Announcement of the World Bank’s 1981 Annual Report Indicating that India’s Economy Rebounded in Fiscal Year 1981

. . _BOLD FOR REU:ASE . · 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.•Telephone: (202) 477-1234 BANK NEWS RELEASE NO. AR 81/20 EMBARGO: For publication on Monday September 21, 1981 WORLD BANK ANNUAL REPORT SAYS INDIA 1 S ECONOMY REBOUN~S IN FY 1981 Bank and IDA Loans Total $1,711 Million for Year India's economy rebounded in fiscal year 1981, achieving growth rates in gross national product (GNP) estimated at between 7 and 8 percent, according to the World Bank Annual Report released today. Growth was achieved mainly in agricultural production, although industry, while slower to recover from the previous year's depressed level, also experienced gains, the Report notes. Commenting on India's overall economic health, the Report observes that the country's agricultural and industrial bases are considerably broader than in the past. During the fiscal year (ending June 30, 1981), imports of food grains were gradually eliminated while buffer stocks were established, rates of gross invest- ments and national savings climbed to 22 percent of GNP, substantial foreign exchange reserves were built, and external debt was at very low levels. At the same time, the Report points out that balance-of-payments present a serious problem, as the current account deficit rose sharply and exports, while registering increases, were "insufficient to counter the deterioration in the terms of trade." Structural problems persist, as well, such as a high incidence of poverty ($190 per capita Income), strained economic infrastructure, insufficient production of commodities such as cooking oils, fertilizer, cement and steel, and continuing population pressure. Nevertheless, the Report states the economy is "substantially stronger than a half decade ago" and will be better equipped to ''weather the effects of the harsh external environment"--largely the result of steep increases in the volume and price of oil and fertilizer imports. World Bank Lending In India In fiscal year 1981, India received $1,711 million in loans from the World Bank to help finance 13 development projects. This amount includes $1,281 mil- lion from the Bank's soft-loan affiliate, the International Development Associa- NOTE: Money figures are expressed in U.S. dollar equivalents. I . ..  - 2 - • t i on (I DA) •* Of this year's loans, the largest share went to agriculture for eight pro- jects which focus on irrigation and drainage, credit, research and extension services. Also included in the total were the following: a $400 million Bank loan to continue development of the Bombay High offshore oil fields; a $400 million lDA credit to construct a fertilizer plant; a $314 million IDA credit to expand the country's telecommunications network (the largest single loan for teleco~munica- tions ever approved by the B~nk); a $42 million IDA credit for a second urban development project in Madras; and a $35 million IDA credit for the construction and rehabilitation of rural roads. The Region On the economy of the South Asia region, the World Bank Annual Report states that the countries enjoyed "an encouraging expansion in total output and per capita growth, recovering from the drought-induced declines in 1979." The growth was particularly "notable" since it occurred despite a sharp rise in the price of petroleum products on which the region depends heavily. The Report says that "during 1979 and 1980, the petroleum-import bill of South Ai;ian countries jumped 80 percent; in these two years, the share of earnings from merchandise exports absorbed by oil imports increased from around 45 percent to 70 percent." The Report points out that favorable weather for most of the region during this period was a key factor in the impressive agricultural performance. Also, government policies, combined with agricultural growth, spurred development in other sectors. • It warns, however, that because of a "profound deterioration in balance-of- payments11--caused by a rise in energy prices and world inflation--countries should "intensify efforts for reorganizing their economies." Moreover, it calls on the international community to step up support "to facilitate the necessary process of change that has come to be called structural adjustment." * IDA credits are repayable in 50 years, including a 10-year grace period. They do not carry interest, but bear a service charge of 3/4 of 1% per annum to cover administrative expenses. I • •• •  - 3- • WORLD BANK/IDA PROJECTS APPROVED FOR INDIA IN FY 1981 Agriculture and Rural Development $140 Million IDA Credit for Irrigation Project in Madhya Pradesh During a five-year period, production of food grains in Madhya Pradesh state will be increased by more than 200,000 tons and the standards of living of local farmers will be raised through the irrigation of some 107,000 hectares and by improvements in planning, design, construction, and operation of medium irrigation projects. Total cost: $232.1 million. $125 Million IDA Credit for Cooperative Warehouses and Marketing Facilities Funds will be provided through the National Cooperative Development Corporation for relending through state cooperative banks for cooperative warehouses and cold storage and marketing facilities in nine states. More than 3.2 million farm families are expected to benefit. Total cost: $267 million. $83 Million IDA Credit for Irrigation and Drainage Project In Orissa Two barrages will be constructed in Orissa state across the Mahanadi and Birupa rivers to ensure the continued irrigation of 167,000 hectares. The income of farmers and the employment of agricultural laborers will thus be safeguarded. In addition, a drainage master plan designed to improve water- management practices throughout the Mahanadi delta area is in\:luded. Total cost: $110 • 3 mi 11 i on . $54 Million IDA Credit for Irrigation Project in Karnataka About 8,000 farm families will benefit from the construction of 120 to 160 tank-irrigation schemes on 25,000 hectares in Karnataka state. In addition, the government will be assisted in creating an improved hydrological data base, and a study of ways to make more efficient use of irrigation water will be conducted. Total cost: $77.4 million. $37 Million IDA Credit to Improve Extension Services in Madhya Pradesh Agricultural extension services will be reorganized and strengthened in thirty districts of Madhya Pradesh state to increase crop production and the incomes of some 3.8 million farm families. Total cost: $60 million. $30 Million World Bank Loan for Reforestatio~ and Soil-Conservation in Foothills of the Himalayas The incomes of about 23,000 farms families and owners of livestock who live in the foo ills of the Himalayas will be increased through reforestation and soil-conservation measures and the development of agricultural land in five watershed areas. Technical assistance is included. Total cost: $60.8 • t mi 11 ion. I . ••  - 4- $28 Million IDA Credit to Expand Extension Services in Tamil Nadu Crop production is expected to increase throughout the fifteen agricultural districts of Tamil Nadu state through the introduction of the training-and-visit system of agricu1tura1 extension. About 3.8 million farm families will benefit. Total cos $45.6 million. • $23 Million IDA Credit to Expand Extension Services in Maharashtra By providing better agricultural extension services in Maharashtra state through the introduction of the training-and-visit system, some 5.8 million farm families will benefit from increased crop production and higher incomes. Total cost: $38.2 million. Other Sectors $~00 Million IDA Credit to Construct Fertilizer Plant in Gujarat It is estimated that the construction of a fertilizer plant in Gujarat state that wil I produce 2,700 tons of ammonia and 4,400 tons of urea a day will cause foreign-exchange savings from reduced imports of fertilizer to increase to more than $3,440 million during the next twelve years. Co- financing is being provided by the Overseas Development Administration ($104.5 million) and the Overseas Economic Cooperation Fund ($98.7 million). Total cost: $1 , 2 76. 9 mi 11 ion. $400 Million World Bank Loan to Develop Bombay High Offshore Oil Field The development of the southern and central areas of the Bombay High offshore oil field will be continued by drilling sixty-four wells and construct- • ing fifteen production platforms, a processing platform, and a platform for living quarters. The production potential is expected to reach 12 million tons of ·ude oil a year by mid 1982. Cofinancing ($30 million) is being provided by the OPEC Fund for International Development. Total cost: $858.2 million. $314 Million IDA Credit to Expand.Telecommunications Network Through the prov1s1on of additional direct-exchange lines, public call offices, telex facilities, and related equipment and by upgrading and modernizing the production facilities of three major manufacturers of telecommunications equipment, the country's telecommunications network will be expanded in four metropolitan areas and extended to about 40 million people living in small towns and villages who have never had access to public telephones. Total cost: $1,619.4 mi 11.i on. I • .. •