India - Maharashtra Agricultural Credit Project

CiRCULATINC t&?Y TO BE RETURNED TO REPORTS D$ T R I C T E Dp Report No. P-1027 FtILEL COHN This rOport 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 It may not be published, quoted or cited without Bank Group authorization.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 THE GOVERNMENT OF INDIA FOR THE MAHARASHTRA AGRICULTURAL CREDIT PROJECT February 16, 1972   INTEENATIONAL DEDPMlIT ASSOCIATICU REPORT AND RECOMMfiDATICN OF THE PRESIDENT TO THE EXECUIVE DIRMCTORS (N A PROPOSED CREDIT TO THE GOVERNIMEN T OF fINDLK FOR THE MAHARASHTRA AGCULTIRAL CREDIT PROJECT 1. *I submit the following report and recommendation on a proposed Credit in an amount in various currencies equivalent to US$30 million on standard IDA terms to help finance an agricultural credit project in Maharashtra State, Tndia. PART I - INTRODUCTICN 2. Since 1949, the Bank has made 40 loans amounting to US$1,111 million and the Association 40 credits amounting to US$1,696 milliom both net of cancellations to India. Of these amounts, US$512 million has been repaid and US$662 million is undisbursed. In keeping with the importance of agriculture in the economy of India and with the need to improve agricultural productivity, 23 loans and credits (totalling some US$421 million) have been for agricultural or agricul- ture related projects. In the last two years, there has been a particular emphasis an agricultural credit. Six recent IDA operations (US$186.9 million) were to finance agricultural credit projects in the States of Gujarat, Punjab, Andhra Pradesh, Tamil Nadu, Haryana and Mysore. The project now proposed in the State of Maharashtra would be one more in this series. Similar projects in other States are to be appraised this year and next. IFC has also supported agriculture in India* Of the 11 caumitments since 1959, amounting to US$42.3 million, the two largest, Indian Explosives, Ltd. (US$11.5 mllion) and Zuari Agro-Chemicals, Ltd. (US$1859 million)have been for ferti- lizer production. A mmary statement of Bank loans and IDA credits as at January 31, 1972 and IFC investments as at December 31, 1971 is in Annex I. 3. Of the undisbursed loans, the longest outstanding is Loan 307-IN of 1961 to the Indian Iron Steel Corporation (IISCO) for the development of its collieries0 My memorandum to the Executive Directors of July 9, 1970 (R 70-135) proposing to postpone the Closing Date to June 30, 1974 explained the technical and other problems which beset this project. Since then, a consultant has been paying regular visits to assist IISCO and there iserery reason to believe that dis- bursements will be completed by June 1974. 4. It was agreed in 1970 that the balance.of Credit 89-IN (Beas Equipment ProJect) should be allocated to Stage II of the project and major purchases will be made in 19720 Ih the Kadana Irrigation Project (Credit 176-IN) the suspension of the main con- tractor, long delays in submitting withdrawal applications in respect of costs incurred on canal constructim, rejection by IDA of bid awards and i  - 2 - request for revision of the list of goods have all contributed to slow disbursement. However, the supervision mission which visited the project in November 1971, reported that work on the dam has been resumed with departmental force account labour, agreement has been reached on bidding procedures for additional equipment and requests for reimbursement of civil works expenditures are now being submitted. 5. Gujarat (Credit 191-IN) and Punjab (Credit 203-IN), are showing slower progress than anticipated. In Gujarat, however, dis- bursements are beginning to pick up and show a recent acceleration in lending for minor irrTigation. Disbursements will be made shortly in respect of the first tranche of tractors ordered and arrangements for the supply of the second and final tranche are well in hand. In the Punjab project, which consists entirely of mechanizatiom, the orders for the first 4I,000 tractors are expected to be plwaced in March with substantial disbursements following within thre months. These agricultural credit projects in India are new and rather complex. As experience is gained with them, I fully expect that progress will steadily improve. 6. Disbursements of the Bank's recent loans to ICICI have not kept up with original forecasts. The closing date of the Sixth (414-IN) ICICI loan has been postponed twice; from December 31, 1969 to June 30, 1971 and again to June 30, 1972. The Seventh (515-IN) ICICI loan has also had to be postponed by one year. These loans were affected by the 1966-68 recession, which meant a substantial lengthening of the interval between ICICI's approval of sub-projects and the actual comitbment and disbursement of Bank funds. However, the current outlook is better and more rapid disbursement is expected in future. In fact, the Eighth loan to ICICI approved in June 1970 (Loan 683-IN) has been fully committed half a year ahead of schedule. The loan for the Tarai Seeds Project (614-IN) is some nine onths behind schedule in disbursing but tenders for all the machinery required have now been approved (technical considerations in this regard had caused some delay). 7. The Maharashtra project vas prepared jointly with FA -under the Cooperative Program and appraised in March/April 1971. Negotiations were conducted in Washington during the week of January 17, 1972. The Borrower was represented by Mr. M. A. Quraishi, Additional Secretary, Ministry of Agriculture and by Mr. G. Venkataramanan, Deputy Secretary, Department of Economic Affairs, Ministry of Finance. The Agricultural Refinance Corporation was represented by its Chairman, Mr. P. N. Danry. Mr. N, G. Abbyankar, Development Commissioner, Dr. V. M. Joshi, Secretary, Finance Department, Mr. D. G. Tungare, Deputy Secretary, Finance Department, Mr. R. J. Oak, Joint Director of Agriculture and Mr. R. Venkataraman, Joint Director, Groundwater Survey and Development Agency represented the Maharashtra Government. The Maharashtra Land Development Bank was represented by its Managing Director, Mr. G. P. Bhave.  - 3 - PART II - THE ECONCMY 8. An economic report entitled "Economie 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 datled November 9, 1971) was distributed to the Executive Directors on November 9, 1971. A country data sheet is attaohed as Annex II. 9. Since the recessian of 1966-68, the Indian eoonaoa has grown at an average anmual rate of about 5 percent, largely reflecting the encouraging progress of agriculture. Foodgrain production in the last crop year reached 108 millm tons, which is 8.5 percent above the level of the preceding year. This is due in part to substantial investnent in irrigation and also to the increased and more effective use of current inputs, such as improved seeds, fertilizer and pesticideso But weather remains an important factor both in agriculture and - because agriculture contributes nearly half of India's GNP - in deternining overall economic growth. 10. Manufacturing naw 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 econonr as a whole, and an increase in manufacturing 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 F! 1968 and FY 1969, by just over 5 percent in FY 1970 and remains low in FY 1971. The main reasons for this disappointing performace appear to have been shortages of raw materials, especiaUly steel and cottan, and also inadequate demand for investment goods reflecting the shortage of financial resources. In contrast, small-scale fines seem to have benefited directly from the advance of agriculture and have made considerable gains. 11 . The Government has followed strict budgetary and monetary policies in recent years and net foreign exchange reserves are now just over one billion dollars, During 1967-71 imports (especially of food) came dawn sharply and, as a result, India's trade deficit decreased from US$1.3 billion equivalent in Fr 1967 to US$130 million equivalent in F! 1971. 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 F! 1966. Among the reasons for the low level of investment is the sharp decline of net aid receipts frm US$800 milIion in 1966/68 to about US$300 millon in 1 970/71. 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 inoreased level of  - 4 - public savings. However, events intervened before economic development could benefit from these efforts. Large numbers of refugees started coming across Indi4a 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 econonm of Bangladesh. 14. According to preliminary estimates, the net budgetary cost of refugee support in the current Tndian 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 estioated that a further US$40 million would have been spent by Marc 1972. vI addition, repatriation of the refugee is expected to cost about US$40 nilion. Total budgetary expenditures may, therefore, reach US$1480 aillion equivalente Against this figuPe, initernational contributims received and pledged, excluding US$25 amillon eazizarked 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 expenditures for this year* No supplementary appropriations for defense were sought but some contingency funds may have been used. Direct expenditures related to the hostilities may be roughly estimated at 5 percent of the defense allocation, or about US$250 million equivalent. 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 expenditures related to the refugee progt'& and the armed conflict were apparently raised through recourse to deficit financing. In fact, there are indications that the biidg6t deficit for the fiscal year will substantially exceed the planned aibiit 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 economyi, affecting the level of real con- suption as well as of real investment. 16. In real ter3s food made up by far the largest Indian contri- butiom to aid to refugee; but since India's stocks of foodgrains have been and remain ample, the impact on the econamy has been deferred. The disruption of trasport and ccmmmnications due to rmlitary operatiAns was confined to the border areas and the dislocation of productien has been minor.  -5- 170 Public sector investment has not been cut in monetary terms On the. other hand, the large increase in dficit financing may well mean that the planned increase of investment will not materialize in real terms. Futhermore, the additional taxation introduced at the beginning and in the course of the fisoal year may well reduce the level of private savingo and investment. 18. The agricultural sector plays a predominant, crucial role in the Indian econamy, accounting for about 50 percent of India's aNP and absorbing 70 percent of the total labor force. Since almost 60 percent of total household consumption and 85 percent of household coamuodity consumption is accounted for by agricultural products or manufactures based principally on agricultural raw materials, the achievement of growth in real income is eosentially dependent on the growth of agricultural production. The requisiterate of expansion in agricultural output in order to stay ahead of the demand for farm products during this decade is estimated at slightly more than 5 percent per annum. For this reason, the Indian Fourth Five-Year Development. Plan allocations for agrioultural, irrigation and flood control investment are budgeted to average a little more than US$1 billion a years or roughly 24 percent of total plan outlay targeted for the public sector plan. Although substantial progreos has been achieved in recent years in foodgrain production, output of most other cmmwdities has beea stagnating and strenuous efforts are needed if India is to reach her agricultural denelopment targetas both in terms of production for the domestio market as well as for agricul- tural exports. A critioal input is agricultural oredit. The Reserve Bank of India has estimated that credit institutions wl1 require to finance an annual average agricultural investment of US$400 million during the Fourth Plan period, ompared with lses than US$100 million so invested in FY 1966. Short-tern credit requiremento needed are projected to increase by 11 percent per year to a total of more than US$2.5 billion in FY 1974. PART III - TE PROJECT 19. A report entiled "Appraisal of Maharashtra Agrioultural Credit Project"l (PA- 11l6(a) dated February 14,1 972) will be distributed separately. A credit and project slmo in at Azmez ITI. 20. The propooed project (like its six predoeesore - Outjarat, Andhra Pradosh, Tdmil Nadu, Haryama Punjab and Wyeore)oan beat be placed in perspective by refe'renco to the cheago In *;phaal away from heavy industrialization, uhlih chawaotwised previowu plAns, to agricultural developmt in the Fourth Five-Year Plan. This change, predicated upon and taking advAtage of the new &gri1oMlauw t6bhaology has involved allocatig prtority to water rse de`Vlop3Mnt by incrvaoing irrigation facilitioo and = neoarY QQnm pleMntar inputso. Farm Moohaniuation, fortiLiarn And penstAcUmo extension work and agricultural oredit figur predO. w aiy moag sush inputs.  -6- 210 Under the project, wells and lift irrigation to be provided are expected to irrigate some 100,000 ha, while land development would be carried out on six major irrigation schemes with a coamand area of 175,000 ha. In all, some 45,000 farmers would be able to expand their output of food and commercial crops. The annual increase in production is estimated at full development at about 247,000 tons of foodgrains, 50,000 tons of seed cotton, 23,000 tons of groundnuts, 400,000 tons of sugarcane and 215,000 tons of bananase At current prices the annual value of this additional production at fall development is about US$23 million equivalent. 22. The total project cost is estimated to be US$51.9 million, of which the proposed Credit of US$30 mdllion would finance about 58 percent (minor irrigation US$22.7 million, land dd*l66e6t US$2.7 million equipment US$4.4 million and consultancy ' eS6irices US$0.2 milli4m. IDA financing is based on: (a) the f6ilign exchange cost of the project equipment and consultancy services and (b) the foreiga exchange cost and one-half of the local cost of minoi' irrigation and land development investments. IDA finaiicing of foreign exchange items would amount to about US$9 million (or 31 percent of its total contribution), whilst local currency financing would total about US$21 million. This substantial financing of local costs is necessary if the Bank Group is to make an effective contri- bution to agricultural development in India, which, characteristically, involves a small foreidg exchange component. The more general case for local.expanditure financing has been discussed in recent economic reports, including Chapter X of the economic report distributed on May 24, 1971 (R 71-120)0 23. Most of the proceeds of the credit would be ie&t to farmers in Mabarashtra for on-farm investments in minor irrigatidni and land development throagh the Agricultural Refinance Corporation (ARC), whioh would refinance the Maharashtra State Cooperative Land Develop- ment Bank (LDB) and its federated Primary Banks as well as selected commercial banks lending to farmers under the project. As in earlier credits, the participating commercial banks would be required to accept the same terms and conditions of lending as the LDB. In addition, the project would include financing for well-drilling, earthmoving and hydrological equipment, and for consultancy services to assist in the proper exploitation of groundwater resources. 24. Farmers' contributions, in the case of loans from the LDB, would be 10 percent of the cost of their individual investmnmts, (except that small farmers Would not be required to make a down- payment for minor irrigation investments) and a share contribution to LDB capital equal to 10 percent of the amount of their loans. The remaining finance needed would be provided in the first instance by the LDB or participating commercial banks; ARC, in turn, would refinance 90 percent of LDB and commercial bank lending for minor irrigation and 75 percent for land development. The Credit would supply about 66 percent of ARC support for the project.  -7 25. Approzdmately, US$4.6 million of the proposed Credit would be made available to the Maharashtra State government to finance the well-drilling, earthmoving and hydrological equipment required for the project, as well as a cmtributimn to consul- tancy services. Approximate3,y, US$25.4 illimn would be onlent to ARC in support of the credit program. ARC would repay at the end of nine years at an interest rate of 5-4 percent in the case of loans to ultimate Borrowers not exceeding this period, and the balance after fifteen years at 6 percent in the case of the longer maturities. These are-the rates which have applied to GOI lending since June 1971* In each case, the interest rate would be reduced by 1/4 percent for prompt payment. ARC, which is already acting as the supervising and refinancing agency for the other six agricultural credit projects and an agro-aviation project, would refinance loans by the LDB and the participating commercial banks at 6-1/2 percent per annum. These banks would lend to individual farmers at 9 percent per annum. 26. Drilling rigs, land reclamation machinery and hydrological equipment are to be procured under the usual arrangements for international competitive bidding, with Indian suppliers receiving a margin of preference of 15 percent or the existing level of import duties, whichever is less. The prevailing customs duty is 30 percent for drilling rigs and earthmoving machinery for agricul- tural purposes. 27. The economic rates of return are estimated to range from 33 to 55 percent for minor irrigation and 39 percent for land develop- ment. Financial rates of return to farmers would also be high, being estimated at current producer prices to range from 40 to 73 percent for minor irrigation investments and about 60 percent for land development. 28. The first five of the agricultural credit projects were in states with comparatively strong institutions, but with the sixth (Mysore) substantial rehabilitation of the LDB system was required in order to make it a suitable channel for IDA funds. A similar situation exists in Maharashtra, where a background of poor lending practices and weak collection discipline has resulted in a serious overdues position going back over many years. In 1970/71, this was exacerbated by a severe drought in the State. As of June 30, 1971, 54 percent of total payments due to Primary Banks r uined uncollected. About one-third of these overdues were attributable to the drought. To meet this situation, the State government and IDB in consultation with the Reserve Bank of India (RBI) and ARC prepared a rehabilitation program. This program, comprising a financial isorganization of the 21 primary banks which would be involved in project lending (out of 26 in the LDB system) and a number of administrative measures designed to recover past overdues and ensure future collections at satisfactory levels, is now being implemented and is expected to be campleted by September 30, 1972.  - 8 - 29. The immediate objective of tbe financial reorganization is to redace overdwe to not more than 25 percent of the amounts due and payable as of June 30, 1971, after deducting overdues attributable to the drought. To the exztnt that this cannot be achieved by June 30, 1972 through improved collections, the State goveromt is obligated to cantribute additional funds to the capital of the Primary Banks, to be repaid as collections of overdues are received. Before the credit would be declared effective, the reorganization of at least 15 of the 21 Primary Ranks in the project would have to have been satisfactorily completed. 30. The LDB system is undertaking an aggressive collection program aimed at recovering all overdues on a scheduled program as well as ensuring a satisfactory repa7ment performance in future. The State has agreed to provide full cooperation in -this-etfort, includiug additional recovery staff where needed andiva,rious collection procedures are being speeded up. ARC will view the recovery performance of each Primary and would, upon..agreement by the Association, withhold refinancing under the project from.any Primary Which failed to make satisfactory progress on recovering amounts overdue on June 30, 1971 or which incurred overdues of more than 25 percent of total payments due for any subsequent year. 31* 'Where the situatimn warrants, the boards of directors of Primaries will be reconstituted and the management replaced. Training courses are being established for managers and staff of the system to introduce new appraisal and lending techniques. 32. These arrangements represent a realistic approach to the general problem facing many agricultural credit instit-dtions in India. Given the cooperation of State governments, of the RBIs, and of ARC, the treatment of the problem as developed for this'and`the'Mysore project could be applied elsewhere and permit broadening:the geographical spread of agricultural lending by the Association in IndiA. 33. There is a need to safeguard groundwater in the State to ensure its opti,m utilizatione In the absence of legislation to control over-exploitation of groundwater resources, the Project Agreement lays down criteria relating to the density and spacing of wells. These are not a substitute for effective legislation (model legislation has been prepared but it will take same time before being adopted in individual States), but they go some considerable way to achieving the objectives shared by the State and the Association.  - 9 - PAW IV - LElAL INSTRUMINTS AND AUTHORTTY 34s. The draft Development Credit Ag t between Iudia and the Association, the draft Project Agreement among the Association and ARC and LDB, the Agreement between the Association and the State of Maharashtra, the Recommendatian of the Commttee provided for in Article V, Section 1(d) of the Articles of Agreement and the te of a Resolution approving the proposed Developcmt Credit are beiug distributed to the Eecutive Directors separatelvr. 35. The draft Agreements incorporate the relnding tern and prcurement provisions explained in paragraphs 25 and 26 above. The specific obligaticns of India regarding the procurement of equipment for the project are included in Sectim 3.01 of the Developmnt Credit Agreement. 36. In addition to the Condition of Effectiveness referred to in paragraph 29, the Development Credit Agreement contains other Condition of Effectiveness in Section 8.01 which relate specifically to the project. PART V - COMPLIANCE WITH ARTICLES OF AGREd3T 37. I am satisfied that the proposed Credit would comply with the Articles of Agreemet of the Association. PART VI - REaCQM1ATIC1 38. I recomnend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments   Annex I INDIA SUMARY STATEMENT OF LOANS AND CREDITS (As fJanuary31, 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 DFC 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-IN 1971 India Andhra Pradesh 24.4 24.4 230-IN 1971 India Agro-Aviation 6.0 6.o 241-IN 1971 India Teleconmunications 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 ICICI 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 10.0O 280-IN 1971 India Railways XI 75.0 75.04 Total (less cancellation) 1,111.4 1,696.0 662.3 of which has been repaid 403.0 .3 Total now outstanding 708.4 1,695.7 Amount sold 110.2 of which has been repaid 108.8 11.4 Total now held by Bank & IDA 707.0 1.,695.7 Total undisbursed 125.8 536.5 662.3 * Not effective as of January 31, 1972   Annex I (Page 2) SUMKARY STATEMENT OF IFC OPERATIONS IN INDIA (As of December 31, 1 971) 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. 812,000 399,047 1,211,047 1964 Mahindra Ugine Steel Co. Ltd. 2,210,000 986,607 3,926,607 1964 Lakshmi 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 COUNTRY DATA Total Percent in kn2 Cultivated Area: 3,268,580 43.0 Density Population: Total prk (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 billion1/ 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% 1968/69Y 2.2% 1969/70_/ 5-5.5% 1970/711-/ 4.5-5% Per capita, 1970/71: US$90 Gross Domestic Product at Current Prices, 1970/711/: 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: 1965/66 1966/673/ 1967/681' 1968/693/ 1969/702/ 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): _ Increase (%) 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 1970/71-/ Rate of increase in prices Consumer prices>/ 5.1 6.o Wholesale prices 5.1 6.5 Third Plan Period 1961/62 - 1965/66 Public Sector Operations (Rs. billion): 1969/70 Annual Average Public sector plan outlay 21.76 17.15 Balance from current revenues plus surpluses of public enterprises 6.68 5.82 Domestic borrowings 9.11 4.23 Total extemal assistance to public sector 5.39 4.84 Deficit financing 0.58 2.26 Ecternal Public Debt, excluding 1965/66 - 1970/71 Supplier's Credits (US $ million): 1970/71 Annual Average Total debt outstanding (as of March 31, 1970) 8,263 Total annual debt service 584,6/ 46 Debt service ratio6/ 30 26 1964/65 - 1970/71 Average Rate of Balance of Payments (US $ million): 1970/711/ Increase () Total exports 2,040 3.0 Total imports 2,170 3.5 Trade balance - 130 1966/67 - 1970/71 1970/71 Annual Average Conmodity concentration of exportsz' 33 34.6   Annex II (Page 3) Official reserves IMF gold Use of Net inter- Foreign Exchange of gold, foreign tranche Overall IlMF national Reserves _ exchange and SDRs position reserves credit liauidity (US $ million) As of December 31, 1967 662 Nil 662 456 206 As of September 30, 1970 1 ,081 Nil 1 ,081 106 975 As of September 30, 8/ 769.' 1,003 Nil 1 1971 9 703 1/ Government of India preliminary estimates as of May 1971. These figures will not be finalized for some time. 2/ Preliminary estimates. 3/ Preliminary estimates and not strictly comparable with data for 1 961/62-1 965/66. 4/ December 1970 to December 1971 . 75/ Working class consumer price index. '6/ Before debt relief. 7/ Jute, tea and cotton fabrics as a percentage of total exports. / Includes allocation of $100.58 million in SDRs in January 1971. 9/ Includes use of $17.5 million previously non-monetary gold.  I  Annex III CREDIT AND PROJECT SUMMARY MAHARASHTRA AGRICULTURAL CREDIT PROJECT Borrower: India, acting by its President Beneficiaries: Agricultural Refinance Corporation, Maharashtra State Land Development Bank and participating cammercial banks Amount and US$ 30 million. To be repaid in semi-annual Terms of Credit: instal3ments payable on each April 1 and October 1 ccamencing April 1, 1982 and ending October 1, 2021, each installment to and including the instalbint payable on October 1, 1991' to be one-half of one percent of the principal amount and each installment thereafter to be one and one-half percent of its principal amount. Relending Terms: Frm ThIdia to ARC: for loans to be repaid 9 years from withdrawal (estimated at approxdmatel,y 70 percent of the Credit), 5-1/2 percent per annum with a 1/4 percent rebate for proipt repayment of interest and principalj for loans to be repaid 15 years from withdrawal 6 percent per annum with 1/4 percent rebate for prompt repayment of interest and principal. From ARC to LDB and participating commercial banks: 6-1/2 percent per anmum with repayments set to coincide, more or less, with the maturity period of the special debentures purchased by ARC or, as the case may be, with expected collections of loans granted to farmers and other ultimate beneficiaries. Loans to ultimate borrowers would be at, 9 percent per annum. Estimated Project (US $ millian) Coist: Local Foreign Total Minor Irrigation 37.4 4.1 41.5 Land Development 4.3 0.5 4.8 Land Development Equipment 0.8 3.9 4.7 Drilling Eqidpment 0.1 0.4 0.5 Hydrologi