Announcement of India and the World Bank Highlights of Bank Activities in Fiscal 1979

.. , ~ '- ' . . . " I • ~OLD fOR._ REL.EA~E ~ ·•World Bank • 1818 1-l Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 For Publication Monday, September 24, 1979 INDIA AND THE WORLD BANK HIGHLIGHTS OF BANK ACTIVITIES IN FISCAL 1979 INDIA RECEIVES $1,492 MILLION India received $1,492 million from the World Bank and its affiliate, the International Development Association (IDA), during the fiscal year ended June 30, 1979, according to the Annual Report of the Bank released here today. This was $210.5 million more than Bank and IDA commitments of $1,281.5 million in fiscal 1978. During f i sea 1 1979, India received $1 , 192 mi 11 ion from IDA on • concessional terms and the balance of $300 million from the World Bank . The Association's credits are 50 years, free of interest, but carry a service charge of 3/4 of 1%. Indian Economy - Four Consecutive Years of Healthy Growth - Per Capita Income Increases The Bank Annual Report says: "For the Indian economy, fiscal 197~ was another prosperous year. Overall economic growth is tentatively estimated at 3% to 4% after 7% in the year before. Four consecutive years of healthy growth have now occurred, accompanied by a significant rise in per capita incomes. "Even though agricultural production had reached record levels in fiscal 1978, and despite widespread flooding, output in fiscal 1979 rose by another 1 .5%, and food grain production reached an all-time high of more than 126 million tons. The high output levels achieved since fiscal 1976 owe much to favorable monsoons. But there are growing indi- cations that the 'floor' level of foodgrain crops achievable with average weather has moved up substantially due to increased irrigation, better provision of other inputs (especially fertilizer), and improved extension services. Growth of industrial output is estimated at 7% to 8% after a generally sluggish performance in fiscal 1978. This increase occurred despite recurring shortages of basic inputs, such as steel and coal, and • inadequate supporting infrastructure, such as a lack of railway wagons and a shortage of electric power." NOTE: Money figures are expressed in U.S. dollar ~quivalents.  . -· . - 2 - The report added: 11 fndia 1 s external payments position reamined • strong, to \','hich a continuing large inflow of workers' remittances contri- buted. With gross external reserves of over $7,000 million, a buffer stock of foodgrains approaching 12 million tons, and near price stability (reflecting adequate supplies and prudent monetary pol icy), the country has been able to step up its long-term developmen.t efforts through a larger utilization of accumulated reserves, primarily for investment pur- poses. There are indications of a growing absorption of external resources, as imports were further 1 iberal ized and rose by 13% in fiscal 1979. But the growth of external reserves has slowed abruptly, and, in the longer run, sustained growth of the Indian economy will continue to require a substantial and rising volume of external assistance." South Asia - Favorable Economic Trends Commenting on the economic situation in South Asia, the Bank Report noted: "In large parts of South Asia, economic trends were favor- able in fiscal 1979. The improvement in economic conditions in much of the region, India in particular, has now continued since fiscal 1976. The gains in output of agriculture, still the most important sector by far, were the result of a combination of generally favorable weather and -- to an extent as yet difficult to quantify -- of structural improvements, such as irrigation and extension, they have raised basic production levels. "Continued expansion of industry and exports and rapidly rising workers' remittances from abroc.:1d have, in addition, contributed to more abundant resources, including ~;ubstantial increases in reserves of food and foreign exchange. Con~equent~y, it has been possible to divert atten- tion from short-term problems and to focus increasingly on more fundamen- tal issues. These broad findings, of course, need qualification in the • light of differing trends in individual countries. Recent improvements should not obscure the fact that South Asia, the world's most populous region, continues to face massive development problems. Despite notable achievements over the past 30 years throughout most of the region, per capita incomes have risen only modestly because of rapid population growth. The region today is still coping with massive and extreme poverty; at least 350 million people, of whom some 250 million live in India alone, continue to be deprived of minimum necessitites in terms of nutrition, unpolluted water, clothing and shelter." .. ./ •  - 3 - • BANK/IDA LENDING IN INDIA, FISCAL YEAR 1979 Agriculture and Rural Development $129 Million IDA Credit for Irrigation in Punjab This $129 million credit will finance the modernization and expansion of Punjab's irrigation systems. The $257.5 million project will help India increase foodgrain, sugar, and cotton production. It is expected to result in a foreign exchange saving of about $160 million annually and to generate farm employment for some 40,000 workers and non-farm employment for an additional 30,000 workers. $111 Million IDA Credit for Irrigation in Haryana This credit will assist Haryana State to complete modernization (mainly by canal lining) of about 30% of its surface irrigation system. In addition, supplemental groundwater will be developed. Development of irrigated agriculture in the Jui Lift Irrigation Command Area will be accelerated, produce markets and village link roads will be constructed or improved, and drinking water will be provided to about 175 villages. Total project cost: $222 million. • $30 Million Credit for Grain Storage Some 5.7 million farm families are expected to benefit as a result of the cooperative grain storage project being financed by this IDA credit. The credit is financing the construction of adequate storage facilities needed by cooperatives in three States. The National Cooper- ative Development Corporation and cooperatives at the village, region and state level will be strengthened, and about 46,000 ffi~f~.~ars of employment will be created during the construction period. ;<::tal cost: $63. 9 mi 11 ion. $27 Miliion Credit for Agricultural Research The $54 million project being financed by this IDA credit of $27 million will help strengthen and reorient research at State Agricul- tural Universities (SAU) in order to increase their capacity to address problems specific to their agro-ecological zones and narrow the gap between SAU research programs and the needs of farmers. In order to accomplish this the project will create a permanent mechanism for appraisal, financing, and supervision of regional research projects and the facilities to provide technical assistance to less developed research institutions will be created in the Indian Council of Agricultural Research. $25 Million Credit for Agricultural Extension Some 6.8 million farm families in Gujarat, Haryana and Karnataka • will be served by a reformed agricultural extension system being assisted by the IDA credit. The advice passed on to these families through the strengthened extension system is expected to contribut significantly to increase crop production and farm incomes. Total cost: $53.4 project mi 11 ion. . .. I  - 4 - $23 Million Credit for Forestry Project in Uttar Pradesh A program to encourage village people in Uttar Pradesh to plant trees for fuel and raw materials is being assisted by the IDA credit. The project includes tree plantations which will be established on about 52,000 hectares of land along roads, rails, and canals, on village conmen- • lands unsuitable for cropping, and on degraded forest reserves in need of rehabilitation. The trees will provide a much needed source of energy to the villages, raw materials to cottage industries, and greater stabi- 1 ity to the environment. Total cost: $44.8 project mill ion. Electric Power $175 Mill ion Credit for Rural Electrification The credit will support the overall lending program of the Rural Electrification Corporation Limited. As a result of the project agricul- tural output will be increased and the quality uf life in rural areas improved through electrification schemes, including the electrification of about 500,000 pumps, to benefit about 2.5 million families in 15,000 villages. Small farmers and small-scale rural industries will benefit as electrification progresses. Landless laborers will benefit through an increase in employment opportunities generated by irrigation-induced double cropping. Total cost: $400 mill ion. $200 Mill ion IDA Credit and $50 Mill ton Bank Loan for Power Development in Andhra Pradesh As IDA credit and a Bank loan totalling $250 mill ion will help finance the construction of three gei rating units, together with ancil- • lary equipment and transmission lines, 3t the Ramagundam thermal power station in Andhra Pradesh. Total cost: $511 million. Water Supply_ $196 Mill ion Credit for Bombay Water Supply Project A $196 million IDA credit is financing the second Bank Group- supported water supply and sewerage project in Bombay. It includes the construction of facilities required for the treatment, transmission, and distribution of an additional 450 million liters per day of water in the Greater Bombay area. The improvement and extension of the city's sewage collection, treatment, and disposal system will benefit most of Bombay's slum population of about 2.5 miJl ion people. As a result, the incidence of waterborne diseases should decrease significantly. [Training and technical assistance are included.] Total cost: $411.6 million. • . .. I . _::.. - 5 - • $48 Mill ion Cr~dit for Water Supply in Maharashtra State The credit will help implement a $100 mill ion water supply and sewerage project designed to benefit over two million people, mostly in the lower income group, 1 iving in six towns and 104 villages in Maharashtra. $38 Mill ion IDA Credit for Water Supply and Sewerage in Punjab T\,<K) mill ion people will benefit from a project designed to improve and expand water supply and sewerage facilities in eight industrial towns in the Punjab. A free supply of safe water from standpipes will help meet the needs of the urban poor. The process will also create employment for about 10,000 workers per year during the construction period. Total Cost: $77.6 million. Fertilizer Industry $250 Mill ion Bank Loan for Fertilizer Production The loan is in support of the construction of a fertilizer plant, including infrastructure and auxiliary and offsite facilities, at Thal in Maharashtra. A net annual savings in foreign exchange of about $200 million is expected due to reduced fertilizer imports, [is expected] and about l ,500 permanent jobs will be created. Co-financing • ($45 million) is being provided by the Overseas Development Assistance . Total cost: $751 million. Transportation $190 Mill ion Credit for Railways This IDA credit is the fourteenth in a series of Bank/lDA operations with the Indian Railways and brings the total of Bank/lDA lending to the Indian Railways to about $1,087 mill ion. The project is designed to improve the operational efficiency of Indian Railways through rationalization and modernization of maintenance, removal of existing bottlenecks in manufacturing capabilities, and support of research and development activities related to improvement in motive power. ConstruL~.Jn of a wheel and axle plant in Karnataka state will generate jobs for about 1,200 workers. Total cost: $459 million. - 0 - •