India - Economic situation and prospects

FILE COPY DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. 156-IN ECONOMIC SITUATION AND PROSPECTS OF INDIA May 8, 1973 Asia Region South Asia Department This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization.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.  CURRENCY AND OTHER EQUIVALENTS Currency Prior to mid-December 1971 US $ 1.00 = Rs 7.50 Rs 1.00 = US $ 0.1333 Mid-December 1971 to end June 1972 US $ 1.00 = Rs 7.27927 Rs 1.OO = US $ 0.1374 After end-June 1972 floating rate Spot rate (March 31, 1973) approx. US $ 1.00 - Rs 7.59 approx, Rns 100 - US $ 0,13 For all projections in this report the exchange rate uS $ 1.00 = Rs 7.50 has been used, unless specified otherwise. Weights Unless otherwise specified all weight measures are metric. Years The Indian fiscal year runs from April 1 through March 31l  This report was prepared in the Office of the Resident Representative of the World Bank in India by William M. Gilmartin, Bilsel H. Alisbah, Timothy King, Wolf Ladejinsky, Timothy P. Lankester, Peter E. Naylor, Norman E. Reynolds, N. S. Segal, Armand Van Nimmen, Sunanda Sengupta and Y. Satyanarayanan (Statistical Analyst).   ECONOMIf, SITTATION XAN) `RCSPECTS CF' INDIA Table of Contents BASIC DATA .................. ..*. . MAP .................................... ... ......... ... SUFi4AP2fA.ND CONCLUSIONS ....................... . . .............. 1. INTRODUCTION Historical Perspective ..................... ...... . 1 Recent Developments .................... , .. ............ 7 2. 1T4?UATION 14 The Current Situation .,..... 17 New Directions? .... ................. C 3. UNEINPLODIP1NT AND POVERTY 21 '. AGRICULTURAL PRODUCTION Growth Rate of total Agricultural Output. 2 Foodgrains - 1. 1Theat ................. e ............... 27 Foodgrains - 2. Rice 8.....2 Foodgrains - 3. Other Toodgrains ., 30 Foodgrains - 4. Total Seasonal and Regional Trends 31 Non-Foodgrains Crops ...... ............ 32 Livestock. . .. 3 The Production Record in relation to Requirements . 34 Implications of past trends for future growth ... 36 5. THE RURAI, SC'ENE The Drought . ..............40 Illusory Drought Consequences . . .42 Green Revolution's Gainers and Losers .....O.......... 43 Agricultural Prospects. .. 45 New Land Ceiling Round 0............ .. Rural Programs .. . ............. .............. 52 G. INDUSTRY HIistorical Perspective ........ .0* ...... 63 Current Situation and Short Term Prospects ............. 67 Longer Term Prospects .... ....................69 7. STEEL, POWIER AND FERTILIZER: A BPLEF REVIEW 76  Table of Contents (continued) Page No. u. DONIESTIC FINANCE Domestic Resource Mobilization .............. .. .... 86 Overall Budgetary Situation ............................... 90 The Center ............ .......... O.!.......... 91 State Finances ............. a. . . . . . . , . . . . 96 Plan Outlay ............. 98 hioney and Prices ...... ............. 100 9. THE APPROAUCT TO TIIE FIFTH PLAN Summary . .... . ......................... 102 Faster Development . ................. 105 n.edistribution . ................. . .... 106 r ,omrjestic Financing ................ ......... 106 'el.f Relia.ce.. ..... * g 109 10. EXPORTS The Overall Record . . . ............ 112 Direction of Exports .................... 0... . ... 1l11 The Comxposition of Exports .................. . I ..114 Tr'aditional .. Exports . . . .......,. 115 T.on-Traditional Ex.orts ................. . . . 117 T..e I. ..ure . . . 124 11. YSTI;:ArTTD ACTD I.EQUIREJ1IET FOR 1 973/7)4 7lecent Trends in te Balance of Payments ..... ............ 125 TIndia1s Trade and Aid el.atfionshin3 with East European rountries ....... ........ 128 Foreign Exchange Reserves . ..............................131 External assistance .................. . . 132 7lalance of Payments Projection and Aid Recor^mendation for 1 973/714 ...1............ ........ 135  COUNTRY DATA - INDIA ]POPULATION DRl'.'TY 3 '68, 580 ,,2 577 million (mid-1973) 177 per km Rate of growths 2.2Yp% (from 1961 to 1971) 350 per km of arable 1nd r UPLAT103 26ARACTRILS, CS (H)EALT Brs ir ith reRe (per 1,000) 38 (eat) Population per phyatcian (1971) 4,000 (ast 1.rLie Death Rate per 1,000) 16 (eat) Populationr per hospital bed (1968/69) 1,826 infant biortality per 1,000 live births) 120-140 (eat) INCui& DlSTlibVTIOP (1967/68) DISTRIMJTION OF LAND OWNERSHIP (1954/55) - of oonsumption, lowest quintile rural 8% (eat) urban 7e (eat) % owned by top 7% owners 12('6 (estj tol cnsumption, highest quintile rural 41% (est) urban 44% (eat) 56 owned by smallest 25%A of owners 19) (est) A,;C-I 'O PIPED WATER (1971) CCESS TO ELECTRICITY (1971) , of ;p,.laaion - urban 7VI6 (est) 56 of population - urban 100 (est) .f rorulation - rural 556 (eat) 56 of population - rural 25 (eat) .Ti.TOl; (i9 - 69) EDUCATION -t. s 1o of requireoienta 83 (est) Adult literacy rate 74 (1971) 36 Ir ,aitta protelr intake (gr. per day) 55 (est) Primary school enrollment 7/. (1969/70) 79 2/' GN? PEN CAPITA IN 1970 t US 4 110 hROSS N6TIONAL P0XO16T IN 1972/73 ANNIUAL RATE OF GROWTL (p/J constant prices) US I Bln. % 1961/62-1965/66 1965/66-1969/70 1970/71-197?/75 11 at Lerket Irices 63.6 100.0 3.3 4.7 2.0 Iro,s Domestic Investment 9.3 14.6 ^.ross ointional Saving 8.6 13.5 Carrent Account Balance 0.7 1.1 Resource Gap 0.5 0.8 OUTPUJT. LABOR FUH0E AND PRODUCTIVITY IN 1971 Value Added (at fastor oost) Labor Force V.A. Per Worker US t Bln. nc ____ L Rf National Averoe kgrijul ture 19.4 42.6 129.9 72.0 149 47 lndoi ry 13.3 23.5 20.2 11.2 658 208 aervises 24.3 34.1 30.2 16.8 805 255 Totl/.,erage 57-0 100-0 IO.3 100.0 316 .0VEW4IAriiT FINANCE 1/ General GOvernment Central Governmen t (Re. Bin) S of GDP (R ) B of GAL 1971/72 1971/72 1968-71 1971/72 1971/72 1968_71 lurreat Receipts 70.30 16.4 14.9 40.28 9.4 8.5 Current Expenditurse 71.64 16.7 14.6 41.28 9.6 8.1 Corrent Surplucs/Deficit - 1.34 - -3 0.3 -_ 1.00 - 0.2 0.4 lapotal iEx~enditnres 35.66 8.3 7.8 29.23 6.8 6.0 Bxternal Ass:.otanoe (net) 3.25 0.8 1.1 3.25 0.8 1.1 M Population of 10 years and over; extracted from 156 sample data of the 1971 Census. t*ffcial estimatet probably overestimates aotual enrollment of age group 6 - 11 by one-fifth. c 2,s per CipltB GN2P estimate is at 1970 market prioces, caloulated by the same conversion technique as the 1972 World Atlas. Ai other conversiorns o dollars in this table are at the average exchange rate prevailing during the period covered. E. Estimates. c,' Prsofers between Center and States have been netted out.  C0OIISRY DATA - 31DIA .O*bY 1h1*;lT AN3 P1UC8S 1965/66 1969/70 l 1 1971/72 October 1971 October 1972 ( Billion Rs outstanding at end of period) :o-OTy and quasi 2looey 61.4 93.3 105.6 122.3 113.7 130.4 oank Credit to Publio Seotor 40.8 52.4 56.9 69.0 64.0 77.5 Bank Credit to Private Sector 28.1 48.3 56.7 64.4 59-9 64.3 (Percentages or Index liumbers) 1965/66 1296 1970/71 1971/72 February 1972 February 1973 i,oney and .uasi Money as 31 of GPP 24.2 24 .3 24.8 26.5 Yholebale Price Index (1961/62-100) 137.5 175.7 180.6 192.2 191.2 217.2 lh,uui percentage changee in? ifolse61e Price Index 12.4 6.4 2.8 6.4 13.6 oank Credit to Public Sector 12.9 1.5 8.6 21.3 Snk Credit to Private Sector la.8 15.1 17.4 13.6 b i-jACa 0. PAYX1aTS 1969/70 1970/71 1971/72 DRCHANDISR EXPORTS (AVERAGE 1969/70-1971/72) (Million US S) US $ min. i dicport of Goode 1,884 1,950 2,106 Jute Manufactures 291 15 l-orts of GoodS ,109 2,179 2,436 Tea 188 9 Trade Balance - 225 - 229 - 330 Cotton Textilee 161 8