India - Karnataka Sericulture Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-28 13-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE KARNATAKA SERICULTURE PROJECT May 14, 1980 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT (as of May 12, 1980) US$1.00 5 Rs 7.931277 Rs 1.00 Rs 0.12608 Rs 1 million = US$126,080 (Since September 24, 1975, the Rupee has been fixed against a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 to Rs 8.40, which represents the projected exchange rate over the disbursement period.) FISCAL YEAR April 1 - March 31 ABBREVIATIONS ARDC - Agricultural Refinance and Development Corporation CSB - Central Silk Board CSRTI - Central Silk Research and Training Institute DOS - Department of Sericulture GOI - Government of India GOK - Government of Karnataka IDBI - Industrial Development Bank of India KSIC - Karnataka Silk Industries Corporation KSSDI - Karnataka State Silk Development Institute SA - Sericulture Assistant SD - Sericulture Demonstrator TSC - Technical Service Center  FOR OFFICIAL USE ONLY INDIA KARNATAKA SERICULTURE PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiaries: The State of Karnataka, the Agricultural Refinance and Devevelopment Corporation (ARDC), the Industrial Develop- ment Bank of India (IDBI), Karnataka Silk Industries Corporation (KSIC), the Central Sericultural Research and Training Institute (CSRTI), the Karnataka State Sericul- tural Development Institute (KSSDI), and three universities in the State of Karnataka. Amount: US$54 million equivalent. Terms: Standard. Relending Terms: GOI to the State of Karnataka, the research institute and the universities: financing in accordance with Borrower's standard arrangements for development assistance. GOI to ARDC to refinance loans to silk farmers and reelers: (a) GOI to ARDC, interest rate at 6% per annum in respect of ARDC refinancing for up to 9 years and 6.5% for refinancing for up to 15 years. GOI to bear foreign exchange risk. (b) ARDC to Participating Banks, interest rate at 6.5% per annum for lending to small farmers 1/ and 7.5% for lending to other borrowers. Install- ment repayments to coincide approximately with expected collections of loans financed. (c) Participating Banks to Borrowers, interest rate at 9.5% per annum to small farmers and 10.5% to other borrowers. Repayment periods to be based on borrowers' repayment capacity. 1/ Small farmers are defined as those cultivating land providing a pre- development net return to family income not exceeding Rs 2,000 annually (based on 1972 prices). I 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.  - ii - GOI to IDBI for lending to KSIC: (a) GOI to IDBI, interest rate at 7% per annum for period between 5 and 9 years and 7.5% per annum for period between 10 and 15 years. GOI to bear exchange risk. (b) IDBI to KSIC, interest rate at 9.5% for the first Rs 20 million and 11% for the balance of loan amounts. Repayment period would be up to 10 years. Project Description: The project is designed to promote the integrated develop- ment of sericulture in India. Its main objectives would be: to increase raw silk production in Karnataka by 1,600 tons per year, including a significant increase in high quality silk; to introduce modern processing facilities and methods to upgrade raw and spun silk to export quality; and to introduce the latest technologies from leading silk producing countries and to expand local research for the longer term improvement of the silk industry. Estimated Cost: (US$ Millions) Local Foreign Total Credit for Silk Production 6.1 - 6.1 Ccedit for Reeling 1.9 - 1.9 Dept. of Sericulture Grainages & Hatcheries 19.5 0.1 19.6 Technical Service Centers 10.3 - 10.3 Training Schools 0.9 - 0.9 Markets 3.0 - 3.0 Filature 0.3 0.4 0.7 Incremental Administrative Costs 3.1 - 3.1 KSIC Filature 0.8 4.2 5.0 Spun Silk Mill 2.1 7.8 9.9 Headquarters and Workshop 0.7 - 0.7 Net Incremental Working Capital 0.5 - 0.5 Research 6.6 1.4 8.0 Technical Assistance & Studies 0.4 2.2 2.6 TOTAL BASE COST 56.2 16.1 72.3 Physical Contingencies 3.0 1.4 4.4 Price Contingencies 15.2 3.2 18.4 TOTAL PROJECT COST 1/ 74.4 20.7 95.1 1/ Includes US$6.6 million in taxes and duties.  Financing Plan: (US$ Millions) Local Foreign Total IDA Credit 33.3 20.7 54.0 GOI/GOK 30.7 - 30.7 ARDC 3.5 - 3.5 IDBI 5.0 - 5.0 Banks 0.9 - 0.9 Farmers/Reelers 1.0 - 1.0 74.4 20.7 95.1 TOTAL Estimated (US$ Million) Disbursement: FY81 FY82 FY83 FY84 FY85 FY86 Annual 3.0 8.0 16.0 14.0 12.0 1.0 Cumulative 3.0 11.0 27.0 41.0 53.0 54.0 Rate of Return: 22% Appraisal Report: No. 2901a-IN dated May 14, 1980.   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE KARNATAKA SERICULTURE PROJECT 1. I submit the following report and recommendation on a proposed dev- elopment credit to India in an amount equivalent to US$54 million on standard IDA terms to help finance a project designed to develop sericulture in the State of Karnataka. The Government of India (GOI) would relend US$4.4 million to the Agriculture Refinance and Development Corporation (ARDC) at 6% per year for lending to farmers for up to 9 years and at 6.5% per year for lending of up to 15 years to refinance loans to farmers for silk farming and reeling; and US$9.5 million to the Industrial Development Bank of India (IDBI) at 7% interest per year for lending for up to 9 years and 7.5% for up to 15 years to lend to the Karnataka Silk Industries Corporation (KSIC) for modernization and expansion of silk processing factories. GOI would bear the exchange risk. Of the balance, GOI would use US$5.5 million to implement technical assistance, overseas training and research programs, and would pass the remaining US$34.6 million to the Government of Karnataka (GOK) in accordance with its standard arrangements for development assistance to the States of India. 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 13, 1979. Country data sheets are attached as Aknnex I. Background 3. India is a large, low-income country with 652 million people (in mid-1979) whose average income is US$180 per annum. The agricultural sector dominates the economy, employing over two-thirds of the labor force and con- tributing 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 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Report for the Kerala Agricultural Extension Project (Report No. P-2797-IN), dated May 1, 1980.  - 2 - drag on overall growth, not only because of its sheer weight in the total, 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 24%. Gross domestic investment has risen from 10% to 24% 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. Irdia 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. Buoyant domestic demand, stagnating output and world inflation have led to significant increases in prices during the first half of the 1979/80 fiscal year. The wholesale price index for  September 1979 was 18.4% above that of the previous September. Together, the rise in the prices of food products, crude petroleum and mineral oils accounted for over two-thirds of the increase in the index. However, prices of almost all commodities moved up significantly over this period as reflected in the 9.6% increase in the prices of the residual commodities. Government attempts to regulate the supply and price of commodities like sugar and edible oils, ceilings on credit, adjustment of some interest rates and the seasonal downturn of the fruit and vegetable prices after summer helped the wholesale price index to level off after September. However, if allowance is made for the seasonal factors, prices are still rising at approximately an 18% annual rate. The Indian economy will no doubt continue to face inflationary pressure during the 1980/81 fiscal year. Its intensity will to a large extent depend on the developments in world inflation, especially the rise in oil prices and India's success in alleviating the supply bottlenecks that emerged during 1979. Although the current inflationary pressures need not seriously impair medium- term growth prospects, given available aggregate resources and production capacity, significant improvements are likely to be required in the organ- ization of key sectors if an economic slowdown is to be avoided. 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 timely and adequate, although severe flooding in some areas destroyed both lives and property and ruined some crops. The basic inputs into agricul- tural 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 has been impres- sive, particularly since it followed two successive years of very high growth-- 18% in 1976/77 and 26% in 1977/78--so that fertilizer consumption in 1978/79 was 75% higher than in 1975/76. However, prospects for agricultural produc- tion in 1979/80 are not good. India experienced a severe drought in 1979. The monsoon was delayed and subsequent rainfall was deficient throughout the country. Consequent damage to the kharif crop has been substantial. Tenta- tive estimates indicate a shortfall of 10-12 million tons in kharif crop from last year's level of 78.7 million tons. Delayed sowing, lack of soil moisture, low levels of water in tanks and wells as well as power cutbacks and recent shortages in diesel fuel for irrigation pumps are adversely affecting the rabi crop. Depending on the performance of the rabi crop, total shortfall in grain crop is expected to be 10-12 million tons below the 1978/79 level. 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% but continuing shortages in many States necessitated power cuts and curbs on new demand. During the first  - 4 - half of 1979/80 supply bottlenecks in basic industrial inputs began to retard overall industrial production. In addition to coal and steel, cement, sugar, cotton textile and cotton yarn output fell below last year's levels. Strong demand has continued to sustain other important industries such as fertilizers and chemicals, but it appears increasingly unlikely that these can counter- balance the constrained sectors. 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 invi- sible 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. Exports during the first three months of this fiscal year are 32% higher than the same quarter of last year. Imports in the first quarter of 1979/80 are around 7% higher than the same period of the previous year. However, the impact of recent increases in petroleum prices are only partially reflected in this figure. India's total POL import bill for 1979/80 is likely to reach $3.2 billion, $800 million higher than earlier estimates. As a result, there should be a sharp decelera- tion in the rate of growth of reserves sufficient to significantly reduce the number of months of imports covered by reserves during 1980. Development Prospects 11. 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 agricultural performance; the impressive saving effort; the liberalization of import controls; and ex- panded public expenditure on development programs. Although sustaining the high growth rates of the recent past in the medium-term is by no means assured, especially if there is a repeated drought in 1980, India has a level of re- sources with which to manage the economy that had not existed before. The comfortable foreign exchange position, and the large foodgrain stocks have greatly eased the pressures to deal with short-term crises and freed India's economic managers to continue planning 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.  - 5 - 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 underemployment, (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, despite the 1979 drought, economic policies, dev- elopment programs and secular trends all seem favorable for resuming a period of sustained high growth after 1979/80. 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 purchases, 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 pro- vide the water control needed to increase yields directly and to induce further productivity-increasing investments. The effective reorganization of the agricultural extension service will raise yields as it takes hold gradually across India. Finally, there are several heartening trends in foodgrain pro- duction: 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 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 traditional 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, increase in planned invest- ment 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 indus- trial 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  - 6 - to induce a more efficient industrial structure. Recent industrial policies have sent mixed signals to private manufacturers and investors. Some, such as reserving certain lines of production for small-scale enterprises or prohibit- ing the location of new firms in municipal areas, have been restrictive. Others have been stimulative, 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 pro- gram 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 improvement in agricultural output. Although its effect has been delayed somewhat, this broad-based demand is finally making itself felt and is eypected to continue into the future unless the growth in agricultural output is constrained by repeated droughts. Another source of demand is public expenditure 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 indus- trial goods. There has been a sustained growth in the export of manufactures such as engineering goods, garments, gems, finished leather 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 in- creased use of inputs; investments should become stronger as growth in the other sources of demand continues and as capacity limitations begin to con- strain production in 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  - 7 - 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 30 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 level. The low performance is primarily the result of the reaction to the harsh birth control policies introduced during 1976. Since then family planning performance 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, Bank estimates indicate that India's rate of population increase should remain below 2% per annum and fall to 1.5% by about the year 2000. Despite the declining trend in the rate of population increase, a net reproduction rate (NRR) equal to one (replacement level) would only be achieved around the year 2020. At this time, the total population is estimated to reach 1.2 billion persons, an increase of about 84% over the mid-1979 level of 652 million. 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 uncultivated 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 there would be about 9 million hectares avail- able for distribution. This compares to roughly 45 million families in the two poorest groups in rural India: landless families and families owning 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  - 8 - 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 57 loans and 118 development credits to India totalling US$2,529 million and US$7,255 million (both net of cancellation), respectively. Of these amounts, US$1,055 million had been repaid, and US$3,226 million was still undisbursed as of March 31, 1980. Bank Group disbursements to India in the current fiscal year through March 31, 1980, totalled US$517 million, representing an increase of about 44% over the same period last year. Annex II contains a summary statement of disbursements as of March 31, 1980, and notes on the execution of ongoing projects. 20. Since 1959, IFC has made 18 commitments in India totalling US$72.5 million, of which US$17.4 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$40.6 million, US$31.5 mil- lion represents loans and US$9.1 million equity. A summary statement of IFC operations as of March 31, 1980, is also included in Annex II (page 5). 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 operations and in providing direct support to major and medium irrigation. Marketing, seed development, agricultural extension, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capacity utilization in industry. The Bank Group has also been active in supporting 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 needs and the Government's priorities. The emphasis of the program on agriculture, power, water supply and other infrastructure sectors remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs, particularly water and credit for on-farm investments, will continue to receive emphasis. Improved water management and intensification and streamlining of extension systems form an important institution-building aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefit- ting small farmers. The Bank Group's continuing role in the fertilizer sector also assists India in the more efficient provision of another key input in the agricultural growth process. 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 infra- structure and industrial investments will focus on those subsectors which have  - 9 - recently emerged as key constraints on India's overall growth, primarily power and transportation. 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 part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid 1970s. However, the need for increased foreign assistance to adjust to an even greater deter- ioration in balance of payments prospects during the 1980s by augmenting domestic resources and stimulating investment, remains. As in the past, Bank Group assistance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, and water supply. 24. India's poverty and needs are such that as much as possible of India's external capital 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 should be regarded as credit- worthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was 12% in 1978/79 and is projpcted to remain below 20% through 1995/96. As of March 31, 1980, outstanding loans to India held by the Bank totaled US$1,516 million, of which US$556 million remained to be disbursed, leaving a net amount outstanding of US$960 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, 1979, India's outstanding and dis- bursed external public debt was US$15.3 billion, of which the Bank Group's share was US$4.6 billion or 30% (IDA's US$4.0 billion and IBRD's US$0.6 bil- lion). Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1978/79, about 17.5% of India's total debt service payments were to the Bank Group. PART III - SERICULTURE IN INDIA General 26. Sericulture holds an important place in the Indian economy. Nearly four million people are engaged in plant cultivation (mainly mulberry), silk- worm egg production and rearing or in the predominantly small-scale reeling and weaving of silk. In 1977, about 131,000 ha of land were under mulberry cultivation. India ranks fifth among silk producing countries after Japan, the People's Republic of China, Korea and Russia. In 1978, India produced 3,700 tons of raw silk, used to manufacture fabrics with an estimated value  - 10 - of US$200-250 million. Since silk is rooted in Indian social tradition, the domestic market is strong and uses most of the production. Exports, mostly fabrics, have expanded, particularly over the last five years, and were valued at about US$45 million in 1978. 27. Four silk varieties are produced in India - mulberry, tasar, eri and muga - which are derived from silkworm varieties feeding on leaves of different plants. Of these, mulberry silk, representing the bulk of inter- nationally traded silk, constitutes about 85% of the total silk produced in India. About 75% of the Indian mulberry silk is produced in Karnataka. 28. Sericulture is highly labor-intensive. Development of sericulture, therefore, accords well with the Government of India's priorities for alleviat- ing unemployment and rural poverty. The time is propitious for expanding sericulture in India, since production is dropping in leading producer coun- tries, notably Japan and Korea, due to high seasonal labor requirements and costs. India also has a greater amount of suitable land available for seri- culture than does Japan, and has an additional advantage of year-round produc- tion (up to seven silkworm rearings) compared to seasonal production (two or three rearings annually) in temperate countries. Consequently, GOI has included several sericulture development programs in its Draft Sixth Plan (1978-83) aimed at doubling production and exports. Mulberry Cultivation 29. Mulberry is a hardy and drought-resistant tree, tolerating most soil conditions other than poor drainage, and, because of a range of varieties, it grows well at altitudes from sea level to 1,500 meters. Established by cutt- ings, the first crop of leaves is harvested five to six months after planting. Harvesting under rainfed conditions in India is seasonal and tails off during the dry season between November and June, whereas under irrigation five harvests at roughly 10-week intervals are customary. The crop responds well to inputs and good cultivation practices, as evidenced by an average yield of 3,000 kg/ha of leaves under rainfed conditions compared to commonly obtained yields of 30,000 kg/ha with a full package of improved practices under irriga- tion. Pests and diseases cause few problems. 30. Mulberry farming, combined with silkworm rearing, is more profitable than any other crop in silk-producing areas, particularly those under irriga- tion. Furthermore, continuous harvesting throughout the year is an attraction as it produces steady cash income to the farmers. However, it requires a very high labor input and careful management. As a result, most silk farmers have less than one hectare of mulberries. The production of mulberry can be improved by the use of improved high-yielding varieties. Silkworm and Silkworm Rearing 31. The nucleus of the sericulture industry is the "grainage" where eggs of selected silkworm varieties are produced under controlled hygienic conditions for sale to sericulturalists who hatch them and rear their result- ing silkworms to produce cocoons. In a grainage, selected seed cocoons are kept in a controlled environment to synchronize the emergence of moths from  - 11 - cocoons of different races for egg layings. The eggs are then examined for disease, and only disease-free eggs are issued to the sericulturists for rear- ing. For the first 26-28 days after their hatching the farmers feed the silk- worms with mulberry leaves; during this time the worms grow to about 10,000 times their birth weight. At the end of this phase of their life-cycle, the worms stop feeding and are transferred to cocooning frames. There each worm ejects a silk filament which it spins around itself to form a cocoon. Each comprises a single unbroken filament, the quality of which--determined by length, thickness and weight--depends on the genetic quality of the worms, rearing method and quality of the leaves fed to them. 32. Tropical silkworms, including traditional Indian varieties, are multivoltine and produce several generations of worms in a year. Temperate silkworms, from Japan and Europe, are uni- or bivoltine having only one or two generations per year. Their eggs remain dormant for some months to allow over wintering, but there are artificial means of terminating dormancy, so that they too can be grown throughout the year. Multivoltine varieties of worms spin an average of 400 meters of continuous filament, but in the case of bivoltine hybrids average lengths of 1,500 meters are common. In India, particularly in Karnataka, increased efforts have been made over the last decade to improve silkworm varieties, and the success in introducing and acclimatizing bivoltine varieties represents a significant advance in Indian technology. Cocoon Marketing and Processing 33. About five days after cocoon formation, farmers sell cocoons to reelers. Formerly, reelers purchased cocoons from farmers either directly or through agents. But in recent years most sales take place at State-regulated cocoon markets. In Karnataka, 85% of the cocoons pass through such markets. 34. Before reeling takes place, the pupa inside the cocoons must be killed; otherwise, on the tenth day, the worm transforms into a moth and emerges from its cocoon, cutting the continuous filament. Traditionally, the pupa is stifled by steaming the cocoon, but in more modern processing hot air is used. By joining eight to ten filaments together, silk yarn of standard thickness is produced in the process called reeling. Small producers use the traditional 'charkha' or improved equipment termed cottage basins for this purpose. Large factory-type units known as filatures are used on an indus- trial scale. The yarn is treated on 'twisters' for increasing its tension, and sold to weavers. Waste material from the cocoons, once the filament is removed, is used for making spun silk yarn. 35. The amount of silk obtained from cocoons and its quality are low in India compared to other major producers. For instance, in Japan 5 to 6 kg of cocoons yield one kg of silk, while in India 12-16 kg of cocoons are required. The quality of charkha silk is lowest but finds a ready market with handloom weavers. Even the silk from filatures is below international market standards. Reasons for low quality include the poor varieties of silkworms and obsolete reeling equipment. Raw silk is sold to silk merchants who in turn sell it to silk weavers. About 150,000 handlooms or small-scale powerloom enterprises are engaged in production of silk fabrics, mainly saris. Silk waste  - 12 - is purchased by merchants partly for resale to the three publicly owned mills in India and partly for export. Government Programs 36. Silk production is a State responsibility handled by State indus- tries ministries. The Central Government is involved through the Central Silk Board which is responsible to the GOI Ministry of Industries. The Board advises GOI on policy and development programs, and is responsible for silk imports, export quality control, and for assisting States with production programs. In addition, the Board is responsible for silk research and some training; it operates four central research stations, seven regional stations and about twenty extension centers in fourteen different States. GOI's financial provision for these activities increased from US$550,000 in the First Five-Year Plan (1951-56) to US$30 million in the Fifth Plan (1974-78); US$190 million is targetted in the Draft Sixth Plan (1978-83). Mulberry and Silk Research and Technology 37. Modern integrated sericulture research began in India in 1961 after the Central Sericultural Research and Training Institute (CSRTI) at Mysore was established under the Central Silk Board. The Institute has a team of 40 scientists and 45 technicians working on mulberry and silkworm improvement, a modest reeling and fiber technology program, and a post-graduate training program for field officers. The research and extension centers under the Institute perform the triple functions of applied field research, advising extension staff and farmers and feeding back farmers' problems into the research pipeline. 38. Research results have been impressive. In mulberry improvement, a high-yielding and more nutritious variety has been evolved, together with a package of cultivation practices which has found ready acceptance by farmers. In silkworm improvement, local varieties have been improved and bivoltine varieties and hybrids have been successfully adapted. To improve rearing of bivoltine varieties, communal hatcheries have been introduced for operation under Government supervision. Despite these impressive successes, there is a considerable gap between silk yields per hectare in India (40-50 kg/ha of irrigated mulberry) and Japan (over 120 kg/ha of rainfed mulberry). To ensure longer-term growth of the industry, research activities need considerable strengthening and Indian researchers would benefit from more contacts with their foreign counterparts. Sericulture in Karnataka 39. The State of Karnataka, situated in Southwest India, has a popula- tion of about 30 million and a cultivated area of about 10 million hectares (of which 1.35 million ha are irrigated). Foodgrains, including rice, sorghum and millets, occupy half the cultivated area, and production has been adequate, for some years, to meet the State's food requirments. With the State's climatic range of humid tropical coasts to more temperate upland areas, Karnataka has a large range of cash crops including cotton, groundnuts, sugarcane and horti- culture crops. The State produces over 60% of India's silk. The topography  - 13 - and climate are ideal for sericulture which was introduced in the State some 200 years ago. Sericulture is now practiced by 200,000 farmers and provides employment for about two million people in the State. 40. The mulberry area is estimated at about 110,000 ha, of which about 30,000 ha are irrigated and 4,000 ha are under the improved M5 variety. It is largely confined to Bangalore and four adjacent districts. However, over the last five years mulberry plantation has extended to other parts of the State, and 1,000 ha have been planted in such new areas. The total mulberry area increased from 43,000 ha in 1951/52, to 106,000 ha in 1977/78. Similarly, silk production has increased from 727 tons in 1951/52 to 2,300 tons in 1977/78. Yields range from 190 kg of cocoons from each hectare of mulberry plantation in rainfed areas in Mysore District to close to the Japanese yield of about 600 kg from one hectare of mulberry in some irrigated areas. Improved technology in sericulture has only become available in the last three or four years. Cocoon yields of 800-1,000 kg per hectare of mulberry in some intensively staffed village scheme areas have proved the value of the new technology. Its large- scale adoption requires intensification of research and advisory services, increased production of improved seed and introduction of improved reeling technology. 41. The Department of Sericulture of the Government of Karnataka (GOK), with a professional and technical staff of 2,000, plays a key role in all aspects of raw silk production in the State, and provides production, advisory and cocoon marketing services. In addition, the Department fulfills regulatory functions, particularly in the fields of silkworm egg production and cocoon marketing. It also used to operate an industrial wing, comprising seven fila- tures (silk reeling factories), a twisting plant, a spun silk factory and a silk weaving factory, which has recently been transformed into a GOK Corpora- tion to operate commercially. 42. The Department operates 74 silk farms (average size 10 ha) and 80 grainages that provide farmers with disease-free silkworm eggs. In silk farms, breeder silkworm stock are multiplied and provided to closely super- vised farmers for further multiplication. In departmental grainages cocoons from such farmers are collected for egg production in controlled aseptic con- ditions. The Department sells eggs to farmers at prices which cover grainage operating costs. In 1979, about half of the 160 million layings used in Karnataka came from departmental grainages and the rest from 833 licensed private grainages. The private grainages also obtain cocoons from GOK super- vised farms but quality control is below the standards of the departmental grainages and thus the product is of variable quality. Due to increasing demand, departmental production is expanding rapidly, but departmental grain- ages lack modern facilities and the Department needs additional staff to allow appropriate supervision of their operations. 43. Technical services so far have been sufficient to raise yields only slightly although they have been effective in preventing any catastrophic disease outbreak. Recently, however, the Department has established a system of serving the industry that has been successful and appears to be the way of achieving greater inpact in the future. The system is based on a technical service center staffed by a sericulture assistant who supervises eight seri- culture demonstrators. About 12-13 communal hatcheries are attached to each  - 14 - center. Each demonstrator is expected to visit each of the 100 farmers in his area of responsibility, once every four days while rearing is in progress and supervise one or two hatcheries. About 60 technical service centers and 640 hatcheries have been established but require additional equipment and staff. 44. GOK introduced regulated cocoon marketing under 1959 legislation, and the Department operates 22 cocoon markets at which cocoons are sold by auction under Departmental supervision. Farmers prefer this type of marketing to direct trading. Designed for 10,000 tons, the markets already handle about 30,000 tons of cocoons. Therefore, there is an urgent need to expand the markets. Reeling is predominantly a cottage industry. About 10,000 charkhas and 7,500 cottage basins account for 90% of all reeling, with the balance processed mostly in government filatures. Until 1957, charkhas were predom- inant, but in that year GOK introduced a 50% capital subsidy for establishing cottage basins to improve quality. As a result, cottage basins now exceed the output of charkhas. 45. Credit for sericulture activities is provided by cooperative and commercial banking, which is well developed in Karnataka. The three-tier short/medium-term cooperative system has about 200 District Central Bank offices and 5,000 Primary Agricultural Society offices in project districts, the two-tier medium/long-term Land Development Bank has 140 offices and commercial banks have about 1,600 branches of which 1,000 are semiurban or rural. There are also several Regional Rural Banks which cater specifically to the poorer section of the rural community. A major credit scheme formu- lated in 1974 for se-iculture development in Karnataka has been disappointing to date. It comprised formation of combined sericulture and general service cooperatives to provide long and short term credit and technical and marketing services. There has been little demand for credit through these cooperatives. For instance as of June 30, 1979 only Rs 1.2 million of a Rs 30 million target had been disbursed by ARDC in 31 long term credit schemes for cooperatives. At the same time both cooperative and commercial banks had, over three years, disbursed well over Rs 50 million for sericulture to individual borrowers. Consequently, lending would now be to individuals rather than cooperatives in new silk areas. Bank Group Activities in Karnataka 46. The Bank Group has been involved in Karnataka through a number of projects, mainly in the agricultural sector. The Mysore Agricultural Credit Project (Cr. 278-IN of January 1971) provided US$40 million to finance agri- cultural loans to farmers, and was fully disbursed by June 1977. The Karnataka Wholesale Agricultural Markets Project (Cr. 378-IN of May 1973) has provided US$8 million to establish agricultural markets in strategic locations. After initial delays, almost all of the 39 markets envisaged are either com- pleted or underway. A US$30 million credit for the Karnataka Dairy Development Project (Cr. 482-IN of June 1974) is being implemented to support dairy development along the lines of the successful Amul dairy cooperative system. Another multi-state agricultural project, the US$35 million Drought Prone Areas Project (Cr. 526-IN of January 1975) includes one district of Karnataka and is progressing well. In May 1978, a US$126 million credit was provided for the Karnataka Irrigation Project (Cr. 788-IN) to irrigate about 105,000 ha of  - 15 - land and promote agricultural development in the area. In addition, the Second National Seed Project (Cr. 816-IN of July 1978) and the Composite Agriculture Extension Project (Cr. 862-IN of February 1979) finance seed development and agricultural research and extension activities, respectively, in Karnataka among other States. Non-agricultural activities of the Bank Group include family planning and nutrition activities under a US$21.2 million Population Project (Cr. 312-IN of June 1972) which is nearing completion. PART IV - THE PROJECT 47. The project was prepared by the Sericulture Department of the Gov- ernment of Karnataka (GOK) in collaboration with GOI's Ministry of Agricul- ture Project Preparation and Monitoring Cell and with assistance by the Bank's New Delhi Office. The project was appraised in September/October 1979, and negotiations were held in Washington, D. C. in April 1980. The Indian nego- tiators included Mr. S. Sharma, Development Commission, Ministry of Industry, GOI, Mr. B. S. Lamba, Deputy Secretary, Ministry of Finance, GOI, and Mr. V. Balasubramanian, Director of Sericulture, GOK. The Staff Appraisal Report (No. 2901a-IN) is being circulated separately. A Supplementary Project Data Sheet is attached as Annex III. Project Description 48. The proposed project would represent a major effort for the inte- grated development of sericulture in India. Its main objective would be: - to increase raw silk production in Karnataka by about 1,600 tons per year, including an increase in high quality bivol- tine silk from 100 to 1,000 tons; - to expand reeling capacity and introduce modern processing facilities and methods that would upgrade raw and spun silk to export grade quality; and - to introduce the latest technologies from leading silk produc- ing countries and to expand local research for longer-term improvement of the silk industry. 49. Silk Production. Silk production would be supported by strengthening and improving of the Department of Sericulture advisory services, providing hatcheries under the Departmental supervision for most of the silk production requirements and expanding cocoon markets to cater for the projected increased production. The advisory services, apart from helping farmers improve silkworm- rearing practices, would encourage replacement of 20,000 ha of local mulberry varieties in traditional areas with improved M5 varieties, planting of 14,000 ha of M5 in new areas to increase the mulberry area there from 1,000 to 15,000 ha, and improving mulberry cultivation in all areas including the 60,000 ha of existing rainfed mulberries. A modest credit program for 3,500 ha of mulberry (25% of the planting target) would support the planting program in new areas (para 60). The project would provide funds for lending to farmers to establish  - 16 - new plantations, purchase silkworm rearing equipment, construct improved rearing houses, and cover recurrent costs for two rearing cycles. The rearing houses would be constructed in accordance with Department of Sericulture specifications acceptable to ARDC and IDA, and such specifications would be drawn up by December 31, 1980 (Section 2.08 of the Project Agreement). 50. Technical services would be provided for silk producers, based on the successful technical service center (TSC) model (see paragraph 43). The project would provide funds for strengthening the existing 60 TSCs and 640 hatcheries and for establishing 90 additional TSCs and 1,060 hatcheries. Most of the sericulture area would be covered, within which about 90% of all silkworm eggs could be hatched and initially reared in communal hatcheries. The project would finance incremental staff totalling 150 Sericulture Assis- tants (SA) and 1,600 Demonstrators, which would result in placing one Demon- strator per 60-100 growers and one Sericulture Assistant to supervise eight Demonstrators. The project would also finance hatchery equipment, TSC and hatchery incremental operating costs and vehicles. To ensure staff mobility for farm visits, 750 light motorcycles would be procured for purchase by staff through loans. Extension advice for mulberry production would be provided by the Department of Agriculture. The Department of Agriculture is employing the Training and Visit System and is receiving IDA support under the Composite Agriculture Extension Project (Cr. 826-IN). 51. In support of the technical services, the project would improve and expand an existing training center and establish two new ones, each with a capacity of 1,200 trainees a year, including staff and farmers. In addition the p5oject would finance 20 model hatcheries including construction of a 110 m hatchery building, and provison of equipment and incremental operating costs. As private grainages have not been able to meet the exacting standards needed for high quality egg production GOK would expand production from departmentally owned grainages. Under the project, most of the present 80 departmental grainages would be closed or converted into egg sale centers and would be replaced by 10 large modern grainages to be financed under the project. To provide adequate facilities for ongoing cocoon production and for its expansion, the project would extend markets in 11 of 22 existing sites and construct markets on 12 new sites. A total of 30 market units would be established in those 23 sites. 52. Silk Processing. The project would create processing facilities in new sericulture areas and, at the same time, it would also improve the exist- ing facilities by introducing modern technology to increase silk recovery from the cocoon and to upgrade quality. In the new areas, the Department would establish one small semi-automatic filature and would also encourage invest- ments in privately owned cottage basins (see paragraph 34). The Department filature would also act as a demonstration, training and cocoon testing center. Since most cocoons in the State would continue to be reeled by cottage basins, the project would provide credit (channeled through ARDC and banks) for 500 units of about one ton per year silk reeling capacity in new areas. GOK provides a subsidy equal to 40% of machinery cost, which would be continued.  - 17 - 53. GOK has established a Karnataka Silk Industries Corporation (KSIC) to operate the existing departmental filatures, spun silk mill and weaving factory (see paragraph 59). KSIC would modernize one of the existing seven large filatures and expand its production capacity. The existing GOK spun silk mill, established in 1936, requires extensive reconditioning. A reno- vation program, based on a technical study carried out by Japanese spun silk specialists, would be implemented by KSIC, and its capacity increased from the present 45 tons of spun silk production to 60 tons per year. In addition, a new 90-ton-per-year spun silk production unit would be con- structed at the factory, and would be provided with the latest equipment to allow it to produce export-quality spun silk. The project would also finance expansion and equipping of the existing GOK workshop, which would be taken over by KSIC and would carry out the spun silk mill renovation program. 54. Research and Technical Assistance. The project would provide funds for laboratory buildings, staff housing, equipment, and incremental staff and operating costs required by: (i) the Central Sericultural Research and Training Institute (CSRTI), to strengthen its central station, establish two regional stations and five substations and to improve five existing substations; (ii) University of Agricultural Sciences, Bangalore, for strengthening its ongoing program focussed on silkworm disease control, for starting new programs for mulberry and silkworm pest and disease incidence surveys, and for strength- ening its sericulture teaching faculty; (iii) University of Bangalore for silkworm genetics research and a broader program on mulberries; and (iv) Mysore University for specific research on silkworm genetics. In addition, GOK, with its heavy stake in the silk industry, would ei3tablish the Karnataka State Sericultural Development Institute (KSSDI) to car:-y out research into all aspects of mulberries, silkworms and silk processing. A Sericulture Research Committee would coordinate the research program (para 62). 55. Longer-term development of the silk industry in India would require the introduction of the latest technologies from leading silk producing coun- tries like Japan and Korea. The project would therefore finance 70 man-months of consultants' time and a 380 man-month program for training abroad. About 19 man-months would be needed for visits of 5 or 6 top-level scientists to CSRTI to support mulberry and silkworm breeding work and for exchange of ideas on other research topics. About 12 man-months would be used for two visits by a two-man team to help the Department of Sericulture with grainage development and another expert would be needed for two visits of six months each to help with the communal hatcheries program, with special focus on disease control. About 27 man-months would be used by KSIC for training staff to operate new filature and spun silk factory equipment. 56. Japan, the leader in silk technology, would be a most suitable source of expertise and training opportunities. To attract the necessary top-class scientists and technicians, it is expected that US$15,000 per man-month, inclusive of air fares, living expenses and local travel, would be required. However, there is no certainty that all the desirable expertise can be recruited, particularly on a time-bound schedule. It is assumed also that most, if not all, project financed overseas training would be in Japan. The cost per training month has been estimated at US$3,400. GOI would,  - 18 - by December 31, 1980, draw up a plan and timetable for the technical assistance and overseas training program on terms and conditions mutually acceptable to GOI and the Association (Sections 3.02 and 3.03 of the Development Credit Agreement). 57. The project would provide funds for an evaluation study by a local research institute. The study would evaluate the impact of the project and its individual components on silk production, employment and rural income. GOK would initiate an evaluation study, by March 31, 1981, with terms of reference satisfactory to the Association (Section 2.13 of the Project Agree- ment). Project Implementation 58. The Department of Sericulture would implement all components con- nected with cocoon production, including development of silk farms, grainages, technical service centers, communal and model hatcheries, training centers and cocoon markets. The Department would cooperate closely with credit agen- cies (paragraphs 60 and 61) which would carry out the lending program for silk farmers and reelers, and with the Department of Agriculture which would provide extension for mulberry cultivation. The Department of Sericulture is part of the State Ministry of Industries and is headed by the Director of Sericulture, responsible to the Secretary of Industries. The Department is dynamic and well organized and its staff responds well to its strong leader- ship. The Department is undergoing reorganization in preparation for almost doubling its technic;l staff over the project period. To ensure adequate training for new staif, GOK would draw up a training plan by December 31, 1981 and submit for IDA's comments (Section 2.07 of the Project Agreement). The field services would be organized on a District basis with a Deputy Director in charge. Each District would have divisions (5 in Mysore, 3 in Bangalore and 2 in all other Districts) headed by an Assistant Director, whose primary task would be organization and supervision of technical service centers and communal hatcheries. At the Head Office, apart from the Senior Technical Advisor, there would be five Joint Directors for the different specialities as well as for silk farms and technical services. To carry out the construction program under the project, the Department would estab- lish an engineering cell. The engineering cell would be established by September 30, 1980 (Section 2.07 of the Project Agreement). 59. The Government of Karnataka has recently established the Karnataka Silk Industries Corporation (KSIC) with an authorized capital of Rs 150 mil- lion. It would take over and operate the GOK-run processing facilities and would implement the modernization program financed under the project. The Corporation would be controlled by a Board nominated by GOK. The management team would be headed by a managing director. Heads of KSIC's Technical, Finance, Personnel and Accounts Divisions would be appointed by September 30, 1980 (Section 2.10(b) of the Project Agreement). An engineering unit with staff deputed from the State Public Works Department would supervise project construction for KSIC. The engineering unit would be established by December 31, 1980, (Section 2.10(c) of the Project Agreement). To allow adequate debt serv- icing capacity the Corporation would maintain a debt:equity ratio as determined  - 19 - by IDBI (Section 2.01(d) of the Project Agreement). The ratio is expected to remain less than 2:1 during the project period. 60. Credit for silk farmers and reelers would be provided by the parti- cipating banks and refinanced by the Agricultural Refinance and Development Corporation (ARDC) under a financing arrangement between GOI and ARDC. ARDC has ample experience of Bank Group project execution through participation in about 40 projects. To ensure adequate and suitable banking arrangements, ARDC would draw up a banking plan which would include a definition of ARDC's role in project implementation and proposals for: banking coverage of the project area; preparation, supervision and monitoring of project schemes; rehabilita- tion or development of banks or branches as needed; recruitment and training of staff; and proposals for necessary improvements in lending procedures. Execution of financial arrangements between GOI and ARDC, satisfactory to IDA, would be condition of disbursement against loans for farmers and reelers under the credit (Paragraph 3(b) of Schedule 1 to the Development Credit Agreement and Section 2.02 of ARDC Agreement). 61. Financing for the industrial component (para. 53) would be channeled through the Industrial Development Bank of India (IDBI), a public sector corp- oration established to finance small- and medium-scale industrial enterprises. IDBI has experience dealing with the Bank Group, as a beneficiary of three projects (Cr. 356-IN of February 1973, Ln. 1260-IN of June 1976 and Ln. 1511-IN of March 1978) and as a financing channel for the Jammu & Kashmir Horticulture Project (Cr 806-IN of July 1978 and the Fertilizer Industry Project (Cr. 598-IN of December 1975). IDBI would appraise the factories' modernization proposals, prepared by a local consulting firm with international experience and their findings would be sent for IDA's review. IDA's approval of the terms and conditions of the financial arrangements between GOI and IDBI would be a condition of disbursement for the relevant part of the credit (paragraph 3(c) of Schedule 1 to the Development Credit Agreement and Section 2.02 of IDBI Agreement). 62. The research component would be carried out by the Central Sericul- tural Research and Training Institute (CSRTI), three universities and by the Karnataka State Silk Development Institute (KSSDI). The latter would be estab- lished, with key staff, before December 31, 1980 (Section 2.09 of the Project Agreement). Responsibility for the development and research programs would rest with the head of each participating institute--Director CSRTI, the Vice Chancellor of each university and the Director of KSSDI. In order to coor- dinate research programs, a Sericulture Research Committee has been set up including the head of CSRTI, the Director of Sericulture and representatives of participating universities as members; the Committee would also include the Chief of KSSDI, when it is established. The Committee would review proposals from participating institutions, formulate annual research program and send each year's plan for IDA's comments by every March 31 (Section 3.04 of the Development Credit Agreement). 63. The Central Ministry of Industries would be the agency responsible for the project at the Center. The Development Commissioner (Handlooms), under the Secretary of Industries, would handle matters connected with the project.  - 20 - The Ministry, through the Central Silk Board, would be responsible for the CSRTI research component and would also arrange technical assistance and the overseas training programs. 64. Overall project coordination, management and monitoring would be pro- vided by a Project Coordination Committee. The Committee has been established and includes representatives of all agencies involved including a representa- tive of GOI. The GOK Director of Sericulture would provide for its secretariat. To support silk production activities, there would be a district level coor- dination committee in each district. The Committee would review and approve the annual programs for the execution of the project and would furnish each year's program, by March 31, for IDA's comment (Section 2.12 of the Project Agreement). Project Cost and Financing 65. The total project cost is estimated at US$95.1 million, including US$6.6 million for taxes and duties. Foreign exchange costs are estimated at US$20.7 million or 22% of the total cost. Included in the costs are: US$8.0 for credit for on-farm activities and for silk reeling; US$37.6 million for sericulture development activities under the GOK Department of Sericulture; US$16.1 million for processing activities under the Karnataka Silk Industries Corporation (KSIC); US$10.6 million for research, technical assistance and studies; and US$22.8 million for physical and price contingencies. 66. The proposed credit of US$54 million equivalent would finance, net of duties and taxes, about 65% of costs of components to be implemented by the Government Departments and about 50% of costs of relending through ARDC and IDBI. The balance would be met by GOI and GOK (32%), ARDC (4%), IDBI (5%), lending banks (1%) and farmers/reelers (1%). The project would provide retroactive financing of up to US$1 million to cover early implementation costs incurred after October 1, 1979. 67. GOI would on-lend (i) US$4.4 million to ARDC to refinance silk farming development loans and cottage basin development loans to reelers, and (ii) US$9.5 million to IDBI to lend to KSIC for modernization and expansion of silk processing factories. The terms of these loans are described in para- graph 1. GOI would use US$5.5 million for implementing the technical assist- ance and overseas training component and the research program under CSRTI and would channel the balance to GOK for the components to be carried out by the State, the Universities and the Karnataka State Silk Development Institute. 68. GOI's onlending rates to ARDC and IDBI and the interest rates to be applied through the ultimate borrower are consistent with the prevailing overall rate structure in India. Intersectoral differences are small. Inflation in India between 1974/75 and 1978/79 averaged only 1.5% per annum. With the sharp increase in oil prices during 1979 coinciding with a severe drought, prices spurted by almost 15% between April and December 1979 and are anticipated to increase another 10% during 1980/81. Given past GOI determin- ation and success in containing inflation, and the likelihood of a resumption of the strong agricultural growth that was disrupted by the 1979 drought and an improved supply of industrial inputs, the rate of price increase over the  - 21 - project period is expected to average somewhat below 7% per annum. The proposed on-lending rates to farmers would be positive in real terms through- out the project period and would compare favorably with real rates in other developing countries. Procurement and Disbursement 69. Civil works for KSIC, the departmental program and the research program costing about US$8.2 million, would be carried out on about 90 sites over five years. Contracts for such work would not attract foreign bidders and would be awarded after local competitive bidding, using GOI or GOK pro- cedures, which are satisfactory to IDA. 70. About 250 motor vehicles (US$1.9 million) would be required by project agencies, mainly DOS and purchased over a five year period. Adequate maintenance and availability of spare parts would be of paramount importance, and this would necessitate purchase of locally made vehicles of types already in use by project agencies. Procurement would be according to GOI and GOK procedures. Motorcycles (US$0.3 million) would be purchased by individual departmental staff, from loan funds provided by GOK. 71. Reeling and spinning machinery and major items of ancillary equip- ment such as boilers (US$14.0 million) for KSIC and cold store equipment, refrigerators, and generators for departmental grainages (US$1.9 million) would be procured by international competitive bidding, following Bank Group guidelines for procurement. A 15% preference on bids based on the CIF price of each item or the actual custom tariff, whichever is lower, would be granted to domestic manufacturers. 72. Other equipment would consist of furniture, silkworm rearing equip- ment, farm and laboratory equipment (US$9.1 million) to be purchased over five years for use over a wide area. These items are not suitable for inter- national bidding and would be purchased by local competitive bidding proce- dures. Small, off-the-shelf, items costing less than US$10,000 and which are required urgently for project execution, would be purchased by prudent shopping, through normal commercial channels. Farmers and silk reelers receiving loans for mulberry planting, silkworm rearing equipment and cottage basins (US$8.0 million) would purchase materials and equipment individually from dealers of their choice and would also arrange construction of rearing houses and reeling sheds locally. Technical assistance and overseas study tours (uS$... million) and the project evaluation study (US$0.2 million) would be arranged on terms and conditions satisfactory to IDA. The balance of the project cost (US$30.7 million) would cover Departmental operating costs and staff salaries and those of various research agencies, KSIC incremental work- ing capital, and land purchase for the research component which would not involve procurement. The above figures include physical contingencies (US$4.4 million), but exclude price contingencies, which amount to US$18.4 million. 73. IDA would disburse: (a) 55% of ARDC refinance for loans to farmers and reelers; (b) 70% of loans to KSIC; (c) 75% of civil works, vehicles and equipment and farm development and incremental staff costs for the Sericulture Department and participating research agencies; and (d) 100% of the costs of technical assistance, training abroad and evaluation studies. Disbursements  - 22 - for all ARDC refinancing and for other expenditures would be made against certificates of expenditures, except for expenditures exceeding Rs 150,000 for vehicles, equipment, staff salaries and incremental operating costs and exceeding Rs 300,000 for civil works for which full documentation would be required. Supporting documents for which payments were made against certi- ficates would be retained by the implementing agency for review by IDA review missions and these expenditures would be audited at least once every six months. Marketing 74. Social traditions, the comfort of the natural fiber and Western European haute couture provide a reliable and expanding market for silk. While demand for silk is growing at a little over 2% per year, production, at present about 50,000 tons per annum, is dropping, notably in Japan and Korea, two of the leading producers, due to high labor requirements and costs. These supply and demand trends are expected to continue, and demand is projected to outpace production within five to ten years. There is an enormous and as-yet- unsatisfied demand for silk in the local Indian market, but falling production by leading producers abroad opens up excellent export opportunities for Indian sericulture. The project with its emphasis on quality improvement through introduction of high-quality bivoltine silkworm varieties and modernization of processing technology would provide essential preconditions for developing silk exports from India. With such promising export opportunities opening up and with the domestic market still expanding, there would be no problems of marketing the anticipated additional 2,200 tons of silk production from the project. Cost Recovery 75. About one third of the project cost would relate to credit for on-farm development, reeling and the KSIC modernization program and would be fully recoverable. Another 35% of project cost would finance project technical assistance, overseas training, research and extension programs for which cost recovery is not considered appropriate. The balance of project cost would finance grainages, cocoon markets, the departmental filature and communal hatcheries. All these except the hatcheries (about 12% of project cost) would be self supporting from fees or sale of products and would gener- ate financial returns from 8% to 18% which are satisfactory for GOK facili- ties rendering services to silk farmers. Communal hatcheries provide a serv- ice that reduces farmers' costs and raises cocoon yields and represent an innovation well-proven on a pilot field scale, but not yet accepted by most silk farmers. GOK ascribes importance to fostering widespread adoption of hatcheries by farmers, and has provided full funding for hatcheries to cover establishment and operating costs over the project period. However, GOK plans that ultimately farmers themselves should operate the hatcheries and is considering ways in which those plans can be effected. GOK, in the third project year would exchange views with IDA on possible ways of recovering hatchery costs, once the benefits of hatcheries are understood by most silk farmers.  - 23 - Project Benefits and Risks 76. The project would help to provide a sound technical basis for improvements in production, productivity and qual;t-y at virtually every major stage of mulberry sericulture in Karnataka. Its principal benefit would be an increase in annual raw silk of 1,600 tons and silk waste of about 480 tons valued at about US$75 million. In addition to incremental production, a general improvement in the quality of raw silk silk would be brought about. To sustain these improvements, the project would seek to enhance research and exchanges with experts in sericulturally advanced countries to broaden and intensify the Indian research establishment to support long-term development of the industry. Very importantly, a significant number of employment oppor- tunities--an estimated 180,000 work-years annually--would be created, primarily among the rural population, and project activities would contribute to increas- ing incomes of producers and processors as well. Benefits from the project would be widely distributed and affect positively the entire spectrum of the estimated two million persons engaged in sericulture and related activities in Karnataka. The economic rate of return from the project is expected to be 22%. 77. The main project risks would be (a) limited response from silk farmers to adopt improved practices and (b) disease damage to improved silk- worm varieties, which are more disease susceptible than traditional varieties. However, the project has been specifically designed to minimize those risks, by providing exceptionally strong advisory services and modern egg production facilities (para 51). Technical assistance and overseas training programs are also largely focussed on improving services to growers and on silkworm disease prevention and control. PART V - LEGAL INSTRUMENTS AND AUTHORITY 78. The draft Development Credit Agreement between India and the Association, the draft Project Agreement between the Association and the State of Karnataka, the draft ARDC Agreement between the Association and ARDC, the draft IDBI Agreement between the Association and IDBI and the Recommendation of the Committee provided for Article V, Section l(d) of the Articles of Agreement are being distributed to the Executive Directors separately. 79. Special conditions of the project are listed in Section III of Annex III. 80. The additional conditions of disbursement, specified in paragraph 3 of Schedule 1 to the Development Credit Agreement would be the following: (a) execution of Financial Arrangements between GOI and ARDC would be a condition of disbursement against ARDC refi- nancing; and  - 24 - (b) execution of Financial Arrangements between GOI and IDBI would be a condition of disbursement against IDBI lending. 81. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 82. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President May 14, 1980  ANNEX I IOU - socA DIC OUTA SM Page I of 5 MIA Alrum= cr um yW LAID ARA (TUOUSAND SO. Kl) 3 _UCE S TrUA TOTAL 3287.6 Sl S 11| llCEE ACUCULTUIAL 1818.3 '*am C mCC C EGa 1960 A 1970 A ISTINAFE tb *lz IC oW: C 02009 cP m CAPITA (US5) 60.0 90.0 180.0 191.1 209.6 467.5 URIc! COUSIPIOUQ| PU CU1ST (KILOCRAN Of 0? L EQUIVALET) 142.0 181.0 216.0 69.1 83.9 262.1 POTOIATION AND VITAL STATITCS POPULATIIO, Km-Ts" (3LIOIS) 4.9 547.6 631.7L n3l1 POPULAION (PRCIT OT OTL) 17.9 19.7 20.7. 13.2 16.2 24.6 POPULATION PIOCJCI POPULATOU DN TEA& 2000 (U.LIONS) 973.0 STATIONAtY POPULATION (MILLIONS) 1643.0 TR STATIONRY POPULATION IS A 2150 POPULATIo DUSITY PE SQ. M. 132.0 167.0 192.0 86.6 49.4 45.3 PER SQ. 11. 4GUCULTL LAD 247.0 308.0 347.0 330.2 252.0 149.0 POPULATION AGE STRUCTURE (PLCUT) 0-14 YIS. 40.8 42.5 42.0 44.3 43.1 45.2 15-64 Ys. 55.7 54.6 55.0 52.4 53.2 51.9 65 Ys. AND AuOV 3.5 2.9 3.0 3.1 3.0 2.6 POPATION GW RATE (PzUCnT) TMTAL 1.9 2.3 2.1 2.4 2.4 2.7 ORA 2.SLA 3.3 3.1 4.1 4.6 4.3 CRUDE lI S gTE (PU T2OUUI0) 43.0 40.0 35.0 44.4 42.4 39.4 CRUDE DEATH LATE (PZU T1tUSD) 21.0 17.0 14.0 16.4 15.9 11.7 GROSS EPRODUCTION RATE 3.2 2.9 2.4 3.2 2.9 2.7 JANKIL PLANNING A5CEPTO3S. AUAL (TE'OUSADS) 64.0 3782.0 4518.0 USERS (PYICZNT OP MAUD WOE) .. 12.0 16.9 7.9 12.2 13.2 OOD AND mnRTIoN nOaX OF FOOD PRODUCTION PU CAPITA (169-71-100) 100.0 102.0 101.0 99.4 96.2 99.6 PU1 CAPITA SUPPLY Of CALOlIES (PUCNT OF lEUIRENNTS) 95.0 92.0 89.0 93.0 93.3 94.7 PROTEINS (GRAMS PER DAT) 51.0 53.0 48.0 56.1 52.1 54.3 OF WIICE ANIMAL AD PULSE 19.0 16.0 12.6 10.4 13.6 17.4 CHILD (AGES 1-4) MOTALTY RATE 28.0 22.0 18.0 19.2 18.5 11.4 HEALTE LIFE EXPECTANCY AT SDn TE ) 43.0 48.0 51.0 49.1 49.3 54.7 TINANT MORTALITY RATE (PU THOUSAND) .. 134.0 .. .. 105.4 68.1 ACCESS TO SAFE WATRI (PCZNT OF POPULATION) TOTAL .. 17.0 33.0 31.5 26.3 34.4 URBAN .. 60.0 83.0 63.9 58.5 57.9 RURAL .. 6.0 20.0 20.1 15.8 21.2 ACCESS To EZ1 DISPOSAL (PEZCENT OF POPULATION) TOTAL .. 16.0 20.0 15.7 16.0 40.8 URBAN .. 85.0 87.0 66.8 65.1 71.3 RURAL .. 1.0 2.0 2.5 3.5 27.7 POPULATION PER PHYSICIAN 5800.01k 4890.0 3135.0 7107.9 11396.4 6799.4 POPULATION PER NURSING PERSON 9630.0L 5220.0 6320.0 12064.0 5552.4 1522.1 POPULATION PER HOSPITAL BED TOTAL 2590.0L_, 2020.0 1231.0 2738.4 1417.1 726.5 iHBAN .. .. .. .. 197.3 272.7 RURAL .. .. .. .. 2445.9 L404.4 ADMISSIONS PER HOSPITAL RED .. .. .. .. 24.8 27.5 HOUSING AVERAGE SIZE OF HOUSEHOLD .OTAL 5.2 .. 5.2 .. 5.3 5.4 URBAN 5.2 .. 4.9 .. 4.9 5.1 RURAL 5.2 .. 5.3 .. 5.4 5.5 AVERAGE NMBER OF PERSONS PER ROOM IOTAL 2.6 2.5 .. UR3AN .. .. .. RURAL .. ACCESS TO -LECTRICITY (PERCENT OF DWELL:NGS) 7OTAL .. .. .. .. 22.5 25.1 3x3BAX .. .. . .. L7. 8 45. 1 RLRAL .. .. .. .. .. 9.9  ANNEX I Page 2 of 5 INDIA - SOCIAL INDICATORS DATA SHEET INDIA C lELL= GROUPS (ADJUSTED AYEAGES - lMOST RECENT ESTINATE) - SUIE SAME ETY UCaER MOST RHOUT OCRAtUIC INCOmE ICOHE 1960 lb 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /e EDUCATION ADJUSTED ZNIOLLMZNT RATIOS PRIMARY: TOTAL 61.0 72.0 79.0 59.5 63.3 82.7 MALE 80.0 87.0 94.0 74.9 79.1 87.3 LEMAU 40.0 55.0 63.0 43.7 48.4 75.8 SECONDARY, TOTAL 20.0 29.0 28.0 19.5 16.7 21.4 MALE 30.0 39.0 36.0 27.8 22.1 33.0 FOUIL 10.0 17.0 18.0 10.0 10.2 15.5 VOCATIONAL ENROL. t2 OF SICOMDUAY) 8.0 6.0/j *- 1.3 5.6 9.8 PUPIL-TEACHER IATIO HEIMARY 29.0 40.0 42.0 42.2 41.0 34.1 SECONDARY 16.0 17.0 .. .. 21.7 23.4 ADMLT LITERACY RATE (PRCET) 28.0 33.0 36.0 25.5 31.2 54.0 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.0 1.2 2.3 2.8 9.3 RADIO RECEIVnS PER TROUSAND POPULATION 5.0 21.0 24.0 15.5 27.2 76.9 TV RECEIVERS PER ThOUSAND POPULATION .. 0.1 0.5 .. 2.4 13.5 NEWSPAPER ("DAILY GENCRAL INTEREST") CIRCULATION PER THOUSAND POPUILATION 11.0 16.0 16.0 6.2 5.3 18.3 ClNEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 .. 1.1 2.5 LABOR FORCE TOTAL LABOR FORCE (ThOUSANDS) 188670.0 226870.0 261000.0/k FEMALE (PERCENT) 31.3 32.6 32.2 21.4 24.8 29.2 AGRICULTURE (PERCENT) 73.0 73.0 73.0 66.3 69.4 62.7 INDUSTRY (PERCENT) 11.0 11.0 11.0 9.6 10.0 11.9 PARTICIPATION RATE (PERCENT) TOTAL 43.0 40.2 39.2 35.8 36.9 37.1 1MALE 57.1 52.3 51.3 52.3 52.4 48.8 FEMALE 27.9 27.1 26.2 15.7 18.0 20.4 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.1 1.3 1.2 1.4 INCOME DISTRIBUTION PERCENT oP PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT O HOUSEHOLDS 26.7 26.3/1 .. .. .. 15.2 iIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.97t .. .. .. 48.2 LOWEST 20 PERCENT OIP HOUSEHOLDS 4.1 6.771 *- *- *- 6.3 LOWEST 40 PERCENT o0 HOUSEWOLDS 13.6 17.27T .. .. .. 16.3 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) L'R8AN .. .. 83.0 86.5 99.2 241.3 RURAL .. .. 73.0 74.2 78.9 136.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 91.9 179.7 RURAL .. .. 50.0 50.4 54.8 103.7 ESTI!ATED POPULATION SELOW ABSOLUTE POVERTY 'NCOME LEVEL (PERCENT) FRBdAN .. .. 47.0 o.3 44.1 24.8 RURAL .. .. 52.0 52.4 53.9 37.5 .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 azong 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; Id Low Income (S280 or less per capita 1976); /e Lower MUddle Income (5281-550 per capita, 1976); !f 1978 mid-year population is estimated at 640.. million; j 1951-60; 'h 1962; _ 1958; 'j 1967; !k 1978 mid-year labor force is escimated at 261 million; /1 1964-t5. Most Recenc Estirate of GNP per capita is for 1978. August, 1979  ANNEX t DU'AEPTP OF IJL INDC.ATORS Page 3 of 5 Note: Altboigh the data ae draw from ore general&ly judged the most thoritatire ad reliable, it should alan be anted that they may not be interna- tionalLy comarblebecaus of the lack of standadized definitions and noasopte used by different coutries in collecting the data. The data are, nonetheless, usefkl to desribe orders of magitude,I indicate trends and =braterine certain major difference betneen coutrie. The adjusted group avrugen for each indicator re poplathon-wighted geomtrie mea, -neldieg the eiArn oluen of the badioator and the moot ppoplted .-utry in each grop. W.s to lack of data, grop avrgssa of all. adioators fee Capita.1 urplue Oil nprete- and of idicatora of Aocesa to Water and Eoorta DIapoal, Hooing, incm Distribution and Povety for other .o-tey grops r pejssltio-eeigbted geomtric ae- without excluion of thc entrec value and the matppltdcuty ic hecvrg fcutiasgteinlaosdpnso vielt - I ta and in sot unifoern cation must be e-eeiard In retlato=vrages ofton iadientor to anthr. Ths-vrgsaeual saeoiais fepected" values aba oomaiag the o-les ofon indisator at a time-amas the coun.try and referenc neonp.. LA"D AREA (thousadfaq.km.( Mon obrt ips) (eon fpdsai -total_ urban, and rurl Total - Total . sraearen coprising hand are and inland eater.. Number of ~peope toal urban an or ere _y urta disposal as Agri-ult-1a - mnt recent estimate of agricultural area used teewrs.idy peroe..tagen of their -epective ppslatiosn. E.-reta disposalI my inclde orPermaently foe crps, pastures, maket and kitebon gardens or to the _ofletios and disposal, nith or nithout treatmet, of humso ec-rta leeflow, and eate-wator by oate'.-hon system or the use of pit privies and -iailar SEP flP CAPiA (upS) - O? per capit esodates a current maket ..i.s Popnatindper Poician - FPpultios dicided by nao of practicig phy-iban calculated by sam conerion method an World Rank Atlas (1976-78 basin; quIlfife froml a dmedal school at anbe-ity leve. 1960, 1970, and 1978 data. Pnpsltioa per ursing Person - Population divided by este o-f peactsing male M .YlEtC:dGLiPW5PP PEP CAPITA - An-..I consuption of -rial eSerY and femle graduateuss p-atioal ssn,ad neultetat nuse. (ca n inte,. Petrole, natural gas and bydro-, anoea end g.- Poosltios per Hsneital hBed - total urbanadrrl- Population (tota., orbs, tbee-l eleotrioity) in kilograms of coal equiraot percapita 1960 and-rural divided by their renrtvenmero opota beds available in 1970, and 1976 data. pli and private genral and pcialkied hotpita and rohnbilitationoe-tor Hospital are establinh-nte permanetly staffed by at 1eaut -e ,sys!ivin. POPULATIONI PNP VITAL STATISTICS n bIshmets providing prisospaly utsdinl caear ts -inlded coral Total Popslatin. Mid-YearNm1li...( As of July 1; 1960, 1970, and hospitals, h-ser, include health and medical casters not permanotly stafico 197? dabs. by a physician (but by a medical ass istant, surse, midwife, etc.) hkiob offer Urba Population (percent of totn( -Ptio of urban to toted population; n-patient ncsdatios and provide a limited range of medical faclitIes difrntdfniin ofubnnesm :ff-et comarbility of data Admissions per Hioapital hed - Total -unbr of amsin to or dinchergos f eon aogoot-es; 1960, 1970, and 1975 datahoptl divddby the ,ester of bed-. Porsilt ico Projection Ponclatios is Year 000 - Cur.ret poplatios projeotions ac bha.od on OEUSING i977 tota pPu-Isosby age and nec n t ermortality and fertility AeaeSloe of Houshold (Person per household - total urban, sad ru-I - rete.t Frojctio paramtersfr raity rates o-prine of three A ba-sbold consists fan of ofiniv -hl.eb share living quarter and leel assum..Ing life e-p-tany t histb isore-ing with .-utry'. their main meals. A boarder or lodger my or my sot he i-oludod is tho Per capita -cona level, and feesle life sop.eotany ntsilising at howuehold for statistical purposes. 77.5 yenro The par-mtor for fertility rate also hav three level Average sober of Persoson, o total, urban, and rura - Aerage somber 555-5mg deolo- In fetlity accrding to ic"m leve and pant of person p:er mona isn. uran ,ndrua occupied cov-tioso doelliogo, famil olsosiag pXrfrsa= ce task v-uty In tbn assigned one of thes repcivl. Weflingn occlude son-perenet etrutures and --ocp-d ptro ciscostinations of aeotality sod fertility trends for projeotiseAcs oietiiy(ecn fdefig)-ttl.ra,sdcrd-Co -purpse. retional deellings nit el_tr~ity in living qnrtera a perc-tago ol Station.sry populstioo - IG stetiosavy pupultios there ia no growth total, urban, and rura dwellings epciey since the birth rate Is equal to thc desth rate, and also the ago stutur esssooat.Tiisahiee onI fter fortuity rates EDUCATION do-lo 1 cik rpacmet eelofuit Ioe-t repeordaction rate, * eke Adjusted is-rllm-t Setso eah genertive of sc- replace itself eu...tly. The stationa-y pupa- P-rosy schoo.Ittl,sle and female - Ge.o. total, saesd fenale -11oh- lticet'i-ensoetinaed 00 the b-oiu of the projected characteristics mast ofalae t the "esar leve no pernctges of'repective p-rany of the popltiosis the peer 2000, and tke rate of dnchise of fertility school-age popuations; s-esaly includes children aged 611 peur hot rot to r"P'nea level sd.-ted for different 1vogtbs of prinay education; lor,ooteic-stb roa toticor .. pnio -I reachd - The year be- stationary population ......aI education -nr1leet my asced 100 percen.tosc anpupils sloe hau been reahed. are below or shov the offic-l school age. Popnlatios D,-sty le-oday school - total. male and female - Computed so s.., --duosor For os. in. - Mid-yea populot-o per square ksl ter (100 heotaren) of eduction requires at least four year of ppr-od prlasr -cotr_tlo t'tal re proides gonera -1 o-tional, or teasher trsining isiotis i pupls~ Pee so. Ion.gri-1ltu-l land - Computed an aho- foe agricultural land onualy of I2 to 17 yearn of ago; -responden-ooiooar mosl only. -colded. P.-I i. Ag.St-t- p -t)- Childre (0-lb your), sorking-age Vs-ti-a enrolleest (pceece.t of secondary) - Vocational -ntitoti-c iso1odo year re,U. tired 65 years and o-v) so p-rotagen of aid-year tehoical, industrial, or other prngram- uhih operate iodopeodeetlyorn popolatoow i6o, 1970, nd 1977 data, dpeprtmets of secondary isotiotioss. tolihon Groth Ot (peots - total - Annua eroth mOos. of total mid- Pupil-e -uEr rtio - primary so ... seodary - Total studsto coisod in yea populti... for 1950-hO, 1900-70, sd1970-77. primay and seodI eeodvddb obr fteacers on Ilcvrc Ponulntiho Growth Hate (-eoet) - urban - Annul growh -at-s of urban o`odig hovels populations for h90bO 1707,nd 1970-79. Adult literacy rein (peevet) - Literte ado1to (tile tq crud sod write) s Crude Birth Pain ep- thounud) - Annua live biethn Poe thousnd of nod- p_r-otage of total edult popuhatioc aged 15 Year and over. year populitos; 1 0,~ 190,ad 197 data. Crud heath Pte pe tosn) _A- na deatho Per thou-acd of old-yea COEIJWI"TP population; 1900, 1970, sad 197its Psee Can (cer thausand posuhation - Ponoeger car -oprisenbro Gros Pepr-d-tios Pate-doerW ag -wner of daogkte- u nill bea setn esta ih esn; ldsahlne,haunad elitar is bee noreal rPe-du-tir- p-od of oh -pe-cih--e presen.t ag-ceil. oPevific f-etilityr.etes; usually ir--sar averges ending is 190, hdoPwiro(one tho-ond --olation) - All types of re.oi..e. toe, di. h970, and 0975. broadcasts to g-sne1 public e huadofpoaio;eolodesoohico Faily i'lsno1io9b- Acceptorsl =oa (thousands) - AnnuaI nuaber of reevesiscutries and In year aso regiora _s ofIuio -eto O.i acetoso birtb-_ntrol deioe _ er ausPices of national f saly offe-t; data for recet years my sot is -op-rble -inc s.:-t co-tries plsosYisg prgmo. abolished lcnig Feallo Plaoiag - Uors poe-et of ried mnic) - P-eestgc of narried TV Peceive- (per thousad noechtion,) - TV recivers foe b-od-st to geso-s nnsof child-bearn ag (5-_ year) hAn us hlrth-o...trI d-ciceI public per th-usnd popultion; enlds onliteseed TV -eeier- soot-s to nil maried ...e. insane age grouP. an sya ho.e regi-tesic of 7V stswo in effect. Nesae iroultios (per thousand peat"'s - ihoso the ovrge- eoltc POOl) ANI) NUTRITION of "dily general ist -t-est aeonpaper' dfinedI sope i-Ioa publivatino Tndeo ofFood roFduotio- per Cepita (1969-71-100) - loden of Pee capita devoted Primail to recording genral. news Cs is cosnidored to hr 'doily" -nsa productIon of all food commoditie. Pro.ductine enludes seed and if it appeast ileas fou. ie ed feed adi o ndneyerbasi. Cosdit -- cvr priosry goods Gnesa An..ual Attendnc Per Capits ow Oea-n-ased on the oubo o~f.ti Icoo (..sgar-nne isetoad of sugar) hbih ar odible and ...otnic ntrients oddrn.h er shdo disost rv-scsesadstt (eg.cffee nod ten se -colded). dggrognte peoduntico of .s-h ouety uits.1di h i. t rv-.i -1 is basd on satiosel Icrg rdooee pric weights.t Fee onPita supply of ouore (p_e_et:of roleet)-Cmue ie lt iC eno rgy equivaet of set food ophe aibe in country pee -apita Totalbo Foc Itosnds) Icnmc yntion perons, i-olodiag ar-d Per day. Availble -ppliet comrise d-netic prodotio, ipoota less foce and onomplywd but e-oluding hcones-ices, studests cto hefioit mr- e-port, and ohnoges is stosk. Pet supplie eclod.eanimal feed, sends, is vaioscontries sen sot comparble- quatities -od 10 food processng, nd base is diotribution. Pequire- P.-I.4Pjpp .ept( - F-sal labor force1 aspercetage of tota1l Ibor forte. vets oor etiented by FAG basdonphysiciogiosl scouft fr.normal Ari-Iurjeeroe..3t( - Labor forc infriedg, foc-try, bhsting sod et ithy sd isu1hi .. cosdofongvoisesa teprtre -oy ights, fishing as percentage of total labor force. age sd ... dostrobut_o ofpopolin acd nlloiog tO peroet for ndsry (sersent) - Labor forc is mining, so-t-t-io, -ofacturiag acd snote at boosebohi bosh, elec~~~tricity, wutor and gasa percetage of total 1mice for-e Fee onIt suppl of proto 'r-n see dyp) - P-tteje ots fpr PriinisPt peet -ttotal, sale no eah rstic'Iptino capita set supply of food pee day. Net supply of food is deshnd an acIity rats, arecoPutds total,mle, sodfeloub frcase- above Reqoireots for all1 countries established by USDA provide foe a _eetas of. totalslean fomal populssi-o of nlae pciey aici-o edosc f 60 gea_ of total proteiw per day and 20 sgas o 196, 1970, and i975 dnta. Thes are I1,1.' part-iplsiocrntos-fleotisg soina1 and pulse peo-in, of chiob 10 gene should be animal protein.f ag-e-tutr ftepplto,sd l..g tiso treed. A fenestiote- These stand nd, se 1o-r than those of 75 gram of total protein and ar . enntionl nron 25 gene of aiea p-oteis as - averge for the ouId, proposed by FAQ Passnain Dependency Ratio - Patio of pspultios oder 15 sod 65 and ovr to in the lhind World Food Surey. the labor forc in age group of 15-6b years. Per cast prtin supl fe.a solsa andple P rotoin supply of food drived froaiNlCnOuleMngaspw dy ET D bTON Ckild (ages 1-u) Mortalty Hate (per thousand) Anuldnbsprtonad PeeIae ofPivate Psa (bhot In cah and hind) - eceired by richest is age grop Iu er, to cbiidree is this ag group; foe sot devel- 5pers.-t, richest PDernon t, poorest PC peren.t, sad posrest 40 perosot oPi. cutre dayta derived fro Life tabls ofh households.. IDiAITH POVERTY TAPOIGZ GROUPS life Pupectany at Birth (years - Average somber of year of life EstImated Absol ute oet IsoeLevel (UV,$ Pee capIta) - urha andrua- ressainin at ir1k 100, 1970, nod 1977. data Absolute pse-ty Iscm ee Is that I=-om leve below hbloh a nism Osfant Mortality Hose leer thousnd) - dA-usI deaths of infants under one nutritionally adequate diet plus e..s.stis1 son-food requirenot s o.t year of age per thousand lIve births, affrdable. Accs toSf ae ecs fpouais oa ra,ad ral- Estimated Relative Po,eety Icom e bevel (UPS! per caIta).-Iuba ndrra1 saf oster suPpply(iwoudetreated surface waters or untreated but personl incom of the coutry. Urban leve Is derived fron the rura 1e-o _nnotanisatedostr suh as ts from protnctod horobois, springs, nith ajsmnfohier coat of living in urban area. and usaitsry veils) as perctentges of their repective populations. n EtmtdP lation hiss. Absolute Pov-te scanlve H(eet" rbnad an ucha area a public founitais or standpost located sot mere than -rurl - Percet of population (urbaanrul)osre'bltepc" 10 mters fr.a a house my be considered as being within reaonable anoes of that house, in rura areas reasonable access -sld imply that she h..s.oife or asters of the househsld do sot have t spend a DEssAicd sad Scia1 Data Division dlsprop-tsio..ate part of the day is fotshing ta family. a wter nseds Do-oic Analysis and Projasti... Dpeprtment Augut 1979  AMNEX I so~~cmwmmaZTs Page 4 of 5 in CAPTr 11 1977 U 150 C60S IU103AUL nowes IN 1977/7$ L US O n. *ntnt rt eae 0ln/61-194/65 lSL/W 29/O 1S70/72z1. 76n77 Go at merket Price 101.47 100.0 3.9 3.S 3.2 ,ross Domestic Investment 21.65 21.3 ross Natieual Swins 22.77 22.4 Current Account BaLane jV 1.04 1.0 Sesourc balanae g/ - 0.31 - 0.3 OUTP1T. U3O I IID hPMSClTT 11 1972 v1lue Per. S' toller EJil.. ~ f Nationl Averea Ariculture 24.5 4.6 13%0.0 72.1 1" 4 Industry ll.d 22.3 20.2 11.2 552 1SS sr,icas .3 31.1 vZ 16-7 AM Totallavsrage 52.6 100.0 1*0.4 100.0 292 ii GOVIC S F1IM8 .'/ tmbrel Coe~ t Centrl 1 Cre_et 19c 51n 1977/73 1974/75-l177 ft 97/75 2197A/72-19f1/t8 Current aceipta 164.42 16.9 18.2 93.62 11.0 10.5 Current netaditurs 157.29 16.6 SU .9bl Current Surplu/Djeficit 7.13 0.8 1.6 0.35 n.e. 0.6 Capital IQendituree f/ 62.58 7.2 7.0 43.31 5.0 5.0 Ixernal Assistance (est) J/ 9.82 1.1 1.6 9.62 1.1 1.6 MGM, CUfS AND PUIs 19p0/71 1973/74 1974/75 197576 1976/77 1977/75 Saetcer 1977 mteg,r 1978 (B Billion eotistAding at ed of period) Noey sad Quasi mony 121.4 19N.4 220.3 254.7 306.9 365.1 334.8 395.6 lak Credit to Gevrmect (nt) 52.6 87.3 95.3 101.1 110.2 129.7 119.3 139.5 sank Credit to Cmercial Sctor 64.6 107.0 126.7 153.9 U5.1 210.0 195.3 223.5 (Percantae Or inAex umbere) Ji.r 197z Jamr- 1i9n NOD" and Quit Mony as S of am 30.1 33.5 31.5 34.5 38.8 41.9 Wholesale Price Index (1970/71 * 100) 100.0 139.7 174.9 173.0 176.6 165.8 184.5 164.6 Ammal percentage c_Cge In: Wholeals Price Index 7.7 20.2 25.2 - 1.1 2.1 5.2 3.2 0.1 Bank Credit to Gonruset (nat) 10.5 12.3 9.2 6.1 9.0 17.7 13.4 16.9 lank Credit to Comrcial Sector 19.4 22.6 18.4 21.5 20.3 13.5 16.6 14.4 */ TM per capita me estimte is at m*at prices, calculated by the coveresio techniu used ti the World Atlas. All other ceversioas to dollars in this table ar* at the avers exchang0 rate prevailin debring 2 period coverd. b/ Quick Ustimtes. c/ Ceuated iroa tred line of 1 at factor cost series, including one observation betfre first year and ane observation atter last yer of listed period. d/ World Bank estimates; not necessrily consistent with official National Account Statistics. i/ Tranfers betwen Centre and States have been netted oet. f/ All loas sad advances to third parties hve been netted out. if Uutral grants and loans less principal repanynts as recorded in the Central budget.  P&Se 5 of 5 BALAECR OF ( IAT)WS 1975/76 J9 Z 1977/7Z 1978/79 It/ iJChUNDIU UxpoT