Announcement of Bank and IDA providing One Hundred and Seventy Million Dollars for Industry in India on June 11, 1973

INTERNATIONAL BANI{ FOR RECONSTRUCTION AND DEVELOPMENT 1 IN'l Ii~RN A'rl()N AL DRVJ~~LOPMENT ASSOCIA'rION 18 1 8 H ST R E E T. N \V WASHINGTON D.C.29433 TELEPHONE EXECUTIVE 3-6360 Bank Press Release No. 73/37 Subject: Bank and IDA providing $170.0 IDA Press Release No. 73/Wa million for industry in India June 11, 1973 The World Bank and its affiliate, the International Development Association (IDA), are providing $170.0 million in two separate operations designed to assist irdust.rial development in India. A Bank loan of $70.0 million will increase the foreign exchange resources of ~the Industrial Credit and Investment Corporaticnof India (ICICI), a development finance company providing medium and long-term finance to private industry. The loan, tenth to be made by the Bank to ICICI, brings the Bank's total lending to ICICI to $335 million. An IDA credit of $100.0 million will enable about 700 medilD1l and large-scale enterprises in selected priority industries to maintain and expand production. The credit will meet about a third of the industries' foreign exchange requirements of about $295 million during 1973/74 for imports of raw materials, components and spare parts. $70 million Bank loan to ICICI ICICI was established in 1955 with the Bank's advice and assistance in order to promote the growth of private industry in India. ICICI has made substantial contribution to the expansion of India's manufacturing output, exports and employ- .ment. S:!!'?.~e :!.ts founding.in 1955, through the end of 1972, ICICI approved financial assistance totaling the equivalent of Rs. 3,861 million. Of this amount, 22% had /more Bank P.R. 73/37 - IDA P.R. 73/44 -- India -- industry - 2 - gone to chemicals and petrochemicals, 1)% to ferrous metal products, 9~ to machinery • manufacture and 7ct, to electrical equipment. ICICI' s clients account for lOOG.! of Indian capacity ··in aluminium and automobiles, 70~ in paper, plastics, steel tubes and steel wire ropes, 68% in cement and 34% in fertilizers. Estimates are that total exports by ICICI's clients during 1971 amounted to about $156 million equivalent. Projects financed by ICICI have led to the creation of J00,000 jobs. This represents about 5~ of industrial employment in factories employing over 25 workers and 11% of the employment created in Indian industry since 1955. ICICI expects its future commitments to rise annually by about 16% during the 1973-77 period. The Corporation has a considerable number of projects under consideration ., and it will require about $112 million equivalent to meet the foreign exchange require- ments till the end of 1975. The Bank loan of $70 million will meet part of the needs. ICICI plans to fill the gap through financing from bilateral sources of assistance and borrowing in the Euro-currency market. The Bank loan to ICICI will bear interest at 7~~ and will be guaranteed by the Government of India. Repayments to the Bank will conform approximately to repayments received by ICICI on its sub-loans financed out of Bank funds which will not extend beyond 15 years. $100 million IDA credit for Industrial Imports Through emphasis in successive Five-Year Plans, India has built up a highly diversified industrial structure capable of producing most of the consumer goods and • wide variety of capital goods and intermediates. In recognition of India's industrial potential, the Government of India's approach to the Fifth Five-Year Plan specifies a target annual growth rate for industrial production of 8.3%. Industrial growth during India's current Fourth Plan (1969-74), however, has been nruch lower than the target rate of 8 to 10%. Among the factors contributing to the inadequate rate of growth has been the underutilization of capacity caused by the shortage of imported raw materials and components. The IDA credit of $100 million will enable the Government to finance additional imports. The industries selected are corrrrnercial vehicles, tractors and power tillers, fertilizers, pesticides, motors, transformers, switchgears and magnetic steel stampings, aluminium smelting, automotive ancilliaries, machine tools, abrasives, ball and roller bearings, heavy construction equipment and spares for heavy construction equipment. The IDA credit will be extended to the Government of India for a term of 5g years, including 10 years of grace. It will be interest-free, but will carry a service char6e of 3/4 of 1% to cover IDA's administrative costs. - 0 - •