as civil disturbances and labor unrest; "sectoral" factors - those that are peculiar to IR's business - such as inefficiencies by the major users in wagon unloadings; "equipment"  -13- factors - such as lower-than-normal locomotive and rolling stock reliability due to poor maintenance or worn-out/outdated equipment being kept in service; and "internal" or management-related factors - such as the lack of sophisticated financial and operational control systems and associated communications networks that are essential to efficient railway management. GOI/IR is keenly aware of these causative factors and is committed to improvements. The proposed project will address the more urgent "equipment" and "internal" factors as part of a coordinated GOI/IR/Bank Group effort to improve IR's efficiency. Some improvements have already resulted from GOI/IR initiatives begun in November 1980 1/ and freight movements for 1981/82 are projected at 174 million ton-km, nearly a 10% increase over the previous year. Further improvement is necessary, however, as the freight traffic demand is projected to be as high as 198 million ton-km by 1984/85. The Bank's Role in the Sector 38. Bank Group lending in the transport sector started in 1949 with a railway loan and since has included ports (Bombay, Madras, and Calcutta), rural roads, highway projects, urban transportation (Calcutta and Bombay), oil tankers and a pipeline. Substantial indirect support to the sector has also been provided through industrial import credits under which imports of material and components for manufacture were financed. The railway sector in the past 32 years has received direct assistance totaling US$1,086 million through 14 loans and credits. 39. Through the first six loans and seven credits, approved between 1949 and 1975, the Bank Group assistance to IR totaled US$896.5 million. The main objective of the assistance consisted of the rehabilitation and subsequent modernization of railway infrastructure, motive power and rolling stock and improvement in operating efficiency, administration and planning. These loans and credits covered foreign exchange for acquisition of materials, parts and components for manufacture and maintenance of motive power and rolling stock, machinery and plant, and materials and equipment for line improvement works and telecommunications. In the 32 years since the first Bank loan to IR, the main railway infrastructure has been substantially improved, and domestic production commenced for diesel and electric locomotives, coaches and wagons, and has resulted in an improved motive power and rolling stock fleet. 40. In the most recent project (Credit 844-IN of 1978), Bank Group support has been directed at improving the utilization of existing IR assets - modernization of maintenance workshops, import of spare parts and of raw materials and components for the maintenance of existing locomotives and manufacture of wheels and axles to meet existing demand. In addition to financial assistance, there have been many visits by Bank Group staff and 1/ IR's initiative in operating more unit trains on specific high-volume bulk freight routes and by-passing intermediate yards has substantially increased daily wagon loadings on the broad gauge system.  -14- consultants to review and discuss heavy engineering, electric and diesel traction technology, maintenance, telecommunications, organization and computerized operating information systems. The substance of these review missions has been discussed with GOI - especially the Ministries of Railways, Finance, and Industry and the Planning Commission - and has assisted IR in identifying its investment priorities and developing programs for addressing them. 41. Project performance audits have been carried out for Credits 280-IN and 448-IN and the audit findings are contained in Report No. 1658 of June 30, 1977. The report found that the projects were implemented on time and the re-estimated rates of return were similar to the appraisal forecast. Because of unusual economic and political circumstances, the financial situation of IR deteriorated during the twelfth project period (Cr. 448-IN) but improved in the mid 1970s. The report also found, as the Government itself found, that transport planning and coordination remained rather weak. In 1978 GOI set up the National Transport Policy Committee (NTPC) and its report, presented to GOI in May 1980, has resulted in the appointment of a high level committee to review and implement the recommendations contained therein (see para 33 above). Overall, the report concluded that IR's performance had been satisfactory and that GOI/IR have sought to meet the covenant requirements set out in the various Credit Agreements. A project completion report has been prepared for the thirteenth project (Credit 582-IN), of August 1975. The project was completed on time and within cost estimates. The Project Performance Audit Report for this project is under preparation. Credit 844-IN is disbursing more slowly than projected at appraisal due to delays in equipment deliveries. Commitments, however, are on schedule. PART IV - THE PROJECT 42. The project was prepared by Indian Railways with the assistance of Bank Group staff. It was appraised initially in January 1981 and re-appraised in June 1982. A report entitled "Staff Appraisal Report, The Second Railway Modernization and Maintenance Project" (No. 3431-IN) is being distributed separately to the Executive Directors. Negotiations were held in Washington, D.C. in September 1982. The Government of India and Indian Railways were represented by a delegation coordinated by Mr. Misra, Department of Economic Affairs, GOI. A Supplementary Project Data Sheet is attached as Annex III. Project Description 43. The objective of this project is to continue the Bank Group's assistance, begun under the last Credit (844-IN), which is aimed at improving the utilization of IR's existing assets - particularly rolling stock, locomotives and the track network - by improving the maintenance and reliability of the fleet of existing diesel and electric locomotives, by initiating a program of modernization of IR's electric locomotives, by improving the technology, design and operation of IR's bulk freight  -15- movements, and by providing technical assistance in the fields of plant operation, bogie testing and improved train operations and fuel efficiency. 44. The proposed project has the following components: (i) Maintenance - the establishment and equipping of a workshop building and associated machinery for the remanufacturing of diesel electric locomotives and locomotive components and assemblies at Patiala in the State of Punjab. This proposed plant, named the Diesel Component Works (DCW), is expected to begin production in 1985-86, and - the import of wheels, axles and other critical parts and components 1/ during the period 1983/84-1985/86 to further expand the Unit Exchange System initiated under the ongoing Credit 844-IN. (ii) The import of up to 20 prototype modern AC electric locomotives during 1984-85 for testing in the Indian environment. In the light of future operating and service requirements, it is necessary to introduce a modern design, high-adhesion, reliable AC electric locomotive capable of hauling trains of 4,500 tons on all IR 25kv electrified track. Domestic development of such a new locomotive would delay the substantial benefits to be obtained from these locomotives by five to seven years. Leading manufacturers will be invited to provide prototype locomotives for testing in India, and on selection, suitable collaborative production arrangements would be arranged with the selected manufacturer. (iii) The import of bogies 2/, bearings and corrosion-resistant steel for the manufacture of 11,300 high capacity freight wagons. Traffic development for bulk commodities, especially minerals, requires greater efficiency in transport to reduce costs. GOI has decided during the Sixth Plan period to support the domestic manufacture of 21,000 high-capacity wagons using cast bogies, for which domestic manufacturing capacity is limited and which utilize tapered roller bearings, for which there is currently no domestic manufacturing capacity at all. The selection of only 11,300 wagons for purposes of this credit is related to the Bank Group's assessment of available supplies and fabrication capacity for this type of wagon during the project period. 1/ "Components" in this context refers to completely finished units (e.g., turbochargers, control units, etc.) as distinct from "parts" which could be any single item such as a bolt, gearwheel, etc. 2/ A wheel/axle/suspension unit.  -16- (iv) Provision of technical assistance and training for IR staff in the operation of the DCW plant, for testing new bogie configurations and for initiating work on fuel conservation and train operation improvements. 45. The need for modern management tools has been recognized by GOI/IR. Given the size of IR's network and asset base, the lack of a real time Operating Information System (OIS) is hampering efficiency at all levels of operation - motive power deployment, maintenance scheduling, inventory costs and rolling stock utilization. At the Bank Group's request, GOI/IR has confirmed that an already existing OIS software and associated computer and telecommunications hardware would be purchased and adapted to IR's needs. GOI/IR also confirmed that a study to clarify the management and organizational aspects of IR's manufacturing units was underway and would be completed by May 1983. IR's manufacturing capacity is growing and the Bank Group sought and received assurances that the growth is coordinated and cost effective - avoiding duplication of work, inventories and management overheads. The recent report by the Rail Tariff Enquiry Committee (RTEC) includes, inter alia, many recommendations for restructuring IR's tariffs. Many of the recommendations have been implemented or are being implemented. GOI/IR has provided information on the expected completion dates for the remainder of the principal recommendations contained in that report. Assurances have been obtained from GOI that passenger fares and freight rates would be adjusted to enable IR to meet all operating expenses and make the appropriate contributions to the Depreciation Reserve Fund (DRF) and payment of dividends on Capital-at-Charge (Section 4.02 of the Development Credit Agreement). Other assurances from GOI/IR have been obtained that reflect the Bank Group's concerns for the efficient utilization of IR's assets: IR is in the process of clarifying its motive power policy, particularly with respect to medium range (1,500-2,000 HP) diesel electric locomotives; IR is studying and testing truck-and-wheel units to determine optimal sizes; IR has agreed to expand the Unit Exchange component pool as agreed with the Bank Group (Section 4.04 of the Development Credit Agreement); and IR has provided assurances that appropriations to the DRF shall be not less than Rs 21,000 million in aggregate for the period April 1, 1983 to March 31, 1985 (Section 4.06 of the Development Credit Agreement). Project Costs and Financing 1/ 46. IR's investment program for the period 1980/81 to 1984/85 totals about Rs 51 billion (US$5.67 billion). The proposed project, which forms part of the program is estimated to cost Rs 10,942 million (US$1,216 million), including US$200 million in duties and taxes. The foreign exchange 1/ Project cost estimates are based on January 1982 prices and include price contingencies averaging 8.0% per annum for local costs and 8.5% per annum for foreign costs. Physical contingencies of 10% in the cost of civil works for the DCW plant and 7.5% for cost of machinery in that plant are included. The exchange rate was assumed to be US$1.00 - Rs 9.0.  -17- component of the project is estimated at US$514 million. The economic case for the proposed project rests on a reduction in maintenance and operating costs of motive power and rolling stock throughout the system, as well as on a more efficient handling of heavy bulk (coal, iron ore and other minerals) which constitutes one of IR's principal commodity groups. With the project, IR will be able to make better use of its assets and to accelerate its improvement in performance in order to allow it to meet the increasing demands of the Sixth and Seventh Five-Year Plans, while avoiding a larger share of long haul goods from being diverted to the more costly road transport system. 47. The proposed loan and credit will provide 39% of the total project cost, net of duties and taxes, and 78% of the foreign exchange costs. The balance would be financed by GOI/IR through retained earnings and GOI Capital-at-Charge infusions. Procurement and Disbursement 48. Items financed by the Bank Group will be procured by IR in accordance with Bank/IDA guidelines. All equipment and materials will be procured through International Competitive Bidding (ICB) except for: (i) contracts of US$100,000 equivalent or less which, in aggregate, would amount to less than US$10 million equivalent; (ii) proprietary items costing, in aggregate, up to US$5 million which IR procures from dedicated sources, either due to licensing requirements or the need for continued equipment standardization; and, (iii) the prototype electric locomotives for the trials, which would be procured by soliciting proposals from all qualified manufacturers and evaluating them on the basis of technical and economic merits, to select up to four but not less than two of the most advantageous types for import and testing (Schedule 3, paragraph C of the Development Credit Agreement). 49. Credit proceeds will be disbursed against 100% of foreign expenditures, 100% of local expenditures (ex-factory) on items eligible for financing or 70% of the cost of locally procured "off-the-shelf" items. It is proposed to allow savings in any category of expenditure under the loan and credit to be used to cover increases in any other category except for proprietary items. Retroactive financing for amounts not exceeding US$5 million (equivalent) will be permitted for expenditures made after November 1, 1981 in respect of process engineering costs for the DCW, preparatory costs for testing of AC electric locomotives and other project related costs (Schedule 1, paragraph 4 of the Development Credit Agreement). Disbursement of the loan and credit is expected to be completed by June 30, 1987 and the closing date would be September 30, 1987.  -18- Project Management and Implementation 50. IR will be the executing agency for all portions of the proposed project and will implement the project as part of its on-going works and manufacturing program. IR has shown itself to be experienced in managing construction, equipment installation, testing and commissioning of large-scale plants and other major project undertakings. 51. The necessary land has been acquired for the DCW plant and general design work completed. The facility will cover some 50 hectares and employ around 2,600 staff in a two-shift operation. The project has been designed with due regard to environmental and worker safety aspects and is within the required standards. No significant adverse environmental impact is expected from the project. The total DCW peak load power requirement is estimated at 5 MW. The Punjab Electricity Board has agreed to supply power to the plant in accordance with the phased requirements indicated to them. Also, the Punjab State Government has assured a reliable water supply, and no water problem is expected since the shop's daily estimated consumption is very low. Within IR itself, a DCW management team has been appointed and final process engineering has already started. Construction commenced in January 1982. Machinery and plant procurement is to begin in January 1983 and be completed by October 1984. The 1985/86 production is to be about 40% of gross rated annual capacity, at least 70% in 1986/87, and at least 90% thereafter (Section 4.05 of the Development Credit Agreement). The prototype AC locomotives are expected to be imported and tested according to an agreed schedule during the period 1983/84 and 1985/86. Procurement of imported items for the unit exchange and freight wagon program will occur between January 1983 and March 1985. 52. With the increasing size and complexity of IR's manufacturing operations it is clear that the logistics of inventory control and maintenance scheduling are becoming more difficult within the existing management processes and IR has agreed that an alternative organization structure and new management tools may be necessary. To this end, a corporate-wide review of IR's manufacturing activities is being planned to ensure that an appropriate institutional capability is in place when the new facilities come on stream. The study details were discussed during negotiations. The Management Information System designed specifically for the IR manufacturing plants and developed under Credit 844 would also be introduced at the DCW during the proposed project. Indian Railways' Financial Performance 53. IR continues to earn a net revenue after covering all its operating expenses, including depreciation. The net revenues in 1979/80 and 1980/81 declined resulting in IR not being able to meet full payment of dividend on its Capital-at-Charge to GOI. A number of factors have contributed to this situation. First, the average earnings per ton-km and passenger-kilometer have not grown as quickly as IR's costs, especially fuel costs and appropriation to the depreciation fund. Secondly, the revenue earning freight traffic had declined in those years, contributing to deterioration in  -19- profitability - since the predominant share of IR costs is fixed. Historically, GOI has kept tariffs at levels much below the increases in the cost of IR's inputs or changes in general price levels. In addition, IR had to absorb losses on such services as suburban and short distance travel, unremunerative lines, etc. These are termed as "social burden" costs by IR and during FY80 and FY81 were estimated at Rs 2,400 million and Rs 4,200 million, (almost 10% and 16% of revenues), respectively. 54. There is evidence of considerable recent improvement however. IR's estimated freight traffic in 1981/82 indicates a significant increase in volume of nearly 10%, which will yield IR a net revenue surplus of Rs 518 million after dividend payment. For the subsequent period FY83-87, estimates indicate that, at present April 1982 tariff rates, and including the absorption of their social burden costs, IR would cover all operating expenses and meet full dividend payment for FY83-85. Shortfalls are projected for FY86-87. IR's operating ratio is expected to increase from 89.3% in FY82 to 92.0% in FY87. 55. GOI recognizes the need for additional remedial measures and increases in revenue beyond the April 1982 rates. In 1980 the Government appointed RTEC issued its report on a study of IR's freight rates, passenger fares and operational efficiency, and GOI policies with regard to IR. The report favors a basic restructuring of tariffs and financial policies, management reforms and government subsidy of mandated, but unprofitable (strategic or other) lines. A program for implementing the key recommendations is now under way within GOI/IR and the details were discussed during negotiations. The net effect of these recommendations will be to place IR's operations on a commercial footing. The recommendations have been endorsed by IR and a special cell has been created within IR to work out the details of implementing the 386 recommendations contained in the five-volume report. Agreement was reached that ensures tariff levels would be maintained and increased as necessary to enable IR to meet all operating costs and provisions for asset replacement and pension fund allocations. (Section 4.02, of the Development Credit Agreement). Economic Justification and Risks 56. The economic rate of return for the DCW Plant is expected to be about 28%; the Unit Exchange Program return is about 19%; and the return on the Wagon Manufacture portion of the credit is about 29%. The weighted average economic return for the whole project is 24%. No separate economic rate of return is calculated for those items that are essentially of a development support nature - the importing of 20 AC electric locomotives, and technical assistance. Significant changes in assumptions regarding the major cost components were analyzed. For the DCW, analyses indicate that if the benefits go down by 20%, the economic rate of return (ERR) drops to about 12%; if the costs were to increase by 15%, the ERR would be reduced to about 16%, and if both elements change in adverse directions but in realistic combinations (e.g, (i) benefits go down by 15% and costs go up by 10%, the ERR=11%; (ii) benefits go down by 10% and costs go up by 20%, ERR=10%, the ERR would still be acceptable). For the wagon manufacture portion, a  -20- reduction in benefits of 20% would yield an ERR of 23%, while an increase in costs of 20% would yield an ERR of 24%. This component, however, is more sensitive to variations in the turnaround time of the unit train. Should the turnaround time increase from five to seven days on average, ERR would decrease to a still acceptable 20%. A similar analysis for the Unit Exchange component, though difficult to quantify, indicates that more pessimistic assumptions affect the overall return very little. 57. All project components involve proven technology, except for the testing and research elements for which technology is well established in other parts of the world; technological risks connected with the project are therefore small. Additionally, in the past IR has successfully implemented similar projects in a timely manner, and has built up competent managerial and technical expertise. Risks from inadequate project implementation are therefore negligible. PART V - LEGAL INSTRUMENTS AND AUTHORITY 58. The draft Loan Agreement and Development Credit Agreement between India and the Bank and the Association and the Recommendation of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement of the Bank and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 59. Special conditions of the Project are listed in Section III of Annex III. 60. I am satisfied that the proposed loan and credit would comply with the Articles of Agreement of the Bank and the Association. PART VI - RECOMMENDATION 61. I recommend that the Executive Directors approve the proposed loan and credit. A. W. Clausen President by E. Stern October 25, 1982  ANNEX I INDIA - SOCIAL INDICATORS DATA SHEET Page 1 of 5 INDIA REFERENCE GROUPS (WEIGHTED AVERAGES AREA (THOUSAND SO. KM.) MDST RECENT ESTIMATE_ TOrAL 3287.6 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 1818.2 1960 /b 1970 /b ESTIMATE /b ASIA 6 PACIFIC ASIA & PACIFIC GNP PER CAPITA (US$) 70.0 110.0 240.0 261.4 890.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 111.2 152.5 194.4 448.7 701.7 POPULATION AND VITAL STATISTICS POPUIATION, MID-YEAR (THOUS.) 434850.0 547569.0 673207.0 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 22.3 17.3 32.4 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 994.1 STATIONARY POPULATION (MILLIONS) 1694.4 YEAR STATIONARY POPULATION IS REACHED 2115 POPULATION DENSITY PER SQ. KM. 132.3 166.6 200.6 158.1 255.9 PER SQ. KM. AGRICULTURAL LAND 247.0 307.8 362.8 355.9 1748.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.9 42.7 40.2 36.8 39.9 15-64 YRS. 54.5 54.2 56.8 59.7 56.8 65 YRS. AND ABOVE 4.6 3.1 3.0 3.5 3.3 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 2.3 2.1 2.0 2.3 URBAN 2.5 3.3 3.3 3.3 3.9 CRUDE BIRTH RATE (PER THOUSAND) 43.7 40.0 35.6 29.3 31.8 CRUDE DEATH RATE (PER THOUSAND) 21.8 16.7 13.6 11.0 9.8 GROSS REPRODUCTION RATE 2.9 2.7 2.4 2.0 2.0 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 5619.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 22.6 19.3 36.3 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 102.0 99.0 108.1 115.6 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 95.6 90.4 88.8/c 97.3 106.4 PROTEINS (GRAMS PER DAY) 53.6 49.7 48.4/i 56.9 54.4 OF WHICH ANIMAL AND PULSE 17.2 14.8 13.1/i 20.0 13.9 CHILD (AGES 1-4) MORTALITY RATE 26.2 20.7 17.4 10.9 6.7 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 43.2 48.1 51.8 57.8 59.8 INFANT MORTALITY RATE (PER THOUSAND) 165.0 139.0 123.4 89.1 63.7 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 17.0 33.0 32.9 32.0 URBAN .. 60.0 83.0 70.7 51.9 RURAL .. 6.0 20.0 22.2 20.5 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 18.1 37.7 URBAN .. 85.0 87.0 72.7 65.7 RURAL .. 1.0 2.0 4.7 24.0 POPULATION PER PHYSICIAN 4850.4 4889.0 3630.6 3297.8 8540.4 POPULATION PER NURSING PERSON 10975.3/d 8296.5 5696.1 4929.3 4829.4 POPULATION PER HOSPITAL BED TOTAL 2178.7 1612.9 1311.0/e 1100.4 1047.5 URBAN .. .. 362.3/;i 301.3 651.6 RURAL .. .. 10432.8/e 5815.7 2597.6 ADMISSIONS PER HOSPITAL BED .. .. .. .. 27.0 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 URBAN 5.2 5.6 4.8 RURAL 5.2 5.6 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 URBAN 2.6 2.8 .. RURAL 2.6 2.8 .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. .. URBAN .. .. .. RURAL .. .. ..  ANNEX I Page 2 of 5 INDIA-SOCIMAL INDICATORS DATA SHZIT INDIA IZFIRENCE GROUPS (WEITHTED AVnOZS - MDST RCEN? ESTIMATEY MOST RECENT LOW INCOME MIDDLE iEtCHN 1960 Lb 1970 /b ESTDIATE /b ASIA & PACIFIC AUIA A PACIFIC EDUCATION ADJISYED ENROLLMENT RATIOS PRIMARYi TOTAL 61.0 73.0 78.0/c 97.4 96.2 MALE 80.0 90.0 92.0/i 101.0 99.6 rEMALE 40.0 36.0 63.0/j; 87. 92.1 SECONDARYt TOTAL 20.0 26.0 27.0/e 33.0 37.6 MALE 30.0 36.0 36.0/i 63.6 41.1 FEMALE 10.0 13.0 17.0/j; 41.3 34.1 VOCATIONAL ENROL. (I Of SECONDARY) 8.0 1.0 0.7/f 1.7 20.8 PUPIL-TZACHER RATIO PRIMARY 46.1 41.5 51.6/c 37.7 35.5 SECONDARY 16.0 20.9 *- 20.2 25.0 ADULT LITERACY RATSE (PERCENT) 28.0 33.4 36.0 52.1 73.1 CONSUMPTION PAsIENU1T CARS PER THOUSAND POPULATION 0.6 1.1 1.3/c 1.5 9.6 RADIO RECEIVERS PER THOUSAND POPULATION 4.9 21.5 33.6 35.4 116.5 TV RZCEIVEBS PER THOUSAND POPULATION 0.0 0.0 1.0 3.2 37.6 NEW6PAPER ("DAILY OENZRAL INTERSSTS) CIRCULATION PER THOUSAND POPULATION 10.6 16.0 19.8 16.4 53.7 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.1 4.1 3.7 3.6 2.8 LABOR FORCE -'!'I=OR FORCE (THOUSANDS) 165951.1 219194.2 264204.4 PEMALE (PERCENT) 30.7 32.5 31.8 29.5 33.6 AORICULTURE (PERCENT) 74.0 74.0 69.3 70.0 52.2 INDUSTRY (PERCENT) 11.0 11.0 13.2 15.0 17.9 PARTICIPATION RATE (PERCENT) TOTAL 42.8 40.0 39.2 40.0 36.5 MALE 57.0 32.4 51.8 31.6 50.5 FEMALE 27.3 26.9 25.9 23.8 26.6 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.0 1.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/j 22.2/f HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 4S.9 49.4/. LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.77j 7.0/ LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.27j 16.2/. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 133.8 194.7 RURAL .. .. 114.0 111.1 155.1 ESTLMAED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 176.2 RURAL .. .. .. .. 164.9 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 40.3 43.8 24.4 RURAL .. .. 50.7 51.7 41.1 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data snd is not uniform. /b Unless otherwise noted, dat for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Moat Recent Eitat, between 1978 and 1980. /c 1977; /d 1962; La 1976; /f 1975; /I 1964-65. May, 1982  ANNX I Page 3 of 5 DNPINITIMN OF SOCIAL MIICATORS Ntam iAitiogh thm dAta sos dYa from -o-e generlly judg.d aim age autharitatire ad relable, It abold ala ha -td that tiny -p ma ha Iota- at aoly corahil. henl- of tie 1tok of stdardlod doftitloo ad t-tPt. usad by diffaro- cotiooo iitotiog th data. Th. data r.a. thaitat. usufu to datrih l rdb r of giad.tdtttt trooda. ood ouatra tetIo aJor dii f.-oos haea ootis Tbsefaro grooPa.r (iiai ta oootry grop ofi the asijlso co-totr ad 12) a c-otry stoop with soaithtgsr -.Srag tinm tha ah. toste arW- ofthe it ooot (..ep tfor Nigh Coco Oi oport-rs growp ohar "Niddls Cocoa North Adrtoa ad Niddia Neat" it h... hoto- of atraga tot-oitoral ffloItota.t i rfar-c growp data tn ovorog. ar PoPolatiot -sihted aihitbto N-ato.fo sah iLdicator ad .h omiy Wo sejority oftincott. toL A group h.. dato for that todItoto. itolo tho co -rag of coatr... aso the dledcatra d.pteda a: ohs ailahgiity of dat aod is oat aIfors. ootiot -ta ha aertan.d L.torlottLogsnrga fa lodloator to Aoothar. Tha- overage or. si oaf o o oar tin eal of ate irdiator at a l. ti-ta. tin co-try aed rafsr..... group.. ARIA (thoosad so.k.)17 .. Fritc orNaiaNd-ttI.onto, ted total - FopoItlota(ttl Toal-T otla.tc rtco.1ia tdea a ot- oo.;i7Mat. oht so rottil divided hy Ohair roopativ o,ar of hooyitoi heAt jWric-itu-l - .ts-tla of agiuiua art, cad taw .rtrtly or P.rsttly anatlahit In p.tiio ad private gsatiadapctltad h.apittiads for crop., poatorot. arkat ad kitchar sardom or to It. foIm; 199data halitatio c-as optl aatbltohmeta pat tly gBuff. by Aloiaat ot- phy.lciao. Natahlitoeot providlog p,mlipaly ooto- iN ~FiCPITA (U51) - GNP Par capita aotAs t c..rraot orkat P...tas. ca-dticraaottldd. aalPapaa.h vr. td.ait ouasby aem oonaaio Athod Ba WorLd teak Attn (i970-60 ha.1ol; 1960. ard di.l..i cotoro at ParsutlY atf fed hy a phyolcisd (hot by A iO.a 190dto. adttal AAusLotat, arm. stafo. at.) ilob off.r I.-pa.tista donor ad provdea l.ited rag. of adical ftoilitisa. yv.. ato INUNGY CSNUIWTION PIn CAPITA - Aduul -otsWtiao of coamca og ca tica1 PorMoat orba hospital. tooled. WM. pri.ittp.i/gam-1t ha tpoaia ad Igato.kpotosm coa e dhdr-folt e soasioic a_d rua h.apittl.. i-ci or rare hoaploala ad msdLca d tro tctty)ito" htiogrsA of coi oqonimIt par t.plta; 1960. 1970. ard i979 cAtor. Bpeotltoed hoopttals era toildad ItlI todrtoal data. ~~~~~~~~~~~~~Ad,"atico rat No-ital Dad - Total otaber of eds iaaoo to o dta sr P r1oe asitato dIvide by tin totar of Mad.. POPULATIONANDa VITAL. STATISTICS T.t.1 otu tt1 I Nl Md-Ta.r.io _ud.) - As of July t; 1960. 1970, and 1960 HOSOlING data. Avarago ioao osodCrm a ioh., dl - totl. ot,tdrr OraoFouao (rrsto aal - Rtio of urhao to tota popuittloo; A ho..hi cootst of a roPof iodttdoia wo LaIr Litg ortr dtffr.o dafoitoos f uto ea. y afococouarahlit of ataeadthei ala mob.I. A hoArd-r or lodgar y or -y oth olddt amo aora;1960. 1900,..od iOdat. the . haolcd for sttistical poP. os... PoruIata oti iasmot. uo o-oro. a ao ttl.ai . ad -ot- vrga1s logti .spctoac at. hird dnrato thcoo11a1. uit aoacaao, -lac tictt y Coar 11at o d ..loss -ota. ob.a oa Coral. Iod faol itf L oat_ry anitlatogt 77.5 yeare. Th' part- Coo-ert..aai d-ttiago stth oactrkitty to ttntng quar.tar as "aroa-p -tat. far f-rtitity ran, alto har rtha. is-ata ssosti decltna 1 of totot. onto, tad r-ra de..lttgaro-pttvely. fertility aCordtngtotooolna and ya_ fmly II.oaapefu., ce techfooatryI tah toa..ge oato thia.aoiaac-btticas of artlity EDUCATION td fetility tread. for prjotoj.tt Lpcruopas. Adjated tBro.iment tatics Stationry ooooI.iot -J toataicor population ltre. is -c Nrmh aLoct Fraysho.-ttl l and fsm1i - Cto.. Ltotl. ala ted feo1i the urh rots is aqu1 to the death tat., aed aIso h:.,,: structure j- Laaieto i aea thapir len ae poro"tage of sepettins saia cooeao This is achievd .oIyaft.r 6isoIftiy ra. lo opris-ny school-age popatatiane ; oom Ly aldro thildret aged h-il thero -cea leve of -oit oa raprodctioo rte.t ot atgoroooytahtajst.frdfoa tgh of pr1-ry sdrtatim; for ofmorpas tefestY. Th. statioary popcta1o e titee: was r thar _as.t o Irs edutatioc sarolimat ap o_ca 100 parra esalatd at te bast of rh prolatad caatrataof ohs popolatica s.tat som pile ra hula or shon the 4ffatot1 shed ANs. i,tohs yea 200.adtert fdecImofa tltyrt orpae Socdrchool -otl,ai Andfale - Coapoted at thw odr sat lent. sductoioarrtilqutraeat -PI ' N i_et too year ,of approvd priary iostra..tiam; Tea atotor aceatc taraid - iThe yc nec souiotay PoPu1Laioo providas gerl.nctitl ortsc tr tritta tao-time for popile aim vill to roa ..ed. usualtY of 12 to 17 y.s.s of aE; . orapood ... courses ore gsmoiiy Par en. is. - Iid-psar~I. pp Iato Per sqar kils-tar (100 Mtoctare) of VO..otioaut emoll-at (prt- of -codaryl - focatimot ta-itutioo total am; 1960. 1970 and 1979 data. iocluda tchoirt1, tadoatol1l or othr programs W,hc operts todepad- Per so. ks. atrittturo toed - C-epetad as aton foragiclurl ed a-tyora drpsrt-t of a-raday tosoltutt I ol;16.1970 ad1979 data. PPril-teache rtio - primay, sad -rodary - Total -ad-at strolled it Porolaioo At itrcturo(rorcatl -Childre (0-14 y-arel orhiogag (15- .rmr n .ecodar IevaIa divided by attsr of teachers to thn 64 year). an rttrsid I(5pasad ove) to p-ootosgea of mId-Year pop.- ccrrePodiog i..rtI.. Latioa;166 971.ed 1990 data. Mo~lt literacy rtet (p-arc. t) - Litera.te adulta (sil.te arod tad mite) Paroltim Ooath ets ltrosal - otal. - AIa-1 grcht at.te of tot1 mid- aspart,ent., of total adolt popolaoioa aged t5 yaoot aSd 0I00 PPoputpoicarom=ot Race(rercoat~) -crtav-A,1oco growth ratae of -rta root- CONSC2WTION tattoo for 11954.ci-7. and 1970-00.' Pa..eoser Cars (car thousan.d ro-1-itoal - P..ae.a.r Iat cI i ao Crue "LtSt. (ran thotauvd) Acotat IVe birtho pro thot....d of oid-y-a core actiag Iree thee tight p-rsovo; -acldos atultaco, h-ues sod pcpl-toa t9O 970, ted 190data. sititeyvwticte Crud Death att (rr tosod)' --uotdat a hoado l-ertdoRtiat(a eead porutaticol - All typss at r-c-a-r- for -sdto pcputa1iio; 1960. 1970. an 1980 data. tr-d,cast to gesralpboil per tiousood of populatioo;toidt- iros Serouctc ateAcet.ate n-b-a of d-gtattero islelt tea tatcoe eevr ocotia n oysaoo otteiatof rdio her oosal aprooctiv perod If se erecr rset g-sei1fic fa- set _a. irffcc dat for rec"t pe-r My act bsoparshle elat tilityrstae;osualtp f ve-paur sasreges so iva iv 1960. tOlO. sd 1990. a so cocotrio stot1shad tlcoost.g Lstt Ply aaiaaL- Acrertv . A.oo (tostad)- coAl ...sIh- r of acce- or TOtatvao(rr hoso roulttol- TV rwre in.rs for brosdcaat to of hith_roat"ileielAlrasie o sla atypaoo Program georl ulicprtosn poatto saclodes Itcra T frootnar Fail latit - Oars (peco- of arcied Pa ...-Fe .rt.ge of arrid tacut Aisd toyer ots- raglora to f TO Bsts wa .t rfft Eiao of rhlld-b-arcg a (-15- y-aa(ot us tt hri-oct- devicsto osae iroato(e thousand rarelatiosr - Shom the Ave.S.to d- .1 rid .e tos v ate rop. -oeio f"diyg 1ca toter-toatePapa". dsftod asapuldicu1 roblicattoo devoted priartly to rscodigt aoaro am. t isL oadsa FlOp AtD NUTRITION to h d "daly" if it p.ar at.. lta Poo "tme a1 weak Lodro of FoodPr-doctio Per Capita (99-71-1101 - Indao of per capita -one Cla- Aov..a Att-d-"r Ot Caoita rPr Tea-See 00. tt oh ter of poctoofalfond oditieie. Pro1doctivo eatLodas sead ted ftad tAd tichots sOld doriog ohs year1. t1cdiag ad.lastoos to driv-la ritas is toalada pear haste. Co-indties cove priary goods (e.g. euacas ad mebiacte tasteS of _ear .t) ichart.dilblaa.dc...taiooc-iao- (e.g. toffee aad to -ss ocudd). i4ggcsatr productico of tct. vor is baead cv L,ABOR FORI vai pt vra prdurppsmiht. t9h-5, 19 70.ad1990 daca. Tota Lb-o Focca (thausa.ads) - Eco.odcl11ty activ parsoo, iocludiag For tseita aurrir of calorits arceny of roiamt)- Cutpo tt-dfomamd oc..ad ..veuployad hot -1cboiag . tousiva,sootrsc sasragy eqoivalet of a t fod sopplios -vaialbl to co...tty par capilta covertog popu1atto of all ages. Deftotistovruscoteas Par day. Availabla opte _oprist domesic prodocvioo. toporte loss von ...ablt; 1960. 1970 and 1900 data. aeporta and oavass v stuc .at ecreirs eo1ldr avi- food. sseds, Fe-lt (p-e...et) - PeaIlebt-o force as par-toag oftoa lhrfPopa. qutattita sed I foodproctairg,Add toaset to d(st rihotio. Raqulte- kA,ficoltura(perroalt - LbrfPocaIa(roa. for-try, h LItN td eeateotrrwa1timetsd by 060 bt..ed -v ptysclcglsl voade for coral -ti- Iihgaapratgofoal1 Iaorfot; 1960. 1970 and 1980 data. vitahelth toeiderits -eiroaotllte-peraturtl,.hdy miAot:ta, ag Iodc-trp (p-r... I b-LtrOcr veaa.0c-aou-ioo, a-factcritg sod eadistrbtiuolo of popolatiot, so looo 0prevfrest tedeattty tr d Assa ateaa fttlihrforna hoaeot lve; L19145. 1970 avd 1977 data. 1960, 1970 sod 1991 Isia Fa loits durply o (roelbai Par day) - Pro teto -cot- of Per capita aecpto Rt rrri - totl. web, sod flet - Fartloipoaia op act sopYo fodpar day. Net coptly of food is dafiod as bhov.Ra.- -ctitpraesar cptedasOt,ar.adfmlisoPrca qoiremoa. 'faraldl coootria establisthd hy lIDA provide 0,I !c P.... pretuga of totl,al sod famla popaltica of .ltS. q -reprtaolv y; allo=ocs of 60 aram of tota proten pee day and 20 gram of vi_L sod tOti, 19170. aed1'9601 dat. Th..a are hoar.d ov ti,0e p-ritolpetiov rtes pulse proteto. of httch tI gram Ihccd ha talal protato. Thrstoto-d- caftactiva ate-err .tcoaof the popolatica. sod lbag tIn tred A ords Ara lonr that those of 75 gra of total protei and 13ga S cL Pr tosndtre are Pros oaniol sourca.. saial prool usoevrg - for the oct1d, pr.opoed ty PM LIv theThird cfrotoalDt SodeocY RaIol - Ratio of rcpol-ibo ooder 15 sad iS tod avr World Fond Sor-y 19t145,1970 aa 97dt,to h oa lbrPr Far "Pit, proteta sooTo fro ia sod ptis - Pro toin atpply of food de- rtoad fro totals d pul.e.tograoprdy 961-iS, 1970 aed 1977 data. iacE~ cISTRiaBUTIa ChildV(oet4 eth Rate (pwo thcoavd> - AIouui deahs Per thc.....d to Parc-ca- of Private lacom (both Lv cash aed kind) - Raceivd hy toheat Aaasrourl4 yers othildretvI.thiea0 A ru. t.p,orme-cdavlctg- oo piar o tev.ntichetlo20rat,-poreev 20 pecte-. ad Poorte 40 Perao tries dots derivad from tile tohlas; 1960. 1970 an 1980 dots. c of houshol.. HRaiTH POVERTY TARIPT GtOUPa Lift,B Ratty.at Lpo7th Icral- '-Aversgr ottr of peupe of liii i-reeetr _The -foil riog astmte r cary ppree late aot of povery irval, at 1pt;t90 190sd 1980 daa.sd should hr int-prt-d mitt coo..id-bela atto tofsot Seta1inyRts (pe I thoused) - -1rou deah of ifaae coder cot Yea ftiated AbI...tt PoveryCca-et (1 e oie - urbo and totl of a~ pap hoooad itr hirta; 160.190sd190 dta Oteolont povery tacm level I. tha ivoe Ieo htWelha. Atoinat Across toSafs Wiata Cper-st of pooPtattoL- - t110, rho and coral - aoe- volriv..lc lyp doquats diet pica teta 1a too- fond quraai isot tar of poaple (tonat, -rba, tad coral tinth reaaooble cest. a.u ffrd.bta rater .opy(ciundas trastod surface atere or uttr.stsdttocaasood Otad teannePoe-r oc evL (09 a capt)-obo v cs raeI ch so that from proostld horeholes. epriaga. and or intl.) asters re.tantr povrt tocom leveli. ot-third of vnecsg .Prcets pe1rcatuateA of thei reaP.Cttre popolanioos . In touhoraotlcParso ...IvLowe of th. c-ctry. Ortso lsv-l ta darivd from the ror1 fotaaitor tsdposticcatad toos etta 200 meter rhorc. a tot, sp be1 rvlsith IdjItmea for higher coot of liciea In _ria oross cosdrd stig Iott aoot b crsofta tos . rrt- ora.e tatae otaIc RBi1n Aboolcte P-nero Ovom aniCrrav - .rbsa crasoabla socasee..Id iwply tnotha th-s fror mter.- of tho household odral-rrttfpritoa(roanrtrai oar "iolt do00hans to sprd a disproportiooana Papa of thr day ta fetchino the Poor ... Access to fertsA Otsposa1 ...roa of ropeltloti - totail, b-,o ndrra aNsker of peorto (ntat.ot, oartri vdty -rocrts dtspas, s p ccC.g.o their repective popolociova Oncroou1 dioP-1u my itloldo the colotoaad disposa. wtt cc rt ooit tralet, If th-s a 'ot an sv-ecar byratr-b-rn syavm or the oat of pit pcivtaa and sa- Lar ostalatico.. Ponolstloo car Phyatior. - Ppoittlot dietlad:d byote of pacie i phyai- Efooto and tocis1 Data Dlniolvo cimsqtslfiodfrosa mdicalstl a ueivttt= lent Occa..mic Mo1ysia sod FP-j-cls ear-a FP. ist..o per 0rtoa' Fersor -Povoindividad'by tooter ofpottc a 1962 mal ad feaIt gradatto-.rs.es, usistt toes practiical ats ad gosoaai ate  Palo 4 of 5 zcotaao DEVLOMENMT DATA 3/ GNI PER CAPITA IN 1980 U8t24D GROSS NA0TIOAL RODUCi IN 1980/81 ANNUAL RATE Of GROWTH %. constant price.) 19 Disk, % 1933/56-1939/60 1960161-1964/65 196i516-169/702 1970171-1974/73 197 5/76-197 9/8 GNP *t Market Prices 159.37 100.0 3.7 3.6 3.6 2.9 4.1 Gro Domestic Investment 38. 46 24.1 Gross National Saving 35.30 22.1 Current Account Balance -3.16 -2.0 OUTSU. LABOR FORCE AND PRODUCTIVITY IN 1978 Ve ~Added (At factor coet) Labor Force V.A. Per Worker ul Bln % IL 1 USS.. of National Averese Agriculture 39.8 39.6 180.6 70.7 220 56 Industry 25.2 t5.1 32.2 12.6 783 199 Services 35.5 53 42.6 16.7 833 211 Totel/Average MT0 I 2! T= 3Y07 I GOVEIRIOUNT FINANCE Generel Govxrnment / Cantral Oovxrnent Rm. Bln %ofGPp Rm %ln IL GDa1,1t 1980/81 1 976/77198/11980/81 1sso/siiso1 1976/77-1980/8f Current Receipts 238.19 19.0 19,1 125,41 10.0 10,6 Current Expenditures 238.93 19.0 18.0 133,29 10,6 10.6 Current Surplue/Deticit *0.74 -0.1 1.1 - 7,88 - 0,6 N.S. Capital Expenditures J/ 107.35 8S. 7.6 79.99 6.4 5.4 External As istence (net) j/ 12.86 1.0 1.0 MONEY.CRCDIT AND PRICES 1970/71 1974/75 1975/76 1976/77 1977/78 1978/79 1979/SO 1980/81 Fh1 uU.J!98 Februerv 1982 (Re Billion outstanding at end of period) Money end Quasi Money 109.8 194.6 223.2 273.2 329.1 398.6 467.9 553.1 536.13 615.53 Benk Credit to Government (not) 54.6 95.3 97.9 118.5 137.3 162.4 201.0 258 1 238.22 292.18 Bsnk Credit to Co mrciel Sector 64.6 126.5 153.7 185.1 212.2 253.5 306.3 363 2 349.03 422.15 (Percentage or Index Nimbers) Avril-Fb 1980/81 Aoril-Pel 1981/82 Money and Quasi Money as % of GDP 27.3 28.0 30.1 33.9 40.8 40.9 44.1 44.0 Wholesale Price Index (1970/71 -100) 100.0 174.9 173.0 176.6 185.8 185.8 217.6 257.0 255.9 280.5 Annual percentage changes in: Wholesale Price Index 7.7 25.2 -1.1 2.1 5.2 - 17.1 18.1 18.4 9.6 Bnk Credit to Goverment (net) 13.0 9.2 2.7 21.0 15.9 18.3 23.8 28.4 28.6 j/ 22:7 h/ Benk Credit to ComeerciAl Sector 19.4 18.2 21.5 20.4 14,6 19.5 20.8 18.6 16.6 5/ NO.9 h/ g/ The per capit CGUP estimte is at *mrket prices, clculated by the converston technique used in the World Bank Atlas 81. All other conversions to dollars in this table are at the averge exchange rate prevailing during the period covered. b/ Quiek Estimutes, Central Stetistical Organization. i/ Computed from trend line of GNF at factor cost series, including one observation before first yer and one observation after last year of listed period. A/ World Bank estimtes; not necessarily consietent with official figures. A/ Transfers between Contre and States have been netted out. I/ All loans and advances to third parties have-been netted out. g/ Percentage change from end-February. 1980 to end-February 1981. I/ Percentage change from end-February, 1981 to end-February 1982. / Total Labor Force and percentage breakdown from Sixth Five Yeer Plan, Table 2.6 and Annexure Table 13.8.  0 ANNEX I Page 5 of 5 BALANCE OF PAYMENTS 1978/79 1979/80 1980/81 1981/82 MERCHANDISE WORTS (AVESAGE 1977/78 - 1980/81) (US $ Mln.) USS Mln 7. Exports of Goods 6,978 7,998 8,504 8,700 Engineering Goods 908 12 Imports of Goods -8,519 -11,302 -15,838 -16,000 Tea 506 7 Trade Balance -1,541 .3,304 - 7,334 - 7,300 Gems 403 5 NFS (net) 717 1,100 722 915 Clothlng 501 7 Leather and Leather Resource Balance - 824 -2,204 - 6.612 - 6.385 Products 457 6 Jute Manufactures 303 4 Interest Income (net) k / 14 196 370 212 Iron Ore 321 4 Net Trnfera 1 / 1,185 1,577 3,079 1,840 Cotton Textiles 316 4 Sugar 102 1 Balance on Current Account 375 - 431 -3.163 -4,333 Others 3,541 48 Official Aid Total 7.448 100 Disbursements 1,695 1,738 2,337 2,724 g/ EXTERNAL DEBT, MARCH 31. 1981 Amartization - 702 - 608 - 707 - 659 USS billion Transactions with IMF - 158 - 1,035 690 Outstanding and Disbursed 17.2 All Other Items 265 - 475 147 - 797 Undisbursed 7.5 Outstanding, including 24.7 Increase in Reserves () -1,475 - 224 351 2,375 Undisbursed Gross Reserves (and year) j/ 7,357 7,579 7,228 4,853 Net Reserves (end year)'s/ 7,357 7,579 6,901 3,876 DEBT SERVICE RATIO FOR 1980/81 j_/ n/ 11.2 per cent Fuel and Related Matarials IBRD/IDA LENDING, DECEMBER 31. 1981 Imports (Petroleum) 2,043 4,045 6,657 6,075 USS million IBRD IDA Exports 24 26 33 n.e outstanding and Disbursed 984 5646 Undisbursed 880 4634 Outstanding, including Undisbursed 1864 10280 RATE OF EXCHANGE June 1966 to mid-December 1971 US$1.00 - Rs 7.5 Re 1.00 - US$0.13333 Mid-December 1971 to end-June 1972 US$1.00 - Rs 7.27927 Re 1.00 - US$0.137376 After end-June 1972 Floating RAte Spot Rate end-December 1980 US$IO0 - Re 7.930 Re 1.00 - US$0.126 Spot Rate end-December 1981 US$1.00 - Rs 9.099 Re 1.00 - US$0.110 J/ Estimated. / Figures given cover ill investment income (net). Major payments are interest on foreign loans and charges paid to IMF, and mjor receipt is interest earned on foreign assets. 1/ Figures given include workers' remittances but exclude official grant assistance, which is - included within official aid disbursements. m/ Excludes net use of Im credit. 'Et Amortixation and interest paymnts on foreign loans as a percentage of exports of goods and services.