India - Shipping Project

CIRCIIIA~~ RESTRI CTED CIRCULATING Copy Report No. P-1035 OBE RETUREL COPY This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR A SHIPPING PROJECT February 24, 1972   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXEUCTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR A SHIPPING PROJECT 1. I submit the following report and recomnendation on a proposed Credit in an aaount in various currencies equivalent to US$83.0 million on standard IDA terms to finance a shipping project in India. PART I - INTRODUCTION 2. The Bank Group has so far played a limited role in financing shipping. The Bank made several loans for ships to the Netherlands in 1948 and loans to the Republic of China in 1963 and 1967 for deep-sea fishing vessels. Ships have been financed indirectly through lending to development finance companies in India and elsewhere, but the credit now proposed would be the Bank Groups' first direct lending for ships in recent years. 3. The project would widen the scope of the substantial Bank Group assistance for the transport sector in India. The Bank and the Association have made six loans and five credits to the Indian railways for a total of US$706 million (net of cancel- lations), of which about US$125 million has been repaid. Other Bank Group lending in this sector comprises three loans and one credit for the ports of Calcutta, Madras and Bombay (totalling US$82 million), one credit for highways (US$60 million) and a loan for civil aviation (Us$5.6 million), The Bank Group has also assisted the local manufacture of commercial vehicles through the six industrial imports credits between 1964 and 1970. 4. In recent years, the share of agricultural projects in Bank/IDA operations has increased substantially, reflecting the high priority which the Government accords to agriculture in the current Fourth Five-Year Plan (1969-74). Agricultural lending is expected to account for a large share of future Bank Group assistance to India. There are also plans to provide assistance  -2- for education, family planning, urban investment, and possibly rural works programs; however, the scope for lending in these fields would not be very large, at least initially. Quite apart from these efforts to achieve greater diversification of our lending, financing of investments in industry, public utilities and transportation will. continue to play an important role in our program to meet the large and increasing needs for funds in these areas. Reports and recommendations on proposed credits for an agricultural credit project in Maharashtra, and a wholesale markets project in Bihar were distributed on February 16. During the remainder of this fiscal year, I expect to present credit proposals for a further industrial imports project, a family planning project and a development finance company project designed specifically to assist small-scale industry. 5. Since 1949, the Bank has made forty loans amounting to US$1 ,111 million and the Association forty credits amounting to US$1 ,696 million (both net of cancellations) to India. Of these amounts, uS$512 million has been repaid and US$662 million is still undisbursed. Comments on the status of disbursements of effective loans and credits are given in ny report and recommendation on a proposed credit for the Maharashtra agricultural credit project. 6. IFC has made thirteen conmmitments in India since 1957 totalling US$42.3 million, of which US$3.3 million has been repaid, US$5.9 million sold and US$6.3 million cancelled or ter- minated. Of the balance, US$18.6 million represents loans and US$8.2 million equity. Of this total, US$5.9 million was undisbursed on January 31, 1972. The largest IFC commitment to date has been US$18.9 million to Zuari Agro-Chemicals Limited for a fertilizer plant in Goa. A summary statement of Bank loans and IDA credits as of January 31, 1972 and IFC investments as of January 31, 1972 is in Annex I to this report. 7. The proposed project was identified and prepared in March/April 1971 and appraised in July/August 1971. Negotiations were held in Washington from January 31 through February 7, 1972. The Borrower was represented by Mr. Ge C. Baveja, Joint Secretary, Ministry of Shipping and Transport, Mr. R. Tirumalai, Joint Secretary, Mr. P. N. Jain, Joint Secretary, Ministry of Finance;  -3- and Mr. Bose, Ministry of Justice. The Shipping Corporation of India was represented by its Chairman, Mr. C. P. Srivastava; Mr. L. M. S. Rajwar, Manager, Research and Planning and Mr. K. N. G. Mennon, Chief Development Manager. PART II - THE ECONCMY 8. An economic report entitled "Economic Situation and Prospects of India" (SA-25a) was distributed to the Executive Directors on May 24, 1971 (R 71-120) and a memorandum entitled "India: Major Economic Issues" (R 71-249 dated November 9, 1971) was distributed to the Executive Directors on November 9, 1571. A country data sheet is attached as Annex II. 9. Since the recession of 1966-68, the Indian economy has grown at an average annual rate of about 5 percent, largely reflecting the encouraging progress of agriculture. Foodgrain production in the last crop year reached 108 million tons, which is 8.5 percent above the level of the preceding year. This is due in part to substantial investment in irrigation and also to the increased and more effective use of current inputs, such as improved seeds, fertilizer and pesti- cides. But weather remains an important factor both in agriculture and - because agriculture contributes nearly half of India's aIP - in determining overall economic growth. 10. Manufacturing now contributes about 20 percent of GNP. India's current Five-Year Plan (1969-74) aims at an annual growth rate of 5.5 percent for the economy as a whole, and an increase in manu- facturing output by about 8 to 10 percent a year in both the organized and the small-scale industrial sectors. Medium and large-scale industrial production rose by about 7 percent in both FY 1968 and FY 1969, by just over 5 percent in Fl 1970 and remains low in FY 1971. The main reasons for this disappointing performance appear to have been shortages of raw materials, especially steel and cotton, and also inadequate demand for investment goods reflecting the shortage of financial resources. In contrast, small-scale firms seem to have benefited directly from the advance of agriculture and have made con- siderable gains. 11. The Government has followed strict budgetary and monetary policies in recent years and net foreidg exchange reserves are now just over one billion dollars. During 1967-71 imports (especially of food) came down sharply and, as a result, India's trade deficit decreased from US$1.3 billion equivalent in FY 1967 to US$130 million equivalent in FY 1 971.  -4- 12. A major cause of concern has been the low rate of invest- ment. Net investment was 12 percent of national income in FY 1970 against nearly 15 percent in FY 1966. Among the reasons for the low level of investment is the sharp decline of net aid receipts from US$800 million in 1966/68 to about US$300 million in 1970/71. 13. At the beginning of this fiscal year (April) the basis was laid for substantial expansion of investment activity through the introduction of additional taxes and an expected increase level of public savings. However, events intervened before economic development could benefit from these efforts. Large numbers of refugees started ccming across India's eastern border requiring food and shelter. From December 3 to 16, there was open conflict in the sub-continent. The majority of the 10 million refugees have now returned to their homeland but the Indian Government is providing substantial financial support for their resettlement and to the economy of Bangladesh. 14. According to preliminary estimates, the net budgetary cost of refugee support in the current Indian fiscal year may be in the order of US$285 million equivalent. By-December 31, 1971, the Government had incurred direct expenditures of about US$400 million and estimated that a further US$40 million would have been spent by March 1972. In addition, repatriation of the refugees is expected to cost about US$40 million. Total budgetary expenditures may, therefore, reach US$480 million equivalent. Against this figure, international contributions received and pledged, excluding US$25 million earmarked by voluntary agencies for use in their own programs, amounted to US$195 million. The financial burden imposed by the war on the Government's budget is more difficult to estimate. About Rs. 12.5 billion or 3 percent of GNP was budgeted for defense expen- ditures for this year. No supplementary appropriations for defense were sought but some contingency funds may have been used. 15. Special taxes for meeting refugees' costs were imposed in October and may yield approximately US$45 million. Further taxes to cover expenditures incurred during the emergency were introduced in December and may yield a similar amount. The bulk of the funds required to meet net expenditures related to the refugee program and the armed conflict were apparently raised through recourse to deficit financing. In fact, there are indications that the budget deficit for the fiscal year will substantially exceed the planned amount of Rs. 2.3 billion. Increased inflationary pressure would thus seem to be the most serious economic problem arising from the refugees and the war, and to the extent it cannot be contained, the effects will be diffused throughout the economy, affecting the level of real consumption as well as of real investment.  -5- 16. In real terms, food made up by far the largest Indian contribution to aid to refugees, but since India's stocks of food- grains have been and remain ample, the impact on the economy has been deferred. The disruption of transport and coimummications due to military operations was confined to the border areas and the dislocation of production has been minor. 17* Public sector investment has not been cut in monetary terms. On the other hand, the large increase in deficit financing may well mean that the planned increase of investment will not materialize in real terms. Furthermore, the additional taxation introduced at the beginning and in the course of the fiscal year may well reduce the level of private savings and investment. 18. Despite considerable and well planned efforts to mobilize dcmestic resources there has been, and will eontinue to remain, a substantial resource gap in India. This has led to the accumulation of a large amount of external debt and a high debt service burden. For the past four years, the Consortium has provided debt relief to India. Thus, India's debt position calls for cautious debt management and particular restraint in eontracting additional short-term debt in the form of suppliers' credits. A realistic development plan which is responsive to priority investment needs and sound monetary and fiscal policies designed to stimulate private and public savings qualify India for continued IDA assistance. PART III - THE PROJEfCT 19. A report entitled "Appraisal of First Shipping Project - India" (PTR-102a), dated February 5, 1972, is being distributed separately. A credit and project summary is attached as Annex III. 20. Shipping is an important industry in India. The Indian merchant fleet ranks fifteenth in tannage among those of the world and comprises about 250 ships, totalling 3.8 million deadweight ton (dwt). India's ships carry about 15 percent of her overseas trade; about 5 percent of crude oil imports are at present carried by Indian tankers. Imports of crude oil, which amounted to 11.6 million tons in 1970, are expected to be more than twice that much by 1976. Imports, exports and coastal movements of refined petroleum products are expected to grow no less rapidly than imports of crude oil. Coastal transport of petroleum products offers scope for substantial expansion in a country with a long coast line and with important consumption centers located on or near the coast. At present, only aboutlO percent of total consumption of refined products is being distributed by coastal shipping. As Indian demand for refined products is expected to grow from a present level of 18 million tons to 32 million tons in 1976, the growth of coastal transport of petroleum products is likely to be particularly impressive.  -6- 21,. The project, which forms part of the Indian Fourth Five-Year Plan (1969-74), would provide some of the transport services required by increasing oil refinery capacity and by rapidly increasing consumption of refined products. The project consists of: (i) the purchase of four crude oil tankers in the 80,000 dwt class for use between the Persian Gulf and Haldin, and (ii) the purchase of two refined oil products tankers in the 20,000 dwt class for the import, export and coastal distribution of refined petroleum products. In addition, shore facilities will be improved and pollution-control equipment installed at Haldia, Cochin and other oil-handling ports. One or more crude oil transfer vessels totalling about 16,000 dwt for use at Haldia will also be provided. 22. The four crude oil tankers would be capable of transporting about 4.8 million tons per year, meeting the initial demand for crude oil delivery at Haldia for use at both the Haldia and Barauni refineries. Crude oil demand by these two refineries is expected to increase from 3.5 million tons in 1974 to 4.7 million tons in 1975 and 5.5 million tons per year in 1977 and thereafter. The product tankers would be used primarily for the import and export of refined products. They would be capable of transporting about 102 million tons per year, about 50 percent of the estimated import demand for refined petroleum products in 1976. 23. The cost of the oil tankers, on the basis of bids received by the Shipping Corporation of India Limited (SCI), is estimated at about US$82.6 million made up of about US$63.6 for the crude oil tankers and about US$19 million for the products tankers, all in foreign exchange, The proposed credit would provide this sum plus a contingency of Us$40O,000. The Government of India has undertaken to finance the shore facilities and pollution-control equipment needed, and SCI has committed itself to provide the crude oil transfer vessels. The cost of these is estimated at US$0.5 million equivalent and US$1.3 million equivalent, respectively; the expenditures would be entirely in local currency. 24. In the course of appraisal, the Association examined with SCI the alternative of buying used ships. SCI opposed this alternative on operational grounds. While it might be possible to find ane tanker meeting the necessary specifications, it would be very unlikely that as many as four tankers could be found to meet the delivery schedule defined by the plan of new refinery capacity. The price of a used ship, the cost of refurbishing it and the costs relating to synchro- nizing its delivery, with capacity requirements was estimated at least to equal, if not to exceed the price of a new ship. 25. Current depressed short and medium-term charter rates are not comparable alternatives to the proposed purchase and a comparable long-term charter could only be obtained at a significant premium.  -7- Furthermore, the proposed shipbuilding contracts appear to be well timed to take advantage of the current relative slack in the shipbuilding business and consequent competitive prices and short delivery periods for new ships. 26. The Government will lend the proceeds of the proposed Credit to SCI through the Shipping Development Fund Committee (SDFC), a statu- tory body created by the Government in 1958 to facilitate the growth of the Indian shipping industry. Although its charter would permit it to borrow funds in the market, SDFC is in practice a channel for Government loans and grants made available to it to meet approved loan commitments to public and private shipping companies. SDFC has proved itself thoroughly competent in making and administering shipping loans. The conditions required by the Association for the on-lending of the credit proceeds to SCI can be readily accommodated in SDFC's standard loan agree- ments, mortgage deeds, and covenants. By using SDFC as an intermediary, the administration of the project will be considerably simplified. SDFC lending to shipping companies out of government funds is typically for periods of up to seventeen years for large new vessels or two-thirds of the residual life of used ships, with one or two years grace period. Effective interest rates have hitherto been 4-1/2 percent perannum. 27. The Government loan to SDFC would be at 7-1/2 percent and repayable in sixteen equal annual installments beginning two years after the delivery of each ship. SDFC's loan to SCI would be at 8-1/2 percent repayable on the same terms. The SDFC loan to SCI would be secured through mortgages an the tankers and on other vessels owned by SCI, as well as by the right of assignment of charter revenues. SDFC will pass the foreign exchange risk on to SCI. 28. SCI will purchase, own and operate the six tankers to be financed by the proposed Credit. SCI is the largest shipping campany in India. It is a well-managed public sector corporation and its performance compares favorably with shipping companies in developed countries. SCI operates general cargo vessels, dry bulk-cargo vessels, tankers and passenger ships. In June 1971, its total fleet consisted of 78 ships totalling 1 .4 million dwt; a further 29 ships totalling over 1 million dwt are on order, not including the tankers to be purchased under the project. SCI's financial position is sound. In 1970/71, operating profits produced a return of around 7 percent on capital employed, which after a period of fleet expansion will increase moderately. SCI's debt-equity ratio wiUl increase from 61:39 in 1971 to a peak of about 77:23 in 1975, as a result of the heavy expansion program undertaken by the company. The loan agreement to be concluded between SDFC and SCI under the proposed project will require that SCI's debt-equity ratio does not exceed 86:14. This isin accordance with SDFC's standard policy and is considered satisfactory. 29. The six tankers to be financed with the proceeds of the proposed Credit would be chartered to the Indian Oil Corporatimn (IOC) for sixteen years from the delivery of each ship. The charter rates  -8- would cover base year operating costs plus allowance for escalation over the charter period, amortization and interest for the loan from SDFC to SCI, and provide a margin to SCI equivalent to 4.8 percent of the cost of the ships declining to 2.55 percent over the charter period. A maintenance of value provision would pass the exchange risk on the SDFC loans to SCI on to IOC. 30. IOC, like SCI, a Government-owned corporation, is the largest oil company in India. Its financial positicn is sound. IOC owns and operates several refineries, including the refinery at Barauni, with a total capacity of 6.65 million tons. IOC will also own and operate. the refinery which is being constructed at Haldia. IOC's operations are efficient. At present, IOC does not have a department to supervise and coordinate marine transport. In connection with the proposed project, IOC has undertaken to establish a special marine department to be concerned with tanker movements, uidch should improve the present turn-around performance, especially of coastal tankers. 31* The six project tankers are being procured by international competitive bidding. SCI solicited tenders from 28 shipyards in eleven countries for the crude oil tankers and from 22 shipyards in ten different countries for the products tankers. In addition, sale and purchase brokers of international standing were asked for bids. The bids received by the January 10 deadline will be valid until March 9, 1972. 32. Disbursements under the proposed Credit would be made against payments under shipbuilding contracts after March 1, 1972. Up to 20 percent of the value of the contracts would be payable within six months of signing; further payments would be made during construction and on delivery of the ships. Disbursements would be completed by late 1974. 33. The economic benefits of the project to India derive from the difference between the costs and benefits to India of owning and operating the ships compared to chartering equivalent tankers from foreign shipowners. It is estimated that a foreign-owned tanker would operate on the basis of a before tax return on capital employed of 8 percent, and that operating costs of India and foreign tankers would be roughly the same. On these assumptions, the annual return to India would be 12 percent. 34. The three largest international oil companies own from 33 percent to 60 percent of their tanker requirements. The average for all major oil companies is 45 percent. These companies charter the balance of requirements on long, medium, short and spot charter markets. During any one period on3y from 10 percent to 15 percent of total requirements are competitively offered on the "charter market'". A team of Government-owned companies such as IOC and SCI,interested in secu- ring a steady flow of oil from a closely defined geographic area to a few refineries, will tend to rely for only a small part of its needs on the charter market. This is borne out by the policy of such companies as Pet- robras (Brazil), IFtrofina 3elgium) and of French and Japanes oil interests.  -9- The proportion of crude oil requirements carried by Indian tankers falls far short of the industry's normal level, and a significant expansion of India's tanker fleet in the interest of steady oil supplies at relatively stable prices would appear to be fully warranted. As India has started to enter into a number of long-term contracts with other governments for the supply of crude oil, the desire of some measure of independence in transporting these supplies would appear particularly understandable. 35. The economic return calculation does not take into account possible benefits to the economy to be obtained by stabilizing the delivery cost of petroleum. The tanker charter market has been subject to sharp fluctuations in the past and as a consequence, excessive reliance on its subjects the delivered price of oil to substantial fluctuations. Tanker ownership provides a safeguard against these fluctuations. 36. The Government, through the commissioner for the Port of Calcutta, is undertaking substantial investments for the improvement of navigation channels up to the Hooghly River to Haldia amounting to about US$74 mil1ion equivalent. These works involve the deepening of the water at the Haldia pier, and the turning area and dredging of the Hooghly estuary gradually to a usable depth of 41 feet by 1980. Until that time, the project tankers would have to be lightened by up to 16,000 tons in order to cross the bars and enter the channel. The provision of transfer vessels srves this purpose. The lightening and transfer operations would be similar to those carried out for grain in the same waters and are technically feasible. In order to improve turn-around time, the Government will improve shore pumping facilities to facilitate quick unloading and loading of crude oil and product tankers.. Further measures to speed up the turn-around of tankers would be the subject of a special study to be undertaken by IOC. Further, the Government and IOC will undertake a detailed study to investigate whether the eventual use of tugs and barges for the coastal transport of petroleum products would be feasible and economical. 37. Matters of transport policy and coordination have been discussed recently with the Government of India during negotiations of the Eleventh Railway Credit. The Government has decided to under- take a full review of the transport sector, and the Association will contribute to this review by means of a comprehensive sector mission. The review is expected to take about eighteen months and to lead to an understanding between the Government and the Association on the basic policies to be followed in the sector as a framework for future Bank Group lending for India's transportation system.  -1 0- PART IV - LEGAL INSTRUMENTS AND AUTHORITY 38. The draft Development Credit Agreement between India and the Association, the draft Project Agreement among the Associatiom, the Shipping Development Fund Committee and the Shipping Corporation of India, the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement of the Association and the text of a Resolution approving the proposed Credit are being distributed to the Executive Directors separately. 39' The draft Agreements incorporate the relending terms, procurement provisions and operating arrangements referred to above. PART V - CCMPLIANCE WITH ARTICLES OF AGREEMENT 40. I am satisfied that the proposed Credit will comply with the Articles of Agreement of the Association. PART VI - RECOMMBDATICN 41. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments  Annex I INDIA SUMMARY STATEMNT OF LIANS AND CREDITS (As of January 31, 1972) (US $ million) Loan or Undis- Credit No. Year Borrower Purpose Bank IDA bursed Loans/Credits fully disbursed 876.4 1,115.6 307-IN 1961 IISCO Coal Mining 19.5 2.4 414-IN 1965 ICICI Industry DEC VI 50.0 4.3 89-IN 1966 India Beas Equipment 23.0 8.3 515-IN 1967 ICICI Industry DFC VII 25.0 5.1 614-IN 1969 India Tarai Seeds 13,0 10.7 615-IN 1969 India Telecommunications III 27.5 19.6 153-IN 1969 India Telecommunications III 27.5 3.3 176-IN 1970 India Kadana Irrigation 35.0 31.4 683-IN 1970 ICICI Industries DFC VIII 40.0 24.1 191-IN 1970 India Gujarat Agric. Credit 35.0 33.6 203-IN 1970 India Punjab Agric. Credit 27.5 27.5 226-IM 1971 India Andhra Pradesh 24.4 24.4 230-IN 1971 India Agro-Aviation 6.0 6.o 241-IN 1971 India Telecommunications IV 78.0 78.0 242-IN 1971 India Power Transmission II 75.0 75.0 249-IN 1971 India Haryana Agric. Credit 25.0 25.0 250-IN 1971 India Tamil Nadu Agric. Credit 35.0 35.0 264-IN 1971 India Cochin II Fertilizer 20.0 20.0 267-IN 1971 India Wheat Storage 5.0 5.0* 268-IN 1971 India Pochampad Irrigation 39.0 39.0 789-IN 1971 i0ICI Industry DFC IX 60.0 59.6 278-IN 1971 India Mysore Agric. Credit 40.0 40.0* 279-IN 1971 India Gorakhpur Fertilizer 10.0 10.0* 280-IN 1971 India Railways XI 75.0 75.0* Total (less cancellation) 1,111.4 1 ,696.0 of which has been repaid 403.0 .3 Total now outstanding 708.4 1i,695.7 Amount sold 110.2 of which has been repaid 108.8 1.4 Total now held by Bank & IDA 707.0 1,695.7 Total undisbursed 125.8 536.5 662.3 =N=S2=2= ie==== =f=1 * Not effective as of JL.nuaZry 31, 1972  Annex I (Page 2) SUMMARY STATEMENT OF IFC OPERATIONS IN INDIA (As of January 31, 1972) Amount US Year Company Loan $ Equity Total 1959 Republic Forge Company Ltd. 1,500,000 - 1,500,000 1959 Kirloskar Oil Engines Ltd. 850,000 - 850,000 1960 Assam Sillimanite Ltd. 1,365,000 - 1,365,000 1961 K.S.B. Pumps Ltd. 210,000 - 210,000 1963-66 Precision Bearings India Ltd. 651,250 378,947 1,030;197 1964 Fort Gloster Industries Ltd. 812,000 399,0h7 1,211,04iI 1964 Mahindra Ugine Steel Co. Ltd. 2 ,310,000 986,607 3,296,607 1964 Laklhmi Machine Works Ltd. 960,000 352,434 1 ,312,434 1967 Jayshree Chemicals Ltd. 1,050,000 104,816 1,154,816 1967 Indian Explosives Ltd. 8,600,000 2,862,437 11,462,437 1969-70 Zuari Agro-Chemicals Ltd. 15,150,000 3,760,502 18,910,502 Total 33,458,250 8,844,790 42,303,040 Less sold, repaid and cancelled 15,520,351 Now held 26,782,690 Loans 18,597,619 Equity 8,185,070  Annex II INDIA COUITRY DA.TA Total Percent in k2 Cultivated Area: 3,268,580 43.0 Density Population: Total per km (Preliminary 1971 Census estimate) 547 million 167 Annual Rate of Growth, current estimates: 2.25 percent political Status: Republic Gross National Product at Market Prices, 1970/71: Rs. 346.7 billion2l/ Rate of growth at constant prices 1955/56 - 1968/69 : 3.4% p.a. 1965/66 : 5.2% 1966/67 : 1.3% 1967/68 : 8.9% 1966/691' 2.2% 1969/702.L 5-5.5% 1970/711/ 4.5-5% Per capita, 1970/71: US$90 Gross Domestic Product at Current Prices,l1970/711/: Rs. 349.5 billion Percentage breakdown : Agriculture 49 (for 1968/69) Mining 1 Manufacturing 19 Commerce and Transport 16 Government and Other Services 15 Percent of National Income at Market Prices: 1961/62- 1965/66 1966/6 1967/681' 1968/692/ 1969/7 i2/ Net domestic investment 13.3 12.1 11.3 11.3 12.0 Net domestic saving 10.6 8.2 7.8 8.8 9.9 Current account balance -2.7 -3.9 -3.5 -2.5 -2.5  Annex II (Page 2) 1 966/67-1 970/71 March 1971 Average Rate of Money and Credit (Rs. billion): I Increase (W) Total money supply 71.38 9.5 Net bank credit to gov't sector 52.36 6.5 Net bank credit to commercial sector 21.41 15.3 1 970/71 Rate of increase in prices Consumer prices