India - Fourth Trombay Thermal Power Project

Docment of The World Bank FOR OMCIAL USE ONLY Rqt N. P-3844-IN REPORT AND RECOM51ENDATION OF THE PRESIDENr OF THE INEUATIONAL BAIK FOR RECONSTiCTION AND DEVEL00EN TO THE EXECUTIVE DIRETORS Oti A PROPOSED LOAN IN AN AMUNT EQUIVALENT To US9135.4 MILLION TO THE TATA ELWTRIC COMPANIES WIMH THE GUARANrEE OF INDIA FOR THE FOURTH TRO1B'SAY THERMAL POWER PROJET June 6, 1984 This iscmemi hinsa rercddudis&Qtbiim.ni my Wb ~use b egm y in dwplfn of thi fiddd npa--p- a oaKwieb hlw ibu edBk .Iioln  CURRENCY EOUIVALEITS (As of June 6, 1984) USSl.00 = Rs 10.993 Rs 1.00 = USSO.0909 Rs 1 million = US$90,964 The US DollarlRupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were, except as othervise not-d, made at the rate of USS1 to Rs 10.8 which represents the projected exchange rate over the disbursement period. FISCAL YEAR April I - March 31 Abbreviations and Acronyms CEA - Central Electricity Authority GEB - Gujarat Electricity Board OOI - Government of India Ga! - Goverment of Mabharashtra MPSEB - Madhya Pradesh State Electricity Board MSEB - Naharashtra State Electricity Board ONGC - Oil and Natural Gas Corporation NEPC - National Hydro Electric Power Corporation NTPC - National Thermal Power Corporation REB - Regional Electricity Board REC - Rural Electrification Corporation SEB - State Electricity Board TEC - Tata Electric Companies  FOR OFFICAL USE ONLY INDIk FOURTH TKOMBAY THERMAL POWER PROJECT LOAN AND PROJECT SUMMARY Borrower: Tata Electric Companies (the Tata Hydro-electric Power Supply Company Ltd., the Andhra Valley Power Supply Company Ltd., and the Tata Power Company Ltd.). Guarantor: India, acting by its President. Amount: US$135.4 million, including capitalized front-end fee. Terns: Repayment over 20 years., including five years' grace, at the applicable variable rate of interest; front-end fee of 0.25% of the base loan amount. Tata Electric Companies vill bear the foreign exchange and interest rate risks. Proiect Description: The project is designed to further the progress of India-s long-term power generation expansion program through the provision of additional generating capacity in the Western Region to help reduce power shortages there, and to replace existing generators scheduled to be retired in the late 1980s, resulting in substantial fuel savings. The project provides for the construction and installation at Trombay (near Bombay, in the State of Naharashtra) of a second 500 megavatt thermal power generating unit, comprising a turbogenerator, a steam generator, electrical and mechanical equipment, and associated works. There are no risks other than those normally associated with this type of project. This document ha a restrited distributmn and may be used by recipients only in the performance of their official duteL Its contents may not otherwise be disclos without World Bank authorization.  Estimated Cost: 1/ (USS millions) Item Local Foreian Total Preliminary works 3.2 - 3.2 Civil Works 23.6 - 23.6 Turbogenerator and Associated Equipment 43.4 53.6 97.0 Steam Generator and Associated Equipment 79.0 10.1 89.1 Electrical and Nechanical Equipment 27.0 7.6 34.6 Svitchyard and Transmission 11.5 6.8 18.3 Engineering and Adainistration 6.0 1.0 7.0 Supercritical Boiler Alternative 7.3 - 7.3 Base Cost 201.0 79.1 280.1 Physical Contingencies 11.1 4.0 15.1 Price Contingencies 48.8 17.0 65.8 Total Project Cost 260.9 100.1 361.0 Front-end Fee on Bank Loan - 0.4 0.4 Total Financing Requirements 260.9 100.5 361.4 -= _ YJ Includes taxes and duties of about US$72.1 million, and excludes about US$82.3 million in interest during construction, which is not capitalized, but is treated as an operating expenditure.  -iii- Financing Plan: (USS millions) Local ForeiRn Total IBRD Loan 89.9 45.5 135.4 Tata Electric Companies 81.0 - 81.0 Local Financial Institutions 90.0 - 90.0 Suppliers- Credits/Foreign Commercial Banks - 55.0 55.0 Total 260.9 100.5 361.4 Estimated Disbursements: (USS millions) IBRD FY FY85 FY86 FY87 FY88 FY89 FY90 FY91 Annual 8.0 23.0 27.0 41.0 20.0 15.0 1.4 Cumulative 8.0 31.0 58.0 99.0 119.0 134.0 135.4 Rate of Return: About 9.5%. jj Appraisal Report: No. 4536-IN, dated May 31, 1984. 1/ Based on tariffs as a proxy for minimum benefits.  INTERSAIIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO TEE EXECUTIVE DIRECrORS ON A PROPOSED LOAN TO THE TATA ELECTRIC COMPANIES WITH THE GUARANTEE OF INDIA FOR A FOURTH TROMBAY THERKAL POWER PROJECT i_ I submit the following report and recommendation on a proposed loan to the Tata Electric Companies, vith the guarantee of the Government of India, in an amount equivalent to US$135.4 million, to help finance the construction of a 500 megawatt thermal pover generating unit and associated works at Trombay in the State of Maharashtra. The loan will be amortized over twenty years, including five years' grace, at the applicable variable rate of interest. Tata Electric Companies will be charged a guarantee fee by the Government of India to bring the effective interest rate to a level comparable to the current rate at which Bank Group assistance is being made available to public sector companies. Additional financing for the project, in an amount equivalent to about US$55 million equivalent, is expected to be provided from suppliers' credits or foreign commercial bank loans. In addition, about US$90 million equivalent will be provided from local financial institutions. The foreign exchange and interest rate risks for the proposed loan will be borne by Tata Electric Companies. PART I - THE ECONOMY 11 2. An economic report, "Situation and Prospects of the Indian Economy - A Medium Term PerEpective" (4962-IN, dated April 16, 1984), was distributed to the Executive Directors on April 23, 1984. Country data sheets are attached as Annex I. Backi2round 3. India is a large and diverse country with a population of about 750 million (in mid-1984) and an annual per capita income of US$260. The economy is dominated by agriculture which employs more than two-thirds of the labor force. Hovever, the land base is not sufficient to provide an adequate livelihood to everyone engaged in agricultural activities, especially those who own little or no land. Growth of value-added in agriculture-2.2Z since 1950/51-has been slover than growth of industrial value-added (5.3% per annum). As a result, there has been a gradual decline in the share of agriculture in GDP (at factor cost) from 522 in 1950/51 to about 332 in 1981/82, while the share of industry rose from 20% to around 262. But industrialization has not been rapid enough to absorb the groving labor force, or to bring about a rapid economic 1I Parts I and II of the report are similar to Parts I and II of the President's Report for the National Cooperative Development Corporation (NCDC) III Project (No. P-3833-IN), datea May 30, 1984.  -2- transformation, with significantly higher productivity and income levels. As a result economic growth has been slow over the past three decades, averaging about 3.6Z per annum since 1950/51. 4. Nevertheless, there has been steady progress, with per capita income rising by about 1.4% per year in the period 1950 to 1980. Despite the large population base and its relatively rapid growth, India aas been able to eliminate persistent dependence on foodgraia imports through significant improvements in agricultural production. Savings and investment have increased markedly since 1950151: the gross national savings rate more than doubled from 10.8Z of GDP (at factor cost) to 22.7Z in 1983/84, while the gross domestic investment rate rose from 12.5% of GDP to 24.8Z in 1983184. Foreign savings (balance of payments deficit on current account) have never financed a major portion of domestic investment: a peak of about 20% was reached during the early 1960s. Currently, foreign savings account for about 8% of investment. External assistance has been low both as a percentage of GDP aud in per capita terms, never rising above 3% of GDP and averaging below 1% for the past five years. Net use of foreign savings has never risen above 3% of GDP, and presently stands at 2.1%. 5. Before the 1970s, India placed relatively less emphasis on export promotion and more on import substitution. The volume grovth of exports between 1950/51 and 1969/70 averaged only 2.2X per annum, vhile the volume growth of imports over the sa-e period was 4.3%. In the early to mid-1970s. hovever, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Gover.ment introduced various policy measures designed to stimulate exports. As a result, the volume of India's exports grew on average about 7.3% per annum for the 1970s as a whole, a performance which demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. 6. Moving into the second half of the 1970s, the Indian economy was buoyed by higher levels of investment and an expanding level of foodgrain output. As a result, growth in real GDP and in agricultural and industrial value-added substantially exceeded the historical 30-year trends (paragraph 3) averaging 5.3Z, 3.3% and 8.1%, respectively, during the 1975/76 .o 1978/79 period. In 1979/80, however, this momentum was broken when the worst drought in recent years, combined with a doubling of international oil prices and domestic supply shortages, led to a sharp fall in foodgrain production, a decline in GDP, and the opening up of a relatively large trade deficit. Severe inflationary pressures also emerged after several years of virtual price stability. These setbacks coincided with the preparation of the Sixth Five-Year Plan which laid down a program of adjustment that aimed at improving the trade deficit, removing infrastructural bottlenecks and ensuring price stability with an overall growth of the economy of 5.2% per annum.  -3- Recent Trends 7. Despite the effects of two severe droughts in 1979/80 and 1982/83, Indias economy in the early 1980s continued to grow at the faster pace of the second half of the 1970s. Between the two droughts (from 1979/80 to 1982/83), GDP growth averaged almost 5Z per annum, while between the two recovery years (from 1980/81 to 1983/84), it was 4.52 per annum-substantially higher than India's long-term growth rate of 3.6Z. Continued rapid economic grovth has resulted from a development strategy which includes higher investment levels and liberalized policies on imports, industrial licensing, prices, and commercial borrowing. These policies, by easing constraints on the supply of infrastructure and basic commodities, were a determining factor in the improved performance of the economy and the industrial sector. This overall improvement in performance, combined with a more restrictive monetary policy in 1981/82 and 1982/83, resulted in a sharp decline in the rate of inflation. The growth rate of wholesale prices declined from over 18Z in 1980/81 . only 2.6Z in 1982/83, but rose to over 9Z in 1983/84, mainly due to the effect of the 1982/83 drought on food prices. Further improvements in the policy environment will be required to maintain these higher levels of economic growth and investment without putting undue pressure on the balance of payments or reviving inflationary expectations. 8. Economic growth in the early 1980s has not been steady, reflecting the uneven rainfall during the period. In 1980/81 and 1981/82, the economy substantially recovered from the 1979 drought, vith real GDP growing by 7.6Z and 5.3Z, respectively. While industrial output expanded by 4Z in 1980/81 and 8.6Z in 1981/82, recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15Z and 5.5Z, respectively. The supply of pover, coal, and rail transport, already iLproved in 1980/81, was further expanded iz 1981(82, recording growth rates of about 10%, 9.6% and 12.5Z, respectively. This overall improvement in the Indian economy was halted in 1982/83 by a severe drought in mid-1982 vhich reduced agricultural production by 42, brought down the GDP growth rate to 1.8Z, and put further strains on the already difficult balance of payments and domestic resource situation. The timely implementation of various economic policies relating to foodgrain imports, procurement and distribution, and the allocation of power to irrigation pumps mitigated the otherwise very distressing effects of the poor monsoon. The ecoromy recovered in 1983/84, led by a robust agricultural sector - GDP grew by about 6.5% to 7% with agricultural production growth in the 92-10% range and industrial growth of 4.5%. The major factors contributing to the good economic performance during 1983/84 were the excellent monsoon, combined with adequate agricultural policies and programs, and satisfactory performance of the coal and transport sectors. The power sector, however, emerged again as a constraint on higher growth, especially in industry. 9. Agricultural production rebounded strongly in 1983/84 in response to the monsoon, improved use of inputs and continued expansion of irrigation. Overall foodgrain production rose by 10%-12% over the previous year, reaching a new record of 142-144 million tons, a substantial increase over the previous peak of 133 million tons in  -4- 1981/82. Corrected for veather variations, foodgrain production continues to grow at a trend of 2.6% per annum-sufficient to maintain a broad balance between supply and steadily increasing domestic demand. Nonetheless, the balance remains delicate, and the need for Loodgrain imports to maintain consumer supplies or adequate buffer stocks could arise from time to time. Thus, adequate management of foodgrain stocks and programs to expand irrigation, strengthen extension and encourage the efficient use of other agricultural inputs continue to receive high priority. 10. Basic infrastructure services had a mixed performance in 1983184, partially because of sluggish demand from industry during the first half of the year but also due to a failure to maintain the productivity gains of 1980-82. Electricity generation grew only by about 3.7Z due to low reservoir water levels during the first half of the year, delays in the commissioning of new capacity, and a deterioration of capacity utilization in thermal plants. As a result, power generation was about 11.5% below requirements and constituted a major bottleneck in the economy. Key industries which were adversely affected by power constraints included steel, fertilizers, cement, and coal. To improve performance in the power sector, the Government recently increased incentives for higher labor and management productivity in thermal plants. Railvay freight traffic, measured in ton-kms, grew by only 0.5% in 1983184. reflecting sluggish demand. Coal production increased by about 6.5% in 1983/84 reaching 139 million tons. When combined with stocks already available this level of production was sufficient to meet the relatively slov demand growth. Infrastructural constraints vould have emerged much more sharply had the pace of industrial grovth and demand been more rapid. It is therefore critically important that India maintain the pace of investment in these key sectors, mobilize sufficient resources to do so, and implement programs to enhance productivity. 11. The Indian economy has reverted from a situation of resource surplus in the late 1970s to an aggregate resource deficit. The gap between gross investment and national savings increased from negligible levels during the late 1970s to an average equivalent to 2.1% of GDP in 1980-84. India's gross national savings rate, which averaged 22.6Z of GDP in the last four years, is high by any standard, particularly considering India's lov income and the large proportion of its population belov the poverty line. The scope for a substantial increase in the savings rate is therefore quite limited. If India is to maintain investment at about 25% of GDP, a major effort will be required to raise additional domestic resources particularly in the public sector. Future increases in savings will depend heavily upon the enhanced profitability of public sector enterprises which would require better utilization of capacity, more efficient operations and adequate pricing policies. This would also allow a marginal decline in the use of foreign savings from the recent 2.1%-2.3Z of GDP to 1.5%-1.8%, to ensure a sustainable external debt service burden. 12. India's external resource position has changed notably since the late 1970s. The current account balance, which recorded surpluses from 1976177 to 1978/79, reverted to deficits averaging US$3.5 billion and 2.1Z  -5- of GDP during 1980/81 to 1983i84. Several deveLupments contributed to these relatively larger current account deficits. First, the terms of trade deteriorated sharply in 1979/80 due to the second round of oil price increases and continued to move against India during the first three years of the l980s. Second, a more liberal import policy towards industrial inputs was pursued. Third, net invisibles declined as travel receipts fell off, workers' remittances stagnated (reflecting slower development activity in the Middle East), and payment of interest on higher levels of foreign debt increased. Faced with severe infrastructural constraints and a deterioration in its balance of payments, India initiated an adjustment program in 1980/81 designed to raise the growth rate from its historical level of 3.6% to 5.2% while adjusting the country's external balance to the adverse price developments in the world markets. The main elements of this strategy are export promotion, import substitution where economically justifiable, implementation of a coherent energy policy designed to meet the energy needs of the economy while curbing the growth of oil imports, and continued movement tovard a more liberal import policy aimed at providing producers with access to inputs for higher capacity utilization, greater efficiency, improved technology and capacity expansion. The program is being successfully implemented, and is leading to substantial improvements. 13. A positive development in India's balance of payments is the reduction in the trade deficit from US$7.7 billion in 1980/81 to US$5.9 billion in 1983/84 despite unfavorable world market conditions and import liberalization. Export volume growth and import substitution of oil and petroleum products, metals and fertilizers more than offset the substantial increase in "other" imports. These "other" imports consist mainly of industrial imports and capital goods which historically have been in chronic short supply and which are of critical importance to capacity utilization, product quality, and plant modernization and expansion. A major factor in the decline of the trade deficit vas the lower net import bill for petroleum, which dropped from US$6.7 billion in 1980/81 to US$3.4 billion in 1983/84 in response to a successful oil development program that reduced import needs and allowed crude oil exports, which totalled about US$1.5 billion in 1983/84. These structural changes in the balance of payments are to a significant degree the result of India's development and adjustment efforts over the past three years. It is expected that the balance of payments will continue to be under strain for the next several years, since the adjustment strategy will continue to require high levels of imports. 14. E-1en assuming a favorable export performance, India will need external ca3ital flows to augment its own resources for the foreseeable future, given the low per capita income level in the country, the already high savings rate, and the import requirement associated with improved growth rates. Faced with a groving need for external capital inflows and stagnation in the availability of concessional assistance, India decided at the start of the Sixth Plan to increase borrowings from the Iaternational Monetary Fund (IMF) and commercial banks to substantial levels. In the period covering the fiscal years 1981182 to 1983184, India drew SDR 3.9 billion from the Extended Fund Facility of the IMF. In  -6- addition, JQdia borrowed significant amounts on commercial terms from the Euro-dollar market and increased the use of suppliers' and export credits. In the period 1980-84, India contracted commercial loans totalling over US$6,000 million and suppliers' credits of over US$1,000 million. The bulk of this borrowing has been used for specific development projects in the public and private sector (mostly for petroleum exploration and development, steel, power, aluminum and shipping). India's favorable debt service position and the nature of its borrowings, for project-related purposes instead of direct balance of payments support, enabled it to tap commercial capital markets at favorable spreads. This larger commercial borrowing and transfer of funds under the arrangement with the IKF has stemmed the use of foreign exchange reserves which had fallen to less than four months of import coverage in 1981/82. Development Prospects 15. The experience of recent years illustrates that India has the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure-irrigation, railways, telecommunications, pover, roads and ports--is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India also has a wide range of institutions capable of fostering development and is well-endoved with human resources. Finally, India has an extensive natural resource base in terms of land, vater, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and reasonable access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 16. The Government is currently preparing the Seventh Plan which will lay down the development strategy for 1985/86-1989/90. This strategy is expected to continue the emphasis of the Sixth Plan on agriculture, energy development, export promotion, domestic import substitution where economically justifiable and the removal of infrastructural bottlenecks. Overall Sixth Plan performance has been encouraging, with aggregate real investment projected to be about 302 higher than in the period 1975-80--a creditable performance indeed. The Sixth Plan expenditure targets, however, will not be fulfilled as resource mobilization by the public sector will fall short of the financing requirements of planned public investment. Actual aggregate real investment is projected to be about 7% below the original target for the period 1980-85, private investment being 5% to 10Z higher and public investment about 20% lower in real terms than actually projected. In terms of meeting Plan expenditure targets, the performance of the Central Government is considerably better than that of the State Governments. The Central Government's Plan outlays are likely to reach about 80% to 90% of the original Plan allocation in real terms, while the States' will probably achieve only about 50% of their targets. Bottlenecks in key sectors such as power, transport and irrigation are  -7- likely to persist as a consequence of real investment shortfalls relative to original Plan allocations. 17. Although Sixth Plan expenditure targets will not be met, India's capital formation rates have increased from 22.6% in 1975-80 to 24.72 of GDP in 1980-84. Recent higher capital formation rates are encouraging for futuie income growth, but returns to investment have so far been relatively low. Much of this phenomenon relates to India's stage of development, in which a large and growing proportion of investmeat has been needed to build up basic infrastructure services which have inherently high capital-output ratios. However, there is scope to reduce capital-output ratios through improvements in efficiency. As discussed in greater detail in our recent economic reports, performance in the basic service sectors can be improved through better planning and management, thus leading to higher productivity and capacity utilization throughout the economy. At the same time, programs to expand domestic capacity are vital. In the case of tradeable commodities like coal, steel and cement, this is justified on the grounds of comparative advantage. For sectors such as irrigation, power and transportation, expansion of planned capacity in accordance with the requirements of the rest of the economy will be vital for sustained growth. 18. Under the Sixth Plan, India has an ambitious oil development program backed by substantial financial commitmnent. Performance under the program has been excellent with real investment and oil production levels running well ahead of Plan Targets. In 1981, and again in early 1983, resources for exploration and development were raised by successive price increases for domestic crude and products. Whi'le the gap between domestic consumption of petroleum and productior remains large, India's dependence on oil imports dropped from 63% of consumption in 1979/80 to about 41% in 1983/84 and is expected to decrease to about 33% of consumption by 1984/85. The rapidly expanding level of exp'oration activity, combined with the possibilities for accelerated offtake from known fields, offers much encouragement for India's longer-term energy prospects. At the same time, the increases in domestic petroleum prices have helped encourage conservation and slow demand growth. 19. India's development prospects over the next few years will hinge on the extent to which the economy can be brought into both internal and external balance, while at the same time achieving more rapid growth than in the past. This will require the continuation of the current development strategy which assigns high priority to export promotion, public finance discipline, improvement of economic efficiency, and investment in infrastructure, supported by adequate flows of external borrowing and aid. In the short term, a relatively large level of external borrowing, including an increased emphasis on commercial borrowing, will be necessary to cope with the balance of payments consequences of such a growth strategy. However, an important element in providing India with the capacity to adjust flexibly will be adequate flows of concessional assistance since India is still a very poor country with a large rural sector and enormous investment requirements for human development and basic infrastructure. Although India is currently in a  -8- position to increase borrowing on comrercial terms from the very low levels of the past, there are, of course, limits beyond which India vill choose to sacrifice grovth objectives rather than accept debt on unfavorable or unmanageable terms. The fact that India has been able over the past decade to maintain a rate of growth above the long term trend, despite the poor monsoons of 1979 and 1982, suggests that a more open trade policy and expanded efforts to remove constraints on the growth of productive capacity, supported by adequate mobilization of both foreign and domestic savings, can sustain a rate of growth closer to 5.0% per annum than to the long-run trend of 3.6% per a2num. If the rate of population growth can be brought to below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trend rate of growth of per capita income of 1.4Z per annum. Success in these efforts would make a significant difference to the prospects of easing poverty in India. 20. A large and growing population and severe poverty underline the need to accelerate India-s development efforts. The 1981 Census indicated there was no decline in the rate of population growth, which remained about 2.2% per annum in the 1970. despite a measurable decline in fertility rates. The population grovth rate failed to decline in the past decade due to a reduction in the infant mortality rate and an increase in life expectancy, reflecting larger availability of food and health services. While this is a welcome development, it implies a greater strain on the economy and re-emphasizes the need for continuing efforts to strengthen the health and family planning programs in a broad range of activities and services. These efforts are given high priority in the Sixth Plan, which aims at a rise in the proportion of protected couples in the reproductive age group from its estimated 1979180 level of about 23% to over 35% by 1984185. The Government is reviewing its population policy for the Seventh Plan, with indications of a determination to retain the emph"sis on the implementation of family planning, health, education and literacy *rograms aimed at reducing fertility rates. 21. Reduction of poverty remains the central goal of Indian economic and social policy. More than one-third of the vorld's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. About 51% of the rural population and 40% of the urban population subsist below the poverty line. Significant reductions in poverty will depend primarily on an acceleration of economic growth, particularly in agriculture, combined with effective implementation of poverty alleviation programs. India's poverty alleviation strategy appropriately recognizes that production-oriented programs, which aim at accelerating the overall pace of economic growth, and poverty alleviation programs, targetted at those least able to participate in the general growth of the economy, can be rutually reinforcing rather than substituting for each other. Major poverty programs operating on a nationwide basis at present include: the Minimum Needs Program (HNP), the Integrated Rural Development Program (IRDP), and the National Rural Employment Program (NREP). The IRDP and IREP are targeted programs aimed at increasing the incomes of the poor rapidly, either through the transfer of productive assets or direct employment. The MNP, aims at broadeuing the provision of social infrastructure and  -9- basic services which enhance the human capital of the poor and improve living standards. These programs represent a vitally important commitment of the Go:.ermient to address the needs of the poorest. The scale of the poverty problem in India, combined with the inherent difficulties in implementing poverty programs in any country, imply the need for continued efforts to ebnhnce the effectiveuess of these programs. PART II - BASIK GROUP OPERAIIONS IN INDIA 22. Since 1949, the Bank Group has made 76 loans and 164 developcent credits to India totalling USS5,183 million aud USS12,016 million (both net of cancellation), respectively. Of these amounts, USS1,452 million has been repaid, and US$5,723 million was still undisbursed as of March 31, 1984. Bank Group disbursements to Icdia in the current fiscal year through March 31, 1984 totalled USS1,072 million, represtenting an increase o