Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-2605-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE THIRD AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT June 28, 1979 This document h restricted dirbution nd may be med by recipients only In the performance of their official duties. Its contents may not otherwise be dbelosd without Word Ink ihorastlon. CURRENCY EQUIVALENTS (as of June 15, 1979) Rs 1.00 = Paise 100 US$1.00 = Rs 8.13782 Rs 1.00 = US$0.1228 Rs 1 million = US$122,800 (Since September 24, 1975, the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/Rupee ex- change rate is subject to change. Conversions in the Appraisal Report were made at US$1 to Rs 8.60, which represents the projected exchange rate over the disburse- ment period). FISCAL YEAR April 1 - March 31 LIST OF ABBREVIATIONS USED IN THIS REPORT ARDC - Agricultural Refinance and Development Corporation GOI - Government of India LDB - Land Development Bank RBI - Reserve Bank of India FOR OFFICIAL USE ONLY INDIA THIRD 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$250.0 million. Terms: Standard. Relending Terms: From GOI to ARDC, interest per annum would be 6% in respect of ARDC refinancing for up to 9 years and 6.52% for refinancing up to 15 years. GOI to carry the exchange risk. From ARI)C to banks, interest per annum would be 6.5% for all minor irrigation loan; and for other agricultural loans, 6.5% to small farmers 1/ and 7.5% to other farmers; repayments to coincide approximately with expected collections of loans refinanced. From banks to ultimate borrowers, interest per annum would be 9.5% for all minor irrigation; and for other types of agricultural loans, 9.5% to small farmers and 10.5% to other farmers; repay- ment periods to be based on borrower's repayment capacity and the type of investments to be finance,d. Project Description: The purpose of the project is to support a two-year ARDC program of lending to farmers, an intensive training program primarily for the staff of land development banks, and provision of equipment to State Groundwater Organiza- tions, State Land Development Banks and ARDC to enable them to more effectively implement groundwater resource evaluations. Lending under the project would be mainly for minor irrigation (including land development), plantation, horticulture, livestock and fisheries. 1/ Small, farmers are defined as those cultivating land providing a pre- development net return, to family income not exceeding Rs 3,100 annually (at '1978 prices). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Estimated Cost: (US$ Million) Local Foreign Total Minor Irrigation 510.9 62.6 573.5 Diversified Lending 276.4 56.8 333.2 Training and Equipment 2.4 0.2 2.6 Sub-total 789.7 119.6 909.3 Price Contingencies 83.0 12.7 95.7 Total Project Cost 872.7 132.3 1,005.0 1/ Project Cost net of taxes and duties 820.7 132.3 953.0 Financing Plan: (US$ Million) Local Foreign Total IDA Credit 117.7 132.3 250.0 Local Financing: GOI/ARDC 2/ 433.2 - 433.3 Banks 140.2 - 140.2 Ultimate borrowers (farmers) 129.6 - 129.6 Total 820.7 132.3 953.0 Estimated --------(US$ Million)------ Disbursements FY80 FY81 FY82 Amount Amount Amount Annual 70.0 140.0 40.0 Cumulative 70.0 210.0 250.0 Rate of Return: About 46%. Appraisal Report: No. 2404a-IN dated June 21, 1979. 1/ Including taxes and duties of about US$52 million. 2/ Of this amount, ARDC and GOI expect up to US$150 million may be provided by other donors, such as KfW, ODM, USAID, CIDA, EEC Special Fund, etc. The extent to which these funds will be forthcoming and their timing are as yet unclear. In any event, GOI will provide all funds required for the project, irrespective of possible assistance from other donors. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CRERDIT TO INDIA FOR THE THIRD AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Government of India (GOI) for the equivalent of US$250 million on standard :[DA terms. The credit would support the activities of the Agricultural Refinance and Development Corporation (ARDC) in providing credit 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 at 6% and 6.5% int,erest per annum for 9 and 15 years respectively. ARDC would on-lend the funds to banks at 6.5% and 7.5% annual interest for up to 15 years and the banks would lend to farmers at 9.5% and 10.5%, the actual terms depending on the type of investments refinanced and the repayment capa- city of the ultimate borrowers. The exchange risk would be borne by GOI. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (2431-IN dated April 9, 1979), was distributed to the Executive Directors on April 1.3, 1979. Country data sheets are attached as Annex I. Background 3. India is a large, low-income country with 640 million people whose average income is US$150 pebr annum. The agricultural sector dominates the economy, employing over two-thirds of the labor force and contributing over 40% of vaLue added. Although smallholder agriculture provides a fullsome subsistence to many, the land base is inadequate to provide all families in rural areas with an adequate livelihood under current conditions, and many who are landless or nearly landless have only an insecure grasp on the means of existence. Industrialization in India has not been rapid enough to bring about the economic transformation that has led to higher productivity and rapid urbanization in some other countries. The urban population was 18% of the total in 1960, 20% in 1970 and is 21% now. The share of manufacturing has grown slowly and since the late 1960s has remained roughly constant at 16% of GDP. 4. Economic growth has been slow in the past, with GDP growing at a trend rate of 3.6% per annum from 1950 to 1975. Agricultural output grew at 2.4% per annum over the same period. Slow growth in agriculture acted as a drag on overall growth, not only because of its sheer weight in the total, 1/ Parts I and II of this report are substantially the same as Parts I and II of the President's Report for the Thal Fertilizer Project (Report P-2599-IN), dated June 14, 1979. - 2 - but also because of the need to use scarce foreign exchange to import food. Growth in industrial output has been higher at 5.2% per annum between 1950 and 1975, but not as high as in many other developing countries nor as high as can be expected. 5. This slow growth has persisted despite a quite creditable domestic saving and investment performance. Domestic saving has grown from 9% of GDP in 1951 to the current high level of 22%. Gross domestic investment has risen from 10% to 21% of GDP over the same period. Foreign savings have never financed a large portion of domestic investment and have financed no more than 5% of investment since 1970. Foreign savings have been important in financing imports, and a shortage of foreign exchange has acted as a constraint on the economy for most of the period. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance is less than 2% of GDP now, has never risen above 3% and fell to less than 1% in the early 1970s. Exports have grown relatively slowly -- 5.4% per annum in US dollar terms and 2.8% per annum in volume terms between 1950/51 and 1975/76. So far during the 1970s, exports have grown much more rapidly, by 18% per annum in US dollar terms and 8% in volume terms over the period 1970/71 to 1976/77. During the same period imports grew by 17% per annum in US dollar terms but only by 2% per annum in volume terms, reflecting a 28% fall in India's terms of trade over the period. 6. India has the capacity to grow and develop at a more rapid pace than has been achieved so far. Although the industrial sector is small compared to the size of the total economy, it nevertheless has a highly diversified struc- ture and is capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure--irrigation, railways, telecommunications, roads and ports--is extensive compared to many countries, although considerable gaps remain. India is rich in human resources and institutional infrastruc- ture, although there is much scope for improvement. India is reasonably well-supplied with natural resources, not only land and water but minerals, including oil, gas and coal. With good economic policies and sufficient access to foreign savings, India should be able to manage these considerable resources to accelerate the longer-term growth trend. Recent Trends 7. India has managed faster growth during the recent past. Growth of GDP in 1978/79 is estimated to be between 3% and 4%; this is a strong perform- ance coming on top of the previous year's 7.2% growth in GDP and considering agricultural output grew less than 2%. Even this agricultural growth is highly creditable given the previous years' record harvests in most crops. Industrial output grew by 8-10% in 1978/79. Over the four years, 1975/76 to 1978/79, growth in real GDP, agricultural output and industrial output has averaged 5.3%, 4.4% and 6.9% per annum, respectively. Although these rates represent growth over the depressed base of the early 1970s, they are signi- ficantly higher than the longer-term past trend and comparable to the target growth rates for the medium-term future. 8. The 1978/79 foodgrain crop exceeded the 1977/78 record crop of 126 million tons, and many non-food crops did well. The 1978 monsoon rains were - 3 - timely and adequate, although severe flooding in some areas destroyed both lives and. property and ruined some crops. The basic inputs into agricultural production continued their rapid growth of the recent past. Additions to area under irrigation have doubled from 1.3 million hectares a year during the five-year period ending 1973/74 to 2.6 million hectares a year during 1977/78 and 1978/79. Fertilizer consumption in 1978/79 reached 5 million nutrient tons, an increase of 18% over 1977/78. This growth is impressive, particularly since it follows two successive years of very high growth--18% in 1976/77 and 26% in 1977/78--so that fertilizer consumption is now 75% higher than it was in 1975/76. These rates of growth in agricultural inputs and output are heartening evidence that the good harvests of 1975/76 and 1977/78 were not isolated peaks resulting from good weather alone but represent: an increased agricultural production capacity. 9. The growth of industrial output in 1978/79 came from a sharp rise in the output of food industries, particularly sugar, a modest increase in textiles,, important increases in the hitherto depressed engineering sector and the revival of demand for consumer durables. Production would have been still higher but for recurring shortages of steel, coal, railway wagons and electric power and capacity constraints in fertilizer, cement, vegetable oils and petroleum products. Labor unrest also constrained output in some indus- tries, particularly in textiles, steel and mining; man-days lost in 1978 ex- ceeded the high level of 1977 and only in 1974 were the number of days lost higher. Power production increased by 12% or more but continuing shortages in many States necessitated power cuts and curbs on new demand. 10. The trade deficit grew and both the current account surplus and the balance of payments surplus of recent years shrank in 1978/79. The import bill is expected to reach US$8.4 billion, which brings the average rate of increase in US dollar terms to 19% per annum since 1976/77. Non-foodgrain imports rose even more dramatically by 28% per annum over the past two years. The growth of imports and the liberaLization of import control policies represents a desirable adjustment to enhanced foreign resources. Although exports grew much faster during the 1970s through 1976/77 than earlier, export growth in 1977/78 and 1978/79 has slowed somewhat. After rising by 12% in 1975/76 and 23% in 1976/77 in US dollar terms (virtually all growth in export volume), export earnings rose by only 9% in 1977/78 (with little or no volume growth) and an estimated 8% in 1978/79 (with 5-8% volume growth). Although part of the decline is attributable to unfavorable conditions in foreign markets, export profitability has been allowed to deteriorate somewhat. With net invisible receipts in 1978/79 estimated the same as in 1977/78--US$2 billion-- the widened trade deficit resulted in a significantly reduced current account surplus, from US$1 billion in 1977/78 to US$400 million in 1978/79. Despite some increase in net aid disbursements from their low level in 1977/78, the increase in reserves declined from about US$2 billion in 1977/78 to about US$1.5 billion in 1978/79 to reach US$7.4 billion. Developm[ent Prospects 11. The circumstances that have brought about the currently favorable economic situation hold the promise of continuing into the future given conti- nued policy improvements. The faster growth of the recent past has been made possible by the much-increased inward flow of foreign exchange from increased exports, workers' remittances and external assistance; greatly improved agri- cultural performance; the impressive saving effort; the liberalization of import controls; and expanded public expenditure on development programs. Although sustaining the high growth rates of the recent past into the future is by no means automatically assured, India has a level of resources with which to manage the economy that had never existed before. The comfortable foreign exchange position, the large foodgrain stocks and the absence of strong inflationary pressures have eased the pressures to deal with short- term crises and freed India's economic managers to plot a more ambitious course for the economy. The policy improvements needed to achieve the better performance now possible have begun in some important areas but in others have yet to be initiated. 12. The Draft Plan, which was released in March 1978 and is expected to be finalized and approved by the National Development Council later this year, sets out India's development strategy for the five years 1978/79 to 1982/83. The principal objectives of the Draft Plan are to achieve within a period of ten years: (i) the removal of unemployment and significant under- employment, (ii) an appreciable rise in the standard of living of the poorest sections of the population, and (iii) provision by the Government of some of the basic needs of the people in these low-income groups. While the Plan recognizes the importance of achieving more rapid expansion of the economy than in the past to meet the employment and welfare objectives, the targeted rate of growth at 4.7% per annum is lower than projected in most earlier Plans. According to the planners, this reflects in part the increased emphasis given to the distribution rather than the level of income generation, and in part the need for greater realism in the macro-economic assumptions underlying the Plan. While the trade-off between growth and distribution is not immediately obvious from the Plan model, the adoption of a more realistic growth target is in itself well justified -- even at 4.7% per annum, the targeted growth rate is higher than actually achieved during any of the previous Plan periods, and is substantially above the longer-term trend growth rate. 13. In agriculture, the economic policies, development programs and secular trends all seem favorable for a period of sustained high growth. Fertilizer prices have been reduced progressively from their very high level in early 1975 and despite some fall in market foodgrain prices, the fertilizer: foodgrain price ratio has fallen to a clearly profitable range. Good harvests and higher farm incomes provide the money to finance higher fertilizer pur- chases, creating something of a virtuous circle. Pricing policies for many crops--rice, wheat, sugarcane, pulses and others--have concentrated recently on supporting prices to maintain incentives to farmers rather than trying to administratively control prices to contain inflation. The ambitious irrigation and rural electrification investment program in the new Five-Year Plan, if fully funded, will help provide the water control needed to increase yields directly and to induce further productivity-increasing investments. The highly effective reorganization of the agricultural extension service will raise yields as it takes hold progressively across India in the near future. Finally, there are several heartening trends in foodgrain production: one is the steady growth of area planted to high-yielding varieties of rice; another is the growing adoption of summer rice cultivation in the traditional - 5 - wheat-producing areas (Punjab and Haryana). These two trends along with the other favorable developments have caused rice production to rise impressively in the last two years. Another good omen for foodgrain production is the rapid growth of winter wheat cropping in traditionally rice areas (West Bengal, Assam and Orissa). 14. In industry, despite some uncertainty in industrial policy and the lack of strong policy stimulus to improve efficiency in the industrial structure, recently strengthened demand forces along with adroit input supply management should allow the industrial sector to continue to grow at the improved rate of the recent past, at least for the near- and medium-term future. Over the longer term, growth of industrial production at or above the rate experienced in the recent past--e.g., 7% per annum during the last four years--will require some changes in policy to induce a more efficient industrial structure. Recent industrial policies have sent mixed signals to private manufactures and investors. Some, such as reserving certain lines of production for small-scale enterprises or prohibiting the location of new firms in municipal areas, have been restrictive. Others have been stimula- tive, such as the raising of the exemption limit of industrial licensing for capital investment or favorable adjustments in the pricing and production controls in several major industries, including cement, steel, and textiles. In addition the liberalization of import controls is of considerable benefit to increasing industrial production. However, there are some worrisome supply shortages that are currently threatening continued rapid industrial growth. Many can be handled through imports, if needed, as long as India maintains a healthy foreign exchange position. However, two supply constraints likely to persist in the future -- namely, rail transport and power -- cannot be eased through imports. The new Plan contains a major power investment program to increase capacity rapidly. The railway investment program is more modest. Another crucial input into both of these sectors, and into most other major sectors, is coal, whose supply needs careful management. 15. The main reason for expecting sustained growth in industrial pro- duction is improvement in demand prospects for each of the four major sources of industrial demand. The first is market demand for manufactured consumption goods, which is expected to pick up in response to the increase in disposable income due in particular to t:he good agricultural harvests. Although its effect has been delayed somewhat, this broad-based demand is finally making itself felt and is expected to continue into the future as long as the growth in agricultural output continues. Another source of demand is public expendi- ture on development projects, which has grown in a major way in the last few years and is scheduled to continue to grow under the new Five-Year Plan. A third source of growth is export demand for industrial goods. There has been a sustained growth in the export of manufactures such as engineering goods, garments, gems, finished lealther and some chemical products. This export growth should continue in the future with proper policy support. A final source of growing demand is private investment by both the household and corporate sectors. There are as yet only a few signs of this growth, such as increased disbursement by term lending institutions and increased use of inputs; investments should become stronger as growth in the other sources of demand continues and as capacity limitations begin to constrain production in - 6 - more industries. The net result of increasing demand should be continued high growth in industrial production in the near and medium term within existing policies. 16. Import policy is an area where there has been significant improve- ment in the recent past; but some improvement in export policy is required to raise incentives to export. India has liberalized import control policy significantly in the past two years and imports have responded. Future growth in imports, and in the benefits of price stability, enhanced production and increased efficiency which imports bring, will depend to a great extent on how the now liberalized policy is administered. A delicate touch is required to yield the benefits without bringing about undesirable damage to vulnerable industries. India has the foreign resources to allow imports to grow at the rapid rates of the past two years for a few more years and continue to relax the very severe restraints imposed on the economy during the early 1970s by suppression of imports. But, given the import liberalization undertaken so far and the expected growth of imports, by the end of the Plan period (1982/83), foreign exchange reserves will have fallen to six months of imports, or less, and some adjustment in the balance of payments will be required. Part of the adjustment will very likely be a reduction in the growth rate of imports; the import bill need not grow 15% in volume terms indefinitely to sustain the target growth in GDP. Part of the adjustment must come from the achievement of a growth rate of exports in the vicinity of 7-8% or higher in volume terms. Faster export growth is needed not only to provide the foreign exchange to sustain the rapid growth in imports but also to allow foreign demand and competition to improve the efficiency of Indian industry. Finally, part of the adjustment should come from an increased net transfer of external assistance. 17. India's population policy continues to aim at reducing the birth rate to 33 births per thousand people by 1983 through completely voluntary acceptance of fertility control methods supplied by a family welfare system integrated with the supply of basic health, maternal and child health and nutrition services. Since 1977, the family planning achievements in terms of number of acceptors have been below that needed to achieve the 1983 goal or even to keep the birth rate from rising above its current low level. The low performance is primarily the result of the reaction to the harsh birth control policies introduced during 1976. Since then family planning perform- ance has been gradually returning to the rising trend which was discernible before it was disrupted by the intensive drive of 1976/77. Given continued support for the program of family welfare, India's rate of population in- crease should remain below 2% per annum and fall to 1.5% by 1990. 18. In addition to stimulating overall economic growth and constraining population growth, reduction of poverty in India requires special attention to ways of raising the income and productivity of low-income groups. More than one-third of the world's poor live in India and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. The prospects for alleviating their poverty by providing these families with more land are not good because of the virtual absence of un- cultivated arable land, the slow progress in implementing land reform and the limited amount of land that would be available if land reform were carried out. Estimates of the amount of land that would be available if land reform were carried out vary greatly. One estimate is that these would be about 9 million hectares available for distribution. This compares to roughly 45 million families in the two poorest groups in rural India: landless families and families owing less than one hectare of land, whose average holding is 0.31 hectares. An approach to the amelioration oF poverty more promising than land reform is the creation of more employment opportunities for the landless and small farmers in rural areas. Although the basic thrust must come from the market by a more rapidly increasing agricultural output, there will be a role for employment-intensive rural works programs. The new Plan provides for increased rural employment both through direct employment schemes and through ambitious programs of investment in rural infrastructure in addition to the more general rural development programs. PART II - BANK GROUP OPERATIONS IN INDIA 19. Since 1949, the Bank Group has made 56 loans and 113 development credits to India totalling US$2,281 million and US$6,747 million (both net of cancellation), respectively. Of these amounts, US$978 million had been repaid, and US$2,720 million was still undisbursed as of April 30, 1979. Annex II contains a summary statement of disbursements as of April 30, 1979, and notes on the execution of ongoing projects. 20. Since 1957, IFC has made 15 commitments in India totalling US$64.0 million, of which US$15.9 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$33.6 million, US$25.6 mil- lion represents loans and US$8.0 million equity. A summary statement of IFC operations as of April 30, 1979, is also included in Annex II (page 2). 21. 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 financirng 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, water supply development, and urban investments have also received Bank Group support in recent years. 22. The direction of assistance under the Bank/IDA program has been consistent with India's ne,eds 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 on-farm investments, improved water management and intensification and streamlining of extension systems, 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. 23. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has success- fully adjusted to the changed world price situation. However, the basic need for foreign assistance, to augment domestic resources, stimulate investment and accelerate economic growth, remains. As in the past, Bank Group assist- ance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Con- sequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, rural water supply and medium- and small-scale industry. 24. Although the growth prospects of the economy have improved, India's poverty and needs are such that as much as possible of India's external capi- tal requirements should be provided on concessionary 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 India may be regarded as creditworthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was 12% in 1978/79 and is projected to remain below 20% through 1995/96. As of March 31, 1979, outstanding loans to India totaled US$1,331 million, of which US$657 million remained to be disbursed, leaving a net amount outstanding of US$674 million. 25. 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 62%, 27% and 38%, respectively, in 1978/79. On March 31, 1977, India's outstanding and dis- bursed external public debt was US$13.3 billion, of which the Bank Group's share was 28%. Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1977/78, about 16% of India's total debt service payments were to the Bank Group. - 9 - PART III -. AGRICULTURAL CREDIT IN INDIA Background 26. India 's agricultural growth requires substantial cash investment on the part of millions of farmers. The traditional system of family financ- ing 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. Specialized agricultural credit institutions with the ability to appraise projects and lend for them on the basis of their productivity, with access to funds outside the rural secitor 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. 27. The share of traditional money-lenders in rural credit is esti- mated to have declined to about 65%, compared with about 90% in the early 1960s. Their diminishing role can be attributed not only to social pressures and borrower protection legislation, but also to the growing accessibility of institutional credit for agricultural investments on reasonable terms. Private investment of the type financed by institutional agricultural credit has increased substantially since the mid-1960s. Institutional credit financed less than 3% of total investment in agriculture in 1956; it reached 8% in 196]., then jumped to 20% in 1969 and has remained at about this level since then. In terms of amLounts, however, total institutional finance (direct and indirect) has continued to register a remarkable increase; from US$194 million for the year ending June 1974 to US$411 million for the year ending June 1978. GOI's current plan calls for doubling of the total institutional credit by about 1980/81. 28. 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 the 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). 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 center- piece. These efforts are expected to lead not only to significant increases in national foodgrain output and to improvement of regional income distribu- tion but ultimately also to stimulation of large-scale private investment in minor irrigation. Agricultural Credit Institutions 29. The history of agricultural credit institutions is long, starting with the Cooperative Credit Societies Act of 1904. At present, the main - 10 - institutions in this field are: the cooperative banks (about two-thirds of outstanding agricultural loans in 1978); nationalized and private commer- cial banks (nearly one-third); and a number of smaller institutions, such as Regional Rural Banks, which combine features of both cooperative and commercial banking. All these banking windows offer farmers similar terms and conditions under Reserve Bank of India (RBI) guidance. 30. Cooperative banks are organized by individual States into two inde- pendent groups of institutions: (a) land development banks (long-term credit), and (b) cooperative banks (short- and medium-term credit) . There are State Land Development Banks (LDB) in 17 States, which lend through their branches, or make loans through their affiliated primary land development banks. LDB lend for 3- to 15-year periods. They do not make seasonal loans or accept deposits. The cooperative banking structure is much larger. In 1977, 26 State Cooperative Banks provided funds for 344 district-level Central Coop- erative Banks which, in turn, supported some 123,000 village-level primary agricultural credit societies. The primary societies specialize in seasonal and medium-term (2 to 5 years) credit and also provide a variety of services to their members, including savings facilities and consumption loans. A study conducted under Credit 540-IN (see paragraph 40), recommended a gradual merger at all levels, and a few States are experimenting with various methods of obtaining the benefits of integration. GOI has agreed to review the progress made by the cooperative credit system towards meeting the agricultural credit needs of farmers through one source (or closely coordinated sources) and to inform the Association, by December 31, 1980, of its findings and proposals arising from the review (Section 4.01 of the Development Credit Agreement). 31. Commercial banks' involvement with agricultural lending is rela- tively recent and occupies a modest proportion of such banks' total business. Even so, the commercial banks' lending to the agricultural sector increased from 5% of their total operations in 1969 to nearly 11% in 1978. Nearly half of their agricultural lending volume is for seasonal loans. An advantage of commercial banks is that they provide both long- and short-term credit to their clients. 32. The main problems in the institutional credit sector are: high loan overdues; marked regional disparities in volume of lending; and diffi- culty 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 proportion 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 channels for providing 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 finan- cial position and administration of credit institutions in backward States and creating clear expectations by use of targets for their growth. The - 11 - 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 cffer sufficient inducement for small farmers to risk undertaking economically viable investments. Agricultural Refinance and Development Corporation (ARDC) 33. ARDC, a subsidiary of the Reserve Bank of India (RBI), was estab- lished by an Act of Parliament on July 1, 1963. Its main objective is to provide credit for agricultural investments by making long- and medium-term funds available to land development banks, commercial banks and other approved institutions, to refinance agricultural schemes which are judged by ARDC to be economically and technically sound and are located within a reasonably compact area. ARDC helps formulate schemes, particularly in less developed States, and consequently is able to influence lending policies and procedures of agencies it assists, thus contributing to the development of agricultural credit institutions throughout India. 34. ARDC had about 500 professional staff and 14 regional offices as of June 30, 1978. ARDC has a nine-member Board of Directors. The Chairman 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. It 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 (see paragraphs 37 to 41). As of the end of FY78, ARDC's sources of funds were as follows: capital and reserves, US$67 million; GOI borrowings, US$497 million; RBI borrowings, US$252 million; and capital market borrowings, US$235 million. 35. ARDC's operations are conducted mostly through the refinancing of agriculturcal development schemes undertaken by State Land Development Banks and commercial banks. The Land Banks' disbursements increased by over 80% between 1974 and 1978, although their share of ARDC's refinancing declined from 90% to 50% over the same period with a corresponding increase in commer- cial banks' share. ARDC's operating results continue to be satisfactory. Profits have increased steadily with ARDC's expanding operations, and in 1977/78 profits before taxes were US$13.9 million. 36. l4ost of ARDC refinance has been for minor irrigation, 70%; other purposes include farm mechanization, 14%, storage and market yards, 6%, and land development, 4%. The remaining 6% has gone to forestry, plantation, livestock and fisheries. Since its inception, ARDC has made significant con- tributions to increased production through financing of about 250,000 tube- wells, 390,000 dugwells, and 580,000 pumpsets. Land development in irrigation projects and land improved under soil conservation schemes aggregate about 890,000 ha. Through its investments, ARDC has assisted in bringing nearly 3 million ha under multiple cropping. - 12 - Previous Bank Group Experience with ARDC 37. ARDC's association with the Bank Group dates from the formulation of a series of State-based agricultural credit projects between 1969 and 1972. Eleven of those projects have since been implemented through ARDC. More recently, ARDC has been entrusted with two general lines of credit, ARDC I (Credit 540-IN, of April 1975) for refinancing from August 1975 to July 1977, and ARDC II (Credit 715-IN, of June 1977) for refinancing from August 1977 to December 1979. In addition, ARDC has taken an active role in the imple- mentation and formulation of another 20 IDA/IBRD projects approved until March 31, 1979, mostly by providing long-term credit and loan supervision in support of investments in major irrigation, horticulture, fisheries and seed. The total amount committed by IDA for disbursement through ARDC in those 33 projects is about US$860 million. Other projects with possible ARDC involvement are currently under consideration. As of March 31, 1979, IDA disbursements to GOI for on-lending through ARDC were about US$504 million. 38. The 11 State-based agricultural credit projects were designed to support three- and four-year lending programs by selected commercial and cooperative banks to farmers for investments in minor irrigation (about 80%), land levelling and, in six States, farm mechanization. Almost every project required the State government concerned to establish or strengthen an agency responsible for monitoring the scale and quality of groundwater investments financed through institutional credit. Each project also required participat- ing banks to adopt specific loan appraisal procedures based on incremental cash flows, to observe uniform lending terms and conditions, and usually to implement various improvements in their staffing and management methods. Nine of the projects closed between 1975 and 1978; the remaining two projects are expected to close in 1980. Project completion reviews have been carried out on six of these projects, two of such reviews were based on ARDC's own competion reports. ARDC is also preparing completion reports on the three remaining projects. The main conclusions of this ex-post evaluation were as follows: (a) The main objective of the projects, that of achieving increased agricultural production through expansion of irrigation and the use of modern technology, was clearly achieved in aggregate. Returns to farmers and to the economy were in the range estimated at appraisal; (b) Many State- level institutions performed well in terms of substantially increasing lending while maintaining good control over loan appraisal and recovery. However, the long-term credit system in some States (notably Gujarat, Maharashtra and Tamil Nadu) has been plagued by persistent overdues; (c) The gradual change from purely security-oriented lending to appraisal based on incremental income has substantially improved the quality and coverage of agricultural lending, and has particularly helped the small farmers; and (d) The groundwater resource balance in a few limited areas is alarming enough to warrant careful control over new investments. 39. So far, Operations Evaluation Department has completed one Project performance Audit, on Gujarat Agricultural Credit (in October 1976). The main recommendations of the Audit Report included: (i) the necessity of enacting legislation to control groundwater resources and development; - 13 - (ii) t:he need for SLDB to reschedule overdue loans in areas affected by severe weather, including project loans as appropriate; (iii) the necessity for SLDB to initiate schemes to diversify its lending in sectors other than minor irrigation; (iv) t:he necessity for SLDB to continue to implement, at the fastest rate possible, its program of improvement of its managerial, financial and organizational operations; and (v) t:he need for improvement in the extension service. These recommendations apply to most other States as well. Therefore, they were t:aken into consideration in preparing each of the three ARDC credits. 40. In April 1975, IDA approved a general line of credit of US$75 mil- lion (Credit 540-IN) for disbursement over two years on the general under- standing that it would be the first in a series of such credits to ARDC. The objective of the project was for ARDC to commit specific amounts for indivi- dual schemes (appraised by ARDC and not by IDA) within an IDA-approved overall lending program. These schemes would normally be too small for IDA to approve individualLy. The project provided funds for minor irrigation and diversified agricultural investments ancl for staff training of lending institutions. The credit closed in September 1977. The completion review of this project had the following main conclusions. (i) The project had achieved its physical targets, including targets for lending to small farmers (50% of the IDA credit); (ii) rhe State Land Development Bank system continued to suffer from a high level of loan overdues, but the sliding eligi- bility criteria helped control overdues. 1/ Expansion of commercial bank refinance through ARDC has been beyond all expectation, and a minimum recovery/eligibility requirement should be introduced; and (iii) The key to the successful results achieved under the project was ARDC, and its performance was good. 41. The second line of credit (Credit 715-IN), which supported ARDC operations throughout India for two years, followed on directly from the first project, and has been effective since August 1977. The Credit amount was increased from US$75 million in ARDC I to US$200 million in ARDC II (but declined from 44% to 34% of project cost), reflecting the substantial increase in ARDC ccmmitments and disbursements since 1977. The diversified lending 1/ Sliding scale eligibility criteria (linking the ARDC refinancing of the Land Banks' future lending volume to the Banks' recent collection per- formance) were introduced to provide an incentive to the Land Banks with poor recoveries to improve their situation. - 14 - component was increased from US$4 million to US$25 million to reflect the change in the composition of ARDC's portfolio. The credit also included a major training program for staff of agricultural financing institutions. Terms and conditions, including eligibility criteria designed to control overdues, are in most respects similar to ARDC I, although the scope for eligible borrowers has been widened to include recipients of capital subsidies from the Small Farmers Development Authority. The Seconil ARDC credit is progressing well. As of March 31, 1979, US$91.1 million had been disbursed. PART IV - THE PROJECT 42. The project was prepared by the staff of ARDC and submitted to IDA in September 1978. It was appraised in October/November 1978, and nego- tiations were held in Washington in April 1979. The Borrowers' delegation included Mr. Baldev Singh, Joint Secretary, Ministry of Finance, GOI; Mr. M. Chidambaram, Managing Director, ARDC; and representatives of GOI Ministry of Agriculture and Irrigation. A report entitled "Third Agricultural Refinance and Development Corporation Credit Project" (Report No. 2404a-IN), dated June 21, 1979 is being circulated to the Executive Directors separately. A Supplementary Project Data Sheet is attached as Annex III. Project Description 43. The project would continue Bank Group support, over two years (fromn abolit 1)Dcember 1979 to December 1981), for ARDC's program of lending to farmers. The proposed credit would support the whole of ARDC's lending operations in virtually every district of India. However, for administra- tive simplicity, IDA would restrict its own disbursements to a few major categories, such as minor irrigation (including land development), plan- tation, horticulture, livestock and fisheries. The project would also continue to support further training, mainly for staff of participating financing institutions. In addition, the project would finance essential equipment to strengthen the groundwater resources evaluation capacities of the State Groundwater Organizations, the State Land Development Banks and ARDC. The project would give emphasis to lending to small farmers, which is expected to reach about 60% of the proposed credit. Small farmers are identified on the basis of their predevelopment annual family income from farming (up to Rs 3,100 at 1978 prices). 44. Minor irrigation development under the project would predominate, accounting for about 63% (US$633 million) of total project costs. Minor irriga- tion investments would include both groundwater and surface water development, though groundwater would constitute the major portion of the project and most of the loans would be to individual farmers. Loans to individual farmers for investments in groundwater development would be for new wells, improvement or rehabilitation of existing wells and provision of pumpsets. Loans for medium- duty tubewells serving areas of 10 to 30 ha would be made to groups of farmers. Loans for deep, high-capacity tubewells serving command areas of up to 100 ha would be made to cooperatives and State Corporations. Loans for surface water - 15 - development would be made to individual farmers, cooperatives, and State Corporations and consist mainly of river lift schemes ranging in size from single farm commands to several hundred hectares. 45. Institutional finance for groundwater programs would be linked to systematic and controlled resource evaluations (Section 2.Oo of the Project Agreement). The controls would specify increasingly detailed levels of investigation commensurate with escalating levels of resource development. This is to provide a measure of security to institutional loans by ensuring that schem1e appraisals would be made from a fuller data base in the case of areas with a high degree of groundwater exploitation. The guidelines defin- ing groundwater resource categories and levels of evaluation studies required have been discussed and finalized. To implement these guidelines, State Groundwater Organizations (SGO) in several States would need to be strength- ened. AR)C has therefore agreed that it would refinance minor irrigation schemes olnly in States where it is satisfied that SGO has been suitably strengthened to carry out the required evaluation of groundwater resources (Section 2.09 of the Project Agreement). 46. While supplies of both electrical and diesel pumpsets are plentiful and availability of spare parts is generally adequate, recent ARDC studies show that sets purchased by farmers are often substandard in technical specifications and, in some cases, in quality. Improvements of technical standards would be achieved through the establishment of approved lists of pumps and prime movers in each State and through the establishment of technical support organizations operating through the banking systems in each State. ARDC has agreed to carry out pilot quality control programs in selected areas of four states which would be completed by December 31, 1980; based upon a review of this experience, ARDC would prepare, by June 30, 1981, a phased program to start implementation in other states before the end of the project period (Section 2.12 of the Project Agreement). 47. The share of len,ding to agricultural and allied activities other than irrigation and land development would be increased during the project period. Such activities would include dairy, poultry, plantations and horticulture, fisheries, farm mechanization and others; their combined share would be about 36% (as against 26% of cumulative disbursements under ARDC II to June 30, 1978). This increase reflects a rapidly growing demand for such loans as well as the increasing importance attached by GOI to such activities, particularly as a means oif reaching the landless and near-landless rural poor. 48. The training program, started in 1975 under the first ARDC project, would be continued and expanded. So far, some 2,300 senior and middle-level staff and about 11,400 junior staff of rural lending agencies have been trained in modern methods of agriczultural lending. This project would provide training for about 3,000 senior an,d middle-level staff (including ARDC staff) and 7,800 junior staff. The project would also provide refresher courses to over 4,000 staff. - 16 - Implementation 49. Project financing and organizational arrangements would follow the pattern successfully established and developed during the previous projects. The proceeds of the credit would be channelled through and supervised by ARDC to refinance up to 90% of participating banks' loans. ARDC continues to be an organization of high caliber. To keep pace with its rapid growth, however, substantial changes in working methods and management systems will have to be introduced to maintain and improve ARDC's capacity for project appraisal and supervision. ARDC intends to implement a time-bound reorgani- zation plan which would include steps to strengthen its regional offices by increased staffing and delegation of responsibilities, and a further review of ARDC's operations with the assistance of local management consultants. ARDC would also appoint a senior officer to be next in command to the Managing Director, by December 31, 1979 (Section 2.04 of the Project Agreement). 50. To deal with the loan overdues problem, under ARDC I and ARDC II, eligibility criteria have been applied to the land development banks as a condition of IDA financial support. The criteria are amended as appropriate from time to time (for example, when abnormal climatic conditions occur), on the recommendations of a Debenture Norms Committee which was set up to advise ARDC on recovery discipline for cooperative banks. The main objective of the eligibility scale criteria has been to provide an incentive to the State Land Development Banks (SLDB) and the Primary Land Development Banks (PLDB) with poor recoveries to improve the situation by linking their future lending volume to their recent collection performance. Under the proposed project, these criteria would be continued and made somewhat stricter. If 50% or more of land development banks (or branches) became ineligible for refinance under the criteria, or if overdues at the State Land Development Bank level were 50% or more, the entire land development bank structure in the State would be ineligible for further ARDC refinance unless the State Government agreed with ARDC/RBI on a specific time-bound rehabilitation program acceptable to ARDC. Such a step is considered necessary to ensure that State governments provide serious support for loan collections and other measures needed to ensure viability of the land development banks. ARDC would maintain eligibility criteria satisfactory to IDA (Section 2.05 of the Project Agreement). 51. Similar loan recovery discipline for the commercial banks has not been included, mainly because term agricultural lending formed only a small part of the commercial banks' portfolio and encouragement has been required for the banks to expand such lending. However, commercial banks' agricultural lending operations have now reached sufficient scale and maturity to warrant closer monitoring of collection performance. Commercial banks' agricultural lending overdues reached an all-India average of about 51% in 1978, with a high of about 68% in the Northeastern region. Consequently, ARDC proposes to scrutinize commercial banks' recovery performance on a regular basis and, under the proposed project, ARDC has established a new Committee on Agricul- tural Loans through Commercial Banks, with membership and functions mutually agreed between the Association and ARDC, to advise ARDC on appropriate appraisal criteria, lending policies, and procedures for improving recovery disciplines in the commercial banks. The Committee is expected to make its initial recommendations by December 31, 1979. - 17 - 52. Project monitoring and evaluation systems established during the previous projects would be continued and further strengthened. To help ensure adequate supervision of its growing portfolio, ARDC intends to improve effi- ciency by improved district level supervision and by continuation of the process of standardization of data collection and presentation of supervision reports b) the participating banks. The concept of "problem scheme" and "problem districts" would be introduced to focus attention on problems. During the project period, ARDC plans to evaluate three completed IDA financed agricultural credit projects for which ARDC will prepare Project Completion Reports. In addition, about five evaluation studies concerning ARDC refinanced schemes would be sub-contracted to research institutes and about ten evalua- tion stuclies would be conducted by participating banks under ARDC supervision. ARDC would intensify its efforts to improve monitoring and evaluation method- ologies and would assist participating banks with establishment and training of monitoring and evaluation units. Project Cost and Financing 53. The total project cost, over the two years, is estimated at US$1,005 million (including duties and taxes of about US$52 million), of which the foreign exchange component is about US$132.2 million or 13%. Included in this cosi: is about US$633.7 million for minor irrigation, US$368.7 million for diversified lending (comprising non-irrigation on-farm investments), US$2.0 million for training and US$0.6 million for equipment for State Groundwater Organizalions, State Land Development Banks and ARDC. 54. The proposed IDA credit of US$250 million would cover about 26% of the totaL project cost, excluding duties and taxes. IDA financing would cover the whole of the foreign exchange costs and an estimated US$117.7 million of local costs. The remaining 74% of the project costs would be financed by borrowing farmers (15%), participating banks (14%) and GOI/ARDC (45%). Of the GOI/ARDC share of US$433.2 million, about US$150 million is expected to be provided by other external donors, such as KFW, UK, USAID, CIDA, and the EEC Special Fund. Nevertheless, GOI will provide all funds required for the project, irrespective of any assistance from other donors. 55. IDA funds would be channelled by GOI to ARDC. US$1.3 million would be in the form of a grant for training and equipment, and US$248.7 million would be provided at 6% interest per annum for ARDC refinancing for up to 9 and 6.5% for refinancing Up to 15 years. GOI would carry the foreign exchange risk. IDA funds for lending to farmers would be used by ARDC for refinancing the agricultural schemes fEinanced by participating cooperative or commercial banks in accordance with appraisal criteria which have been reviewed by the Association and are satisEactory. ARDC's refinancing to the banks would be at the annual rate of 6.5%. for all minor irrigation loans, and 6.5% for other types of agricultural loans to small farmers (see paragraph 43) and 7.5% to other borrowers; repayments to coincide approximately with expected collections of loans refinanced. From the banks to the ultimate borrowers, the interest per annum would be 9.5% for minor irrigation, 9.5% for other types of agricul- tural loans to small farmers and 10.5% to other farmers; repayment periods to be based on the borrower's repayment capacity and the type of investments to be financed. - 18 - 56. Interest rates are consistent with the prevailing overall rate structure in India; intersectoral rate differentials are small. The average increase in the Indian wholesale prices over the past four years was 2%; it is not expected to exceed 5% over the next three years. The proposed interest rates are expected to provide adequate margins to participating financing institutions (including ARDC). ARDC is expected to complete a comprehensive survey of interest margins on lending through land development banks in mid-1979. GOI would, by June 30, 1980, review the results of the survey and inform IDA of GOI's proposal for implementing the survey recom- mendations (Section 4.02 of the Development Credit Agreement). Procurement and Disbursement 57. Procurement under schemes involving relatively small investments by individual farmers would be based on farmers' choice through local dealers and contractors. Typical items would be pumpsets, tubewells, dugwells, dairy cattle, bullock and pneumatic tyre carts, and farm mechanization equipment such as tractors, power tillers and sprayers. ARDC would establish guidelines for the selection of pumpsets which would include equipment performance standards established by the Indian Standards Institute, and standards relat- ing a given investment item (e.g., size and horsepower of pumpset) to farmers' typical situations (e.g., size of area to be irrigated). Procurement under such schemes as construction of storage warehouses, market yards, and agro- processing facilities would normally be based on local competitive bidding procedures satisfactory to IDA. International competitive bidding would not be practical given the relatively small size of investments involved and their dispersion throughout the country and over time. Normal commercial channels provide an adequate choice of locally manufactured equipment and good servic- ing facilities, and prices are competitive with those on world markets. Procurement of equipment for the State Groundwater Organizations, the State Land Development Bank and ARDC (US$0.6 million), which would be spread over two years, would be based on local shopping procedures satisfactory to the Association. 58. IDA would disburse against 50% of ARDC's refinancing for minor irrigation and land development, for diversified lending (plantation and horticulture, livestock and fishing), and for training and equipment. Dis- bursement would continue to be against ARDC certified statements; documents would be retained by ARDC for inspection by IDA supervision missions. Economic Benefits and Risks 59. The project's primary economic benefit would be an increase in agri- cultural production for domestic consumption and export. At full development, by about 1986, the annual value of increased production is estimated at about US$825 million in 1978 prices. 60. 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 ongoing ARDC schemes, they can be regarded as - 19 - indicative of the rates of return which would accrue. Results of the calcu- lations indicate that the economic rates of return range from about 30% for some dugwell and pumpset schemes, to about 50% for poultry, dairy and land development schemes and to over 50% for some other minor irrigation schemes. The overall economic return of the project would be about 46%. 61. Beyond the realization of substantial benefits arising out of productive on-farm investments, the project aims to continue the long-term process of strengthening the agricultural credit structure started under ARDC I and ARDC II. In ARDC itself, a reorganization phase would begin with a build-up of senior management and technical expertise, the design and im- plementation of area-based supervision systems, and the introduction of additional technical appraisal criteria. Participating banks would be assisted through training and through enforcement of conditions of loan refinance. 62. The number of project beneficiaries would be substantial and is estimated at about one million farmers, including farmers who would be expected to purchase excess water from project borrowers. At least 60% of the credit is expected to be! extended to small farmers and approximately 50% is expected to be used in the less developed northeastern States. Incremental annual empLoyment generated by project investment is estimated at about 115 million man-days. Much of the additional labor would be supplied by un- employed or underemployed members of beneficiary families. However, a sig- nificant part would be proviided by hired laborers, many of them landless people belonging to the poorest segments of India's population. 63. 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 wieather are an omnipresent risk, but with about two-thirds of project investments planned for minor irrigation, the project by its nature reduces weather risk. A further risk relates to participating banks' ability to enforce satisfactory repayment discipline at higher volumes of lending. Stricter repayment disciplines proposed under this project (see paragraphs 50 and 51) should help minimize this risk. PART V - LEGAL INSTRUMENTS AND AUTHORITY 64. The draft Development Credit Agreement between India and the Association, the draft Project Agreement between the Association and the Agricultural Refinance and Development Corporation, and the Recommendation of the Conmittee provided for in Article V, Section l(d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 65. Special conditions of the project are listed in Section III of Annex III. - 20 - 66. The execution of a Subsidiary Loan Agreement between GOI and ARDC is an additional condition of effectiveness of the Credit (see Section 6.02 (b) of the Development Credit Agreement). 67. I aiv satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 68. T recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President June 28, 1979 ANNEX 1 Page 1 of 5 INDIA - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES INDIA LAND AREA (THOUSAND INDIA - MOST R E TOTAL A387.6 SAME SAME NEXT HIGHER AGRICULTULRAL 16118.3 MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 lb ESTIMATE /b REGION {c GROUP Id GROUP /e GNP PER CAPITA(Ls ) 60.0 9U.0 .50.0 167.4 182.9 432.3 ENERGY CONSUMPTION PER CAPIIA (KILOGRAMS 0P COAL EQUIVALENT) 142.0 181.0 218.0(76) 65.7 88.9 251.7 POPULATION AND VITAL STATISTICS TOTAL POPULATION, MID-YEAR (MILLIONS) 434.9 547.6 631.7 /f IJRBAN POPULATION (PERCENT OF TOTAL) 17.6 19.5 20.6 12.8 15.0 24.2 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 973.0 STATIONAPY POPULATION (MILLIONS) 1643.0 YEAR STATIONARY POPULATION IS REACHED 2150 POPULATION DENSITY PER SQ. m. 132.0 167.0 192.0 83.2 46.8 42.7 PER SQ. EM. AGRICULTIRAL LAND 247.0 308.0 347.0 322.6 254.1 95.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 41.0 41.6 42.0(77) 44.0 43.6 44.9 15-64 YRS. 55.9 55.3 55.0(77) 52.9 53.3 52.8 65 YRS. AND ABOVE 3.1 3.1 3.C(77) 2.9 2.9 3.0 POPULATION GROWTH RATE (PERCENT) TOTAL 1.9 2.3 2.0 2.2 2.4 2.7 UTRBAN 2 .5/ 3.4 3.5 4.2 4.0 8.8 CRUDE BIRTH RATE (PER THOUSAND) 44.0 40.0 35.0(77) 45.1 44.3 42.2 CRUDE DEATH rATE (PER THOUSAND) 21.0 17.0 14.0(77) 17.3 19.7 12.4 GROSS REPRODUCTION RATE 3.2 2.9 2.4(77) 3.2 2.9 3.2 FAMILY PLANNING ACCEPTORS, ANNLAL (THOUSANDS) .. 3768.0 4518.0 USERS(PERCENT OF MARRIED WOMEN) .. 12.0 11.2 13.7 14.6 14.2 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION 100.0 102.0 101.0 95.6 96.4 104.3 PER CAPITA (1969-71 = 100) PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 95.0 92.0 89.0 91.1 92.3 99.5 PROTEINS (GRAMS PER DAY) 51.0 53.0 48.0 49.6 50.0 56.8 OF WHIFCE ANIMAL AND PULSE 19.0 16.0 12.6 12.6 13.9 17.5 CHILD (AGES 1-4) MORTALITY RAIE 28.0 22.0 10.0 .. .. 7.5 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 41.7 48.0 51.0(77) 43.1 45.8 53.3 IMFANT MORTALITY RATE (PER TiCUSAND) 1 '34.0 134.0 99.5 102.7 82.5 ACCESS TO SAFE WATER (PERCENT OF POPULATION ) TOTAL . 17.0 33.0 30.0 26.4 31.1 UR3AN - 60.0 83.0 66.3 63.5 68.5 RURAL *- 6.0 20.0 17.2 14.1 18.2 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL 18.0 20.0 15.7 16.1 37.5 LRBAN 85.0 87.0 66.9 65.9 69.5 RURAL - 1.0 2.0 2.5 3.4 25.4 POPULATION PER PHYSICIAN 5840.0/h 4890.0 3135.0(77) 8830.8 13432.7 9359.2 POPULATION PEN NURSING PERSON 1l590.0/h 5220.0 63Z0.0(76) 8479.3 6983.3 2762.5 POPULATION PER HOSPITAL BED TOTAL 2590.0/4 2020.0 1231.0(77) 1624.5 1157.6 786.5 URBAN 8. .. ,, .. 183.3 278.4 RURAL . .. ., .. 1348.8 1358.4 ADMISSIONS PER HOSPITAL RIO .D. .. .. .. 19.5 19.2 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 .. 5.2 ., 5.2 URBAN 5.2 ,, 4.8 ,, 4.8 RURAL 5.2 .. 5.3 .. 5.3 AVERAGE NUMBER OF PERUONS PER ROOM TOTAL 2.6 2.8 .. URBAN .. .. .. .. 1.8 2.3 RURAL .. .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINCS TOTAL , . . .. . 25.9 28.3 URBAN RURAL ,, .. .. .. 8.7 10.3 ANNEX I INDIA - SOCIAL INDICATORS DATA SHEET Page 2 of 5 REFERENCE GROUPS (ADJUSTED AVERAGES INDIA /a - MOST RECENT ESTIMATE) SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE /b RECION /c GROUP /d GROUP L e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 72.0 79.0(76) 59.1 62.9 75.8 FEMALE 40.0 55.0 63.0(76) 38.4 45.9 67.9 MALE 80.0 87.0 94.0(76) SECONDARY: TOTAL 20.0 29.0 28.0(76) 19.9 14.4 17.7 FEMALE 10.0 17.0 18.0(76) 9.9 8.8 12.9 MALE 30.0 39.0 38.0(76) VOCATIONAL (PERCENT OF SECONDARY) 8.0 6.0/ *- 1.5 6.6 7.4 PbPIL-TEACHER RATIO PRIMARY 29.0 38.0 40.0 38.2 38.5 34.3 SECONDARY 16.0 17.0 .. 23.5 19.8 23.5 ADULT LITERACY RATE (PERCENT) 28.0 33.0 36.0 35.6 36.7 63.7 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.0 1.2(76) 2.2 3.1 7.2 FADIO RECEIVERS PER THOUSAND POPULATION 5.0 21.0 24.0(76) 14.9 31.1 71.1 TV RECEIVERS PER THOUSAND POPULATION * 0.1 0.5 .. 2.8 14.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPLLATION 11.0 16.0 16.0(75) 6.4 6.0 16.3 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 .. 1.4 1.6 EMPLOYMENT TOTAL LABOR FORCE (THOUSANDS) 175000.0 218000.0 261000.0/k FEMALE (PERCENT) 31.3 32.6 32.2 21.3 24.2 28.0 AGRICLLTURE (PERCENT) 73.0 73.8 72.5 62.8 60.7 54.1 INDUST'RY (PERCENT) 10.4 9.8 .. PARTICIPATION RATE (PERCENT) TOTAL 43.0 40.2 39.2 35.8 39.8 37.8 MALE 57.1 52.3 51.3 52.4 53.3 50.3 FEMALE 27.9 27.1 26.2 15.6 19.6 20.9 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.3 1.3 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 25.0/1 .. 18.6 20.3 19.5 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 53.1/1 .. 42.9 45.1 48.9 LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 4.7/1 .. 7.3 5.7 5.9 LOWEST b0 PERCENT OF HOUSEHOLDS 13.6 13.1/1 .- 19.3 16.8 15.7 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (CS$ PER CAPITA) URBAN .. .. 83.0(77) 80.2 88.5 155.9 RURAL .. .. 73.0(77) 67.2 71.9 97.9 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) UREAN .. .. 80.0(75) .. 100.8 143.7 RURAL .. .. 50.0(77) 39.8 42.0 87.3 ESTIMATED POPULATION BELOW ABSOLLTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 47.0(77) 50.3 46.0 22.9 RURAL .. .. 52.0(77) 44.6 48.0 36.7 Not available Not applicable NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1977. /c South Asia; /d Low Incorme ($280 or less per capita 1976); /e Lower Middle Income ($281-550 per capita, 1976); If 1978 mid-year population is estimated at 640.4 million; Lg 1951-60; /h 1962; /i 1958; J; 1967; Lk 1978 mid-year labor force is estimated at 261 million; /L 1964-65. March, 1979 ANNEX I Page 3 of 5 FnfPlfr INS OF SOCIAL niDCATOOS joaa.j Althoogh the dtens are draw froms sor...sgnerally Judged h6. moa -oehatIeeiive and reliable, ft shoulid also he noted thit they may not haIner. .ial map.arole b,:ause of the tacit of standrdized definitions .Ad cenept. oaed by different Ioustriec innolntu the date. Tha data arm onthlee u-or.1 to de...rib. orders of ngaeitd., in,dicate tread., aed nharot.ristimo 4tAoiS. -alor difference. b.eties noon-rte.. Th. dote ro avej~ rogoo for ...oh indicatot are populstioee-Seighted goomstein eaana, Oodigthe sworn. values f th. Ctdi--' and h.a --e ~PpL-td -ootr Io ech group. Due to la-k of data,P group aee. of all indicnatrs for Capital Surplus Oil impaorter. and of .1rddiIt.re oltus t, -at- sod so..reta di'Pol.::Ifoonig, bone. dIsctnIbu-on and Povrty for other rounty groups arm popul.tion-aeightsd geontrtO eases ittttuO oclso Of the o. m .aaeand and neat pupuisted -oor. Sen i ,tse footrsane heidctr daedo onsnilblitY of dote oud Io lot unfr uto uthenrte to relotin ararsOeaof on. indnator no sother. Thae et'sreee are maily osefofas sneroniailone of"omecectedntatunaa0.0ofonoarte the".e..oc if on todloanor Or a vIes 0e005 the connors sod reference oreose~~~~~~~~~~~~~~~~~~~~~~~r t LAND RiEh f:h!,-ed op. Ion) Pn.a2L.ti-oaer hyhricis - Populstion dtiidd. brcate f pr-acrict ph-oi- Toa n luel, aeormse,atsprialeg land arm sand laad wat.es. sian qotl"ifid Ifn a-dic,I. scoo St u' rio ee., ALricult, al - Moe Irecnoat st*-t of arclua raused tespararily ponlaclo Par snc Ese Pouato I divie hy, or o rci,.Cg onp -seotly to, -rpa, Pastures, osrkec and kitohen genden or to osi andl femalt greduatanore... rst-to-ol nor..., an d ...el-- I'l lie (ahoy. ~~~~~Ponulatian nr h.sntalbd-cnl.ubn o rural ?porlattui (otl ore_, and r_srl, divided hy the trapoiemano optlnd GNP0 PER CAPITA (U9SS 7lfP Per caieeteteanocrn bht prices, s...ale. i pbl.c and privaec g Iea mod cp.oisos hoapitaad s becu edh cas -onrelo mthod aa World BSeek Atieas (1975-77 baseie); habilitation center. Hospital. are oablisha-c potts-ptly et.-ted hr 19h0, 1970, sod 1177 data. at least on phyi.t.ie. Et.belihasnt. providing pri-ulpair - `,aioll care are not iocloded. houel hompicat hors, iooad heelth Sod madi- buN'R: CCtnSlMIyIunOtI CPr - ho-so -ocsoPtion of teseal sogy (ca a e e o ersetpnnfdh trltn(u ramdcl e o,td lignite, patoolet, - turs.i. gsnd bydroP, nucl.r aed genshewnal siaiaeet, osr-, sideife, ec,.) ohith offer topttnin nndro n sL.ctrliciy) in kLlotm fcalo -ln eropi.peid.so limaited tongs of oedica1 f-itlittes. Ad.Lsions, or hoanit&l bad - Total nuber ofr,isost o lcbre POPTILATION CND VITAL ;TATtSTICN Irom, hospitals dvidad by the .-b.ha of eds.. Totl cooinod-er(itue us of Jo1y 1; 1960, 1970, ad 1977 data. HnUSTNG trhs, oPPulation (pennant of total) -RaIttle of urban to total popolm,tioe; Aoer,ce else of h-saeodt(roe on,rhnand - oal 00 o intl1 di oretd nfooon of aISe ersemy affet uonpae-ility of dsta ho- hocld Io.n.isie of s rop of indiyidual who uha living Teir onon - otries sand tbeir main me As boar.der or lodgar may -or ny no he to-lad In the ?Puolatlon ProconcioM. household for suLtOiP-roee... FPonu-atto to Teen 7000 - Current poPuistion preJecioe ar, based oM Aversm numbr of meron ear room - -otel urban, and r-rI - verage, nanb- "975 total population by age and eon and their lsortsltty and fertility of Persone Par roanio alm ohe L.d rural -coptd oneci idunite." caes ProJection para ters for .ortolity rat.s nompniem of 3 level roepanti-ely. Doellisg. ald n-pennttrnur and --ocpied porte. ea nglife :ognotasny en birth iscrese.. wSith I.utrety's Per cepits ACCteSa to alstrinity (rerent of dusltloge) -ttl -ra,ad --1a - booms level, ano Annal lfe,, ...staI. .tebjiling at 77.5 ysars. Conronetionsi dw-llIns. sinhIeotninity t. liriog q-aronr at porro-tgn of Thn,sseeot. etiIyrt lohn levels,11 se-oniln denlientotal. erhan, and total doelltg.n rmspaoti-er. --noo.Othrutry is then assigned ens of thee. 9 nosbiostlans EDUrCATION of oortatity -.Id fertlinytronde for prn)otion Pourposee. dmsed nrolletent ratios Scatloose pnStao-Ia1otionary Population, then is no grneesh prsy col- tonl a Sd f Gml .ross tnna.1 male and fetl. enrol- iobe tho birth -aeis qeqoI to th. death rats, and aleS the ge man 00 all ages atItep-et arta percetnsges f -op-cti- prlnor -trrrereain, -tsom.t. Thio is achievd only after fertility ra to h- oba-ags popolationes; so-olty Inoiude. ohildree aged 6-1.1 flare hut lciethr.-p1-onot Level of -nit nat reprodoetion rats, hobo meac sd)cd for different length, of prImaur edonstion; for ottrias with esrto f wasn replotee itself osmetly. Th. Ststienaoy, Population tociaa aduration anIonliss -a, -oredIDO P00...w aL-. s-n popils are lie. nsaas imned on the basis of the progeoted ch ...otriatiee of the hbo nsoo_hMffoa sbo ga. -o.Ulonio~n I the poor 2000, end the rena of dsolime of fertility Irac Senend.ry col-tnl aesdlcl Coup-td as Shove; -scodaryiadus- to"rPIa. aSt lo-e1 tin regoi-e an lease four pears of approved prIar ntrart--ion Provide YMoor1 'Mranc Pp.1uloion to. ne..ded - Chs year ohao Stationary Ponals- geea oaional,, o tesoher tra ingla tu-rlu- for Putilo ea f cion r1ica has bteen.. rahed. 12 to 1 mr-=fae;orepon~d-o - oraaat- --al eoudd PoulttoNdsit Vostlonal .n.II-atn (per ... of VtndrI - VotIua i-ftitut -n -Inclde Per 0. on. - Mid-year popolation Per sqasre kilneter (100 hentar.e) tanheital, iedumtria1, or other p-groee which opan-t independentlyura of tonal eo.depa.meneote of -eondary inetitunions. Per en. on. aorlulturol !and - Conpoted se above for ant llo an ed Poeil-t Ieortio _ oieo and .aced.EL - To-Io.. otdeniseorled1 i only. rmr e snodogry Isas iid. by nour.atr of- On-h-r ntin rr P.nul.,I..ao oncooe oroent) - Childlde (0-14 yeare), .:rskog-.qe eposedinglve. 71--pom,cd rned(65 years a. ad over) ue per.ennag e of old- Adu!ltIlcr reta-- -toer t - lter-t adolts lai o r-d sod -rI-n as coon ropolsrian. a ~~~~~perceonsp 01 Ioa autPoPultion aged 15 years andon. Population orouth rano )oedr,-no'- otal. e-d urbo - C~onp.ood afloat groth -ate of toalan uroan cid .ee popuiStiana for 1950060, CoOlltUMPT7feP 1960-70. aod 1910-77. -seoa ae(o toos nuafn)-Psegrcr -rooriaoo rr Cods bit race P.,r th.ocand) - t,unol live birth. Per thousand of Ssetin las he ago Ioeoa sclu. ..ua.. e bero odmltn oid-y-e populs(ion; 1960, 1970 and 1977 dana.. vehidlas. Crude death rote nper thoand) - usn." deatho Per thouaned of mid- Radio reier 'Inat thousand Pon laton - l types ofrelorfrrao ys- Population. 1960, 1970 and 1977 data. Oroadnasce to gearl bi perLthousand of popuLation; -ottdoeolt-cer,sd iro... -Prdu-i- rao;te AyOerage namb-f of d.oght.ro. a -tee ill bear r-oivar In ooomtrioe snd in y.an whnrgitaIn ofrdosaaweC In rrnoma rcprndu-ir period if sh. aepreosPr...e ag-ffot; data.for recent pesos may non ho -enyreblstv orottrs opeclfCa fertility ronas; usual-ly five-year avrae aedlog In 1960, abelhed lcnig. 1170. and 19'S 10.0~~~~~7 reoivereCen thousand lnaition) - TVro-oiv-- for- odattgor ancspnor of htoth-concrol d-o.ie _ude tasie nof mtinal roily- "tie aad 1 aerOsn r_gistrtion of T10 sate -S 10 effect. poningpore.tsemntnr`aio nrtoosdenloiol- Shone oh,aaor go1 ciroa- IsnlyologigI-%oorc Ceorus-t of uaIroid.edaon.n Penna of Itin of "dily reetorsi .osetnaaa" is . spari d iodoo pohli ma .dot f -vld-hbe...t age S 15-46 peace) -,ht, us. blt-h-on-tr1 coi dvted pot-aily tors-ordlog gonr.l os -_ It 1.s -nidr-d to 3r'iens o all marIInd wmnin e-anego group. ha"aly' if it'appesro at least four ti-s a aenk. Clone -Ioa atnad.... Par ..pi,* par Yeatr- Baand -n ohs cn- of itk-sn FOOD1 aNnt PUTITIl oold durig 06. year. I-Wldlng adniaion to dri-e-ic ctn- and nohil. Ind.. of foo oodeto nor 1a9t us6~ll0)-t,ncabhr of par aolto. energ eqolnaisot cA In 0-0 s-ppl is .-a ilabla in outr Per cpita. oa Shnun (thousands) - E-eoIou11o uc-i- -e - n, cirlodingote Par daY. A.ilbhl stppJime IIooer iea d-mtic p-odaotomn, mp.rte lees forcee and anep1oyad bun senludinghoultosviv, t.td..t.. .I0. Defio -oporeIso ooe 1n stock. Na.t suppliese emluds anleaal feed, oseds, tioesin various -otrieosare notIneperabl., fuoii.aue 1 od poseo,and I..... L. distribution. 9.5- F-al lestouot) - Fena. lahb ao spretfoIttlbor forte.,p... quirnaelnte oe,,etimatsd b, CAO baesd on pbvoioltogila . osd. for no- AuR-oultrs (es-nt) - Labor force in foni.g, fo-esry, h,Ircog and fishing ma cflya,,d 0h10 considering onvr-eato1l conperantum, body asper tnnge of toota Ilabor foro.. ruihe . oeadandtscrib ction of PopuSlation, aod allowing 10 Par- oduanny Cre--et, ao ot is nintg, coeotcto, m eatnrrosd ~rr eottooopnlr ofor-oin (aren Pre day) - prot.e retncet of Pmr Panonco ae(eon -totlm'a7 s and fonslo. - -<Coo , main end -a1a e tupell rf food Per day. Pet supply-o foo edele a oal or ao as peoraa f theirnectv ortr;Wh.90 shts equirsnsots for all rountri-s neabliahed hy USDA previd. for and .1975 data. Th... ar ILOc) adjtoa-d rtcorn r -verf-ieoin ws a tton- al'oac of.60 gr- of.total protein par.dsp, and 20 gros o otaor of the ppolation, and long tl.e drend.~ ioma and Itusa(rn , of whichI10 goon ohould be onleall Protini. Incnrdnnac ai 001 fpptta ne 0d cC and c-sr to 2 hsce totnddrdIdore bootth-n those o 75 gina of total protein end telbrocaiage groop of 15-64 -ers 23rOsof Snmlprtloasan _gnoe for the -arl.d, prapoend by FAOT it the Third aurIdoodF INoy.TCOM lIISTIt'1 per Qtoita Bo- tsl _eunol TIrosislad Ios. - Pr'tein supply of food Preosofrva I-oan <both in t.sh and kind; rerl s bv richeec 5 d fevd ro un=lmls n oi rm e ds. p-roeo, riubhs 20 percent. pooret 70 percen. an d portto er n Child (oct 1-41 notai0 rat - Cost!I o,honaad) - k-ro1 deaths Per nhoue- uf households. -td goe groP 1_4 year, to o1tildren in this ago; groop. PIALTH 11till"d l1l1!r1111 1I.-Elyfil.11- "I'll ttOy 100011-1410110 jC-.if. ctap-- 00 birrh (vT-ra-Aerg. mn-br of years of lifl. rosaio- nb_olutn povrt mon evlt thtItn ee n.. c; ta ing a' olrth; 1960, 1070, sod 1977 Io, urnoaiaoot itp. es ilnnCvr~ien-oeo Infant--orallt ruts (P., thousan d) - Anoual deathe of infant. uod.r sfIodbe oepa Ca&e Por rcndIon hiorhe. Ianntd eain-oeo ntn ee 1')S0p nerabl-ahu ond tonl to ut cternooen o ntuatentnoe .. rbn.oc rual- slstv pven, -cntn level is an-thtvd ofan np-r .upt,. peronal iN-- o el cot.a.. Lme, odora 1, .4th reioaleoe ebn.- of rho ooir c-l, ta1rotu,pln Cincwaude treated a-foco oanr r -n,eted hoc --fote o,l-rir co- aolueooet -b-sboe emnr.'ta on .ocouov Col- aoinr -aut,:,tha0 ut.Cro prnte;ced borsholno . opringe, r:Url -.eo of PrP;clotion (urhou -nd no,'ctSr'. -.C, op _td solrarn. mello asPerotao f tnwir tee ponv populatos lv on -rOac twpuhilt f-,natr or etandpoet or-tad no, t nOO rh` 10 aton Et,, a ocsan bo -a-ideond an being oithin -rna nsln rho te ho. tot o vH ner n.f rh houshol dotrot CaveR) "" to nenda oronr mntl parotthedanif ontingthefuolyaatereno .Iroowi ,r So r- d Sre ,,1 I' olsoesl cerrn t o onoultuwoCP' tota. rh... odi. .rn..rneWrntdI rerol- Tootor f pn -d- (omb.uobu . udthrulr aere rehe-dt orh pe aI n ecenaco f hirrnpettcnpoubtinb Cooht -luou ANNEX I OONC DllTm D Page 4 of 5 03P PR CUXl IN 1977: M 15L0A b/ cJ GROSS TIO PRODUCT IN 1977/78 ANSL RS w cu Cll coolant n ries) U.s$ Sl 1960/61-19M/65 1965/1W"9/70 1970/71-1976/77 GNUT t Markect Price 101.47 100.0 3.9 3.6 3.2 Grooe Dometic Investment 21.65 21.3 Gross National Saving 22.77 22.4 Current *ccount Balance d/ 1.04 1.0 Resource Balance d/ - 0.31 - 0.3 OUTPUT BOR POOZ AND PROnICTMT! IN 1971 Value Added (at f-etor cost) sbAor Force V.A. Per Worker U Bln. 2 flu, IL 119 2 of Hatioal Averata Ariculture 24.5 46.6 130.0 72.1 158 64 Industry 11.8 22.3 20.2 11.2 582 199 Servie*a 16.3 31-1 30.2 16.7 542 18 T tal/average 52.6 100.0 180.4 100.0 292 100 CovENIINT F*NAm Cenral Govarment Central Ce_at Is..Bln as ofDr ID f ls77/7e 1 9 7 > 7 7 1977/7~~~~~~~~~~~~1247-519 Current Receipt. 164.42 18.9 18.2 95.62 11.0 10.5 Current Expenditures 157.29 18.1 16.5 95.27 10.9 9.9 Currant Surlus/Deficit 7.1.3 0.8 1.6 0.35 a.e. 0.6 Capital Expenditures f/ 62.58 7.2 7.0 43.31 5.0 5.0 External Assistance (nat) A/ 9.82 1.1 1.6 9.82 1.1 1.6 MMY. CUDIT AID PUIC 1970/71 1973/76 1974/75 1975/76 1976/77 1977/78 S.ttber 1977 Sest_ebr 197e (Is 5illion outstanding at and of period) Money and Quasi Moay 121.4 198.4 220.3 254.7 30.9 365.1 334.8 395.e Bank Credit to Goverannt (net) 52.6 87.3 95.3 101.1 110.2 129.7 119.3 139.5 Bank Credit to Comercial Sector 64.6 107.0 126.7 153.9 185.1 210.0 195.3 223.5 (Percentage or Indem Hubers) January 1978 January 1979 Money and Quasi Money as 7 of CDP 30.1 33.5 31.5 34.5 38.8 41.9 Wbolasale Price Index (1970/71 - 100) 100.0 139.7 174.9 173.0 176.6 185.8 184.5 184.6 Anual percentage changes in: Vbolsole Price index 7.7 20.2 25.2 . 1.1 2.1 5.2 3.2 0.1 Bank Credit to Govermnent (net) 10.8 12.3 9.2 6.1 9.0 17.7 13.4 16.9 bank Credit to Co_rcial Sector 19.4 22.6 18.4 21.5 20.3 13.5 16.6 14.4 l/ The per capita ONW etimate is at mrket prices, calculated by the conversion technique used in the World Atla.. All other converaions to dollars in this table are at the averag exchang rate prevailivn during the period coverd. b/ Quick Setluates. c7 Cputed from trend line of GNP at factor cost aerita, including one observation before first year and on obaervation after last year of listed period. dt World bank estimates, not necessarily consistent with official National Account Statistics. a/ Transfers between Centre and States have bean netted out. ft All loans and advances to third parties have been netted out. A/ External grants and loans, l1es principal repsymenrt, as recorded in the Central Budget. ANNEX I Page 5 of 5 hi h/ BALANCE OF PAYMENTS 1975/76 1976/77 1977/78 1978/79 NERCHANDISE EXPORTS (AVERAGE 1975/76 - 1977/78) (US$ million) US$ mln. % Exports of Goods 4,672 5,753 6,276 6,800 Engineering Goods 610 11 Imports of Goods -6,449 -5,928 -7,237 -8,400 Tea 417 7 Trade Balance -1,777 - 175 - 961 -1,600 Gms 377 7 NFS (naet) 310 360 650 700 Clothing 331 6 Leather and Leatb,er Resource Balance -1,467 185 - 311 - 900 Products 278 5 i/ Jute Manufactures 267 5 Interest Payments (ne:) - 216 - 180 - 50 - Iron Ore 265 5 Other Factor Payments (net) - - - - Cotton Textiles 248 4 Net Transfers j/ 470 730 1,400 1,300 Sugar 244 4 Others 2,530 45 Balance on Current Account -1,213 735 1.039 400 Total 5.567 100 Official Aid Disbursements 2,341 1,953 1,628 1,805 EXTERILL DEBT, MARCH 31. 1978 6/ Amortization - 531 - 560 - 645 - 725 USS billion Transactions with I1F 242 - 337 - 330 - 158 Outstanding and Disbursed 14.8 All Other Items - 45 - 216 384 205 Undisbursed 4.3 Outstanding, including Increase in Reserves (-) - 794 -1,575 -2,076 -1,527 Undisburied 19.1 Gross Reserves (end year) 2,172 3,747 5,823 7,350 h/l/ Net Reserves (end yesar) k/ 1,365 3,276 5,668 7,350 DEBT SERVICE RATIO FOR 1977/78 15.0 percent Fuel and Related Materials IBRD/IDA LENDINS, DECEMBER 31. 1978 Imports 1,417 1,581 1,817 1,980 US$ million of which: Petrolewn 1,417 1,581 1,817 1,980 IBRD IDA Exports 43 37 33 n.a. Outstanding and Disbursed 613 3,864 Undisbursed 615 1,992 of which: Petroleum 22 21 18 n.a. Outstanding, including m/ Undisbursed 1,228 5,856 RATE OF EXCHANGE June 1966 to mid-December 1971 US$1.00 - Re 7.5 Re 1.00 - US$0.133333 Mid-December 1971 tc end-June 1972 US$1.00 - Rs 7.27927 Re 1.00 - US$o.137376 After end-June 1972 Floating Rate Spot Rate end-December 1978 US$1.00 - Rs 8.188 US$1.00 - Re 0.122 h/ Estimated. i/ Figures given cover all investment income (net). Major payments are interest on foreign loans and charges paid to IMF, and major receipt is interest earned on foreign assets. J/ Figures given include workers' remittances but exclude official grant assistance, which is included vithie official aid disbursements. k/ Excludes net use of 11M credit. 1/ Amortization arnd interest payments on foreign loans as a percentage of merchandise exports. m/ Excludes exchsatge adjustment, but includes US$ 22 million due to third parties. ANNEX II Page 1 of 15 TBE STATUS OP BANK GROUP OPERATIONS IN INDIA A. STATEMNT OP BANK LOANS AND IDA CREDITS (As of April 30, 1979) 1US$ Million- Loan or (Net of Cancellations) Credit N. year Borrower Purpose Sank IDA Undisburoed 40 Loans! 1,100.6 55 Credits fully disbursed 3,338.6 267-IN 1971 India Wheat Storage -- 5.0 1.10 294-IN 1972 India Bihar Agricultural Markets -- 14.0 2.48 312-IN 1972 India Population -- 21.2 2.43 342-IN 1972 India Education - 12.0 7.03 356-IN 1972 India IDBI 25.0 9.02 378-IN 1973 India Mysore Agricultural Markets -- 8.0 6.67 902-IN 1973 ICICI Industry DFC X 62.8 -- 0.26 390-IN 1973 India Bombay Water Supply -- 55.0 13.00 427-IN 1973 India Calcutta Urban Development -- 35.0 3.71 440-IN 1973 India Bihar Agricultural Credit -- 32.0 7.05 456-IN 1974 India hP Apple Processing & Marketing -- 13.0 8.80 481-IN 1974 India Trombay IV -- 50.0 2.42 1011-IN 1974 India Chambal (Rajasthan) CAD 52.0 -- 28.05 482-IN 1974 India Karnataka Dairy -- 30.0 22.42 502-IN 1974 India Rajasthan Canal CAD -- 83.0 42.71 520-IN 1974 India Sindri Fertilizer -- 91.0 7.09 521-IN 1974 India Rajasthan Dairy -- 27.7 19.91 522-IN 1974 India Madhya Pradesh Dairy -- 16.4 10.72 526-IN 1975 India Drought Prone Areas -- 35.0 16.89 1079-IN 1975 IFFCO IFFCO Fertilizer 109.0 -- 26.oo 1097-IN 1975 ICCII Industry DFC XI 97.5 -- 8.33 532-IN 1975 India Godavari Barrage Irrigation -- 45.0 17.19 541-IN 1975 India West Bengal Agricultural Development -- 34.0 19.03 562-IN 1975 India Chambal (Madhya Pradesh) CAD -- 24.0 11.19 172-IN 1975 India Rural Electrification -- 57.0 33.02 585-IN 1975 India Uttar Pradesh Water Supply -- 40.0 29.84 598-IN 1975 India Fertilizer Industry -- 105.0 74.46 604-IN 1976 India Power Transmission IV -- 150.0 103.97 609-IN 1976 India Madhya Pradesh Forestry T.A. -- 4.0 2.87 610-IN 1976 India Integrated Cotton Development -- 18.0 16.06 1251-lN(TW) 1976 India Andhra Pradesh Irrigation 145.0 -- 124.97 1260-IN 1976 India IDBI II 40.0 -- 29.88 1273-IN 1976 India National Seeds 25.0 -- 24.65 1313-IN 1976 India Telecommunications VI 80.0 -- 24.98 1335-IN 1976 BMRDA Bombay Urban Transport 25.0 -- 14.40 680-IN 1977 India Kerala Agricultural Development -- 30.0 29.84 682-IN 1977 India Orissa Agricultural Development -- 20.0 17.88 685-IN 1977 India Singrauli Thermal Power -- 150.0 126.74 687-IN 1977 India Madras Urban Development -- 24.0 18.52 695-IN 1977 India Gujarat Fisheries -- 4.0 3.21 1394-IN(TW) 1977 India GuJarat Fisheries 14.0 -- 14.00 690-IN 1977 India West Bengal Agricultural Development -- 12.0 12.00 712-IN 1977 India Madhya Pradesh Agricultural Development -- 10.0 10.00 715-IN 1977 India Second ARDC Credit _- 200.0 79.67 720-IN 1977 India Periyar Vaigai Irrigation -- 23.0 20.36 728-IN 1977 India Assan Agricultural Development -- 8.0 7.62 1473-IN 1977 India Bombay High Offshore Development 150.0 -- 81.35 736-IN 1977 India Maharashtra Irrigation -- 70.0 61.58 737-IN 1977 India Rajasthan Agricultural Eitension -- 13.0 12.09 740-IN 1977 India Orissa Irrigation -- 58.0 54.89 1475-IN 1977 ICICI Industry DFC XII 80.0 -- 56.54 747-IN 1978 India Second Foodgrain Storage - 107.0 101.52 756-IN 1978 India Second Calcutta Urban Development -- 87.0 72.99 761-IN 1978 India Bihar Agricultural Extension & Research -- 8.0 8.0 1511-IN 1978 India IDBI Joint/Public Sector 25.0 -- 25.0 1549-IN 1978 TEC Third Trombay Thermal Power 105.0 -- 96.42 788-IN 1978 India Karnataka Irrigation -- 126.0 126.0 793-IN 1978 India Korba Thermal Power -- 200.0 181.18 806-IN 1978 India J .amo-Kashmir Horticulture -- 14.0 14.0 808-IN 1978 India Gujarat Irrigation -- 85.0 85.0 815-IN 1978 India Andhra Pradesh Fisheries -- 17.5 17.5 816-IN 1978 India Second National Seeds -- 16.0 16.0 1592-IN 1978 India Telecommunications VII 120.0 -- 91.93 824-IN 1978 India National Dairy -- 150.0 147.98 842-IN* 1978 India Second Bombay Water Supply & Sewerage -- 196.0 196.0 843-IN 1978 India Haryams Irrigation -- 111.0 106.10 844-IN 1978 India Railway Modernioation & Maintenance -- 190.0 186.68 848-IN 1978 India Punjab Water Supply and Sewerage -- 38.0 37.74 855-IN 1979 India National Agricultural Research -- 27.0 27.0 962-IN* 1979 India Composite Agricultural Extension -- 25.0 25.0 871-IN* 1979 India NCDC 30.0 30.0 1648-IN* 1979 India Ramagundam Thermal Power 50.0 -- 50.0 874-IN* 1979 India Ramagundam Thermal Power -- 200.0 200.0 889-IN5 1979 India Punjab Irrigation -- 129.0 129.0 Total 2,280.93 6,747.39 of which has been repaid 931.11 47.22 Total sow suistandiing 1,349.82 6.700.17 Amount Sold 133.3 of which has been repaid 111.5 21.8 Total now held by Bank and IDA 1,328.02 6,700.77 Total undisbursed (emcluding*) 646.75 2.073.19 Not yet effective 1/ Prior to exchange adjuntment ANNEX II Page 2 of 15 B. STiATEMENT OF IFC INVESTMENTS (Aks of April 30, 1979) 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 Gloser Industries Ltd. 0.8 0.4 1.2 1964-75 Mahindra Ugine Steel Co. Ltd. 11.8 1.4 13.2 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 1978 Housing Development Finance Corporation 4.0 1.4 5.2 TOTAL 53.6 10.4 64.0 Less: Sold 5.9 1.7 7.6 Repaid 15.9 - 15.9 Cancelled 6.2 0.7 6.9 Now Held 25.6 8.0 33.6 Undisbursed 4.5 0.6 5.1 ANNEX II Page 3 of 15 C. PROJECTS IN EXECUTION 1/ Generally, the implementation of projects has been proceeding rea- sonably well. Details on the execution of individual projects are below. The level of disbursements was US$496.4 million in FY78 or 39% of Bank Group com- mitments to India in that year. The undisbursed pipeline of US$2,720 million as of April 30, 1979, reflects the lead time which would be expected given the mix of fast- and slow-disbursing projects in the India program. Ln. No. 1097 Eleventh Industrial Credit and Investment Corporation of India Project; US$100.0 million loan of April 2, 1975; Effective Date: July 1, 1975; Closing Date: December 31, 1980 Ln. No. 1475 Twelfth Industrial Credit and Investment Corporation of India Project; US$80.0 million loan of July 22, 1977 Effective Date: October 4, 1977; Closing Date: March 31, 1983 These loans are supporting industrial development in India through a well-established development finance company and are designed to finance the foreign exchange cost of industrial projects. ICICI continues to be a well-managed and efficient development bank financing medium- and large-scale industries, which often employ high technology and are export-oriented. Loan 1097 is fully committed and disbursements are slightly ahead of schedule. Disbursements under Loan 1475 (US$23.5 million) are also ahead of schedule. Cr. No. 440 Bihar Agricultural Credit Project; US$32.0 million credit of November 29, 1973; Effective Date: March 29, 1974; Closing Date: March 31, 1980 The project provides US$32.0 million in support of a lending program for 50,000 tubewells and pumpsets investment in the Tirhut Division of Bihar. Because of slow disbursements caused by a lower than estimated Dollar/Rupee exchange rate and by low unit investment costs compared with appraisal esti- mates, IDA agreed to extend the closing date to March 1980 and expand the project area to cover the whole State. Physical targets have now been achieved and the credit should be fully disbursed by the revised closing date. 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 15 Cr. No. 715 Second Agricultural Refinance and Development Corporation (ARDC) Project; US$200.0 million credit of June 1, 1977; Effective Date: August 24, 1977; Closing Date: December 31, 1979 Credit 715 is designed to provide long- and medium-term credit to farmers through credit institutions, for on-farm investments, primarily in minor irrigation. The piroportion of disbursements to small farmers is currently estimated at abouLt 60% compared with the appraisal target of 50%. Training programs for staff of the financing institutions are progressing satisfactorily. Cr. No. 267 Wheat Storage Project; US$5.0 million credit of August 23, 1971; Effective Date: November 14, 1972; Closing Date: September 30, 1979 Cr. No. 747 Second Foodgrain Storage Project; US$107.0 million credit of January 6, 1978; Effective Date: May 17, 1978; Closing Date: June 30, 1982 Credit 267, which is being co-financed with Sweden, finances (i) the construction of bag and bulk grain storage and handling facilities, (ii) staff training, and (iii) an All-India Grain Storage Study. The government-owned Food Corporation of India is responsible for the storage construction. All the nine 10,000-ton-capacity bag warehouses envisaged under the project as revised became operational in 1975. The construction of five grain silos is progressing satisfactorily after delays due to cement shortages. The training component is being implemented. The All-India Grain Storage Study was completed in October 1976 and proved useful in formulating the proposal for the Second Foodgrain Storage Project (Credit 747). The Second Project is proceeding satisfactorily. Cr. No. 456 Himachal Pradesh Apple Processing and Marketing Project; US$13.0 milLion credit of January 22, 1974; Effective Date: September 26, 1974; Closing Date: December 31, 1980 Cr. No. 806 Jammu-Kashmir Horticulture Project; US$US$14.0 million credit of July 17, 1978; Effective Date: January 16, 1979; Closing Date: June 30, 1984 Credit 456 includes grading and packing centers, cold storage facilities, a juice processing plant, road improvements and cableways. It also includes cold storage facilities and a pilot project to promote mush- room production. The project encountered initial delays due to managerial and technical problems; however remedial measures have been taken to overcome these difficulties. Land has been acquired for 8 to 10 packing and grading sites, and procurement and construction activities are well underway. The Project Preparation Report for the juice processing plant has been completed, ANNEX II Page 5 of 15 and the equipment has been ordered. The road improvement program is progres- sing satisfactorily, and the feasibility reports on aerial cableways at the packing/grading sites have been completed. The Jammu Kashmir Horticulture Project was declared effective on January 16, 1979. Ln. No. 1313 Telecommunications VI Project; US$80.0 million loan of July 22, 1976; Effective Date: September 14, 1976; Closing Date: March 31, 1980 Ln. No. 1592 Telecommunications VII Project; US$120.0 million loan of June 19, 1978; Effective Date: October 30, 1978; Closing Date: March 31, 1982 Loan 1313 supports the expansion of the Indian telecommunications system through the provision of funds for the installation of 220,000 direct exchange lines and expansion of the trunk network. A second loan (Loan 1592) continues support of the development of India's telecommunication system through FY 1981 and as well contributes to the improvement of the Indian telecommunication industry. Both projects are progressing satisfactorily. 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 Under Credit 604, contracts aggregating about US$65 million had been awarded by December 1978. This Credit included a supplementary Credit of US$30 million to meet increased costs of equipment scheduled under the Third Power Transmission Project; all but US$4 million of this amount has also been committed. Cr. No. 481 Trombay IV Fertilizer Expansion Project; US$50.0 million credit of June 19, 1974; Effective Date: August 21, 1974; Closing Date: June 30, 1979 Cr. No. 520 Sindri Fertilizer Project; US$91.0 million credit of December 18, 1974; Effective Date: February 27, 1975; Closing Date: September 30, 1979 Ln. No. 1079 IFFCO Fertilizer Project; US$109.0 million loan of January 24, 1975; Effective Date: April 28, 1975; Closing Date: March 31, 1980 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 Trombay IV project is now being commissioned, about 18 months behind schedule due to longer-than-expected delivery times for critical equip- ment. The Sindri project is also being commissioned. The IFFCO project was ANNEX II Page 6 of 15 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. However, project construction is now proceedling satisfactorily and no further delays in project implementaiton are expected. Credit 598 is designed to increase the utiliza- tion of existing fertilizer production capacity. The proje.zC 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. IDA has agreed to 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, 1979 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 oE towns in Bihar and Karnataka. Progress under the Bihar project has generally been satisfactory. The project includes training of the Agricultural Produce Marketing Committee (APMC) staff and evaluation of the project's economic impact. Development plans have been completed for 53 market yards to ensure the project target of 50 markets is met. As of November 1978, the date of the last review, appraisals had been completed for 50, and loans approved for 49 markets. Construction had been completed for 19 and was in progress for 31 markets. Farmers and traders served by the 11 market yards now in operation report more efficient marketing activities and improved farmers' terms of trade. Progress under the Karnataka project is improving. As of October 1978, when the project was last reviewed, construc- tion was underway for 36 of the 39 project markets. Plans and land acquisi- tion are nearing completion at the remaining sites. Both projects are expected to be completed by their respective closing dates. Cr. No. 312 Population Project; US$21.2 million credit of June 14, 1972; Effective Date: May 9, 1973; Closing Date: June 30, 1980 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 arnd monitor research aimed at improving the family planning program, are now functioning. To allow adequate time for the Population Centers to complete their evaluation of family planning strategies and the introduction of manage!ment information and evaluation systems, the closing date has been extended by one year. ANNEX II Page 7 of 15 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 univer. sities in Assam and Bihar. The primary aim of the AUs project is to improve the quality and practical training of undergraduates and so the spectrum of their employment opportunities; and to strengthen university structure to enable it to give an impetus to agricultural and rural development. Consider- able progress has been made in achieving the latter objective; but achieving educational objectives is more slowly attainable, constrained by traditional attitudes and structures where consistent effective leadership falters. Changes to a more functional orientation are now planned. The Project Director and others responsible are aware of the constraints and are support- ing efforts to remove them. 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: September 30, 1979 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 Loan No. 1511 IDBI Joint/Public Sector Project; US$25.0 million loan of March 1, 1978; Effective Date: May 31, 1978; Closing Date: March 31, 1983 The first IDBI Project had a slow start mainly due to institutional problems in the participating State Financial Corporations. However, the credit is now fully committed. In order to continue the Bank Group's involve- ment in assisting small- and medium-scale industries and in strengthening the State Financial Corporations involved, a second operation (Loan 1260) was approved in 1976, and disbursements have reached US$9.3 million by the end of March. Loan 1511 is designed to encourage the pooling of private and public capital in medium-scale joint ventures. The project will also assist IDBI in carrying out industrial sector investment studies and in strengthening the financial institutions dealing with the state joint/public sector. 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: June 30, 1981 ANNEX II Page 8 of 15 Cr. No. 842 Second Bombay Water Supply and Sewerage Project; US$196.0 million credit of November 13, 1978; (expected) Effective Date: June 12, 1979; Closing Date: March 31, 1985 Cr. No. 848 Punjab Water Supply and Sewerage Project; US$38.0 million credit of October 27, 1978; Effective Date: January 25, 1979, * Closing Date: March 31, 1983 Having overcome earlier difficulties, including cost overruns caused by inflation (requiring project redefinition in February 1975), re- design of major project comlponents and the addition of a supplementary study on sewage disposal, Credit 390 is now progressing relatively well. All of the major contracts will be sufficiently advanced to permit the supply of additional water (455 mld) in the second quarter of 1979; completion of water treatment works for the whole supply by the end of 1979 is realistically fore- cast. Completion of additiLonal sewage disposal studies (August 1977) has allowed e-ngineering design of the project sewerage components to proceed, so that completion of construction of these works is now scheduled for mid-1980, two years later than originally forecast. Financial performance of the project e-ntity is satisfactorily. Credit 848 was declared effective on schedule and preliminary work in connection with its implenentation is pro- gressing 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 has had a slow start due to delays in the preparation of technical reports for riegional- and local water authorities and in the engagement of consultants. While improvements have been made in the physical execution, other aspects of project implementation continue to lag so that disbursements under the Credit have fallen short of estimates at the time of appraisal. In order to improve the situation, arrangements are being made to appoint a full-time management adviser to closely supervise and coordinate implementation. 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, 1979 Cr. No. 756 Second Calcutta Urban Development Project; US$87.0 million credit of January 6, 1978; Effective Date: April 7, 1978; Closing Date: March 31, 1983 For the first of these projects, following considerable increases in project costs, GOI and IDA finalized a project redefinition in April 1976. It is now expected to be substantially completed by December 1979. Credit 756 is designed to expand and upgrade the capabilities of Calcutta's admin- istrative authorities, to strengthen the city's fiscal base, and to reha- bilitate and extend its urban service system. ANNEX II Page 9 of 15 Cr. No. 687 Madras Urban Development Project; US$24.0 million credit of April 1, 1977; Effective Date: June 30, 1977; Closing Date: September 30, 1981 The project is designed to develop and promote low-cost solutions to the problems of providing improved services to the urban poor in the Madras Metropolitan Area (MMA) and to strengthen metropolitan planning. Project components consisting of sites and services, slum improvement, small- scale and cottage industry, and maternal and child health are designed to benefit directly some 250,000 persons in low-income areas of the city. The water supply and sewerage, road and traffic, bus transport and technical assistance components are designed to eliminate bottlenecks in water supply and transport. Project implementation is proceeding satisfactorily, and disbursements are slightly ahead of appraisal estimates. Cr. No. 482 Karnataka Dairy Development Project; US$30.0 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 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 Cr. No. 824 National Dairy Project; US$150.0 million credit of June 19, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1985 These four credits, totalling US$224.1 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 considerable improvement under new management appointed recently. Farmer response has been good and over 700 dairy coop- eratives with small farmer participation are functioning effectively. All four dairy unions envisaged under the project have been established and are functioning satisfactorily. Karnataka's decision to procure plant equipment jointly with Rajasthan and Madhya Pradesh on the same tender should lead to a recovery of considerable time lost earlier in the Karnataka project. In Madhya Pradesh good progress has been made. About 252 new dairy cooperatives societies have been established. Detailed design studies for plant construc- tion are complete. The response of small farmers to the project is excellent. GOMP has plans to cover all districts in the State. Technical services in- vestments 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 ANNEX II Page 10 of 15 800 dairy cooperatives at the village level. Plant designs are ready, and procurement is making adequate progress. Based upon the good results expe- rienced, GOR is planning to expand the form of dairy development to all other districts of the State. Cr. No. 532 Godavari Barrage Project; US$45.0 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 and is proceeding satisfactorily. Disbursements reached 59% of total credit amount as of December 31, 1978. Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52.0 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1981 Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83.0 million 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$24.0 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 Cr. No. 720 Periyar Vaigai Irrigation Project; US$23.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 7T6 Maharashtra Irrigation Project; US$70.0 million credit of October 11, 1977; Effective Date: January 13, 1978; Closing Date: March 31, 1983 Cr. No. 740 Orissa Irrigation Project; US$58.0 million of October 11, 1977; Effective Date: January 16, 1978; Closing Date: October 31 1983 Cr. No. 788 Karnataka Irrigation Project; US$126.0 million credit of May 12, 1978; Effective Date: August 10, 1978; Closing Date: March 31, 1984 ANNEX II Page 11 of 15 Cr. No. 808 Gujarat Irrigation Project; US$85.0 million credit of July 17, 1978; Effective Date: October 17, 1978; Closing Date: June 30, 1984 Cr. No. 843 Haryana Irrigation Project; US$111.0 million credit of August 16, 1978; Effective Date: December 14, 1978; Closing Date: August 31, 1983 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 infrastructure, drainage, and land shaping are 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. Cr. No. 541 West Bengal Agricultural Development Project; US$34.0 million credit of April 28, 1975; Effective Date: August 28, 1975; Closing Date: March 31, 1980 The project provides financing over four years mainly for minor irrigation investments but also for development of markets, agro service centers, and support of related government extension services. Although dis- bursements have been slower than anticipated, there has been a considerable improvement in project organization and administration and disbursements are expected to improve considerably. The physical progress of shallow tubewells, and of deep tubewells for the Minor Irrigation Corporation, is satisfactory. IDA, GOWB and ARDC are combining efforts in order to solve difficulties such as organizational problems at the farm level; lack of demand for agro service centers; and completion of designs for water distribution systems and irriga- tion schemes. Positive results, particularly for the redesigned water distri- bution systems have been achieved. Cr. No. 682 Orissa Agricultural Development Project; US$20.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 728 Assam Agricultural Development Project; US$8.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 690 West Bengal Agricultural Extension and Research Project; US$12.0 million credit of June 1, 1977; Effective Date: August 30, 1977; Closing Date: September 30, 1982 Cr. No. 712 Madhya Pradesh Agricultural Extension and Research Project; US$10.0 million credit of June 1, 1977; Effective Date: September 2, 1977; Closing Date: September 30, 1983 ANNEX II Page 12 of 15 Cr. No. 737 Rajasthan Agricultural Extension and Research Project; US$13.0 million credit of November 14, 1977; Effective Date: February 6, 1978; Closing Date: June 30, 1983 Cr. No. 761 Bihar Agricultural Extension and Research Project; US$8.0 million credit of January 6, 1978; Effective Date: May 2, 1978; Closing Date: October 31, 1983 Cr. No. 855 National Agriculture Research Project; US$27.0 million credit of December 7, 1978; Effective Date: January 7, 1979; Closing Date: September 30, 1983 Cr. No. 862 Composite Agricultural Extension Project, US$25.0 million credit of February 16, 1979; Effective Date (expected): August 16, 1979; Closing Date: December 31, 1984 These projects, totalling US$123 million, finance the re-organi- zation and strengthening of agricultural extension and the development of adaptive agricultural research services with the objective of achieving early and sustained improvements in agricultural production, particularly foodgrains. Arrangement for monitoring and evaluation of project progress and impact is an essential feature of these projects. The Orissa and Assam projects also provide funds for laying the basis for longer term improvements in ground- water development in the States. The projects' components include provision of additional staff, training facilities, housing, offices, laboratory facilities, equipment and transportation. Cr. No. 526 Drought Prone Areas Project; US$35.0 million credit of January 24, [975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Overall physical progress of the Drought Prone Areas project (DPAP) continues to be satisfactory. The rate of disbursement is improving and implementation of most components is proceeding, by and large, according to schedule. Cr. No. 680 Kerala Agricualtural Development Project; US$30.0 million credit of April 1, 1977; Effective Date: June 29, 1977; Closing Date: March 31, 1985 This project would improve tree crop production in Kerala and has particular emphasis on increasing benefits to small farmers. It comprises rehabilitation of 30,000 ha coconut and 10,000 ha pepper and 2,240 ha cashew, and new plantings of 5,000 ha coconut and 1,500 ha cashew. About 25% of the coconut area would be irrigated for intensive intercropping. Funds have been provided for development of a seed garden for tree crops and for strengthening tree crops research. Ten crumb rubber factories would also be established to process smallholder rubber. Project implementation started slowly due to initial staffing and funding delays but has recently gained momentum. Proj- ect actions for 1978/79 have been rephased and advance action planned so as to make up for lost time. ANNEX II Page 13 of 15 Cr. No. 871 National Cooperative Development Corporation (NCDC) Project; US$30.0 million credit of February 2, 1979; Effective Date: May 3, 1979; Closing Date: December 31, 1984 This project is intended to strengthen the institutional framework responsible for promoting and financing development of cooperatives, partic- ularly village level multipurpose cooperative societies. 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 Credit 572 consists of a tranche of rural electrification schemes which, at about Rs 5 million each, would cover about 140 schemes. There are now thirteen States eligible for onlending (compared with six at the time of appraisal). The project got off to a slow start, due principally to the need to adapt the specifications and tendering procedures to international competitive bidding, but the position has now improved and the full amount of the Credit has been committed. Cr. No. 844 Railway Modernization and Maintenance Project; US$190.0 mil- lion credit of November 13, 1978; Effective Date: January 10, 1979; Closing Date: December 31, 1984 Credit 844 was designed to help the Indian Railways reduce manu- facturing and maintenance costs of locomotives and rolling stock and to improve their performance and availability. 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. 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 The project finances equipment, civil works and crop production credit to support programs for cotton research and cotton production increase in three states. The project also provides credit for improving cotton gin- neries, new ginneries, cotton seed oil extraction plants and vegetable oil processing factories. Effectiveness was delayed by slow appointment of consultants, but the cotton extension services program was started without delay and has now been in operation for two years. Disbursements have been ANNEX II Page 14 of 15 small mainly due to poor demand to date for project credit. A recent super- vision mission, working with technical consultants, has made detailed recom- mendations for more appropriate pest control practices and more adaptive research to identify and introduce better varieties. These measures are under discussion with GOI, and when agreed to and implemented, should speed up project disbursements. Ln. No. 12.73 National Seed Project; US$25.0 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1981 Cr. No. 81.6 Second National Seed Project; US$16.0 million credit of July 17, 1978; Effective Date: December 20, 1978; Closing Date>: December 31, 1984 Loan 1273 supports the first phase of India's national seed program, consisting of: sebed industry expansion in the public and private sectors, improvements in seed quality control, strengthening of breeding and seed technology research, and development of a reserve stock scheme. Insti- tutional development and managerial arrangements, particularly at the state level, have proceeded fair:Ly satisfactorily. Project implementation, however, slowed down after loan effectiveness mainly due to organizational problems. Project progress is now gaining momentum after GOI filled the two top posts of the National Seeds Corporation which were vacant for several months. A project supporting the second phase of India's national seed program (Credit 816) is now effective. 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 Contracts for all 700 bus chassis and nearly all 700 bus bodies to be procured under the project have been awarded and some 500 buses have been delivered. Civil works contracts have been awarded for 8 bus facilities, and 24 traffic engineering, schemes. Delays are expected in implementing some BMC traffic engineering schemes and the BEST workshop schemes although steps are being taken to minimize such delays. Consultants in organization, admin- istration, financial management systems, accounting and development planning are at work assisting the Borrower, the Bombay Metropolitan Regional Develop- ment Authority. Other beneficiaries of the loan, the Bombay Municipal Corporation and the Bombay Electric Supply and Transport Undertaking, have selected consultants in traffic engineering and operations and management assistance, respectively. Ln. No. 1394 Gujarat Fisheries Project; US$14.0 million loan and US$4.0 (TW) and million credit of April 22, 1977; Effective Date: Cr. No. 695 July 19, 1977; Closing Date: June 30, 1983 ANNEX II Page 15 of 15 Cr. No. 815 Andhra Pradesh Fisheries Project; US$17.5 million credit ofJune 19, 1978; Effective Date: September 19, 1978; Closing Date: September 30, 1984 These projects finance the construction of fishing harbors, sea~oo_ processing plants and other facilities required to assist the development of fisheries in the States of Gujarat and Andhra Pradesh. The projects also provide funds through ARDC to assist fisherman to purchase 9-15 meter vessels and 9 meter canoes. Preliminary work in connection with implementation of these projects is progressing satisfactorily. Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 793 Korba Thermal Power Project; US$200.0 million credit of May 12, 1978; Effective Date: August 14, 1978; Closing Date: March 31, 1985 Ln. No. 1549 Third Trombay Thermal Power Project; US$105.0 million loan of June 19, 1978; Effective Date: February 8, 1979; Closing Date: March 31, 1984 Credit 685 assists in financing the first stage of the 2,000 MW Singrauli development which is, in turn, the first of four power stations in the Government's program for the development of large Central thermal power stations feeding power into an interconnected grid. The second such station, at Korba, is being financed through Credit 793. It is proposed that the Bank Group will have a continuing involvement in this development program. The National Thermal Power Corporation (NTPC) has been formed to construct and operate these power stations, and the development program has gotten off to a good start. Organization and staffing of NTPC is proceeding satisfac- torily, and the Singrauli project is proceeding on schedule. Civil works are in progress and contracts have been awarded for major plant (turbo-generators, boilers, transformers). Loan 1549 is supporting the construction of a 500 MW extension of the Tata Electric Companies' station, in order to help meet the forecast load growth in the Bombay area. Ln. No. 1473 Bombay High Offshore Development Project; US$150.0 million loan of June 30, 1977; Effective Date: October 20, 1977; Closing Date: December 31, 1980 The project is progressing satisfactorily. Gas and oil pipelines from Bombay High to shore have been laid and were commissioned in June 1978. Disbursements had reached 46% of the loan amount on April 30, 1979. ANNEX III Page I INDIA THIRD ARDC CREDIT PROJECT Supplementary Project Data Sheet Section I: Timetable of Key Events (a) Time taken by the country to prepare the project Nine months (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 proje-t June 1978 and July 1978. (d) Date of departure of appraisal mission October 20, 1978 (e) Date of completion of negotiations April 25, 1979 (f) Planned date of effectiveness August 1979 Section II: Special IDA Implementation Actions none Section III: Special Conditions (a) GOI to review progress made by the cooperative credit system in meeting farmer credit needs and inform the Association, by December 31, 1980, of the findings and proposals for the future (paragraph 34); ANNEX III Page 2 (b) ARDC to apply guidelines for groundwater evaluation appropriate to levels of resource development, and to refinance minor irrigation schemes only in States where it is satisfied that SGO has been suitably strengthened (paragraph 45); (c) ARDC to establish and maintain criteria, satisfactory to the Association, for determining eligibility of the land development banks to receive refinance (paragraph 50); (d) GOI to review the findings of the survey on interest rate spreads, conducted under the Second ARDC Project, and inform IDA, by June 39, 1980, of GOI's proposal for carrying out the recommendations of the survey (paragraph 56). IBRD 12630R 1 MARCH 1979 IN THIRD AGRICULTURAL RFF NANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT DEMOCRATIC REPUBLIC ) Genera ized Occurrence of Groundwater, Rainfa 1, EvapDrotion and ARDC Regional Offices AFGHANISTAN I PAITN c# ; tt,F1sera 0 a bo rnC -hs- t -2KjtV> L 2 .<...... +SA .tn AHMEnB &HOPAL4fe 1 , t . . v,>t, 20'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~, gOMtEAX*.tW ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~P -A\.r h'I 2g-, h,' I, 'LSa, . , L \Th ~ '} ( lolA/JAR i "RA a' - -Indf - gM~~~~~~~~~~~~~~~~ADr- C,p l 1, -2f- AArabianR,,q -I 0ffiI- TRIV/X2i~~~~~~~ ~ ~~~~~~~~~~~~~~~ 'ANS 'A lti', <, 2 591>R LAXNKA 2 s 70u 300 ONH N The~~~~~~~~~~~~~~~~ Cnph te 00h h - insiarxhis Yterrsc 200 300 400 500 rowt hN f f hyCh bModwr E, -- 70~~NE PAI attad,o~~ Ca *a4 ~ ~ B H4U T DSCODO,WOWOOOP0'A paolooDVAoO&k00 r0,rOaOO P DODOSD& .aoOa''Ooo O~OO~.oe iuJAe 80' 00'~~~~~~~~~~~~~N
Groupe de la Banque mondiale · Memorandum & Recommendation of the President
India - Third Agricultural Refinance and Development Corporation Credit Project
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Memorandum & Recommendation of the President
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