India - Economic situation and prospects

Report No. 1529-IN Econom, ic Situatiore an,d -- Prospects of India *; u April 25, 1977 South Asia Region r.('D (b-rElClAl I ICr. (%KI V 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 AND OTHER EQUIVALENTS Clurrency ~~ * ~~~ TTWe1 AA - n~ I.7~f PriLor to June U, 19U6 : US.00 - Rs.4.7619 Rs.1.00 = US$0.21 From June 6, 1966 to : US$1.00 = Rs.7.50 mid-December 1971 Rs.1.00 uS$0.13333 Mid-December 1971 to : US$1.00 = Rs.7.27927 end-June 1972 Rs.1.00 = US$0.1374 After end-June 1972 : floating rate Spot rate (March 31, 1976) US$1.00 = Rs.8.81 Rs.i.00 = US$0.113 Rupee trade figures have been converted into dollars by using the prevailing exchange rate up to 1970/71. For subsequent years average IMF par rates/market rates have been used. These are Rs. 7.444, Rs.7.706, Rs.7.791, Rs.7.976 and Rs.8.653 per US dollar for the periods 1971/72, 1972/73, 1973/74, 1974/75 and 1975/76. For 1976/77, the average market rate for the first half was Rs.9.015. For the year as a whole the rate of Rs. 9.00 has been used. Weights Unless otherwise specified all weight measures are metric. Years The Indian fiscal year runs from April 1 through March 31. Abbreviations Used n.a. = not available n.s. = not significant (blank) = not applicable nil  FOR OFFICIAL USE ONLY rnis report was prepared in New Delni by memDers of tne woria Bank Resident Mission in India and of the India Division at World Bank head- quarters under the guidance of J. Kraske tResident Mission Chief) and 0. Yenal (Principal Economist). Those contributing from the Resident Mission were M. Baird, J. Harrison, M. Karcher, L. Laurenti, R. Rowe, S. Sengupta and A. Van Nimmen. Those from the India Division were: W. Dellalfar, R. Grawe, C. Taylor, J. Wall and M. Wolf. Y. Satyanarayana assisted in the statis- tical work. The report drew upon background papers prepared by R. Cassen (consultant) on Population -- Family Planning -- Nutrition and Health; R. Krishna and G.S. Raychaudhuri (consultants) on Agricultural Price Policy - Rural Savings and Capital Formation; M. Ahluwalia (World Bank) on Rural Poverty. P. Visaria (World Bank) contributed to Part II. The report was almost entirely prepared before India's recent elections. Evidently, the discussion of the recent past and of fundamental development opportunities and constraints is not affected by this omission. However, the new Government has introduced new policies in some areas and is obviously likely to introduce more. To that extent this report cannot give a completely up-to-date picture of India's current situation and pros- pects. I Th documnt ha a maUbad doinb4ce and may be ued by .nluSnta only in the performance of theif o4kW dutIe, IW senste .a no othfwhe be diucle without World Bak authorization.   CONOAMCT eTTITATTAN ANTn PRSPErTS V TONnITA Table of Contents Page No. BASIC DATA MAP SUMMARY AND CONCLUSIONS ......... . .. . . . .. . . ........................ ... . i-v PART I - CURRENT DEVELOPMENTS ................................ 1 Chapter 1. General Economic Scene .... .............. 1 A. Background ... ................................. 1 B. Recent Economic Policy Issues . ............ 2 C. Balance of Payments ... .................... 8 Chapter 2. Sectoral Developments ..... .............. 12 A. Agriculture ..... .......................... 12 B. Industry and Mining ....................... 15 C. Energy .................................... 18 PART II - POPULATION AND POVERTY .............................. 22 Chanter 3. Ponulation Profile and PoliCY .... ....... 2- A Tndin'- ' )Pmnarnnhi r Profil-23 100o --r-- - -- -- B. Family Planning ... ........................ 26 C. The National Population Policy of 1976 .... 32 ChApter 4. Persperrtia on Pnniolatin and Poverty .. 38 A. Population Pro4ecFt n ... 3 B. Employment Problem .......................... 46 C.J '<a l.Ly of LT e ............................L4 D. Rural Poverty ...... ....................... 54 PART III- GROWTH OPPORTUNITIES AND CONSTRAINTS .... ............ 62 Chapter 5. Growth and Capital Accumulation .. ....... 63 A. Growth .. .................................. 63 B. Investment and Savings .... ................ 64 C. Efficiency of Capital ..................... 70  -2- Page No. Chapter 6. Agriculture ............. .. .............. 75 A. Investments and Plan Expenditures in Ag -4 -..IulLuC ..- 76 B. Foodgrain Pricing Policy .... .............. 84 C. SmaLL rFatrIers ........ . . . . . . . . . . . . . . . . . . . . . 87 D. Forestry ................. ................. 95 Chapter 7. Industry .... ............................. 99 A. Decade of Slow Industrial Growth: 1965-1975 .............................. 99 B. Structural Causes of Slow Growth .... ...... 101 C. Engines of Growth ..... .................... 105 Chapter 8. Trade and Aid ........... .. .............. 109 A. Balance of Payments - 1977/78 .... ......... 109 B. The Need for Aid . ...................... ... 112 STATISTICAL APPENDIX (including List of Tables)  List of Text Tables Page No. 1.1 Spending on Public Sector Plan 6 1.2 Money Supply and Foreign Exchange 7 1.3 Foodgrain Production 12 1.4 Production of Commercial Crops 14 1.5 Production of Major Mineral Inputs and 16 Intermediate Products 1.6 Power Generation 18 2.1 Population Growth 23 2.2 Family Planning Acceptors 26 2.3 Population Projections 40 2.4 Percent Share of Age Group 41 2.5 Population Aged 5-14 41 2.6 Illustrative Proiection of Labor Force 43 2.7 Incidence of Week-long Unemployment 47 2.8 NSS Estimnteq nf Tnridpnpe of Poverty in 55 Rural India 2.9 Growth of Aa4piv1t ral Ntuit- and Incme 57 2.10 Agricultural Growth by States 59 2.11 Regional D4stribution of Agricultural Growth 3. E,conomi.c Gro-w3 a. Per Cand apita L c 63 3.2 Investment Rates 64 l. a-es of Sa-ving 66C L. J L. L Lvu 3.4 Composition of Saving 67 3.5 Fifth Plan Savnrg and In-vestment Targets 68 3.6 Sectoral Average Capital Output Ratios and ICORS 72 3.7 Rural Saving and Agricultural investment 76 3.8 Plan Expenditures in Agriculture 77 3.9 Major and Medium Irrigation Projects 79 3.10 Size Distribution of Agricultural Land 88 3.11 Cropping Intensity and Irrigation by Holding Size 89 3.12 Fertilizer Use by Holding Size 91 3.13 Man-Made Forest Plantations 97 3.14 Estimated Domestic Roundwood Requirements 98 3.15 industrial Growth i00 3.16 Capacity Utilization 103 3.17 Balance of Payments 110 List of Graphs 1 Wholesale Prices 3 2 Growth and Capital Formation 65 3 Industrial Growth and Related Variables 104   ..a I 0 0* a,J . 0 - 1 -uIt ont o* It - s .N. 00 f .0p oL, h: s i" 034t .-' tt0 Ont - 4 5 0 7 N a a .4 a..t ...t 30 0r: F:l 0I,taNo 00 0 .0 1 0 0 05 * 0 0 0 00 0 0 O 3~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~9I a-sw a 3~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~mlm , , 2e & 31St 01 .0t t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t*r* a_mI01: , ma so .0 5 -I -I -..R., j o 0 ol O wln0aD o rio ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ n X-t CS 710 .0 -- ItO UtVt NtA 5 *VtN 0 ~~~~~~~~~~~~~~~~~~~~~~-0 00-oCO . W * ON NwA. co0 *00 0 Ci 0 Ia - * N~m Z 0 - nnnltI.0-0 . m - Z * -a tat I~~~~~~~~~'M- . Os = W 0 s 0 0 :3:i- I L m 3: -o3 0. 5 I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~et ~l e 0a9 j . 0 3 a.W3 9 m IW 2 . I 39bon--- 0 a - l-I0 a 1:-s CO Zb !~~~~~i tail Z-l A d b, 7 C,--at - 0 0 - ON A5-03. a E C) onl . W m ) 02a W - W tO l o w M t-- 5 Cg, Z.O.MO - . ItW 34 M- -t0 m3 t )aw -?I SI .5. I -, .0eII.Ot.Ot_ Ws I 4J-0 I1,Itt t ),CLCLM l 5.- M S W 0 P-Ci 0' ON -A ..ifttt sC0 0060. * Co W00 OF .-* I0 I , * .0 4 In W" C0. Nt 0 0-Iso IIto .0 -. N ale ..JI 57 50 Ut -Vt 10 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~w Ct-I .W - a's IL C T ..  imi. oterwse nte - dat fo 1060 reertoan yarbewen l959 and 1lObE for 1970 betwee 1968 and 1970 and for Moat Recen.t fEticiate between 1973 and 1975. --Brazil baa been selected an an objective coun.try hecaae of its nine and coeparable problena of regional Inequality. INDIA 1960 I 1951-61 averag; lb 1951-60; Ic Ratio of Population cnedr 11 and 65 and avon to lobor foroe age 15 and ovr; Id Regiatared applican.ts for cork; Ie 1962; If gegiatered, not all praoticing in tbe country; I& Including n1d.i-no; /b 1958; /i 1960-62 1970 / Ra tio of population under 15 and 65 and aver so labor force age 15 and over, /b 1967-68; In Including nidwi-so; /d 1967. MTREC NTcEsTc,rE. I.s lOll; II eRan of n-p,lotion under 1~5 and A5 and aver to labor forno ago 15 and avr n 1976; Id Inniuding nidive; Ia 1969-71 averge; If Popolation 10 years and over. IIfDONEIIA 1970 Ia 1961-71; lb 1971; In Incloding nidwivna; Id Total bospital beds innonpiete PHIIThP'PINES 1970 Ia A. percentage of enplonnent; lb Not in.ulding private voctioarl schoo1a. BRAZIL 1970 Ia Ec-oic-11y active population; lb Hoapita1 paranona1; InsInide only. RIlO, April 18, 1977 Land Area (thoc in 2 Pop.lati.n Par -uring porson - Popolation dicidod by nenbor of precti- Total -Total c-forn a-c c-pr i.ing lend orna cud inland cotoro. cing ..I. ond fncc1e graduarecoao "treic-d' c "certified" Aonic. M- Ho roconi ociooof ogri-o-tor el rec -cd tnpor-riy1 or nra, ndciloyPoroonlcihcciigorcprino p-rnoccoly for cropa, poirn,nrkot &, hitn-o gccdnno or in ha. Populaticon nor h-spit1 bed - Popol aticco dicided by'enbor of hospital 1011cc. ~~~~~~~~~~~~~~~~beda -acalblo in public end. pricodte genore1 and apaciclio-d honpitai and rhnbcbllliasiic-tirs;ecudenring hcne aend cniebllohnnnic GHy Pcr cecPie (U0$) - SiP per -cp-t ctineice ct corrent narhot pri-a, f-or -utidiai and pr-votivocen celceiccad by cone c-cor-ion onthd ac World Honk Ailas (1973-75 besis); Par tati oplyc clries (7. of reocirementa) - Conpoind iron 1961, 971and 19 75 dote.. orgy oqt-lotof nut mo.d aopplii e -aoilabln in ....try pepn cepita par day; ceailahic supplies ccepriao dococtin prod-ti-o, inporto I.oo Ponuiecico ond octel otarloilna eu~~Parrs, end chag- sin aonk, nect supplie na-noodo unic- fend, ceedo, Population (aid-yr. lillin) - Au of July first; if not -niloblo, qu.otitinc ocod in food prooncning aod Ilossn to diutrihution; reqeir- -average of two -nd-pear -toicein; 1960, 1970 end 1975 date. n-ent core noticatud by FAO hbased on pbyuicicgi-cI needs for nornul -cilnity and bealIthcanc iderioc e-viromtcotI tonpetreir, body colgbia, "Poc.ietio d.. t-n oc k-ft-erppiio Per aqucre kilo- agoco coo dc-trt-unio ci popoitio, cod.. .ilootngo u tOtfr ocato etr(100 he--re) of total -ro. ath ..ouhokld Incl Popolation denoliy -per square he of r~ic- loud - iC-poted as cho- for Por capita supply of protein (crone per day) - Prtetin rntontn of per cgrcnitcro lend only. napit onet sopplp of_food per day, net scPppy of food is defined as abovo roolele-ta for a'i o..ntriec ectablinhed by "1PA f.ncooin litol unoiloiloc i~~~~~ennornh Srinc p ide ic icinue el Ioa.nne of 60 grons of Credo birth ro te n thosn. nrooAn.... lion bintbo per thonuend .tota prcteePer dcy, cod 20 orolof an oi.al and fulse Protein, of ci nid-pet populaion, renpeor orllnenlo verareg ending in 1960 cnd chink 10 graco sobuld he ceincl proteIn, tbnsu standards are boar c,,1,cud fvo-por aeecgo ndingin 1A97,5fcr,a, ..t ecnt ..in . tmen th-oo 11 grao e tto protei.n ec 23 gr-n of nnlprotein Coedahrac pr ihuad crage-Ana dv.k ertbc nu f aid- a. an anerage for thc world, proposed bp FA0 in the Third Wunld Food year ppulnlon, ueu-yocr onitheonie o-erga cending in logo and 1970 and Su-oep bie-yea 2acor, endioi in 1975 f......st recntanmae Per -Pcit. Protein ocpply iron cicol end pu1uc - Protein suppip of food rttt,-no- - A-. --h.o cre i net coder one poor danced ironei. cand poiso. in groso per dap. of cgm,Poe thocucud 1ie- htrthu Death rate (/thcu) coon 1-4 - Annual dnaihc poe thoclood in age grop Lifecpeciony at birth (yru) -%A-oafe ucoher of yeors of life runain- 1-4 year, no children in ihic age group, noggoatod 00 cc c-dtct-r of tug a't bircth ..n...lly fi-e-y- a-erge- n-ding in 1560, 1970 and nalnoiriti-n iroacrprodulconrac-Aeeago -lohr of li,e,da-ughiorc coceenao ill Education he.r in, hor ncr-l r-peoductio- Period Ifsh xeri n-n pr.aent Ofe- Adjo!tu.dtenro.l"een raio-pricero ochocl - inroIlne-t fi ci ages Os opeln incf-tilitY r-tno; ucuollY fiv-py-r c axgec ending in 1960, peretge fi pDrinarysokol-eac Populotion, -1tldea children aged PI cviyc cutnn.-c- pecra huc adj ..ced -c diferent length~ ofc prinar y edocanion, Ponlariongroo,,th rate (7. - total - Cccpocnd ...n.al grccth raica of old- for cno-tri-a withnkoivers1 nd-oticn, ce.rolloni nap eccood 1007. Year p ,paion for 1950-60, 1960-70 end 1970-75. since noon popiln arc helow or chuv rheofcfitial cohoo age. PPopulaion or-oth rate (7) urcban -lon.poted like gr-oth rctc of total Ad u.red enrlment Iratio - ne--d-ry school - ICeputad as bho-; pcpnace,, coteno, oucoceo u orhon areas noy afeo- n-paca- ae.nonary educcricu reqoir-c or incur four yeera of ppr-ced princry humpt of aaangcctic intruoin rvd- eea,vctional cr te-nher iraining Urhan population (7. of total) -Rcti of urban to toia population; intrcin fopulsi12t17yascog;crepdne dliffernt definition nf urban areca coy affect -op-ecility of data core c oeoly oclded. nngc..cnirie lecra of -nloliog er-oided (float cod secon.d levels) - Tntel pecra of Ag rtur .t -Chbtlden (0-14 yearn), cork1ing-agoe (1-64 peora), schooling; at c.o.odrylevel, --toional inniroci-c nay ho Par- and retred (65 -ye.arncd 00cr)pa prentgc fiod-year populetion. ricily or onepietel ry.ocudd Cue depeodoncy ratio - ictio of popoictlon under 15 and 65 cu d ovr to Vcc-rio..al enrolluont (7. of cn~.cnudcry) - VPc..ci.nn1 i-atitutiona those of agna 15 through 64. include technical, induntrial or other prugraca chink operate Iconc.ic deneedency ratio - Ratio of Popeltilc under 15 end 65 and ovrindependently cr as doparcete ot ooncou-dary ine,iliutlona. to rho lahor orcetin ago gro f 11-64 yer.Adult lercrate ()-Literate adis c to rad cod onto) as Fanilyulanulo - aueetors(c=uo ti-co, thou) -Couicltivc nucnhar of p-rcentago of Ltota adult population aged 15 poare and over. oc-ptcra cf blith-cotirl d-vicec onder aucpies of natiioncl iu7 planning progron clne ince.ption. Housing Ponily Planning - users (7. of carriod wcaaen) - Pertnetrgec of carried Personc Per r.ce (urbao) - Avocogo nonbor of percona par rune in conen of child-bearing ego (15-44 pears) whc o.. birth-coetrc1 devicc occu.pied. coventionl,, deo1iugs .in.orbo,n are.c dwellings occlude to oil - cicd 00000 in con age group. nn-perea nntt o . icture en'd ncouied pri.. Icopied dwellings nithoct piped water (7. - Occupiod cooccetiuna1 E.poyuvent d-e111nga in urhan end coral areas w ithout inside orouad pie Total labor force (ihu..a.ud) - ic-n-i-e11y entice Puesona, inolding crerfa-iIit,ooIn as eontage of all -ocpid dollng.. creed forces and unenpicyed hot ...ciodiog haucoeica, students, oto., Aun_as to electricity (7. of all dwellings) - Cu..veutionc1 dwellings definitionc in -ariou.n .. trciree are not cunperabie. cith electricity in Hieing quartera an peruent of total dcsllings in Labr force in acricultu-e (7.) - Agricultural lobar fo"e (in fu"ing, urbon and coc-1 es forestry, boating and fishing) as peroentage of total lcbnr fuc.Rural dcellinou connected to electrictity (7 - Conputed cc ab-ov for Uneeployadw (7 of labor ioce) - lon-piuyed cr0 c...clip defined eauror1 due11iego onlp. p-ro- ro c0abeand ciluing to take a Job, oct ofi Jajb on give dap, roniebdl out of Ja jb,and seeking cock for a apecified iC.sn.ptico c.nlieu pero no ieff in n ee,nyno enoprhe ec Radio rei--er (par thou pop) - All typoc of -ecieora far radio broad- nonco duetod 'feet de f-nltln of unno,pioped and arce of ..oi. to general poblic Per thocoa.nd of Ppuplatton, enclade- deto, eg. _ePIopeont offIc i.'ataisntica nap -surepe -oopolary uulicenad ciesin ocuncrien end in pears when registration of unoeploynent incuraue. rdio uto cas ineffor; dat fr recent yearn nap not be ...eParable In..ne Dlistibution - P-c-ennge cf pri-te te-.ne (honk in rank and Pac cr pcns(ar thoc eon)- Pa au or oprise ecior core hind)fr-eievod 1by:richest 57., richect 207., poorest 207., cud Pooreat neating lees than aight persona; eacluden cebul...e.. hearses and hOt og boocehod. dilitarp -ehioie.. Eleornicity (bob/pr per can) - Annual onecuceion of i.d.atrial oe Diarihulonof andocorchc -Perceotgage of icend ownad bp -eithiest noroliri poblic en d pri-ate electricity in biloocti hours per capita, 107. and poorect 107. of lend ownera. geneciy baaed on prcductiuu dare, without al1o-anco foe loso.a in gr ida hot uliwing for inport.ancd e.ports of eleitrinity. Health and Noi iAon Neono-int (bc/cr -eran Per caita annual Iconn-,,ce n in All - tenliin per Pbysician - Population divided by onbcer cf prantining neticcied fr.c d-netin production pluc net inpcrtn of newsprini. phypaiona qualified iron a nedical schoel at .icvcraitp level.  uoomma nm.oyy n*u GURP PR WM IN 1975 US 15t GROSS RArIONAL PRODUOP XI 1975/76 IJ AMMAL RATE OP CYN (N. constant Pric..) WIS Bln. !960>/6t-1964./65 196r,/66_t969/7Q 1970/71-197A/75 GNP at Market Prie.e 82.8 100.0 5.8 3.7 2.6 Gross Dah.e+tic Tinvetent 16.7 20.1 Grose National Saving 16.0 19.3 Current Account Balance -0.7 -0.8 Resource Gap -1.5 -1.8 OUTPUT. LBOR FPRCI An) MoWCTITr IN 1971 Value added (at faot98 cant) l q Worker R16:19 Bln, 1; Bl, US4