Announcement of Twenty Five Million Credit for Small-scale Industry in India on January 11, 1973

• INTERNATIONAL DEVELOPl\fENT ASSOCIATION 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 73/1 Subject: $25.0 million credit for small- January 11, 1973 scale industry in India The International Development Association (IDA), an affiliate of the World Bank, today announced its first operation in direct support of India's small-scale industry sector. An IDA cxedit of $25.0 million will contribute towards an estimated $42 million required in foreign exchange by State Financial Corporations to meet the development needs of the small-scale industry sector over the next two years. The Industrial Development Bank of India (IDBI), a f:ully-owned sub- • sidiary of the Reserve Bank of India, will channel the proceeds of the credi.t through 18 State Financial Corporations covering the en1:ire country. established in 1964, has been active in identifying and financing gaps in the IDBI, industrial structure and in coordinating, aa an apex institution, the activities of other industrial term-financing institutions at the national and state levels. The World Bank Group has been involved in finand,ng Indian industry for 20 years. Seven loans and credits totaling $228.5 million have been made directly to steel and fertilizer enterprises. Seven credits totaling $680 mil- lion have financed the imports of equipment, spares and raw materials for key industrial enterprises. In addition the Bank has provided $265 million to the Industrial Credit and Investment Corporation of India {ICICI) to finance industry. Over 500 enterprises have so far had access to Bank resources • through these loans. Most of these loanS have benefited large-scale enter- prises. /more Illt\ P.R. No. 73/1 - India -- small-·scale industry - 2 - • For both social and economic reasons, India is making special efforts to develop the labor-intensive small-scale industrial sector, which is an important component of Indian industry. About 50% of the value added in the entire manufacturing field '.is contributed by small industries. These provide employment to about seven milUon people. Exports of small-scale enterprises have also become significant. The development of small industries is considered an :importan.t instrU1J1ent to promote economic growth in rural areas, and thus to bring income and employment to the poorer sections of India. The proceeds of the credit will be relent by the Government of India to IDBI at an interest rate of 5 3/ 4% for a period of 15 years. Corporations, which will pay i11terest at 6 1/2%. IDBI in tum will use the funds to refinance projects put forward by the State Finance Ultimate borrowers will pay • at least 9%. The maturity of loans made by the State Finance Corporations to sub-projects and of any refinancing of these loans by IDBI will be determined by the requirements of the sub-project. The project is expected to be completed by 1977. The IDA credit to the Government of India is for a tenn of 50 years includ:f.ng 10 years of grace. It will be interest free, but will carry a service charge of 3/4 of 1% per annum to cover IIN\'s administrative expenses. - 0 - •