India - Second Agricultural Refinance and Development Corporation Credit Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2038-IN REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE SECOND AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT May 12, 1977 This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as at April 28, 1977) Rs 1.00 = Paise 100 US$1.00 = Rs 8.73 Rs 1.00 = US$0.1145 Rs-1 million = US$114,500 (Since September 24, 1975, the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the US Dollar/Rupee Exchange rate is subject to change. Conversions in the appraisal Report were made at US$1 to Rs 9.00.) FISCAL YEAR GOI: April 1 - March 31 ARDC: July 1 - June 30 ABBREVIATIONS ARDC - Agricultural Refinance and Development Corporation GOI - Government of India LDB - Land Development Banks RBI - Reserve Bank of India  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE SECOND AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT 1. I submit the following report and recommendation on a proposed de- velopment credit to the Government of India (GOI) for the equivalent of US$200 million on standard IDA terms. The credit would support the activities of the Agricultural Refinance and Development Corporation (ARDC) in providing credit mainly to farmers for on farm development purposes, primarily minor irrigation. The proceeds of the credit would be channelled through the ARDC to cooperative and commercial banks for on-lending to farmers. On-lending from GOI to ARDC would be for 9 and 15 years at not less than 6.5% and 7.5X interest per annum, respectively, depending on the type of investments to be refinanced by ARDC. ARDC would on-lend the funds to banks at a minimum 7.5% and 8% annual interest for up to 15 years, the actual terms again depending on the type of investments refinanced. Banks would lend to farmers for minor irrigation investments at a minimum annual interest rate of 10.5% and for other types of investments at a minimum annual rate of 11%. Details of on-lending arrangements are presented in Annex III. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (1529-IN dated April 25, 1977), was distributed to the Executive Directors on May 3, 1977. Country data sheets are attached as Annex I. Background 3. India is exceptional among the Bank Group's member countries for its size and diversity; the country is divided into more than 20 States with a population of some 640 million speaking over 60 languages. Since Independ- ence the trend in growth of GNP has been about 3.5% per annum, or a little over 1% per annum in per capita terms, while over the five years 1971/72 - 1975/76 it fell to as low as 2.5% per annum, in spite of the record harvest of 1975/76. This unsatisfactory performance is in part the result of the low availability of investible resources: the net transfer of resources from abroad has never been above 3% of GNP, and fell to as little as 0.8% between 1969/70 and 1973/74; similarly, while India's domestic savings ef- fort compares well with other countries at the same average income levels, the rate has very rarely exceeded 17% of GNP. The investment rate puts India 1/ Parts I and II of this report are identical to Parts I and II of the President's Report for the Madhya Pradesh Extension and Research Project (Report No. P-2011-IN), dated May 2, 1977. This document has a restncted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -2- in the lower third of all developing countries. More significant perhaps is the fact that in spite of a marked rise in the investment rate from about 10% in the early 1950's to about 18% over the past fifteen years, the trend in GNP growth has remained about the same. This indicates a marked decline in the efficiency of capital use, as a result of increasing capacity underutilization, long project gestation, and increased emphasis on relatively capital intensive projects and sectors. 4. Since Independence the growth of the socio-economic infrastructure (transport, education, health services, etc.) has been impressive, but has often been achieved at high cost and has yielded results of variable quality. Many industrial and agricultural investment schemes have been highly successful, but others have taken excessively long to be completed and have operated well below full capacity. In some regions of the country, growth and structural change have been rapid and compare favorably with developments in many other parts of the world, in other regions there has been stagnation, and in some, decline. Although national income has increased in most years, there has been no rise in the living standards of the vast mass of rural and urban poor, conservatively estimated at 200 million people with per capita incomes of US$70 per annum (converted at the official exchange rate) and US$250 on a purchasing power parity basis. 5. The structure of the economy has been slow to change. Agriculture remains the dominant sector, with its share of national product declining only gradually from about 50% to 42% over the last twenty years. The share of manufacturing industry has increased only slowly and, since the late 1960s, has remained approximately constant at about 16%. There has, however, been a shift in the composition of manufacturing production, with consumer, inter- mediate, and capital goods now contributing about one third each, compared with an overwhelming preponderance of consumer goods 25 years ago. Recent Trends 6. In March, 1977, a party other than Congress formed a Government for the first time since Independence. Undoubtedly, changes in economic policies and emphasis will be formulated in the course of the next few months. The state of the economy was not a prominent election issue; in fact the economy was generally stronger than at any time in the last six years. Although the growth of GDP in 1976/77 is not expected to have exceeded 2%, this was on top of the very good growth of 8.8% in 1975/76. Agricultural production is ex- pected to have fallen by about 3%, but only because of the return to a more normal harvest of 110-114 million tons of foodgrains after the record 121 million tons of the previous year. Industrial growth was around 10% in 1976/77, which is significantly above the rates achieved in the late 1960's and early 1970's. Exports continued their bright performance, rising by 18% in US dol- lars and 12% in volume terms. The overall resource position, with record foreign exchange and foodgrain reserves, is exceptionally strong, and gives the Government considerable room for maneuver.  7. In agriculture the bumper crop of 1975/76 was largely due to remarkably good weather conditions; the good crop in 1976/77 - a foodgrain harvest in the region of 110 million tons would be the second largest on record - was produced under generally normal weather. A conspicuous change was the increase in fertilizer use, which rose by more than 20% over 1975/76, following marked declines in fertilizer prices. Industrial production bene- fited from fewer labor disputes, fuller utilization of installed capacity in both private and public sectors, a more liberal import policy, relatively good power availability, and increased demand because of higher consumer incomes, expanded exports and higher public expenditures. However, whole- sale prices which had fallen 14% from September, 1974 through March 1976, rose 11% from the end of March to December, 1976 and continued rising into 1977. It is not yet clear whether this upsurge indicates a new inflationary trend or merely a correction of the previous sharp decline in the relative prices of a range of agricultural commodities. 8. The balance of payments situation has improved dramatically since the 1973-1975 period. In 1975/76 the trade deficit was $1,530 million, which was more than covered by US$1,560 million in net aid, US$205 million in net purchases of currency from the IMF, and US$559 million in net miscellaneous capital and invisibles (mostly private remittances); indeed, this large aggregate net resource inflow led to a US$794 million increase in foreign ex- change reserves, to a level of US$2.2 billion. In 1976/77, the trade deficit is estimated to have fallen by US$1,080 million, due to a rise of US$845 million in exports and also to a fall of US$235 million in imports, primarily because of lower prices and volumes of foodgrains and fertilizer imports. The decreased trade deficit, along with a further increase in the net inflow of miscellaneous capital and invisibles from abroad of US$540 million, more than offset the fall of US$350 million in net aid and the substantial repurchases of currency from the IMF, and allowed a US$1.5 billion addition to reserves, which reached a level of US$3.7 billion at the end of March 1977. Development Prospects 9. The favorable economic situation gives the new Government the op- portunity to address the longer-term constraints on growth. The basic task is to raise the overall rate of growth from its historic range of 3% to 4%. In the long run this will require raising more resources for investment. But it will also be important to achieve significantly better utilization of avail- able resources, partly through an immediate boost to industrial demand. 10. In agriculture, the basic problem remains that, despite the record foodgrain crop in 1975/76 and the good crop in 1976/77, the long-term growth rate of foodgrain production has been unacceptablly low, at about 2.5% per annum over the last seventeen years, and only 2% in the last ten. This has meant that only in good years has there been any margin of production to cater to per capita growth in food consumption, and in normal years it has been necessary to import food. There is considerable scope for stepping up growth both by increasing the use of inputs and by raising the productivity  of existing capacity. Three promising developments in regard to the first are the sharply higher outlays on irrigation in the Fifth Plan Period along with a renewed determination to complete projects expeditiously; the indica- tions that private investment in tubewells is picking up again after a slow- down in the early 1970's; and the recent recovery of fertilizer demand. With regard to more productive use of existing capacity, there is increased aware- ness in the Government that the benefits of irrigation projects can be much increased not only through command area development but also through more efficient design and operation of major surface irrigation infrastructure. Also, hopes have been generated for increasing productivity on both irrigated and rainfed farms through a reorganized and improved extension and research system, which has been recently introduced in several States in northern and eastern India. 11. A strong effort to raise agricultural growth is essential, not only to meet food requirements, but also because of the pervasive influence of agriculture on the levels of activity in other sectors of the economy. This effort must also be so structured as to increase the incomes of small and marginal farmers, in order to increase production since they operate 25% of the cultivated land and account for somewhat more than 25% of production, and for welfare reasons, since they make up about 70% of rural population and constitute the majority of those living below the poverty level. 12. The industrial sector is poised for rapid growth, as the most serious constraints on the supply side have been removed by the improved situation with respect to power, coal and imported raw materials and components. There has been a progressive liberalization of controls and the 1976/77 Central Budget announced a reduction of some taxes on private industry. In many cases management of public enterprises has improved, as is reflected in their markedly higher production and profitability as a group. In the medium term it is the demand for industrial output that will determine industrial growth. In certain industries, export demand will provide a strong pull on production; this is true, for example, for iron and steel, certain chemicals, some electrical equipment, processed agricultural products, and vehicles. But the impact of increased exports on overall industrial demand will grow only slowly given the current low share of exports in sales. If the higher growth and productivity in agriculture discussed earlier were to materialize, it would provide a significant stimulus to industry. It is difficult to specify the linkages explicitly; but because of the large share that agri- culture holds in GNP, the coefficients do not have to be large for agricul- tural growth and the concomitant growth in demand for industrially produced inputs and mass consumption goods to boost overall industrial demand signi- ficantly. A higher public deficit and increased public investments are the instruments most directly under Government control, and also those that can increase demand for industrial products most immediately. The interim budget of the new Government moves strongly in this direction with a 240% increase in the planned budget deficit over 1976/77. 13. Improvement in the supply of energy augurs well for India's ability to meet the needs of a more rapidly growing economy. Organizational  and transportation problems in the coal industry have largely been overcome, production is sufficient to meet demand, stocks are comfortable, and the industry has good prospects for meeting both domestic and export demand. Supply of electricity continues to be a concern, because of the vulnerability of hydro power to variations in the monsoon and the continued existence of local shortages, even when the overall power situation is satisfactory. But the severe power supply constraints of the past have been relaxed for the moment at least, and several institutional improvements promise to reduce the future incidence of shortages: underutilization of capacity has been virtually eliminated in well-established power stations; progress has been made in the organized exchange of power between states thus relieving local- ized power shortages; and the problems of slow implementation of power invest- ment due to delayed delivery of materials and equipment have virtually dis- appeared. In addition, the delays caused by the inability of State Electricity Boards to finance projects expeditiously have been eased by their improved financial position following tariff increases, and by increased Plan outlays by the Central Government. The medium term prospects for the oil and gas sector have been further improved by major new finds of oil and gas near the large offshore Bombay High field. Crude oil from Bombay High was brought to shore for the first time in May 1976; production reached an annual rate of 2 million tons by March 1977, and will rise to a level of 12-13 million tons by 1984/85. Although India will continue to import crude at or somewhat above the current level, much of the foreign exchange burden of rapidly rising imports will be avoided by the development of these resources. Prospects are also bright for further discoveries offshore, given the current high level of exploration activity. 14. Underlying all other development issues is that of population. Al- though India's population growth rate of a little over 2% is not high in com- parison with most LDCs, the size of the absolute increment - 13 million annually - is daunting. It appears, however, that population growth may have passed its peak in the 1960's, and it is expected to continue to slow down, both because the birth rate will continue to decline and because the death rate will not fall as steeply as in the past. With a sustained family planning effort, it should be possible to lower the population growth rate to 1.1% per annum by the end of the century. Our "best guess" projection of India's population by 2000 is 880 million. Many of the benefits of family planning policy will only be felt beyond the turn of the century, but the decline in fertility will bring about an early change in the age structure of the popu- lation. The school age group will grow more slowly or not at all after 1981 thereby reducing the pressures on the primary and secondary education system. The labor force, however, will continue to grow at a fast rate until the end of the century. 15. India's balance of payments position should be comfortable for the next few years. The combination of past global inflation and increased ex- ports have reduced the proportion of export earnings needed for debt service from 30% in 1970/71 to 16% in 1976/77. This ratio is not likely to rise above this level in the next few years. Given continuing favorable policies, the volume of exports should continue to grow by 7% to 10% annually in the near  future; and import needs for fertilizer, POL and foodgrains will continue to require a diminishing proportion of available foreign exchange. The large inflow of private remittances shows no immediate signs of declining and should continue to bolster the foreign exchange position in the medium term. Imports, including a variety of capital goods, have already been liberalized signifi- cantly. Increased public investment and a revival of the domestic economy is likely to generate substantial additional import demand. However, this should be quite manageable, given the currently comfortable foreign exchange position, bright export prospects, and continuation of the current real level of net aid. The present situation presents an opportunity to raise the level of investment and, consequently, reach a more satisfactory level of long term growth. PART II - BANK GROUP OPERATIONS IN INDIA 16. Since 1949, the Bank Group has made 49 loans and 80 development credits to India totalling US$1,751 million and US$4,112 million (both net of cancellation), respectively. Of these amounts, US$808 million has been repaid, and US$1,524 million was still undisbursed as of March 31, 1977. Annex II contains a summary statement of disbursements as of March 31, 1977, and notes on the execution of ongoing projects. 17. Since 1957, IFC has made 14 commitments in India totalling US$58.4 million, of which US$12.4 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$31.5 million, US$25.0 mil- lion represents loans and US$6.5 million equity. A summary statement of IFC operations as of March 31, 1977, is also included in Annex II (page 2). 18. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit opera- tions. Major irrigation, marketing, seed development, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capac- ity utilization in industry. The Bank Group has also been active in support- ing infrastructure development for power, telecommunications, and railways. Family planning, education, water supply development, and urban investments have also received Bank Group support in recent years. 19. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, industry, power, urban development and water supply remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs such as credit for  - 7 - on-farm investments, command area development of existing irrigation schemes, intensification and streamlining of extension systems, and seed production form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefitting small farmers. Projects supporting water supply, sewerage, and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on agriculture-, export- and energy-related projects. 20. The need for a substantial net transfer of external resources in support of India's economy has been a recurrent theme of Bank economic re- ports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has successfully adjusted to the changed world price situation. However, the basic need for readily usable foreign exchange assistance, to augment domestic resources, assure effective use of existing capacity, stimulate investment and accelerate eco- nomic growth, remains. As in the past, Bank Group assistance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity of the domestic capital goods industry. The import component of projects tends to be especially low in such high-priority areas as agriculture, education, and family planning. For the Bank Group to be able to make an appropriate con- tribution to the financing of projects in these sectors, it is important to cover a proportion of local expenditures. 21. It is clear from the review of the Indian economy that as much as possible of India's external capital requirements should be provided on con- cessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support, and some Bank lending to India, for which the country is creditworthy, is appropriate. As of March 31, 1977, the loans to India held by the Bank totaled US$968 mil- lion, of which US$512 million remained to be disbursed, leaving a net amount outstanding of US$456 million. 22. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 58%, 24% and 29%, respectively, in 1975/76. On March 31, 1976, India's outstanding and disbursed external public debt was US$13.1 billion, of which the Bank Group's share was 25%. The Bank Group's share is expected to remain around this level in the future. Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1975/76, about 15% of India's total debt service payments were to the Bank Group.  - 8 - PART III - AGRICULTURAL CREDIT IN INDIA 23. India 's agricultural growth strategy requires for its success substantial cash investment on the part of millions of farmers in modern in- puts and assets. The traditional system of family financing and rural money- lending supplied a large portion of funds in the past; but these sources are not well-suited to the needs of modern agriculture because of their consumption orientation, lack of organization and, in most cases, high cost. Specialized agricultural credit institutions with the ability technically to appraise proj- ects and lend for them on the basis of their productivity; with access to funds outside the rural sector; and with the ability to fulfill farmers' needs for production credit at reasonable cost have come to play a crucial role in facilitating and accelerating private agricultural investment. 24. Private investment of the type financed by institutional agricul- tural credit increased substantially in the period from the mid-1960s to the early 1970s. In terms of total agricultural investment, institutional agri- cultural credit financed less than 3% of total investment in agriculture in 1956; it reached 8% in 1961; then jumped to 20% in 1969 and has remained at about this level through 1973/74. In terms of total farmers borrowings, by the early 1950s, institutional credit provided only 7% of borrowings by farmers; by 1962 it was 19%, by 1968 it was 38%, and currently it is about 40%. A very large proportion of farm investment remains in such traditional assets as bullocks and the wooden ploughs and carts to go with them; but between 1966 and 1972 investment in tubewells and pumpsets rose over 250%, tractors about 175% and iron ploughs over 50%, compared to less than 3% for the traditional assets. Overall, private investment in agriculture surged from 1966 to 1971, and then fell somewhat in real but not nominal terms through 1975. With the good monsoons of 1975 and 1976, there are indications that private investment is picking up again. 25. The bulk of loans from agricultural credit institutions to farmers has been to finance minor irrigation investments - mainly tubewells and pump- sets; but dugwells, river lift, tank and small surface diversion irrigation have been financed as well. This is consistent with the need to expand the irrigated area which is seen by most analysts of Indian agriculture as the crucial variable in raising productivity. Minor irrigation (mostly private) accounts for over half of current gross irrigated area and represents just under half of the ultimate irrigation potential remaining to be developed. Undeveloped potential for minor irrigation is particularly large in the Eastern Region (West Bengal, Bihar, Orissa, Assam and eastern Uttar Pradesh) where progress has been slow, despite a huge aquifer. Recently the Government of India with the assistance of the Bank Group has been concentrating on raising agricultural productivity in this region through a series of agricultural projects with research and extension as their centerpiece. Several of these have already been presented to the Board. These efforts are expected to lead not only to significant increases in national foodgrain output and to improve- ment of regional income distribution but ultimately also to stimulation of large scale private investment in minor irrigation.  - 9 - 26. The history of agricultural credit institutions is long, starting with the Cooperative Credit Societies Act of 1904. The cooperative credit system has provided the bulk of institutional credit for agriculture, over 60% in 1973/74. However, since their nationalization in 1969, major commercial banks have lent an increasing portion of their funds for agricultural projects and have accounted for an increasing portion of institutional credit in the sector. Both the cooperative and commercial banking systems provide short- term crop loans and medium and long term project loans. The cooperative system is comprised of a three-tiered system of cooperative societies at the village, district and state levels that extend mainly short-term credit but also some medium term loans; and a separate two-tiered structure of land development banks at state and district levels that lend exclusively for medium and long term, mostly against the security of land mortgages. 27. Demand for medium and long term institutional credit for agriculture is estimated to be about Rs 24 billion (US$2.7 billion) during the Fifth Plan (1974-79). Funds are raised by sale of debentures, mainly to state governments, commercial banks, Life Insurance Corporation of India, other agencies, and also to individuals. An important and increasing part of medium and long term credit disbursed through land development banks and commercial banks is re- financed by the Agricultural Refinance and Development Corporation (ARDC). In addition to providing funds, ARDC plays an important role in improving the performance of agricultural credit institutions through technical assistance and enforcement of performance standards. 28. The main problems in the institutional credit sector are: high loan overdues in the cooperative system; marked regional disparities in volume of lending; and difficulty in providing access to credit for the smallest farmers. To some degree these problems are interrelated, as often areas where overdues are highest are the areas where the volume of lending is lowest and the pro- portion of small farms is highest. For the most part, these problems do not originate in the agricultural credit system but are a reflection of more fundamental problems of agricultural development, particularly extensive rural poverty and low productivity. Nevertheless, lack of agricultural credit is part of the problem and much can be done to improve the situation. Loan overdues can be reduced by better technical and economic appraisal of projects, improved supervision, and greater determination at the state level to enforce repayment discipline both among farmers and within the institutions themselves. Regional differentials can be reduced by strengthening the financial position and administration of credit institutions in backward states and creating clear expectations by use of targets for their growth. The volume of loans to small farmers can be raised by increasing the incentives for credit institutions to lend to small farmers and by providing credit terms that offer sufficient inducement for small farmers to risk undertaking economically viable investments. 29. To help meet these needs the Government of India established ARDC in 1963 to increase the flow of medium- and long-term credit and to strengthen local credit and supporting institutions. Since its creation, ARDC has estab- lished a reputation for sound technical and financial appraisal standards for  - 10 - refinancing lending schemes of local institutions. In 1969, the Bank began its association with ARDC by using it as a vehicle for loans to seed growers in the Terai Seeds Project (Ln. 614-IN). This was followed in the period 1970 through 1975 by ten agricultural credit projects, each at the state level, mainly for refinancing loans to farmers through state land development banks. These credits were basically concerned with minor irrigation development, land levelling and, in some states, farm mechanization. In addition, there have been thirteen operations where ARDC served as a vehicle for financing private investment under various agricultural projects. Two of these operations financed market development projects in Bihar and Karnataka; four provided refinance of on-farm development, land shaping and watercourse construction in irrigation projects; three were for dairy development; and other projects dealt with apple processing and marketing, seeds production, cotton cultiva- tion and ginning, and on-farm development in drought prone areas. In 1975, as a consequence of experience gained from the ten agricultural credit projects, IDA provided US$75 million to ARDC (Cr. 540-IN, ARDC I) to support its all- India operations for a 24 month period. As in the state operations, highest priority was given to minor irrigation. Progress of this first ARDC credit has been exceptional. The Corporation has been scrupulous in its adherence to agreements and undertakings and has been regular in submitting required reports, documents and audited accounts. Disbursements under the project are on schedule at this time and are expected to be completed ahead of the Closing Date (December 31, 1977). Through the above 11 agricultural credit projects, ARDC has had access to US$395 million of Bank Group lending over the last eight years. Of this, as of March 31, 1977 it had utilized US$308 million or 77%. 30. GOI and ARDC, with the support of the Bank Group, have been making progress toward the solution of many of the problems discussed above. To make inroads on the high level of overdues, ARDC has strived to improve standards of appraisal, supervision and collection through programs of training staff of local institutions; and has required institutions to meet schedules for improvement in their overdues position as a condition of continuing refinance. It has obtained in some cases state governments' commitments to enforce col- lections discipline and has been active in project supervision and imple- mentation activities. It has paid particular attention to strengthening institutions in backward areas and has set targets for the proportion of funds flowing to these areas. It has special provisions for encouraging lending to small farmers, including lower down payments and longer repayment terms for such loans and proportional targets for the volume of such lending. 31. GOI has also taken other steps to alleviate some important insti- tutional constraints to increasing the flow of rural credit. In areas where the cooperative credit structure is weak, GOI has encouraged commercial banks to take up the slack and open more rural branches. The Reserve Bank of India (RBI), through a committee known as the Talwar committee, has made recommen- dations, now adopted by ten states and being considered by a number of others, for legal and administrative changes in state banking systems to put commer- cial banks on an equal footing with cooperative banks. In the past, coopera- tive banks have enjoyed certain advantages such as exemption or relaxation in  - 11 - the payment of stamp duty and registration of liens, as well as priority on claims. Partly as a result of these measures, commercial bank lending refi- nanced by ARDC has been rapidly increasing in recent years and grew from Rs 279 million in FY1975 to Rs 708 million in FY1976. 32. Another significant step which could lead to substantial improve- ment in the institutional framework for cooperative credit is the recent completion of a comprehensive study undertaken by the Reserve Bank of India and ARDC under ARDC I to examine the feasibility of merging the short and long term cooperative credit structures. An RBI/ARDC committee (The Committee on Integration of the Cooperative Credit Institutions) concluded that the two cooperative structures should be merged to ensure that investment (long-term) credit and production (short-term) credit needs of farmers are adequately met. Under the present dual system, often one or the other type of credit is not available to farmars when needed. Also, there are often conflicting security requirements and other problems associated with dealing with two separate institutions. The result is that investments are not as productive as they should be or, in some cases, are not undertaken at all, to the detriment of farmers and the economy. GOI and IDA are pursuing the implementation of these recommendations. Under the proposed project GOI and ARDC would provide regular reports to IDA on the progress of implementation of the Committee's recommendations. PART IV - THE PROJECT 33. The project was prepared by the staff of ARDC and submitted to IDA in August, 1976. It was appraised in November 1976, and negotiations were held in Washington in April, 1977. The Borrower's delegation was headed by Mr. I.J. Naidu, Secretary, Rural Development, Government of India. A report entitled "Second Agricultural Refinance and Development Corporation Credit Project" (Report No. 1520-IN), dated May 12, 1977) is being circulated to the Executive Directors separately. A credit and project summary is attached as Annex III. Project Description 34. The project would continue Bank Group support, over two years, for ARDC's program of lending to farmers. The project would also continue support for an intensive training program primarily for staff of land development banks. The main focus of ARDC lending would continue to be minor irrigation development to assist in increasing India's food production. The staff train- ing program would enable the main rural banking institutions to meet more effectively the growing credit needs of Indian agriculture. 35. The project would provide loans to approximately 500,000 farmers. The minor irrigation component would involve loans primarily for wells and pumpsets, to supply an estimated I million ha with irrigation water. US$175 million of the credit would be utilized for minor irrigation and land devel- opment.  - 12 - 36. Credit would also be provided to farmers for development of tree crops, dairy and poultry, sericulture, fisheries and several other agricul- tural activities. US$24 million would be utilized for these diversified lending purposes. 37. US$100 million of the Credit would be reserved for small farmers who would qualify for preferential borrowing terms provided that their anti- cipated income was adequate to repay the loan over a prescribed period. Small farmers would be identified on the basis of their predevelopment in- come. A farm family earning Rs 2,000 or less per year at 1972 prices (or about US$50 per capita) would be entitled to participate in the project under less stringent terms for down payment and repayment period. 38. The training component would provide for continuation and expansion of training begun under ARDC I. Training would focus on staff of agricultural lending institutions, particularly of land development banks, to accelerate improvement in the quality and quantity of lending and recoveries. The train- ing program should result in improvement of overall operating effciency of the main rural credit institutions. US$1.0 million of the Credit would be devoted to this component. ARDC Description 39. ARDC would be responsIble for carrying out the project. ARDC is qualified in terms of staff competence and experience to undertake the task. During fiscal year 1976, ARDC disbursed refinance assistance amounting to US$190 million, up from US$118 million the year before, and sanctioned 850 new lending schemes representing commitments of US$329 million. The aggregate disbursement by ARDC since its inception amounts to US$660 million represent- ing total agricultural investment of over US$800 million when contributions of banks, state governments and ultimate beneficiaries are taken into account. Refinancing for minor irrigation schemes accounts for the major portion of ARDC's business. Up to June 30, 1976, this accounted for 75.2% followed by farm mechanization (10.8%), land development, reclamation, and soil conser- vation (5.8%), with the balance divided among plantation and horticulture, diversified agriculture, storage and market yard schemes. 40. ARDC had grown to a professional staff of 320 and 15 regional offices as of June 30, 1976. ARDC has a nine member Board of Directors. The Chair- man is a Deputy Governor of RBI. ARDC's shareholders include RBI, State Land Development Banks, State Cooperative Banks, the Life Insurance Corporation of India, commercial banks and investment companies. 41. ARDC derives its operating funds through borrowings from GOI, RBI and the market as well as from profits on investments. Its GOI borrowings represent mainly the flow of IDA funds to ARDC under ongoing projects. As of the end of FY76, ARDC's sources of funds were as follows: capital and reserves Rs 250 million, GOI borrowings, Rs 2,500 million; RBI borrowings, Rs 1,400 million; and capital market borrowings, Rs 1,377 million.  - 13 - 42. ARDC's operations are conducted mostly through the refinancing of lending schemes undertaken by state land development banks (LDB) and commer- cial banks. Since ARDC's inception, LDBs have accounted for about 76% of ARDC's total refinance of Rs 6,000 million through FY1976. Commercial banks accounted for 21% and state cooperative banks 3%. The proportion of ARDC's operations accounted for by refinancing of commercial banks has, however, grown rapidly in recent years, and was 42% of ARDC's FY1976 disbursements. This proportion is expected to level out at about 50% in the future. ARDC's operating results are satisfactory. Profits have increased steadily with ARDC's expanding operations and in FY76, profits before taxes were Rs 58.5 million. ARDC accounts for the fiscal year ended June 30, 1976 have been audited and received an unqualified report. 43. The schemes which ARDC supports are mostly area development pro- grams for a particular type of investment on a large number of farms in a compact area within a single state. The average size of investment in each area scheme is about Rs 5 million. Schemes are assessed by ARDC in terms of technical and financial feasibility. ARDC has expertise in groundwater development, soil conservation, horticulture, animal husbandry, and fisheries. The appraisal covers not only the financial feasibility of the schemes, but also the administrative, organizational, and credit requirements for their successful implementation. 44. During the next few years ARDC plans to continue to expand its in- vestments, particularly in minor irrigation, and to diversify its lending pro- gram. Another objective is to achieve a more even spread of investments in different regions (particularly in the lesser developed states in the eastern and north eastern regions having major untapped groundwater resources). By FY81, ARDC expects to reach an annual disbursements level of Rs 3,600 million compared to Rs 1,700 million in FY76. Project Implementation 45. Project financing and organizational arrangements would follow the pattern successfully established under ARDC I. The proceeds of the credit for minor irrigation and diversified lending would be used by ARDC to refinance up to 90% of participating banks' loans. ARDC would enter into refinance agree- ments with participating banks under which eligibility conditions, relending terms, and well spacing criteria as agreed with IDA would be applied. For cooperative banks these conditions would include recoveries standards which a bank must meet to maintain eligibility to receive ARDC refinance. The minimum level of recoveries permissible would be 75%, with the additional provision that the bank must have collected on its own at least 65% of debt service due; the state government could provide the balance of up to 10%, to be applied against a corresponding amount of arrears, as redeemable equity if necessary. This standard emphasizes the need for cooperative banks to achieve viability not through injection of state governmental capital, but through their own efforts at recovering loans as they become due. To encourage project parti- cipation and strengthening of LDBs in lesser developed areas, an intermediate  - 14 - recoveries formula, agreed under ARDC I, would be included under this project as well. Under this formula, LDBs would be eligible to receive ARDC refinance according to a sliding scale arrangement which links the amount of refinancing for which a bank is eligible to its recoveries performance. An LDB would be eligible to receive a percentage of the refinance received the previous year, depending upon current recoveries performance. Further, any bank that falls in performance from one year to the next and achieves a recoveries level below 75% progressively loses its eligibility to receive refinance from ARDC. This interim formula would be applied until October 31, 1978. After that date, all LDB would be governed by the 75% minimum recoveries standard (see Section 2.04 of the Project Agreement). 46. To facilitate lending to small farmers, ARDC, participating banks, State Governments, and GOI have instituted a number of measures which would apply under the project. These include: reducing down payments, and, if necessary, permitting these to be spread over two years rather than paid in one installment; special terms for participants in groups; and relaxation of land mortgage requirements and provision of a State Government guarantee in lieu. Furthermore, many small farmers at the lowest range of the small farmer definition are also eligible for capital subsidy assistance ander GOI and state sponsored small and marginal farmer development programs. Subsi- dies range from 25% for minor irrigation investments to 33-1/3% for invest- ments in activities such as dairying and poultry raising. Under the project, the loan portion of investments undertaken by these small farmers would also be eligible for project refinancing. However, to ensure subsidy funds are adequately administered, farmer eligibility criteria would be checked for each subloan by the participating banks, and ARDC would be responsible for overall supervision. 47. Interest rates charged under the project would be consistent with the prevailing overall interest rate structure in India, which is considered adequate. Inter-sectoral differentials in rates charged by institutions lend- ing primarily to agriculture and those lending to industry are small. For example, industrial financing institutions generally lend to industry at 11% and 12%, and commercial banks for agricultural purposes at about 13% when using their own funds. Under this project, participating banks, including commercial banks, would receive funds from ARDC at minimum annual interest rates of 7.5% for minor irrigation and on-farm development, and 8% for diver- sified agricultural lending. Final beneficiaries would borrow at minimum rates of 10.5% for minor irrigation and on-farm development, and 11% for other agricultural purposes. (On-lending terms and conditions are detailed in Annex III). Under the project, ARDC would ensure that interest rates charged on loans would be sufficient to enable ARDC and participating banks to cover all operating expenditures and charges, including taxes, and maintain adequate provisions for bad debts and general reserves. While interest rates are gene- rally adequate to cover the current costs of lending operations, most LDBs would benefit from an increased "spread" to allow continued expansion and diversification of operations to meet the needs of small farmers and to ensure long-term viability. Under the project, ARDC, in conjunction with the Reserve  - 15 - Bank of India, would carry out a study of interest spreads with particular reference to the long-term needs of LDBs. The Government has agreed that such a study would be completed by March 31, 1978 (see Section 4.01 of Development Credit Agreement). 48. Steps would be taken under the project to improve ARDC's capabili- ties to monitor and evaluate its activities and impact. With regard to mo- nitoring, sampling methodology would be reviewed and modified as appropriate, and sample sizes increased to provide more accurate and complete information on the progress of programs at the field level. ARDC's post project and scheme evaluation system needs strengthening, particularly as ten IDA financed agricultural credit projects will have been completed during the project period and will require post project evaluation. To assist in this effort, and to improve ARDC evaluation methodology, ARDC has agreed to establish, by December 31, 1977, an evaluation task unit of 4 senior staff in ARDC head- quarters and to appoint an agricultural economist in each Regional Office (see Section 3.09 of the Project Agreement). 49. Groundwater development in India, largely supported by ARDC, is continuing at an impressive pace and is expected to do so for a number of years. Together with this development, however, there is a danger of over exploitation of groundwater in some areas and consequent loss of farmers' investments and production. In a few areas, the development potential has already been reached. Consequently, the need for groundwater legislation is becoming increasingly necessary. Model legislation drafted by the Central Groundwater Board has been available to states for a number of years but no state has enacted it. The State of Gujarat has recently promulgated an ordinance based on the model legislation, and several other states are actively considering legislation or similar ordinances, with strong encour- agement from GOI, ARDC and IDA. However, groundwater is constitutionally a state subject and in most states there is strong political opposition to legislation. Therefore, progress is likely to be slow. 50. On the other hand, institutional control of groundwater has made significant progress in recent years, and has lessened the danger of over development. Under previous IDA agricultural credit projects, state ground- water institutions have been substantially strengthened and more information on groundwater acquifers, use, and recharge has become available. Under ARDC I, problem and potential problem areas for groundwater exploitation have been delineated and are being closely monitored by the Central Groundwater Board and ARDC. Well spacing criteria and restrictions in problem areas are being applied by credit institutions throughout India. Also, in risky areas, farmers are reluctant to invest their own funds, and control through financial institu- tions is adequate. WIhile IDA, GOI and ARDC would continue to press for early enactment of legislative controls over groundwater development, the project would continue to place reliance on institutional controls to ensure that groundwater problem areas are monitored closely and that institutional finance for further development is restricted in those areas. ARDC has also agreed to carry out, by December 31, 1978, studies in these areas to assess in more accurate measure the remaining potential for development and the extent of development through private sources of finance (see Section 3.08 of Project Agreement).  - 16 - 51. The project would continue and expand training programs for: (i) senior and middle level staff of the main agricultural lending institutions; and (ii) LDB junior staff. At appraisal of ARDC I it was estimated that about 6,600 agricultural credit banking senior and middle level staff would require in-service training. About 25% of these will have received such training by the closing date of ARDC I (December 31, 1977) if current sched- ules are met. By December 31, 1979, estimated completion date of the pro- posed project, this should have risen to about 45%. This rate of progress is satisfactory given that banks have difficulties in releasing staff for training during busy periods. A study of LDB junior level staff training requirements conducted by ARDC as part of ARDC I indicated that all the junior staff of LDB, some 17,500 in all, required training and that the training of about 9,000 staff in special categories such as technical and recovery officers should be given priority. All staff in the priority category are expected to have had this training by completion of ARDC I, and the remainder would receive it under the project. Present training arrangements and quality of training are generally satisfactory. ARDC is aware that deficiencies have existed, and in some instances, still exist in the training program - mainly the lack of training materials at the LDB training centers. ARDC is adequately staffed, however, to direct and monitor training programs and implement remedial mea- sures when problems arise. The primary training center would continue to be the College of Agricultural Banking (CAB) at Poona. The LDB training centers, which would handle the bulk of the junior level training, would be required to meet ARDC standards for the curricula and for staff experience and quality. Project Cost and Financing 52. The credit would support ARDC's on-farm investment program over a two year period costing a total of about US$583 million equivalent (includ- ing duties and taxes) of which the foreign exchange component is about US$73 million or 12%. Included in this cost are about US$437 million for minor irrigation and US$144 million for diversified lending. The project also includes a total of US$2 million for training. 53. The proposed IDA credit of US$200 million would cover 34% of the total project cost, including the whole of the foreign exchange costs and an estimated US$127 million of local costs. The remaining 66% of project costs would be financed by farmers (7%), banks (9%), ARDC (49%), and GOI (1%). 54. IDA funds for lending to farmers would be channelled by GOI to ARDC for onlending to participating banks which would, in turn, relend the proceeds to individuals or groups of farmers. The terms for small farmers would in- clude less rigid downpayment criteria (5% rather than 10% or 15%) and repay- ment over a longer period (up to 15 rather than 9 years). Project lending rates would be in line with the prevailing rate structure in India and the spreads proposed are reasonable in relation to the risk element involved and the cost of appraisal and supervision of individual loans (see paragraph 47).  - 17 - Procurement and Disbursement 55. Procurement would involve small investment items (mainly tubewells and pumpsets) on individual, widely scattered farms throughout India with pur- chases spread over two years. As in other ARDC operations finn.aced by the Bank Group and as is usual in agricultural credit projects financed elsewhere, project beneficiaries would be given freedom of choice in the procurement of equipment, goods and services. Consequently, bulking for International Compe- titive Bidding (ICB) would not be practicable, and ICB would not be used as a means of procurement. 56. Normal commercial channels provide an adequate choice of locally manufactured equipment, good servicing facilities exist, and prices are com- petitive, so that farmers have a fair choice of goods at reasonable cost. 57. The credit is expected to be disbursed over two years. IDA would disburse against 55% of ARDC's refinance for minor irrigation and diversified lending; and against 50% of the cost of training. Economic Benefits and Risks 58. The project's primary economic benefits would be an increase in agri- cultural production for domestic consumption and export. At full development, by about 1984, the annual value of increased production is estimated at about US$367 million in 1976 prices. 59. Economic rates of return have been calculated for the investment models used in the financial analysis of the project. As they are based on the experience gained under on-going ARDC schemes, they can be regarded as indicative of the rates of return which would accrue. Results of the calcula- tions are summarized in the following table which indicates that the overall economic return of the project would be about 32%. Economic Rate of Return Dugwell and pumpset 27 Shallow tubewell 41 Pumpset (1.2 ha) 35 Pumpset (2.0 ha) 32 Land development over 50 Coconut 22 Dairy 39 Poultry 23 Mechanized fishing vessel 39 Mechanized canoe 33 60. Beyond the realization of substantial benefits arising out of pro- ductive on-farm investments, the project aims at the build-up of stronger institutions. Strengthening of ARDC's technical units and improvements in  - 18 - the Corporation's monitoring and evaluation systems should result in better preparation, appraisal and monitoring of schemes, thus reducing investment risks. Strengthening of LDBs through intensive staff training would have a similar impact. Mleasures to improve recovery performance of weak LDBs in poorer areas should increase the availability of funds for investments and contribute to a more equitable regional distribution of productive assets. 61. The number of project beneficiaries would be substantial and is estimated at about 1 million farmers, including farmers who would be expected to purchase excess water from project borrowers. At least 50% of the credit would be extended to small farmers and about 25% of the credit is expected to be used in the less developed north eastern States. Incremental annual employ- ment generated by project investment is estimated at about 175 million man-days. Much of the additional labor would be supplied by unemployed or underemployed members of beneficiary families. However, a significant part would be provided by hired laborers, many of them landless people belonging to the poorest segments of India's population. 62. The main risk in this type of project is inadequate appraisal and monitoring of schemes and individual borrowers, leading to poor performance of some investments and individual loans. ARDC's experience shows that this risk is slight, and continuing institutional improvement should reduce it further. The vagaries of weather are an omnipresent risk, but with about 75% of project investments planned for minor irrigation, the project by its nature reduces weather risk. PART V - LEGAL INSTRUMENTS AND AUTHORITY 63. The draft Development Credit Agreement between India and the Asso- ciation, the draft Project Agreement between the Association and the Agri- cultural Refinance and Development Corporation, the Recommendation of the Committee provided for in Article V, Section 1 (d), of the Articles of Agree- ment of the Association and the text of a draft Resolution approving the proposed Development Credit are being distributed to the Executive Directors separately. 64. Special conditions of the Project are listed in Section III of Annex IV. 65. The execution of a Subsidiary Loan Agreement between GOI and ARDC has been made an additional condition of effectiveness of the Credit (see Section 6.01(b) of the Development Credit Agreement). 66. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association.  - 19 - PART VI - RECOMMENDATIONS 67. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President May 12, 1977   so 0S S -8 am I - 0 a SH 4 ; 4" I 1 C 40 SC a U ft Ut 7% NO 0-00~~~~~'t % N~ .55 0 1%' e NCo -rIt 4 7 Om I N .N-C-M am N~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~f ~ S~~~~~~ c-em a S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~M mew oc -I -I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~w o 1 * C Zco a -- 00~ ~~~~ ~~~ ~~~~~~~~~~ M 1.N 0 Ot 0a-. =P0 0 t&ON N o oo C-I OS... - 0- 4W 4~~~~~~ 0 . - - 00% 0 !00.0 0M. W aOCO 46 OS... - 0 N~~~~~~V , :. ! Z = a.0a - a am ZZR 00W. . I me U I~~~~~~~~~~~~~~~ZM 3 C - a 5c~~~~~~~~~~~~~~l WW: 64 , . . aZ ' S W H 00 !0 *. , .1 I 0 0 =C * 0 7 * C .43 C * COHN~~~~~~-M Ow a W .8 - C WI-.RC C~~~2 7%. W It rHs W.. Nt C , Co CO, OCm, ON 'Wmm4.CZ Ce i-a...- a -t~~~~Ib ISMO a .a : -7 mc cam. 5..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Z c e I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ IC *~~~~ a CC -*~~~~~~&Z- M- .. 0C, :4 I, I, Oa I 'as t - Z *4 *ea M e- rn 1% C~~~~~~~~"u It W - W - - vIC s C aS C C I - I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -e~~~~~~O : C( .0W e on. . ..aW 4. 0a  ANNEX I Page 2 of 4 Unless otheevise noted, date for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 end 1970 and for Moot Recent Eutinate between 1973 ad 1975 -- Brasl has been selected as an objective coutry because of ice sine end ecparable problems of regional inequalIty. INDIA 1960 I 1951-61 avrage, lb 1951-60; / Ratio of populatio ncder 15 end 65 end over to labor, force age 15 and over, Id Regietared opplica.nta for work; In 1962; If Registered, not all practicing in the coun try; /a IncludIng nidwives, lb 1958; If 1960-62. 19780 / Ratio of population under 15 end 65 and over to labor force age IS and over, /b 1967-68; /c Including midwive, Id 1967. MOST RECENT ESTIMATE: Is 1971: /b Ratio of population cedar 15 and 65 and over to labor force age 15 and over; in 1976, Id Including nidives Ia 1969-71 -verge, If Population 10 years and ovr INDONESIA 1970 I 1961-71; /b 1971; Ic Oncludig nidwivas; Id Tote1 hospital bedo i-coplote. PHILIPPINIES 1970 /a i percen.tage of esploymet; /b Nat including priv-te voctional schools. BRAZIL 1970 /a gno inalty active populetlon; lb Hospital personnel In Inside only. RIO. April 58, 1977 DEFINITIONS OP SOCIAL INDPICAMORS Land Ares (thou in ) Population par n.rsine peruno - Population divided by nubnhor f procti- Total -Total surfer. a re coprising lsnd area so nand waters. ing osle sod fna1o greduate nurses, tLrained or 'certif-dn Agri.. N-Mat recent eutinate of egricu1tura1 area used temporsrily or nuss and austliery poroonne1 sitb training or coperifence. pernanetly for crops, pastures, narbet & bitches garden or to lhr Population per hospils1 bed - Population divsded by nuobcr of hosplis1 fal1low beds -ialsblo in public and private general sod upenialiond hospital and rehabtlit.tatl centers; ... (odes -c-cg bones and estoblvnhnentc GNP per capita (US$) - iNP pee capita estinates ut current earket prices, for cus todial and prev-tine carn. calcul.atd by- can.ovosinnthod as World Bank Atlas (1973-71 bssis); Per capita sanely ofclrn (7. of recoir-eonLt) - Coopoted fison 1960, 19 70 and 1975 data. enercy eqival-nt ot net Iced uoppiies avilable in counItry per -ap-r po dy aalable ouppilco copriso do.entic prod-t-c , tu~ports loss Pupalation sed vital ststcstirs on~eportc, ad chsnges in otoob; net -oppiivseac lode asival feed, sends, Popuatio (mdyr li-ins - As of July first: if nout avaclablo, qc-tittos used iv foo rccsn adlsscndsrbro, eqire- - aerage of two end-year entiestes; 1960, 1970 and 1975 data. nents were estinated by FAO based on phyuiologiccl needs for -onn1 activity and health cons.idering e-vir-eeta1 t peprator a, body enights, Pocaindsity e e5a in - id-year population per sqoare bilb- ag ad son distibutions of popolation, and s1howig 107. for usete nevetr4(100 hentarosp) ofttS ra ath householdlvl Popolation density-noer souse k beo agric. land - Coeputed as above fur Port capta supply'of prot.in (crans pcr day) - Protei contour of per agricolvuraIlaned only. capita vet supply of food per day; vet supply of food in dfo-md as above, reqaironntn for oil conilco estsblished by USDA Eiruonic Vital statistics eaerchServIcesprovide for a nivinn a11uanc of 60 grain of Crude birth rats per thousan.d. averaaen- An...o IlIve births per thousand total prtotin per day, and 20 gran of aninol and pulae prot.vin, of of old-pear population; ten-year arith-stic -veragno ending in 1960 end uhich 10 grays should be aniool protein; thes standurds arc loser 1970,and fve-per aveage eding in 1975 fornes recet ....se. baItos 7 irInc0 oa pro reesd 23 grain oPavf a protein Crude deat rac or hboead.a re-Assa eths per thousand of old- aan vegefoe rho nId, proposed by POi h hidWrdPn yeee populetion, ~~~ten-year eritlnetic -veragee ending in 1960 and 1970 and Survey. rive-pea average ending Lv 1975 fo ser recent es tinste. Pe aiauoesspl rneisal and pnIon - Protrais inpply of food Infest orra licy rate I/thou) -Annual deaths finfants under one year derived Iro aE n adptusi gan.prdy of age per thousan.d lIve births. Sooth ra.te i/thou) Aees [.4 - Annual deaths per thb.nand in agr group Life espectancv at birth (pro) - Average nunber of pears of life eas 1-4 years, to rhcldreo is thi age group, suggested asa nia or f ing at birth, usually five-your cer-g-c ending in 1960, 1970 and -al-tritin.. 1975fur d-eelpiog c..ontriesl. Gr..ss roseoductics rate - Av era ge nbnhr of liceda-gh tars aune-nill Edu...ti.. hear in, hoe. norol reproduction perio i she vee ene peeset ago- Adiasted enrolment ratio - prinary school - Enru11uont of all ag-na prfcfriiytt es suly-lv-ea -rges ending. 160 percentage of privry school-age popolarc-n, inclodve chcidr- aged 1970 end 1975 for develo,ping cootriecbilpar u ajs edfordifferent lengths of priosr. r.d-ctc-, Popalatios groth rar (7)-ua - _Conpond anulgroth rates of esd- fur outrie wIth stu rroa educatio, enrols etvy vicd 1 00 ps population for 1950-60., 196O-70 and 1970-75. uince non popils ore hbol or above the official urhool ago. Poultion groath rt (7)-ubn-Cospated like groth rate of total Adlcsted erl netetn- onodary school - Coopotda oos population; diffsret df-cittuen of orb anrense say affect voepara- secodary education reqoiren at leat four yearn of approvd peccay bclity .7 data amng c..ustr Ies. i-trrucion; pr-vd- general, -ocac-na or teaher iracecog irbas population_(7. of coral) - gatin of urban to total popoSatios otrcie fur pupils of 12 to 17 years fi age; correpc-dev- different defisitlon of urban smu- nay effect -oparblilty of data ccone sngera lly ecldd. _ongvrootI_ enearn of schoolieg pr-ided (first and secnd levels) - Totl1 yearn of Age tI.L pfre (Percent) - Children (S-I4 year).. eie-g (15-ib years), schoolc-g; at secodary level,: vctional intutinny be par- years s6sdy. ever)aspercenta-ges of ed-ypese popultion t,ily ir c-pletnely sloded Age dependenc ato- hti ofppltion under 15ad 65 n !vr t oainlerluo (7. o eonay Voa Ioa "Iisulcti s those of ages 15 thr-cgh 64. inclue technical, ind-sirio1cc other priaooch operte iconoic dependency ratio - Ratio of population under 15 end b5 and evr indepesdcetly or so departoesnt of -or..ndoryistotnn in the labor force iv age g roup of 5-b 6 osro. Aduolt literacy ratc (7) itorare sdo1s (ableto road and oto) an Painl planning - acceytror (-umoltin-. thou) - C ...lar...e Iobe t of Pe rcentage of total adlt populatio aged IS year and over acceptor of birth-conrol devices under -apice of national faty planning p,rugai ucc icption. Hoo-ing Famly lniganr 7 IL inarriod c-v) - Perceotagen of earned Persons.per rune (ucben) - A-ergn -ober of persoc per rune i annen of child-bearing age ((-4Lb years) who us birth-contro devices ucepid c_nenti..ol duelling, si urbuno-e , das11logs novlode tc ci .oreced .unce in sane age group. nun-p raen Istructir_ and unoccu pi ed parts. Occu..pied dueicoas, without piped eater (7. - Occupied convetional inpiovoent doelligS' inura and rura areas without inside or outide piped Total labr farir (housand)- ELc..onically arrive persons, including eater fac ilities as porcentage o l ccupied daellcvgn. aree d forces and seep1yd hot secluding chouewve, tdenti, eta., Acceus en electricIty (7. of all deelic-os) - Co-neni ti..a deellisgu de aIc L In aiu coant'rie areI nt coparebIe withe triyin ivg q-trers as ycrc.on of total dashllo.gsi Labor fo rce ivauricltror (7. - Agricultural labor forc (in faming, urbansd ruralaes forestry, hasting ad fishing) anpretg ftotal labor force. ina uliescnetdt electricity (7. - Coeputed as above for iecod(7cIflbrfre - Oseopnyod se uau aly def ined as rIa dulirg ony. pean .he are able and willing to tub o,oa fajb vs g-in day, r. eaend nor of ajob, and seeking ann ,for specified Cn-opt-In oinnperid nout e-eding one wek; say not he coparable botun- Radio receiver (prr thou yap) - All types of receiv-- for radio broad- data e.,e opiopen ofiesatistics,sipesm s oplur niesdrciesa cnctrsen andc- years whnrgstaino useepinynent insaaco. radio cots was in effect'; dora for recent ynors nay not bknuonpar..ble s:vceeso-L rle abolished IIcencc.S Lacen Distriboti.o - P-rvovige of peil.eanico (bcth is vaub sod Pa_unour cors (pr thai paP) - Pani.engu- cars vaoyrsnv votor cars hind) frheceive,d b.y richest 57., richest 207., porarvo 207., and punrontcotn les ha eight Pccov-, enciodev ahbaiseve, heerens and LO.o oshods elit_ry vhcles Electric-tv (huh/yr eer cap) - Anv...l c-n-cpti-s of industrial, von- Distribatio of land Isvn sp-Pecnasof lie d owned bpyelbii veria ,hpblitad piay rliya iiatbo e aia 10. and poorest 107. of land cave rn..nr i baedonprdut .io data aithoct allowance fur I. nies _ grids hit llowing fur iopor ad eports of ecle,tic ivy. Health and Sriio eio,riot (he,/yr per cap) - Pr caIta ac.. I....u.vptiun ce bilogr-n Population, per physicc-n - Popu!lattu di.ided.by cueher of prac ,ic fg e-timtd iron domestic productio plus net imports of sewpr-nt. phycici..s qualified feom . I sonica eolatuiverst y level.  ANNEX I Page 3 of 4 BCON0MC DEVELOPMENT DATA GNP PER CAPITA IN 1975 i UsS 190 GROSS NATIONAL PRODUCT IN 1975/76 ANBUAL RATE OF GROTH N. onrtant prices) USS Bln. 6 1960/61-1964/65 1965/66-1969/70 1970/71-1974/75 GNP at Market Prices 82.8 100.0 3.8 3.7 2.6 Gross Domestic Investment -I6.7 20.1 Gross National Saving 16.0 19.3 Current Account Balance -0.7 -0.8 Resource Gap -1.5 -1.8 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1971 Value Added (at factor cost) Labor Force V.A. Per Worker USt Bin. B Mile 9 1St % Of National Average Agriculture 24.5 46.6 130.0 72.1 188 64 Industry 11.8 22.3 20.2 11.2 582 199 Services 16.31.1 0.2 16.7 542 186 Total/average 52.6 100.0 180.4 100.0 292 100 GOVERNMENT FINANCE General Government Central Government Tis. ~Bin %of GDP oR.MTf GDP 1975/76 1975/76 1973/74-1975/76 1975 /76 1973/74-1975/76 Current Receipts 133.34 18.5 16.7 79.11 11.0 9.8 Current Xxpenditures 118.77 16.5 15 70.01 9.7 8.8 Current Surplus/Deficit 14.57 2.0 1.4 9.06 1.3 1.0 Capital Expenditures 2/ 54-27 7.5 6.2 40-75 5.6 4.6 External Assistance (net) 13.89 1.9 1.3 13.89 1.9 1.3 MONEY. CREDIT AND PRICES 1965/66 XL72 1972/73 1973/74 1974/75 1975/76 September 1975 September 1976 (Billion Re outstanding at end of period) Money and Quasi Money 61.4 122.4 142.2 169.1 187.2 213.6 199.0 238.3 Bank Credit to Public Sector 40.8 69.o 82.5 92.9 102.6 108.5 112.8 112.7 Bank Credit to Private Sector 28.1 64.4 76.0 90.1 109.5 134.2 106.0 143.8 (Percentage or Index Numbers) January 1976 January 1977 Money and Quasi Money as % of GDP 24.0 26.4 27.9 27.1 26.2 27.9 Wholesale Price Index (1961/62 = 100) 131.6 188.4 207.1 254.2 313.0 302.8 290.0 320.5 Annual peroentage changes in: Wholesale Prime Index 7.7 4.0 9.9 22.7 23.1 10.5 fl Bank Credit to Public Sector 12.9 21.3 19.6 12.6 10.4 5.7 4.7 Bank Credit to Private Sector 12.8 13.6 18.0 18.5 21.5 22.5 24.6 a/ The per capita GNP estimate is at market prices, oalculated by the conversion technique used in the World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. b/ Quick Estimates. S/ Computed from trend line of CNP at factor cost series, including one observation before first year and one observation after last year of listed period. / Transfers between Center and Statee have been netted out. e/ All loans and advances to third parties have been netted out. _f Net bank credit to Government Sector. S/ Bank Credit to Commercial Sector.  ECON0tI1C DEVELOPMENT DATA ANNEX i Page 4 of 4 BALANCE OF PAYMENTS 1273/74 25/76 1976/77 MCHANDISE EXPORTS (AVERAGE 1973/74-1975/76) CUSS lMillion) UIS 8{n. Esports of Goodo 3,239 4,174 4,555 5,400 Sugar 342 9 Imports of Goods -3,971 -5,794 -6,085 -5,850 Jute manufactures 317 8 Trade Balanoe - 732 -1,620 -1,530 -450 Tea V 249 6 NFS (net) i/ n.a. n.s... n.a. n.e. Cotton Textiles 413 10 Iron Ore 206 5 Resource Gap n.a. n.a. n.a. n.a. Engineering Goods 391 10 Others 2.071 S2 Interest Payments (net) i, - 233 - 260 - 250 - 280 Total 3,989 100 Other Factor Payments (net) n.a. n.a. n.a. n.s. Net Trarwfere j/ n.a. n.a. n.a. n.a.h Balanoe on Current Accounts n.a. n.a. n.a. n.a. EXTERNL DEBT. MARCH 31. 1976 USS Billion Official Aid Disbursements 1,249 1,766 2,326 2,050 Repayable in foreign currency 12.3 Amortisation - 459 - 519 - 516 - 560 Repayable through axport of goods 0.7 Transactions with IMF 75 515 205 - 565 Total Outstanding and Disbursed 13.0 All Other Items 205 80 559 1,100 FDMBT SERVICE RATIO FOR 1976/77 15.5 percent Increaae in Reservee (-) -105 38 - 794 -1.495 Gross Reserves (end year) 1,416 1,378 2,172 3,667 ITRD/IDA LENDING, December 31, 1976 (USS Iln.) Net Reserves (end year) 1,341 783 1,332 3,202 IBRD IDA Fuel and Related Materials Outstanding and Disbursed 452.7 3208.4 Imports 720 1,451 1,417 1,625 Undiebured 510.3 1140.5 of whioh: Petroleum 719 1,451 1,417 1,625 Outstanding including Exports 20 26 41 n.a. Undiebursed 963.0 4348.9 of whioh: Petroleum 16 17 22 n.a. RATE OF EXCHANGE 2/ Prior to mid-Deoember 1971 sS81.00 = Re 7.5 After end June 1972 : Floating Rate Rs 1.00 = USSO.133533 Spot Rate March 31, 1976 Mid-December 1971 to USS1.00 = Re 7.27927 approx. USS1.00 - Ne. 8.80475 end June 1972 Rs 1.00 = US$O.137576 approx. Rs 1.00 = US$ 0. 113575 1/ Estimated. i/ Included with 'All other Items'. j/ Aid and trade figures converted to US dollars using exchange rates as indicated in inside front cover of this report or notes to individual tables. t/ Including garments. j Amortization and interest payments (excluding ILF transaotions) as a peroentage of merchandise exports.  ANNEX II Page 1 of 12 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of March 31, 1977) Loan or US$ Million-/ Credit No. Year Borrower Purpose (Net of Ca..cellation) BANK IDA Undisbursed 38 Loans/ 1,032.5 42 Credits fully disbursed 2,271.9 614-IN 1969 India Tarai Seeds 13.0 - 3.8 203-IN 1970 India Punjab Agricultural Credit - 27.5 8.1 226-IN 1971 India Andhra Pradesh Agricultural Cr. - 24.4 2.0 242-IN 1971 India Power Transmission II - 75.0 7.9 250-IN 1971 India Tamil Nadu Agricultural Credit - 35.0 5.3 264-IN 1971 India Cochin II Fertilizer - 20.0 0.9 267-IN 1971 India Wheat Storage - 5.0 3.7 789-IN 1971 ICICI Industry DFC IX 59.0 - 2.3 278-IN 1972 India Mysore Agricultural Credit - 40.0 1.9 294-IN 1972 India Bihar Agricultural Markets - 14.0 11.3 312-IN 1972 India Population - 21.2 9.1 342-IN 1972 India Education - 12.0 11.3 356-IN 1972 India IDBI 25.0 15.4 377-IN 1973 India Power Transmission III - 85.0 35.0 378-IN 1973 India Mysore Agricultural Markets - 8.0 7.3 902-IN 1973 ICICI Industry DFC X 70.0 - 9.6 390-IN 1973 India Bombay Water Supply - 55.0 40.3 392-IN 1973 India Uttar Pradesh Agricultural Cr. - 38.0 13.5 403-IN 1973 India Telecommunications V - 80.0 19.2 427-IN 1973 India Calcutta Urban Development - 35.0 15.8 440-IN 1973 India Bihar Agricultural Credit - 32.0 18.5 456-IN 1974 India HP Apple Processing & Marketing - 13.0 11.7 481-IN 1974 India Trombay IV - 50.0 24.6 1011-IN 1974 India Chambal (Rajasthan) CAD 52.0 - 41.9 482-IN 1974 India Karnataka Dairy - 30.0 29.8 502-IN 1974 India Rajasthan Canal CAD - 83.0 58.2 520-IN 1974 India Sindri Fertilizer - 91.0 37.5 521-IN 1974 India Rajasthan Dairy - 27.7 27.4 522-IN 1974 India Madhya Pradesh Dairy - 16.4 16.1 526-IN 1975 India Drought Prone Areas - 35.0 30.2 1079-IN 1975 India IFFCO Fertilizer 109.0 - 90.4 1097-IN 1975 India Industry DFC XI 100.0 - 67.3 532-IN 1975 India Godavari Barrage Irrigation - 45.0 35.1 540-IN 1975 India ARC Credit - 75.0 37.6 541-IN 1975 India West Bengal Agrc. Dev. - 34.0 32.0 562-IN 1975 India Chambal (Madhya Pradesh) CAD - 24.0 21.5 572-IN 1975 India Rural Electrification - 57.0 55.9 582-IN 1975 India Railways XIII - 110.0 50.0 585-IN 1975 India Uttar Pradesh Water Supply - 40.0 40.0 598-IN 1975 India Fertilizer Industry - 105.0 98.0 604-IN 1975 India Power Transmission IV - 150.0 150.0 609-IN 1975 India Madhya Pradesh Forestry T.A. - 4.0 4.0 610-IN 1976 India Integrated Cotton Development - 18.0 18.0 616-IN 1976 India Industrial Imports XI - 200.0 8.0 1251-IN(TW) 1976 India Andhra Pradesh Irrigation 145.0 - 145.0 1260-IN 1976 India IDBI II 40.0 - 40.0 1273-IN 1976 India National Seed 25.0 - 25.0 1313-IN 1976 India Telecommunications VI 80.0 - 61.8 1335-IN 1976 India Bombay Urban Transport 25.0 - 25.0 Total 1,750,5 4,112.1 of which has been repaid 782.6 25.9 Total now outstanding 967.9 4,086.2 Amount Sold 111.5 of which has been repaid 111.5 Total now held by Bank and IDA 967.9 4,086.2 Total undisbursed 512.1 1,012.2 1,524.3 1/ Prior to exchange adjustments.  ANNEX II Page 2 of 12 B. STATEMENT OF IFC INVESTMENTS (As of March 31, 1977) Fiscal Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.7 0.3 1.0 1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2 1964-75 Mahindra Ugine Steel Co. Ltd. 11.8 1.0 12.8 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.0 0.1 1.1 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 TOTAL 49.6 8.8 58.4 Less: Sold 6.0 1.6 7.6 Repaid 12.4 - 12.4 Cancelled 6.2 0.7 6.9 Now Held 25.0 6.5 31.5 Undisbursed 5.6 - 5.6  ANNEX II Page 3 of 12 1/ C. PROJECTS IN EXECUTION-/ Generally, the implementation of projects has been proceeding reasonably well. Details on the execution of individual projects are below. The level of disbursements was US$551 million in FY76 or 62% of Bank Group commitments to India in that year. The undisbursed pipeline of US$1,524 million as of March 31, 1977, corresponds roughly to com- mitments over the preceding two-year period and reflects the leadtime which would be expected given the mix of fast and slow-disbursing projects in the India program. Ln. No. 902 Tenth Industrial Credit and Investment Corporation of India Project; US$70.0 million loan of June 8, 1973; Effective Date: August 16, 1973; Closing Date: December 31, 1978 Ln. No. 1097 Eleventh Industrial Credit and Investment Corporation of India Project; US$100 million loan of April 2, 1975; Effective Date: July 1, 1975; Closing Date: December 31, 1980 These loans have supported industrialization in India through a well-established development finance company. Loan 902-IN is fully committed and commitments are progressing satisfactorily for Loan 1097-IN. Disburse- ments under Loan 902-IN are ahead of schedule. A proposal for a twelfth loan is under consideration. Ln. No. 614 Tarai Seeds Project; US$13.0 million loan of June 18, 1969; Effective Date: September 12, 1969; Closing Date: Dec- ember 31, 1977 This loan to the Tarai Development Corporation is to assist in the production, processing and marketing of certified seeds of high yielding varieties. The corporation is working effectively and has developed an ex- cellent reputation for quality seed. Expansion of three processing plants is well under way. Delivery of some equipment in damaged condition, and retendering, because of poor response for some others, has delayed delivery schedules necessitating an extension of the Closing Date by one year to December 31, 1977. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 4 of 12 Cr. No. 203 Punjab Agricultural Credit Project; US$27.5 million credit of June 24, 1970; Effective Date: September 4, 1970; Closing Date: June 30, 1977 Cr. No. 226 Andhra Pradesh Agricultural Credit Project; US$24.4 million credit of January 8, 1971; Effective Date: May 10, 1971; Closing Date: June 30, 1977 Cr. No. 249 Haryana Agricultural Credit Project; US$25.0 million credit of June 11, 1971; Effective Date: November 2, 1971; Closing Date: June 30, 1977 Cr. No. 250 Tamil Nadu Agricultural Credit Project; US$35.0 million credit of June 11, 1971; Effective Date: November 2, 1971; Closing Date: June 30, 1977 Cr. No. 278 Mysore Agricultural Credit Project; US$40.0 million credit of January 7, 1972; Effective Date: September 25, 1972; Closing Date: June 30, 1977 Cr. No. 391 Madhya Pradesh Agricultural Credit Project; US$33.0 million credit of June 8, 1973; Effective Date: October 10, 1973; Closing Date: December 31, 1977 Cr. No. 392 Uttar Pradesh Agricultural Credit Project; US$38.0 million credit of June 8, 1973; Effective Date: October 31, 1973; Closing Date: December 31, 1977 Cr. No. 440 Bihar Agricultural Credit Project; US$32.0 million credit of November 29, 1973; Effective Date: March 29, 1974; Closing Date: June 30, 1977 Cr. No. 540 Agricultural Refinance and Development Corporation (ARDC) Project; US$75.0 million credit of April 28, 1975; Effective Date: August 5, 1975; Closing Date: Dec- ember 31, 1977 Apart from the Punjab project, which consists of mechanization equipment only, all the above agricultural credit projects are similar in structure, being designed to provide long- and medium-term credit to farm- ers through credit institutions for such on-farm investments as tractors, minor irrigation and land-leveling. Disbursement of the minor irrigation components are on schedule. Tractor procurement was delayed following changes in both the supply and demand situations after the projects were originally appraised, which prompted GOI to request that indigenous as well as imported models should be eligible for IDA financing under these credits. The Executive Directors approved this request in December 1973 and those credits which have tractor components have been amended accordingly. Tractor  ANNEX II Page 5 of 12 procurement is proceeding satisfactorily. Credit 540 is a continuation nationwide of the previous program of agricultural credit projects, which were confined to individual states. ARDC will continue to act as the financial intermediary for refinancing agricultural credit. Cr. No. 267 Wheat Storage Project; US$5.0 million credit of August 23, 1971; Effective Date: November 14. 1972; Closing Date: September 30, 1978 The Food Corporation of India is making satisfactory progress in the execution of this project. Piling and foundation work is nearly com- pleted. Silo construction has begun and staff training is in progress. Cr. No. 456 Himachal Pradesh Apple Processing and Marketing Project; US$13 million credit of January 22, 1974; Effective Date: September 26, 1974; Closing Date: December 31, 1978 This project was designed to promote the development of apple processing and marketing in Himachal Pradesh, and comprises grading and packing centers, cold storages, a juice processing plant, road improvements and cableways. The project encountered initial delays due to managerial and technical problems, however, remedial measures have been taken to over- come these difficulties. A recent review mission found a satisfactory improvement in the prospects for successful project implementation. Cr. No. 403 Telecommunications V Project; US$80.0 million credit of June 25, 1973; Effective Date: July 30, 1973; Closing Date: December 31, 1977 Material supply problems which delayed the start of this project have been resolved and physical achievements were at record levels during fiscal year 1976. However, to cover the delivery and installation of im- ported transmission and switching equipment, the closing date was extended by one year to December 31, 1977. Cr. No. 377 Power Transmission III Project; US$85.0 million credit of May 9,, 1973; Effective Date: October 10, 1973; Closing Date: September 30, 1977 Cr. No. 604 Power Transmission IV Project; US$150.0 million credit of January 22, 1976; Effective Date: October 22, 1976; Closing Date: June 30, 1981 All equipment for Power Transmission III has been ordered; there will be a substantial cost overrun due to international price increases, part of which is being met from Power Transmission IV. For power Transmission IV, bids for most of the equipment have been invited.  ANNEX II Page 6 of 12 Cr. No. 264 Cochin II Fertilizer Project; US$20 million credit of July 30, 1971; Effective Date: December 2, 1971; Closing Date: June 30, 1977 Cr. No. 481 Trombay IV Fertilizer Expansion Project; US$50.0 million credit of June 19, 1974; Effective Date: August 21, 1974; Closing Date: December 31, 1977 Cr. No. 520 Sindri Fertilizer Project; US$91 million credit of December 18, 1974; Effective Date: February 27, 1975; Closing Date: September 30, 1978 Ln. No. 1079 IFFCO Fertilizer Project; US$109 million loan of January 24, 1975; Effective Date: April 28, 1975; Closing Date: March 31, 1979 Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1980 The Cochin Fertilizer Project is being commisssioned, about 31 months behind the appraisal estimate. Progress on the Trombay IV project has been good although project completion may be delayed by about four months because of longer than expected delivery times for critical equipment. Under the Sindri project plant construction and erection is proceeding generally according to schedule except for a one-month delay due to anticipated delays in receipt of some materials. Commencement of commercial production is ex- pected by March 1978. The anticipated cost to complete the project is pre- sently running within budget. The IFFCO project was delayed by about a year as a result of a change in feedstock from fuel oil to naphtha and delays in completion of engineering contracts. The project is now progressing satis- factorily based on naphtha as feedstock. Site work has begun, process- and time-critical equipment is being ordered, and engineering work is well under way. Credit 598-IN is designed to increase the utilization of existing fertilizer production capacity. The project has encountered delays in sub- project preparation and investment approvals by the Government. Further, some of the sub-projects identified earlier may not materialize because of reconsideration by the Central and State governments. The Central Govern- ment has submitted a list of sub-projects to replace the ones that are likely to be dropped. Because of the above, the project is likely to be delayed by 6-12 months. Cr. No. 294 Bihar Agricultural Markets Project; US$14.0 million credit of March 29, 1972; Effective Date: July 31, 1972; Closing Date: December 31, 1978  ANNEX II Page 7 of 12 Cr. No. 378 Karnataka Wholesale Agricultural Markets Project; US$8.0 mil- lion credit of May 9, 1973; Effective Date: September 7, 1973; Closing Date: December 31, 1979 These projects were designed to help with establishment of whole- sale markets in a number of towns in Bihar and Karnataka. Progress under the Bihar project has generally been satisfactory. Markets construction in Bihar was delayed due to legal challenges arising out of the state's acqui- sition of land for market sites; however, these difficulties have been satis- factorily resolved. Construction of markets is well advanced and a number have opened for business. Progress under the Karnataka project is much less satisfactory, however, largely due to deficiencies in market planning, design and construction. These problems and remedial actions have been brought to the attention of the State and Central Government. The project is being mon- itored closely to try and bring about the necessary improvements in implemen- tation. Cr. No. 312 Population Project; US$21.2 million credit of June 14, 1972; Effective Date: May 9, 1973; Closing Date: June 30, 1978 This credit is designed to finance an experimental and research oriented population project in Karnataka and Uttar Pradesh. The project's infrastructure, which would provide the optimum facilities (buildings, equip- ment, staff and transport) according to GOI standards in selected districts in each state, is almost complete. The two Population Centers, which will design and monitor research aimed at improving the family planning program, are now functioning. Cr. No. 342 Agricultural Universities Project; US$12.0 million credit of November 10, 1972; Effective Date: June 8, 1973; Closing Date: December 31, 1979 The project involves the development of the agricultural uni- versities in Assam and Bihar. Initial lag in implementation on account of late appointments of project staff has been overcome. Campus plans have been approved, and construction has started in Assam and is scheduled to start in Bihar by mid 1977. Disbursement which has been slow because of initial delays should accelerate now that construction and equipment procurement are under way. Cr. No. 356 Industrial Development Bank of India Project; US$25.0 million credit of February 9, 1973; Effective Date: June 22, 1973; Closing Date: June 30, 1977 Loan No. 1260 Second Industrial Development Bank of India Project; US$40.0 million loan of June 10, 1976; Effective Date: August 10, 1976; Closing Date: June 30, 1981 The first IDBI Project (Cr. 356) had a slow start mainly due to institutional problems in the participating State Financial Corporations.  ANNEX II Page 8 of 12 However, the credit is now fully committed. In order to continue Bank Group's involvement in assisting small and medium scale industries, the second operation (Ln. 1260) was approved on June 10, 1976. Cr. No. 390 Bombay Water Supply and Sewerage Project; US$55.0 million credit of January 22, 1974; Effective Date: March 13, 1974; Closing Date: December 31, 1978 A substantial cost overrun on the project from US$158 million equivalent to about US$375 million equivalent has been caused by inflation and price increases resulting from delays in appointment of engineering con- sultants and redesign of certain project components. The project has been redefined and rephased to fit the financing available from the Credit, local loans and bonds, and internal cash generation of the project entity. The revised cost estimates for the implementation period 1975/76 to 1979/80 amount to US$266 million equivalent excluding interest during construction. All major contracts for civil works, equipment and materials have been awarded. This is expected to considerably speed up disbursements which has been slow. Financial performance of the project entity during 1975/76 was satisfactory, and major rate increases from April 1, 1976 should ensure continuing financial viability of the project entity. Cr. No. 616 Eleventh Industrial Imports Project; US$200.0 million credit of February 24, 1976; Effective Date: April 1, 1976; Closing Date: June 30, 1976 This credit was signed on February 24, 1976, and became effective on April 1, 1976. Cr. No. 427 Calcutta Urban Development Project; US$35.0 million credit of September 12, 1973; Effective Date: January 10, 1974; Closing Date: December 31, 1978 Following considerable increases in project costs, GOI and IDA finalized a project redefinition in April 1976, to accommodate the project to funding available. It is now expected to be substantially completed by March 1979. Agreements have been reached on consultants services and technical assistance, as provided for under the project. Cr. No. 482 Karnataka Dairy Development Project; US$30 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982 Cr. No. 521 Rajasthan Dairy Development Project;; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982  ANNEX II Page 9 of 12 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23, 1975; Closing Date: June 30, 1982 These three credits totalling US$74.1 million support dairy devel- opment projects organized along the lines of the successful AMUL dairy coop- erative scheme in Gujarat State. The Karnataka Project which got off to a slow start has begun to show improvement under new management appointed recently. Farmer response has been good and about 250 dairy cooperatives with small farmer participation are functioning effectively. Two Dairy Unions have been established. Close supervision is being maintained. In Madhya Pradesh good progress has been made. About 110 new dairy cooperatives societies have been established. Detailed design studies for plant construc- tion are complete. Technical services investments are being made. Contracts have been placed for livestock imports. The Rajasthan project is also doing well. Four milk unions have been formed and excellent progress has been made in organizing the servicing of nearly 350 dairy cooperatives at the village level. Plant-designs are ready, and procurement is to start soon. KDDC decision to procure plant equipment jointly with RDDC and MPDDC on the same tender should lead to a recovery of considerable time lost earlier. Cr. No. 532 Godavari Barrage Project; US$45 million credit of March 7, 1975; Effective Date., June 9, 1975; Closing Date: June 30, 1980 Both the civil works and equipment tenders have been awarded after international competitive bidding. Work is in progress. Ln. No. 1011 Chambal (RaJasthan) Command Area Development Project; US$52 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1981 Cr. No. 502 Raiasthan Canal Command Area Development Project; US$83 mil- lion credit of July 31, 1974; Effective Date: December 30, 1974; Closing Date: June 30, 1981 Cr. No. 562 Chambal (Madhya Pradesh) Command Area Development Project; US$24 million credit of June 20, 1975; Effective Date: September 18, 1975; Closing Date: December 31, 1979 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Project; US$145.0 million loan (Third Window) of June 10, 1976; Effective Date: September 7,1976; Closing Date: December 31, 1982 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructures, drainage, and land shaping are  ANNEX II Page 10 of 12 prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Progress of these projects is generally satisfactory and particularly successful with respect to agricultural extension. Cr. No. 541 West Bengal Agricultural Development Project; US$34 million credit of April 28, 1975; Effective Date: August 28, 1975; Closing Date: March 31, 1980 The project became effective on July 31, 1975. Successful reor- ganization of agricultural extension services has been a major achievement, but preparations for lending operations have been slow mainly due to poor coordination of project agencies. IDA and the government of West Bengal have agreed on measures to improve coordination and on a timetable covering a range of project activities. Progress with preliminaries for procurement of equipment, markets construction and riverlift completions are satis- factory. Cr. No. 526 Drought Prone Areas Project; US$35.0 million credit of January 24, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Progress varies among components but overall is satisfactory. Expenditure to date is less than anticipated but is reasonable because price inflation has been much less than expected. Disbursement perform- ance is poor and the Borrower has been requested to expedite claims. Greater attention is now being paid to data collection to measure project performance. This is essential since several components are innovative. The Systems Research Institute of Poona has been contracted to design an information system to facilitate monitoring and evaluation. Cr. No. 572 Rural Electrification Project; US$57.0 million credit of July 23, 1975; Effective Date: October 23, 1975; Closing Date: December 31, 1979 Twelve states have now fulfilled the conditions of eligibility for on-lending under this project [compared with six at the time of appraisal] and three more have applied for participation. The project got off to a slow start, due principally to the need to adapt specifications and tender documents to international competitive bidding procedures, but these problems have been overcome. As of March 31, 1977, contracts with a total value of US$45.6 million had been or were about to be awarded.  ANNEX II Page 11 of 12 Cr. No. 582 Railways XIII Project; US$110.0 million credit of August 26, 1975; Effective Date: October 10, 1975; Closing Date: September 30, 1977 The project is intended to cover most of the foreign exchange requirements of Indian Railway's (IR) investment program from April 1, 1975, through March 31, 1977. Since the approval of the project, increased pro- duction in steel products in India and further developments in IR's indigen- ization program have resulted in a less than anticipated foreign exchange requirement. It is expected, therefore, that of a total Credit of US$110 million, some US$30-40 million may be undisbursed at the end of the current project period. During the year 1975/76, IR carried 223 million tons of freight traffic, 6% more than forecasted. The project is being implemented satisfactorily. Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40.0 million credit of September 25, 1975; Effective Date: February 6, 1976; Closing Date: June 30, 1980 The project had a slow start due to delays in preparation of techni- cal reports for regional and local water authorities. The technical reports for about a third of the project have now been finalized and construction works started in October 1976, about one year behind schedule. All consul- tants for engineering, organization, management and accounting services for the Jal Nigam (Water Supply Development Corporation) and the Jal Sansthans (water authorities) have been engaged. Significant institutional develop- ment can be expected only after the consultants submit their final recommenda- tions. The project is expected to be completed by March 1980, approximately 9 months behind schedule. Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4.0 million credit of February 26, 1976; Effective Date: May 26, 1976; Closing Date: December 31, 1981 This project will identify a sound resource base for pulp and paper manufacture and related industries, develop suitable logging systems, and undertake a feasibility study to determine optimal use of the existing wood resources in the Bastar District of southern Madhya Pradesh. It also includes a study of ways to integrate the area's tribal population with future develop- ment. After initial delays due to difficulties in employing key personnel, project implementation is now satisfactory. For the feasibility study, proj- ect authorities have prepared a short list of three foreign consulting firms, who are now being asked to prepare detailed proposals. On the basis of these proposals, the final selection will be made shortly. Cr. No. 610 Integrated Cotton Development Project; US$18.0 million credit of February 26, 1976; Effective Date: November 30, 1976; Closing Date: December 31, 1981  ANNEX II Page 12 of 12 Ln. No. 1273 National Seed Project; US$25.0 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1981 Good progress has been made since negotiations. The National Seeds Corporation (NSC) has withdrawn from seeds production as planned, hav- ing handed over to State Seeds Corporation (SSC). Detailed production pro- grams, by variety and responsible institution, have been prepared for breeder, foundation and certified generations. GOI and State Governments have made equity contributions to SSC thus ensuring financing of major project activity. Orders will shortly be placed for processing machinery to provide bridging capacity pending the construction of new processing plants. Tender documents for the first purchases of farm machinery have been finalized. Ln. No. 1313 Sixth Telecommunications Project; US$80.0 million loan of July 22, 1976; Effective Date: September 14, 1976; Closing Date: March 31, 1980 Disbursements have commenced and the project is progressing satis- factorily. Ln. No. 1335 Bombay Urban Transport Project; US$25.0 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30, 1980 Procurement work is well in hand. Contracts for 275 single and 175 double deck bus chassis have been awarded and bidding for corresponding bus bodies is in progress. Civil works for bus facilities have been partly commissioned and bidding for 18 of 31 traffic engineering schemes is in progress. Preparations for technical assistance envisaged under the project are under way. Cr. No. 680 Kerala Agricultural Development Project; US$30 million credit of 1st April ; Effective Date: July 1, 1977 (expected) Closing Date: March 31, 1985 Cr. No. 682 Orissa Agricultural Development Project; US$20 million credit of April 1, 1977; Effective Date: July 1, 1977 (expected); Closing Date: December 31, 1983 Ln. No. 1394 Gujarat Fisheries Project; US$14 million loan and US$4 (TW) and million credit of April 22, 1977; Effective Date: Cr. No. 695 July 22, 1977 (expected); Closing Date: June 30, 1983 Cr. No. 687 Madras Urban Development Project; US$24.0 million credit of April 1, 1977; Effective Date: June 30, 1977 (expected) Closing Date: September 30, 1981 Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit of April 1, 1977; Effective Date: June 30, 1977 (expected); Closing Date: December 31, 1983  ANNEX III Page 1 INDIA SECOND AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT Credit and Project Summary Borrower: India, acting by its President. Beneficiaries: Agricultural Refinance and Development Corporation (ARDC) and banks for on-lending to farmers for on- farm investments. Amount: US$200.0 million. Terms: Standard. Relending Terms: GOI to ARDC (a) For ARDC refinancing up to 9 years: (i) annual interest rate of 6.75% minimum, less 0.25% for prompt payment; (ii) repayment at the end of 9 years. (b) For ARDC refinancing for more than 9 and up to 15 years: (i) annual interest rate of 7.75% minimum, less 0.25% for prompt payment; (ii) repayment at the end of 15 years. (c) GOI to carry exchange risk. ARDC to Lending Banks (a) Annual interest rate of 7.5% minimum for minor irrigation schemes (including on-farm development); (b) Annual interest rate of 8.0% minimum for diver- sified lending; (c) Installment repayments to coincide approximately with collections from ultimate borrowers; and (d) Refinancing by purchase of debentures or by loans up to 90% of individual loans.  ANNEX III Page 2 Lending Banks to Ultimate Borrowers (a) Minor irrigation: (i) annual interest rate of 10.5% minimum; (ii) optional initial evaluation fee may be charged in the amount of 0.5% of the cost of the project investment; (iii) downpayment required would be at least 10%; for small farmers the downpayment required would be 5%; 1/ (iv) repayment period for pumpsets to be a maximum of 7 years; (v) repayment period for tubewells to be a maximum of 9 years except for small farmers who could be given up to 15 years to repay minor irrigation loans other than for pump- sets; (vi) technical standards, in particular well spacing criteria, as laid down by ARDC to be observed. (b) Diversified lending: (i) annual interest rate of 11% minimum; (ii) optional initial evaluation fee may be charged in the amount of 0.5% of the cost of the project investment; (iii) downpayment to be at least 10% except for small farmers who would need at least 5% down; 1/ (iv) repayment period up to 15 years including grace period; Farmers having an annual income of Rs 3,500 or more would be required to pay 15% down; small farmers would be defined as those having an annual income not exceeding Rs 2,000 at 1972 prices.  ANNEX III Page 3 (v) no loans to be given for tractors, markets or storage investments without prior IDA approval; (vi) refinance of lending schemes other than minor irrigation having total investment costs of more than US$0.5 million to be approved by IDA. (c) General: (i) ARDC would specify security arrangements to apply to lending to farmers; (ii) ARDC to refinance only sound subprojects which are financially viable (15% financial rate of return, minimum), and are backed with satis- factory technical and administrative manage- ment. Project Description: The purpose of the project is to support a two-year ARDC program of lending to farmers and an intensive training effort primarily for the staff of land development banks (LDB). Lending under the project would be mainly for minor irrigation, but credit for development of other on-farm activities such as dairying, poultry raising, and sericulture would be provided. Estimated Cost: (US$ Million) Local Foreign Total Minor Irrigation 385.3 51.5 436.8 Diversified Lending 122.7 21.5 144.2 LDB Training and Studies 2.0 - 2.0 Total Project Costs 510.0 73.0 583.0 Financing Plan: (US$ Million) Local Foreign Total IDA Credit 127.0 73.0 200.0 Local Financing: GOI 1.0 - 1.0 ARDC 289.3 - 289.3 Banks 54.8 - 54.8 Farmers 37.9 - 37.9 Total 510.0 73.0 583.0  ANNEX III Page 4 Estimated FY78 FY79 FY80 Disbursements Amount Amount Amount Annual 60.0 95.0 45.0 Cumulative 60.0 155.0 200.0 Procurement Arrangements: The procurement of investment items (mainly tubewells and pumpsets) would be through normal local commercial channels by individual farmers according to their choice. Capital equipment orders would be difficult and costly to group for centralized procurement to attract international competitive bidding. Dugwells would be made by the farmers themselves and tubewells would be contracted directly by the farmer with a local well driller. Competitive bidding would not be practical. Rate of Return: The overall economic rate of return would be about 32%. Appraisal Report: No. 1520-IN dated May 12, 1977.  ANNEX IV Page 1 INDIA SECOND ARDC CREDIT PROJECT Supplementary Project Data Sheet Section I: Timetable of Key Events (a) Time taken by the country to prepare the project Several months during 1976. (b) The agency which has prepared the project ARDC (c) Date of first presentation to the Bank and date of first mission to consider the project July, 1976 and September 1976. (d) Date of departure of appraisal mission November 1, 1976 (e) Date of completion of negotiations April 25, 1977 (f) Planned date of effectiveness August 1, 1977. Section II: Special IDA Implementation Actions none Section III: Special Conditions (a) ARDC would apply agreed regulations for determining eligibility of LDBs to receive refinance (para 45); (b) ARDC, in conjunction with RBI, would carry out by March 31, 1978 a study of interest spreads with particular reference to the needs of LDB (para. 47);  ANNEX IV Page 2 (c) ARDC would by December 31, 1977 establish a Project Evaluation Task Unit satisfactory to IDA and pro- vide all regional offices with an agricultural economist (para 48); and (d) ARDC would carry out a study by December 31, 1978 of groundwater problem areas to provide more ac- curate data on the extent of the areas involved and of the effect of continued minor irrigation investments in those areas (para 50).  1-60 12630 _.- _7~ _ J;; ,>I N D I AERuOY 1977 Second Agricultural Refinance and Development Corporation Credit Project AFGHANISTAN ) C- GENERALIZED OCCURRENCE OF GROUNDWATER, RAINFALL AND EVAPORATION ' an Ks <;37k F- -- TmOlimodM.tkr eelpe i, \> lM -,nio-n us 07eld s_.f t\\\/<<~~~~~~' (N5 HIACnn$ - t 4779 Frroinfo 7zr. nmereis ~~~~~~~~~~ KPvAEs KISTN\ ~-,-3R ~~\. *79tD 97Znu7 m-7097777 .ro9 ,ar7777S '-7 PAKISTAN -r, T.-, -r.nusdn_.es / - |.>\ m1; iw< -. - S A >a7boon / 171 NEPAL k -X.piT - -nNf ;F~~~~~~~~~~~~ '-N. - - -J .X >1 / < 0 *%577. I PBHAOSHAL% . '-,1-( 7> ' ir" _, - \' --A% J BANI LANKA --7' t P / I"' y~> -y 7 \~K(7~$4~ c-'~'\x>., '~ BURMA 990- MAW)As%JR ~~~~Bay Arob,cn~~~~~~~~~~ I 'I, "174 '99 I 799~~~~~~~~~~~~~~~~~~'I 509