India - Current economic position and prospects

RESTRICTED 4 Report No. AS- 114 a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF INDIA June 20, 1966 South Asia Department EQUIVALENTS 1 Indian Rupee = U.S. $0. 21 1 U. S. Dollar = Rs. 4. 762 until June 6, 1966 = Rs. 7. 5 from June 6, 1966 Rs. 1 crore = Rs. 10 million The Indian fiscal year begins on April 1. Reference to tons in the text are to metric tons = 1. 1 short ton. CONTENTS Page PREFACE BASIC STATISTICS SUMIARY AND CONCLUSIONS i - viii Chapter 1 Introduction 1 2 Current Economic Situation 2 National Income and Production 2 Agriculture 2 Industry 5 Transport and Power .7 Saving and Investment 7 Effects of Hostilities 7 The "Pause" in Aid 8 Internal Finance 10 External Trade and Payments 13 External Assistance and Creditworthiness 17 External Debt 19 3 Economic Policies and Management 21 Agriculture 21 Population 23 Exchange Rate, Trade Incentives and Controls 26 Transport 29 4 1966/67 Program 30 Agriculture 30 Industry and Transport 33 Social Welfare 33 Internal Finance 33 STATISTICAL APPENDIX MAP OF INDIA PREFACE i. This Report is intended to provide a summary review of recent develop- ments in the Indian economy. Analysis of the Indian development effort in greater depth is provided in the Report of the Bell Mission of 1964/65 which Report, it is hoped, will soon be available for distribution. Furthermore, basic changes in Indian economic policies are beginning to emerge from New Delhi as this Report goes to press, and the decisions taken are expected to have so substantial an impact on the future course of the Indian economy as to render premature any forecasts. The recently-announced devaluation of the rupee by 36.5 percent and the import liberation program are cases in point. ii. At this time, moreover, Indiats detailed economic programs and po- licies are still not fully formulated. The Fourth Five Year Plan, now in preparation, is expected to be issued in preliminary form during this summer. The Bank expects to send a mission to India to review the Plan, and a report dealing with India's prcepective eccnomic development would be a product of such a mission. iii. This Report was drafted by Stanley Katz on the basis of materials provided by the members.of a Mission to India in March 1966 led by Mr. Bernard R. Bell and composed of Messrs. Jean Baneth, Kenneth Bohr, Atle Elsaas, Stanley Katz, Romano Pantanali and Stanley Please of the Bank and Sir John Crawford and Mr. Wilfred Owen, consultants to the Bank. The principal purpose of that Mission, however, was to receive comments from Government of India authorities on the Bell Mission Report. BASIC DATA Area Total area 811 million acres (1,270,000 sq. miles) of which: Cultivated b4 (334 million acres) of which: Irrigated 21% ( 70 million acres) Population Total population (1965) 481 million Overall population density 379 per sq. mile Rate of growth of populaticn 2.1% per annum Assumed rate of population growth (1961-1976, 1961 Census data extrapolated) 2.4% per annum National Output (1964/65) Net national product at factor cost Rs 200.1 billion of which (approximate): Agriculture, forestry and fisheries 47% Mining 1% Factory establishments 11% Small enterprises 7% Commerce and transport 16% Government administration 8% Other services 10% Output per head Rs 421 Net national expenditure at market Rs 218.5 billion prices of which (approximate): Government consumption (Center and States) 12% Net investment 12% Private consumption 76% Government Finance: Center and States Consolidated (1965/66 preliminary) Total revenue receipts Rs 40.6 billion of which: Tax revenue 69% Non-tax revenue 31% Total expenditure on revenue account Rs 38.6 billion of which: Defence expenditure 20% Social and development services 33% Civil administration, debt service, etc. 47% Foreign Trade and Payments (1964/65) Payments for imports, c.i.f. Rs 13,960 million of which: Foodgrains 22% Petroleum 6% Iron and steel 5% Capital equipment 27% Other imports 30% Exports and re-exports, f.o.b. Rs 8,030 million of which: Jute goods 21% Tea 16% Cotton goods 7% Mineral ores 10% Nuts and spices 6% Hides and leather 1% Oilcakes and vegetable oils 6% Other exports 33% Net invisible receipts (exc. foreign aid) Rs 510 million Foreign grants and loans (inc. PL 480) Rs 6,910 million Foreign Assets (end of March 1965) Gold with Reserve Bank Rs 1,310 million Foreign exchange with Reserve Bank Rs 860 million Government balances abroad Rs 300 million Total Rs 2,500 million SUMMARY AND CCNCLUSIONS i. India completed 15 years of planned economic development on March 31, 1966. In the past decade and a half, an essentially dormant Indian economy was changed into a growing one. During the first decade (1951/52 - 1960/61), Indian real national income rose on average by about 3.7 percent a year and real income per capita rose by almost 2 percent a year. During the Third Plan period (1961/62 - 1965/66), the economy did not grow as rapidly as had been planned, and final data are expected to show that the rate of growth was below the rate that had been achieved during the previous decade. ii. Had it not been for the catastrophic drought of 1965/66, it is likely that the growth of output and income during the Third Plan period would have been fractionally higher than in the preceding decade. This achievement would, nevertheless, have been somewhat disappointing, not only in relation to Third Plan targets but also in a more fundamental sense. The fact that both the level of aid and the level of imports were higher during the Third Plan period than they had been in the preceding Plan periods justified the expectation that the growth of output and income would have been accelerated. Furthermore, a substantially better relationship of economic growth to imports and to aid would have been necessary to evidence progress toward ultimate self-support and self- sustaining growth. iii. The combination of two basic factors appears to be responsible for the disappointing performance of the Third Plan period. The first consists of the deficiencies in the policies and programs of the Government of India which affected the allocation and utilization of available resources. The second is the fact that although the level of aid appears to have been high, it was probably inadequate in relation to the size of the Indian economy and the magnitude of the development task. Performance of the Economy iv. Economic Growth. The level of Indian income and product increased by about 3.2 percent a year during the first three years (1961/62 - 1963/64) of the Third Plan period, mainly because of the disappointing performance of the agricultural sector. Foodgrain production, which was representative of the total agricultural sector's performance, showed a slight decline from the level that had been achieved at the end of the Second Plan period. Output-of foodgrains, which had totaled 82.0 million tons in 1960/61, amounted only to 80.2 million tons in 1963/64. Indian industrial production grew at a somewhat more satisfactory rate of about 7.5 percent a year during this period, with most rapid expansion in the newer engineering and chemical industries. - ii - v. The economic picture brightened considerably in the fourth year of the Third Plan (1964/65), in large measure due to a favorable monsoon which in combination with increased use of fertilizers and other inputs provided the basis for a 10 percent increase in foodgrain production. Total production of foodgrains amounted to 88.4 million tons, a level that was consistent with the longer-term trend of agricultural expansion of about 2 percent a year that had been recorded during the past ten years. Industrial production grew by about 7 percent during the year. As a result of this improvement, the level of national income rose by 7.7 per- cent in 1964/65, and annual total and per capita income growth rates over the first four years of the Third Plan period averaged 4.3 percent and 2.0 percent.,respectively. vi. The recovery in agriculture was short-lived. Widespread shortages of monsoon rainfall in the summer and fall of 1965 brought the worst drought in half a century. As a consequence, foodgrain production fell by an estimated 13 million tons. This serious agricultural failure to- gether with a slowing in industrial production that was caused by delays in the completion of projects; shortages of imported inputs, agricultural raw materials, and power in hydroelectric service areas affected by drought; and some slackening of demand, is likely to mean that Indian real income has fallen in the final year (1965/66) of the Third Plan period by perhaps some 3 to 5 percent. vii. Saving and Investment. Domestic saving is estimated to have been equal to about 11 percent of national income in 1965/66, about 10 percent above the rate at the close of the Second Plan period. The public sector accounted for an estimated 27 percent of the total. At the end of the Third Plan period, the marginal saving rate is estimated to have reached about 20 percent. Investment (net) is estimated to have amounted to approximately 14 percent of national income in 1965/66, up slightly from the last year of the Second Plan period. It is estimated that about 34 percent of this total represented public sector investment. The marginal investment rate is estimated to have been about 20 percent over the Third Plan period. viii. Internal Finance. Tax revenues (Center and State) represented some 13 percent of Indian national income and product in 1964/65 and are expected to have increased to about 14 percent in 1965/66. Center revenues were buoyant during the Third Plan period, and the Central Government showed a willingness to increase taxes to meet growing fiscal needs. Some structural changes were introduced in the Central Govern- ment taxes as well. Development expenditures expanded rapidly over the Third Plan period, but a larger increase was registered in non-developmental expenditures. While defense outlays contributed materially to the growth in current expenditures in 1963/64, there is recent evidence that non- developmental outlays are being held in check. - iii - ix. The continued weak fiscal position of the Indian States has under- mined a more rapid expansion in developmental expenditures in recent years. Growing financial deficits at the State level were covered primarily by the transfer of tax revenues, grants and loans from the Center. In addition, the States have had substantial recourse to Reserve Bank borrowings. In part in response to strong encouragement by the Ministry of Finance and the Planning Commission,some of the States have imposed new taxes during the current year in order to reduce their expansionary borrowing. x. Wholesale prices rose by about 9 percent in 1964/65; the improved availability of foodgrains following the good harvest in that year, however, prevented more substantial price rises in the following months. Prices, principally of foodgrains, showed an upward movement following the first indications of crop failures in 1965/66. These pressures were moderated by the arrivals of aid-provided foodgrains, but prices have continued to rise. xi. India's capital markets have remained depressed, and the market has been unreceptive to new issues. Tax and other measures have been designed to spur a revival, but so far these have not been notably successful. The present state of the market is due principally to the market's adjustment to the increase in the domestic interest rate structure as well as to the fact that a substantial share of personal savings are channeled to the Government either through taxes or, indirectly, by restrictions on investments by institutional savers. xii. External Trade and Finance. The gap in India's balance of payments grew as the Third Plan progressed. In part this reflected a planned larger inflow of aid-financed capital for the Third Plan investment program. In part, it was due to imports that had not been anticipated and to .smaller invisible and capital receipts which put pressures on reserves. Most of the 20.5 percent expansion of exports -- approximately the size of the increase envisaged by the Third Plan -- was realized between the second and third years of the Plan; thereafter exports remained at an annual level of about Rs. 8 billion. The poor subsequent showing of exports reflected principally the effects of losses of agricultural exports due to agricultural shortfalls, active demand in domestic markets, and, to some extent, uncompetitive prices for Indian products. Tea exports showed little growth during the period, while jute goods exports increased fairly sharply. Iron ore exports, including ores from Goa, also increased, and India's newer exports -- leather goods, light engineering, motors, etc. -- showed fairly rapid growth. In part, these increases were a result of expanded trade agreements with East European countries. Imports rose from about Rs. 11 billion in 1960/61 to about Rs. 15 billion in 1965/66. Foodgrains, machinery,and fertilizers accounted for the major part of the increase. Invisibles and capital items continued to decline. Debt servicing requirements rose to about Rs. 1,500 million in 1965/66 (from about Rs. 900 million in 1961/62) and represented about 19 Vercent of Indian exports in that year. - iv - xiii. External assistance initially pledged to India by consortium members for the Third Plan amounted to $5.5 billion (excluding PL 480). As of the end of 1965, agreements signed under these pledges totaled $4.5 billion and disbursements of this assistance amounted to $2.7 billion. Total aid disbursements during the Third Plan, including amounts carried forward from earlier Plan periods and aid from East European countries (but excluding more than Rs. 13 billion of PL 480 aid) are estimated at Rs. 20.9 billion on a gross basis and at Rs. 15.4 billion after debt servicing requirements are deducted. Net aid amounted to about 13 percent of total Plan investment (although if the under-valuation of foreign exchange is taken into account the share would be closer to 20 percent). India's external debt was approximately $5.3 billion as of the end of fiscal year .1964/65. xiv. The Hostilities and Aid Pause. The level of defense outlays increased sharply following the Chinese hostilities in 1962 but has not shown much expansion since then. Defense expenditures totaled Rs. 8.1 billion in 1964/65 and are estimated to have increased to Rs. 8.9 billion in 1965/66, including the cost of about Rs. 500 million of the 1965 hostilities. India's military outlays equal about 4 percent of annual national income, and, consistent with India's defense require- ments, a reduction would be desirable from an economic viewpoint. xv. The Indo-Pakistan hostilities led to a brief but general "pause" in the provision of new aid for projects and industrial imports, although such aid continued to flow under existing agreements, and food and related emergency aid increased substantially. xvi. A direct effect of the aid "pause" was a reduction in the level of new import licensing, particularly for industrial component parts and maintenance items. For a time,import arrivals under previous orders and inventories were available for use in current production. These sources are now drying up, however, and bottlenecks arising from shortages of such imports are beginning to emerge. New aid has by and large been resumed, and imports of maintenance items are expected to be resumed on a considerably expanded scale under uncommitted amounts of aid pledges for the Third Plan. Consortium countries are now giving consideration to non-project aid in an aggregate amount of $900 million in 1966/67 as well as to additional aid for new projects. xvii. Conclusions. India's performance in terms of income expansion during the past several years has been disappointing. To a significant degree, this was due to a decline in the rate of growth of agricultural production which was compounded by a severe drought and widespread crop failure in the last year of the Plan period. More basic problems involved deficiencies in economic policies and a flow of aid that was less than sufficient to meet the development task. A reorientation of agricultural policies and programs that is to increase production and productivity is now underway. Given the fact that agriculture accounts - v - for almost one-half of India's annual national income, an improvement in agriculture would go far toward improving the overall performance of the economy. Industrial production grew at a more rapid rate in the past several years, although it was less than had been planned. Savings and investment expanded less rapidly than had been hoped for, in part due to the use of potential savings for defense expenditures. The Government has indicated that such current outlays are being held in check, so that a larger proportion of future tax revenues should become available for developmental investment. The recent change in the value of the rupee should help to direct investment on a more rational basis. xviii. India's export performance was disappointing -- although approximately as had been projected in the Third Plan -- and the increased level of imports was based on larger aid receipts. The new external value of the rupee is intended to stimulate increased exports during the next few years, although further access to western markets is likely to be an important condition of expanded exports. India's foreign exchange debt burden and servicing requirements continued to increase. Some $180 million of principal and $137 million of interest are payable in the current fiscalyear. These requirements and the resources required for a higher level of capital and maintenance imports point to the need for a greater gross flow of aid. Recent Changes in Economic Policies and Programs xix. Agriculture. India has made a major start toward increasing agricultural production and productivity both over the near term and in the longer run. A program has been formulated and is now underway that should help to bring about substantial increases both in total output and in per-acre yields. The program is based on a change in technology rather than further extension of cultivated area and involves the provision of much larger amounts of water, improved seeds, fertilizers and other physical inputs. The concept of irrigation is being changed from one of drought protection to one of irrigation for intensive production. Increased water is being supplied by improvements in existing irrigation systems, by completion of projects underway, and by public and private tubewells. The supply and use of fertilizers are being substantially expanded, and improved seeds, pesticides, and related inputs are being supplied to Indian farmers who, contrary to earlier expectations, are proving to be highly receptive to the use of new inputs and techniques. In addition, prices paid to producers are being raised as an incentive to increased output, and agricultural credit facilities are being expanded. xx. Population. India has also launched a far-reaching program of population control that is intended to bring the rate of annual growth down from 2.5 percent to 1.5 percent by 1975. The program is centered around the intra-uterine contraceptive device, but includes other modes - vi - of birth control as well. Administrative machinery for the revised program has been reorganized, and the program now has Cabinet-level support and direction. Adequate financial resources for the program have been promised. India has started to manufacture the IUCD loop domestically, and production is about 20,000 units per day. Training of technicians and of doctors in the techniques of application is going forward, and IUCD insertions are now at a rate of 100,000 a month. xxi. Trade Liberalization and Exchange Rate Adjustment. The Indian Government has indicated that if sufficient non-project aid in a form that permitted flexible use were provided, it would be desirable to direct resources through the more general instruments of tariffs and fiscal and credit policies rather than by present detailed administrative arrangements, and a move in this direction was announced recently. Devaluation of the Indian rupee was announced on June 5, 1966. The value of the rupee was changed from 4.76 to 7.5 per U.S.$1.00, a reduction of 36.5 percent. The devaluation was accompanied by downward adjustments in import duties (other than those on consumer goods) which moderated slightly the impact of the devaluation on the landed costs of imports. The Indian authorities have decided not to raise immediately the domestic selling prices of imported foodgrains. On the export side, the previous system of selective incentives (through import entitlements and tax rebates) has been eliminated, and export duties ranging from 10 to 40 percent have been imposed on a dozen items (including tea, jute goods, raw cotton, coffee, oil cakes, etc.) in order to avoid export sector windfalls or a deterioration in export prices. xxii. Conclusions. The reoriented agricultural program represents a significant step toward the objective of achieving 125 million tons of foodgrain production in 1970/71 and self-sufficiency in food. Fertilizer imports are being greatly expanded in order to meet the rapid expansion of demand, and steps are being taken to encourage foreign private and domestic investment in fertilizer manufacturing capacity along with public sector investment. More rational use of available water, and increasing availability and use of new seed varieties, pesticides, and new cultivating techniques should provide a substantial stimulant to increased yields and total output. India's birth control program is, similarly, a major new departure and is expected to go far toward checking excessive population growth. The problems of translating these plans and policies into continuing programs of action are, however, formidable, and it is still too soon to know whether they can be implemented with sufficient speed and vigor to achieve the objectives envisaged. India should be encouraged to press forward with implementation of these efforts, as well as with various other new policies and programs that have been designed to accelerate India's economic development. - vii - xxiii. The change in the rupee rate is the most important of the recent steps taken by India to achieve a long-run improvement in the balance of payments situation. The new rate is expected to increase incentives for exporters and, coupled with the elimination of cumbersome administrative controls, should reduce the investment and production distortions that arose previously from the under-valuation of external resources and exchange. These steps should also permit a higher level of production and, through greater competition, should reduce the costs and improve the quality of domestic production. The adjusted rate should also help stem the flow of hard currencies outside official channels. 1966/67 Plan xxiv. An outline of the Fourth Five Year Plan is now being prepared for discussion in the Parliament preparatory to completion of the detailed Fourth Five Year Plan. In the interim, a one-year program for 1966/67 was issued in April. The one-year program is focused primarily on achieving a rapid increase in agricultural production consistent with the revised agricultural program. Some 13 percent of planned outlays is directed to agriculture, compared with about 10 percent in 1965/66, and the resources applied to this sector are expected to be increased by 15 percent. By contrast, the increase in industry and mining sector out- lays is being held to 3 percent, while outlays for other programs are expected to show relative declines between 1965/66 and 1966/67. The 1966/67 program is expected to involve total expenditures of Rs. 20,815 million, down from Rs. 22,965 million the previous year, although these amounts are not strictly comparable since under Indian financial conventions, certain developmental outlays are excluded from Plan totals after the Plan period in which they were initiated has ended. It was estimated that about 29 percent of the total 1966/67 program is to be financed by external assistance. xxy. Conclusions. Although the Bank has not appraised the program for 1966/67,it appears to carry forward the agricultural policies and program measures adopted last autumn. Emphasis is placed on completing works, particularly in irrigation, that are already well-advanced, and new project starts are held to a minimum. Highest priority is being assigned to agriculture. This program will be appraised in conjunction with the Fourth Plan when the latter is completed and is reviewed by a Bank mission. Creditworthiness xxvi. New economic policies and programs, and prospects for renewed growth and development provide a basis for the effective use of substantial amounts of external assistance. Policy changes involving India's external payments are intended both to stimulate exports and to reduce India's use of administrative controls while increasing reliance on market forces for deciding the allocation of scarce resources. - viii - In agriculture, a good start has been made toward the goal of self- sufficiency in foodgrain production. The program of population control is also promising. xxvii. Policy changes involving India's external payments position are expected to require a level of non-project assistance for maintenance imports of about $900 million annually for at least two and probably several years. In addition, assistance for projects during the Fourth Plan period, including new commitments of $300 to $400 million in the current year, has been requestedto carry forward India's investment program. Although aid for new projects is needed, there has been no opportunity as yet to appraise the amounts suggested by the Government of India or the specific projects. xxviii. Considering the prescnt and projected burden of servicing on India's existing debt, the scope for additional lending on Bank terms is quite limited. However, India is considered eligible for substantial amounts of additional aid on IDA terms. CHAPTER 1 INTRODUCTION 1. March of this year brought India's Third Five Year Plan to a close and marked the completion of a decade and a half of planned economic development. During this period, an essentially dormant economy was changed into a growing one, and a strengthening of India's economic base was achieved. Although the rate of growth during these 15 years was not as rapid as had been planned, growth was in fact realized. 2. During the first decade of planned development (1951/52 - 1960/61), Indian real income rose on average by about 3.7 percent a year, and the corresponding rise in annual real income per capita was almost 2 percent. During the Third Plan Period (1961/62 - 1965/66), growth was slower than had been hoped for, and the average annual growth rate is expected to be somewhat lower than had been achieved during the previous decade. The severe drought and the consequent widespread crop failures in the last year of the Plan period are in large measure responsible for these dis- appointing results, although a longer-term slowing of agricultural expansion and a concurrent decline in industry were also contributing factors. 3. Had it not been for the drought of 1965/66, the Third Plan growth rate would probably have been slightly higher than the rate achieved during the earlier (195/2 - 1960/6i) period. Even this result would have been disappointing, however, not only in relation to the higher Third Plan targets, but also because increased levels of aid and imports justified expectations for accelerated growth and more rapid progress toward self-sustaining growth. 4. Two basic factors appear to underlie the disappointing performance of the Third Plan period. The first consists of the deficiencies in Government policies and programs concerned with the allocations and use of available resources. The second is the fact that although the level of aid provided to India was high in absolute terms, it was probably in- adequate in relation both to the size of the Indian economy and to the magnitude of the development task. Superimposed on these factors were an agricultural sector that grew at a slower rate than had earlier been achieved, the severe drought of 1965/66 already alluded to, and a shortage of industrial imports that was aggravated by the aid "pause" that followed the outbreak of hostilities in 1965. 5. India has already undertaken some policy and program changes designed to overcome these basic deficiencies,and additional measures are expected. In particular, the reorientation of agriculture, the program for population control, and the recently-announced devaluation of the rupee and import liberalization program represent major steps toward accelerating the rate of Indian economic growth. CHAPTER 2 CURRENT ECONOMIC SITUATION National Income and Production 6. The level of Indian income and product, to a large degree a function of agricultural sector performance, showed only modest change over the first three years of the Third Plan period. The increase in real income amounted to about 2.2 percent in both 1961/62 and 1962/63. In 1963/64 Indian income rose by approximately 5.0 percent. For the three year period 1961/62 - 1963/64, then, growth in Indian income and product averaged about 3.2 per- cent. In per capita terms, income rose on average by less than 1 percent a year during that period. 7. The economic picture brightened considerably in the fourth year of the Plan, 1964/65, due in large measure to a favorable monsoon and a con- sequent recovery of agricultural production to levels consistent with the longer-term trend of growth in that sector. Real income rose by about 7.7 percent in total and by 5.3 percent per capita in 1964/65, raising total and per capita average annual growth rates for the first four years of the Third Plan period to 4.3 percent and 2.0 percent, respectively. 8. The recovery of agriculture was, unfortunately, short-lived. Widespread absence of rainfall in the summer and fall of 1965 brought in its wake the worst drought in half a century, and major crop failures occurred over much of India. The resulting fall in output, compounded by a concurrent slowing of industrial production, is likely to mean that real income and product fell in the final year of the Third Plan period by some 3 to 5 percent. Agriculture 9. Agricultural production targets for the Third Plan were set initial- ly on the basis of output levels realized in 1960/61, the last year of the Second Plan and a rather good crop year. Foodgrain production of 82.0 million tonsl/ in that year was above the original target and gave rise to hopes for a level of production of 102 million tons by 1965/66. This projected level of output implied a 4.h percent annual (compound) increase in production, a rate of growth substantially higher than the long-term trend. Mid-way through the Plan, the target for 1965/66 was reduced to 92 million tons, a level then considered to be within reach, given normal growing conditions. In the event, failure to reach this level of output reflected principally the fact that growing conditions were far from normal. 1/ References are, unless otherwise specified, to metric tons; 1 metric ton = 1.1 short tons. - 3 - The agricultural sector's continued heavy reliance on seasonal rainfall and the widespread failure of the annual monsoons during the 1965/66 grow- ing seasons were substantially responsible for the crop failures in that year. 10. This continued vulnerability of Indian agriculture--and, consequent- ly, of the entire Indian economy--to the annual monsoons is demonstrated dramatically by a comparison of agricultural production in the last two years of the Third Plan period (1964/65 and 1965/66). An underlying factor also affecting India's agricultural growth was the decline in the long-term rate of agricultural production which had averaged about 3 percent a year during the first two Plan periods but was under 3 percent a year during the more recent period. Relatively abundant rainfall in 1964/65 contributed to a 10 percent increase in agricultural production in that year. Foodgrain output reached 88.4 million tons, 8.2 million tons over the level realized in 1963/64 and some 5.7 million tons more than had been produced in the best prior year (1961/62). Wheat production rose by over 2 million tons (to 12 million tons), rice production rose by just under 2 million tons (to 39 mil- lion tons), and greater production of minor cereals and pulses accounted for the balance of the increase. Production of non-foodgrain commodities showed somewhat mixed results in 1964/65. Oilseed output rose from 7.0 million tons to 8.6 million tons and sugarcane from 10.6 million tons to 12.3 million tons. Cotton, jute and mesta, on the other hand, declined marginally from the relatively high levels that had been reached in 1963/64. 11. Data on agricultural output for 1965/66 are still being compiled, so that the record is far from complete. Preliminary information on autumn crop cuttings, however, point to a substantial fall in agricultural output from the prior year's level. In brief, rainfall was substantially below normal--if not totally absent--in most of India's rainfall reporting zones, and the drought of 1965/66 is, in fact, considered one of India's worst in recent times. As a consequence, the autumn foodgrain harvest is estimated to be some 9 or 10 million tons below the corresponding output in 1964/65. Although the effects of the drought on spring crops may not be so pronounced as initially anticipated, it is estimated that yields may be 1 to 2 million tons below the prior year's level. Corresponding declines in other cereals will probably bring the total 1965/66 foodgrain shortfall to 12-14 million tons. Largely because of unfavorable monsoons, then, foodgrain production in 1965/66 is likely to reach only some 75 or 76 million tons, a level lower than in any year since 1957/58, and far below the yield of perhaps 90 or 91 million tons that would normally have been expected in 1965/66. INDIAN FOODGRAIN PRODUCTION a/ (Million metric tons) Year Production 1960/61 82.0 b/ 1961/62 82.7 1962/63 78.4 1963/64 80.2 1964/65 88.4 1965/66 (est.) 75.9 c/ Source: Government of India, Ministry of Food, Agriculture, Community Development and Cooperation, Report 1965-66. a/ Additional data on Indian agricultural performance are presented in Tables 4-6 of the Statistical Appendix. b/ Compared with an original target of 77 million tons. c/ Compared with an original target of 102 million tons that was subsequently reduced (in 1963/64) to 92 million tons. 12. The consequences of the 1965/66 agricultural shortfall may be seen in clearer perspective if potential demand for foodgrains arising from population expansion and higher money incomes and from the pressing need to build up buffer stocks is added to demand already in existence. In the face of this total demand picture, a supply position of at least 95 million tons of foodgrains would have been a highly desirable objective for 1965/66. Instead, supplies mayreach only about 85 million tons, and this amount includes heavy withdrawals from stocks and over 10 million tons of food supplies provided by the U.S., Canada, Australia, the U.K., Germany, and some 15 other countries and organizations around the world. Putting aside the question of buffer stocks, then,a shortage of 5-8 million tons of food- grains may persist for the crop year ending this fall. 13. The geographic pattern of food shortage in India is, however, uneven, with some areas finding themselves with adequate or surplus supplies while others are seriously deficient. Unfortunately, shortages affect principally the rice-consuming areas, for it is in respect of rice that shortfalls in production have been most severe and imports are most difficult to secure. 14. The States and Central Governments have taken a number of steps designed to achieve a more equitable distribution of available food supplies. While some of these arrangements have been criticized in the Indian press, there has been ho-evidence of starivation as a consequence of the -5- 1965/66 crop failures. In addition to voluntary food-conserving measures -- skipping meals, limiting the number of guests at parties, and the like -- foodgrain rationing has been introduced in a number of urban centers; a system of food zones, intended to prevent the movement of food stocks from less- to more-affluent areas, has been continued; the States and Center have actively entered the foodgrain markets; some 110,000 "fair price" shops have been opened where consumers can buy foodgrains at fixed prices; and rural inhabitants in famine areas who have little or no purchasing power have been provided foodgrains on a grant basis. Industry 15. Indian industrial production showed a fairly regular pattern of growth during the first four years of the Third Plan period (1961/62 - 1964/65), with output increasing at an average rate of about 7.5 percent a year, although the target provided in the Third Plan was 11 percent. It should be noted, however, that the index of current industrial production is based on the output pattern of 1956, so that it probably gives undue weight to the traditional, slow.!oving textile and food-processing indus- tries vis-a-vis the newer engineering and chemicals industries which are growing at a more rapid pace. 16. Industrial output is expected to have grown at a somewhat slower rate in 1965/66, perhaps by less than 5.0 percent. Industrial activity appears to have increased at a declining rate since the start of 1965/66 and, although some improvement was realized in the third quarter of the fiscal year, the aggregate production index for December 1965 dropped be- low the level recorded for the same month of 1964, More recent data suggest that production in the final quarter of 19U5/66 remained below the same quarter a year ago. 17. Increases in the production of steel, aluminium and cement during the past two years have reflected expansion of capacity combined with active demand. Output of finished steel is expected to reach 4.6 million tons in 1965/66, compared with about 4.4 million tons in 1964/65. Aluminium pro- duction was about S,000 tons in 1964/65 and is expected to have reached 65,000 tons in 1965/66. Cement production amounted to about 10 million tons in 1964/65, up slightly from the previous year, and during the first six months of 1965/66 was running some 11 percent ahead of the corresponding period in 1964/65. Coal production in 1964/65 amounted to some 6k million tons, about 2 million less than in the previous year. This decline reflec- ted a continuing slackening in demand. Market conditions have improved, however, and production in the first half of 1965/66 ran about 10 percent ahead of the same period in 1964/65. 18. Performance in the engineering industries -- machine tools, machi- nery, railway wagons, electrical products, and the like -- was mixed during 1964/65 and 1965/66. The value of machine tool production rose (in current prices) from Ps 201 million in 1963/64 to Rs 257 million in 1964/65. - 6 - Production during the first half of 1965/66, however, was somewhat below the corresponding period a year earlier. The same pattern is evident in commercial vehicles, where output may have been further curtailed in the latter half of 1965/66. Plany of these industries received non-project imports under the last IDA credit, so that these declines may reflect a slackening in demand rather than shortages of imported components. 19. Expansion of cotton textiles production was limited both by a slack- ening in domestic demand for cloth, purportedly related to poor harvests and higher food prices, and to a somewhat lower rate of export. In addition to the consequent build-up in inventories that depressed production, some slow- down was attributed to power shortages in areas served by hydro-electric systems following the failure of the late monsoon. Adverse weather condi- tions also affected India's plantation crops. Tea production in 1965/66 is expected to have amounted to about 360 million kgs., some 4 percent below the previous year. Coffee production is expected to remain about the same in the two years. 1/ 20. The generally favorable past trend of industrial production (in any case, through September of 1965) obscures a disturbing underutilization of installed manufacturing capacity during the Third Plan period. Although there were notable exceptions-- in aluminium. steel and cement--excess capacity existed in some lines. -of nidnufa6turing.. A recent sample survey undertaken jointly by the Government of India and U. S. AID , 2/ for. .exanple, shows fairly extensive under-utilized capacity in scme 28 representative firms engaged in light and medium manufacturing that were surveyed. The principal explanation, according to the study, is the shortage of foreign exchange for imports of components, raw materials and spare parts, and it is pointed out that increased production could be realized if greater imports of these items were possible. The study notes that 1/ Additional data on Indian industrial performance during the Third Plan Period are presented in Tables 7 and 8 of the Statistical Appendix. 2/ Government of India and U.S. AID, "Utilization of Industrial Capacity" (mimeograph) 1.w Delhi, December 1965. past aid donor and. Central Governent preference for using exchange for capital equipment imports, the subsequent allocation of raw material and maintenance imports on the basis of installed capacity, the prevalence of protected sellers markets, and a variety of tax incentives have added. to existing pressures for expanding industrial capacity. Transport and Power 21. The transportation bottlenecks that characterized the first two years of the Third Plan period. were virtually eliminated by 1963/64. Except for temporary localized. dislocations, the Indian transport system has been able to cope with the annual increase in traffic without notable difficulty. It is reported., in fact, that some 12 million tons of rolling stock capacity are now in temporary surplus. Traffic in terms of million-ton kilometers of goods carriedincreased,only modestly (by about 2.5 percent) in 1964/65, with the greater share of the increase handled by road.transport. Although supporting data are not yet available, goods traffic appears to have increased more rapidly in 1965/66, with a 5 percent rise in railway traffic alone. Foodgrain shipments appear to have accounted.for a substantial portion of this increase. 22. The rate of expansion of electric power generation has shown some slackening during the past year. Electricity generated.increased.from about 26 billion kwh in 1963/64 to 29 billion kwh in 1964/65, but the rate of increase declinedslightly over the first half of 1965/66. Installed generating capacity continuedto expand, with total public sector capacity growing from 6.2 million kw in 1963/64 to 7.5 million kw in 1964/65. Additional plant expansion completed.by the end. of December 1965 increased generating capacity to 8.5 million kw. Saving and Investment 23. Domestic saving is estimated to have been equal to about 11 percent of national income in 1965/66, about 10 percent above the rate at the close of the Second Plan period. The public sector accounted. for an estimated 27 percent of the total. At the end of the Third. Plan period., the marginal saving rate is estimated. to have reached. about 20 percent. Investment (net) is estimated. to have amounted to approximately 14 percent of national income in 1965/66, up slightly from the last year of the Second. Plan period. It is estimated.that about 34 percent of this total represented public sector investment. The marginal investment rate is estimated to have been about 20 percent over the Third Plan period. The Economic Effects of the Indo-Pakistan Hostilities 24. According to the recently-issued 1965/66 Annual Report of the Ministry of Defence, the direct costs of l.st autumn's nilitary campaign were Rs 500 million, this amount covering the costs of expendable items such as arms and ammunition, etc., but excluding the costs of civilian property damaged.and destroyed. Although the increasingly modern military equipment used by Indian forces has a high import content, available - 8 - information does not indicate how much of such equipment was lost nor how much of the direct cost of the hostilities involved imported equipment. Indirect costs included some deferment and/or loss of exports due to dis- locations in internal goods transport and some confiscation of cargo (by both sides) in transit. In addition, some imports for Indian projects and some maintenance imports continue to be held by Pakistan (and vice versa). 25. The "Defence Plan" adopted shortly after the 1962 Chinese incur- sions provided for expenditures of Rs 50 billion to cover expansion, mo- dernization and maintenance of India's armed forces during the period 1964/69. About Rs 7 billion was reported to be the foreign exchange com- ponent of that lotal. Expenditures for military purposes were accordingly expected to amount to about Rs 10 billion annually of which some Rs 1.4 billion would be in foreign exchange. The Government of India has stated that while total and foreign exchange expenditures under the -efence Plan increased sharply in 1963/64, they have increased only slightly since then* Published data indicate, moreover, that actual defense outlays have not reached the annual level anticipated by the Plan. Defense expenditures (current and capital) were Rs 8.06 billion in 1965/66 (including the cost of last year's hostilities). A relatively modest increase of about Rs 300 million has been budgeted for 1966/67 which, given interim rises in pay and prices, means little real change in outlays in the two years. These, of course, are official budget data,-and additicnal allocations for pro- grams with only an indirect defense content may be covered under other headings. Such official data would indicate, however, that India's mili- tary expenditures represent about 4 percent of annual national income and product. The "Pause" in Aid 26. The outbreak of hostilities between India and Pakistan in September of 1965 led to a brief but general "pause" in the provision of new aid for capital and maintenance imports although such aid continued to flow under existing agreements, and food and other emergency aid was increased subs- tantially. 27. The aid "pause" was superimposed on an Indian economy already laboring under serious foreign exchange difficulties and (as discussed in paragraphs 9-14) beset by a crisis on the food front. Even before the mili- tary events of September, foreign exchange difficulties had made formu- lation and approval of a foreign exchange budget for 1965/66 virtually impossible. Import allocations to established importers, which are supposed to be announced at the start of the new fiscal year, were issued only after three months of 1965/66 had passed, and the import allocations finally pro- vided were highly restrictive. Allocations of foreign exchange to industrial enterprises were made on an ad hoc basis. Even these unsatisfactory arrange- ments for imports were interrupted at the outbreak of the Pakistan-Indian hostilities in September, in part because a number of aid donors had indica- ted reservations about continuing to provide aid while fighting was underway. In November, import allocations were resumed on a limited basis, and, by the end of the year, most donors' aid programs had been resumed. 28. The "pause" in aid aggravated India's maintenance import situation in 1965/66. The impact of the "pause" was not inmediately reflected in the flow of maintenance imports or in the level of domestic production since imports under licenses issued earlier continued to arrive and exist- ing inventories of such items were drawn down for current production. These sources appear to be drying up, and shortages and bottlenecks aris- ing from insufficient maintenance imports are among the factors that are restricting domestic production. The main impact of the aid "pause", however was on maintenance import licensing. 29. A comparison of actual licenses of maintenance imports during each of the past two years with prospective licensing for 1966/67, as foreseen at the end of the past fiscal year indicates the seriousness of the-aid "pause". Import allocations (for other than food aid and projects) were reduced by some $550 million between 1964/65 and 1965/66, a decline of almost 30 percent. The pause in 1965/66 aid commitments for maintenance imports, and the uncertainty about this year's (1966/67) aid level caused the Government of India into an even more restrictive position with res- pect to import allocations for 1966/67. On the basis of commitmentsof non-project assistance as of Aprill,1966, and other net resources available (after payments on past licenses, profit remittances, debt service and related prior charges against available resources), the Indian Government had calculated that import allocations for 1966/67 could be authorized only at a level some 60 percent below the already considerably-reduced total for 1965/66. The more recent resumption of new aid commitments has eased India's maintenance imports situation. 30. Because of the uncertainty of then-prevailing aid prospects and the unexpected foreign exchange costs associated with the agricultural situa- tion, the Government of India found it necessary early in the year to request a Fund standby and to approach the consortium (through the Bank) concerning the provision of emergency assistance. In March, the Fund agreed to provide new credits of $187.5 million, an amount that will cover the estimated foreign exchange costs associated with the agricultural failure. In addition, the consortium members have provided some new aid for non-project imports under uncommitted amounts of Third Plan pledges and they are now giving consideration to non-project aid of $900 million for 1966/67 as well as to additional aid for new projects. - 10 - 31. Some longer-run effects of the aid "pause" and the shortage of industrial imports are now beginning to become apparent. These factors and the deferral of the Fourth Five Year Plan have produced some hesitation on the part of India's investors and plant managers with respect to their production programs and investment plans. This uncertainty seems to un- derlie the current slow-down in the rate of investment which, in turn, is responsible for a falling off in demandfor machine tools, electrical equipment, and other investment goods. This slacken ing was reinforced by the generally contractionary credit policies followed by the Indian monetary authorities which have contributed to a reduction in liquidity in the industrial sector. Internal Finance 1/ 32. Center and .tate tax revenues represented approximately 13 percent of Indian national income and product in 1964/65 and are expected to have increased to about 14 percent in 1965/66. Tax revenues of the Central Government amounted to over Rs 20 billion in 1965/66, more than double the Rs 8.8 billion collected in 1960/61 (the last year of the Second Plan) and Rs 2.1 billion more than the corresponding amount in 1964/65. The average annual rate of growth over the Third Plan period was 18 percent compared with an average rate of approximately 10 percent over the entire 15 years of planned development. Growth in revenues, however, was uneven, with a pronounced spurt occurring in 1963/64, the year following the Chinese emergency. Fiscal measures taken in response to the emergency brought about a change in the volume of revenue accruing from taxes on individuals and, thus, in the tax structure. 33. Revenues from income taxes,which had remained relatively stable for several years, increased by about 40 percent (to Rs 2.6 billion) in 1963/64 but have subsequently shown little further increase. Revenue from excise duties has continued to be buoyant throughout the period and amounted to Rs 8.6 billion in 1965/66. Over 40 percent of the revenue increase during the Third Plan came from excise duties, and these taxes now account for 43 percent of all Center revenue. Receipts from customs duties (almost entirely on imports) have shown the most marked rate of increase over the Third Plan period. Customs collections were Rs 5.3 billion in 1965/66, some three times the level of collections at the end of the Second Plan, and the rate of growth in customs receipts has increased almost continuosly over the past five years. Corporation tax revenues have trebled over the Third Plan period and amounted to Rs. 3.3 billion in 1965/66. Unlike import duty revenues, the rate of growth has almost continuosly declined. 1/ Additional data on Center and State finances are presented in Tables 18-21 of the Statistical Appendix. Price indices are presented in Tables 9-12, and data on money supply and prices are presented in Tables 1h and 15. - 11 - 34. This resulting pattern of growth was due less to the "built-in" elasticity of the various taxes than to conscious policy decisions. The Chinese emergency led to an increase in both direct and indirect tax rates. Subsequently, personal income taxes were reduced, as were the effective rates on profits as a result of the extension of tax concessions. On the other hand, while there have been some reductions in the higher rates of excise duty imposed during the Chinese hostilities, additional duties have since been imposed. Nost of the additional excises have been introduced for the express purpose of diverting to the exchequer part of the scarcity profits accruing to the sellers of certain metal products. It is for this reason also that import duties have been markedly raised over the past year or so prior to the rupee devaluation that became effective on June 6, 1966. Import duties were reduced as part of the devaluation, thereby, moderating-- but not substantially-- the impact of devaluation on the landed costs of imports. 35. While Center tax revenue has been buoyant during the Third Plan, expenditures increased rapidly and have doubled since the end of the Second Plan period. Non-development expenditures increased most rapidly during the Plan period. The source of this high rate of increase in non-development expenditure is to be found in the rise in defense ex- penditures in the 1963/64 budget. In the past two years, however,the growth of non-development expenditure has been held in check. After a rise of 42 percent between 1962/63 and 1963/64 (following the Chinese invasion), these expenditures have increased by only 5 percent and 7 percent in the last two years. It is expected that pressures for higher non-development expenditures will continue to be contained during the current year. 36. One of the factors that has undermined the possibility of a more rapid expansion in developmental expenditures was the weak financial po- sition of the Indian States. Not only are they entitled under the Cons- titution to the whole or part of the revenue from certain centrally- assessed and collected taxes, but their residual fiscal needs are also met by grants and loans from the Center. Over the Third Plan period, revenue expenditure and total expenditure of the States increased by 80 percent, while total State receipts other than from the Center have increased by 63 percent. 37. The growing gap between expenditures by the States and their autonomous sources of funds has been covered primarily by Center devo- lution of tax revenues, grants and loans. Under the proposals of the most recent Fourth Finance Commission, the States' share of income tax re- venue is to be raised from 66.7 percent to 75 percent and their share of excise revenue (still kept at 20 percent) is to be based on all com- modities rather than 35 commodities as at present. In addition, annual grants in aid (excluding grants and loans under Plan financing) are to be more-than doubled (from Rs. 6ho million to Rs. 1,400 million per annum). - 12 - Part of this increase merely reflects the financial convention under which Plan revenue expenditures cease to be financed by Plan grants with the termination of the five-year Plan period in which the activity was un- dertaken, thereafter becoming a charge against the State's non-Plan revenues. 38. In addition to their growing dependence upon Center funds, the States have also had substantial recourse to Reserve Bank borrowing. Part of this is "authorized" in the sense that Center securities held by the States are used as collateral. Hore important quantitatively, however, are the States' overdrafts on the Reserve Bank. Although there have been considerable variations in the extent to which the individual States have availed themselves of such financing, these overdrafts appear to have been substantial during 1965/66. The Central Government has been effective in encouraging the States to increase their tax rates and coverage in their 1966/67 budgets, thereby reducing their reliance on overdraft accom modati6ns. 39. Resort to bank financing by the States, in conjunction with Central Government budget deficits financed by monetary expansion and, more recently, with less-than-season contractions in the volume of pri- vate sector credit, have contributed to a 14 percent increase in money supply in 1963/64 and to further increases of about 9 percent in both 1964/65 and 1965/66. A consequence of the resultant expansion of mon- etary demand has been the generation of pressures on the level of do- mestic prices. On the supply side, the pattern of foodgrain arrivals at markets has had a strong (sometimes countervailing) influence on do- mestic prices. hO. At the wholesale level, prices rose by about 9 percent in 1964/65, despite a decline in the latter half of the year. A somewhat slower rate of price increases in early 1965/66 reflected a continued comfortable food supply situation. Accelerated foodgrain arrivals, an unexpected result of the hostilities in the autumn of 1965, caused a modest fall in price levels. Thereafter, the first signs of the drought and crop failures produced a resumption in the upward movement of prices. Pressures have been somewhat dampened by large-scale foodgrain imports although agri- cultural prices have reflected the effects of higher prices being offered to producers as incentive for increasing production. Prices of manufac- tured goods,for both intermediate and final products, have shown the effects of domestic demand pressures and some push on the cost side. In the twelve months ending January 1966, wholesale prices of manufactured goods increased by some 8 percent and prices have continued to rise dur- ing the remaining months of fiscal 1965/66. A generally similar pat- tern of price changes prevailed at the retail level. 4l. The generally bullish conditions that prevailed in India's capital markets until 1961/62 have since changed into an almost conti- nuous depression. The index of variable dividend industrial securities - 13 - which was 193 in 1961/62 (1952/53 = 100) fell to 163 at the beginning of 1965, and a further decline, to about 138, was recorded in January of 1966. The most obvious effect of this decline has been in the market for new issues which has slumped both in terms of the number and the volume of issues. This decline has been most pronounced with respect to new issues of existing companies. 42. The factors underlying the relatively dormant state of the ca- pital market are of both a short- and long-term character. In part, they represent a correction of the previous over-optimism in the market; in part, a hesitancy arising from uncertainties about economic and fiscal policies; and in part, they may be a reaction to the succession of po- litical and military shocks dating from the Chinese invasion in 1962. More importantlypresent conditions reflect the market's technical adjustment to the increase in the interest rate structure that has oc- curred since 1963 in the form of the step by step increase in the bank rate from 4 percent prior to January 1963 to 6 percent from February 1965. In addition the large share of personal saving that is chan- neled to the public sector either by taxation or by restrictions on investments by private institutional savers has also had an adverse effect on the market. 43. Two selective fiscal measures were adopted by the Central Govern- ment in 1965 in an attempt to increase the flow of funds to the new issues market. The first of these permits a taxpayer to exclude from net assets subject to wealth tax for a period of five years the value of equity shares in new industrial companies. The second measure provides for the grant of tax credits for four years to people purchasing the shares of new companies, up to a maximum purchase of Rs. 35,000 in any one year. The most recent budget has made a further attempt to revive the capital market by abolishing the 12.5 percent tax on bonus share issues and by limiting the 7.5 percent tax on dividend distributions to that part in excess of 10 percent of the paid-up equity capital. In addition, bonus shares will not become liable to income taxation as capital gains until the gain is actually realized. While the quotations for companies likely to benefit from these concessions have strengthened, the capital market has not responded favorably, and the general state of market stagnation continues. External Trade and Payments h. The gap in India's balance of payments grew during the Third Plan period. In part, this reflected a planned larger inflow of aid-financed capital for the larger Third Plan investment program. In part it was due to import demand in excess of projections and to reduced invi- sible and capital receipts, both of which put pressure on Indian reserves. - 14 - Adverse developments were most pronounced in 1964/65 and 1965/66, and (as indicated in the table below) a rapid step-up in aid disbursements financed the level of imports realized. in those years. Although the growth of exports in 1962/63 and 1963/64 was encouraging, most of the 20.5 percent increase in export earnings over the five-year period was, in fact, real- ized between 1962/63 and 1963/64. Thereafter, exports remained at a level of about Rs. 8 billion a year. It should be noted, however, that the actual growth in exports was approximately of the size projected in the Third Plan. Neither the expansion in exports between the second and third years nor the stagnation in the exports thereafter was asmarked as the relevant data would indicate. About Rs. 180 million of the 1962/63 to 1963/64 increase reflected the inclusion of exports (mainly of iron ore) from Goa. In addition,there may have been some overvaluation of ex- ports in the latter year due to the initiation of an export promotion scheme involving the issuance of import licenses based on the declared custom value of exports. lags of a speculative type affected the repa- tration of export receipts, especially in 1964/65 and 1965/66, and a change in the method of recording export receipts also influenced the level of exports reported for 1965/66. INDIA -BALANCE OF PAYMENTS 1961-1966 ($ Million) Average 1961/62 1962/63 1963/64 1964/65 1965/66 annual growth Imports, c.i.f. -2,092 -2,254 -2,525 -2,860 -3,217 11.8% Exports, f.o.b. 1,)403 1,)432 1 683 1,685 1,691 4.8% Trade balance -688 -821 -841 -1,174 -1,526 22.0% Invisibles, net a/ 32 24 57 3 -- -- Miscellaneous capital b/ -6 12 -121 -179 -31 Debt service c/ -195 -188 -198 -249 -322 13.0% External assistance 722 943 1,176 1,450 1,855 26.o% of which PL 480 (181) (254) (351) (480) (588) (34.0/%) Change in net liquidity d/ -135 -29 72 -151 -24 -- Source: Government of India, Ministry of Finance. a/ Excludes grants and interest and service payments on foreign loans and credits. b/ Including errors and omissions, and in 1965/66, remittances under the National Defense Remittance Scheme. c/ Not including repayments to INF nor profit remittances. d/ Including net borrowing from IMF. Minus sign indicates fall in net liquidity. - 15 - 45. A notable development in the area of Indian foreign trade dur- ing the Third Plan period was the increasing proportion of Indian exports and imports moving under trade agreements with the Soviet Tnion, Poland, Bulgaria, Yugoslavia, Czechoslovakia and Rumania. Trade between India and this group of countries has grown more than three-fold over the Third Plan period. In 1965, Indian exports to these countries were Rs 1.5 billion and accounted for about 19 percent of total exports; and imports from these sources in the same year of about the same volume accounted for about 11 percent of the import total. This trade moved for the most part under trade agreements that providedibr expansion and diversification of the pro- ducts exchanged. Indian imports have thus far been mainly capital goods (about 60 percent) and raw materials (about 40 percent). Exports have been predominantly traditional items (i.e., about 73 percent of the total in 1965) such as jute manufactures, cotton waste, cashew, tea, coir and pepper, although the share of light engineering pods and manufactureres in the total has been increasing. A distinctive feature of these trade agreements is the fact that settlement is effected in rupees rather than in sterling or dollars. Such agreements are based on negotiated lists of goods and prices, and po- tential dangers involve possible diversion of potential sales for freely- convertible hard currencies, uncertain quality of imports, acceptance of a "package' involving lower priority imports, and over-pricing of imports. On the other hand, these arrangements permit the organization of production and marketing on a more economic scale, reduce producer uncertainty with respect to markets, and help to diversify Indian exports. This possibility contrasts with India's current trade possibilities in some Western markets where exports have declined over the past two years. 46. The trend of India's traditional exports, tea and jute, differed sharply. Tea exports were between Rs 1.2 and 1.3 billion a year, while the value of jute exports rose substantially (partly on account of price changes frcm Rs 1.4 billicn in 1960/61 to Rs 1.8 billion in 1965/66. Both tea and jute exporters should find a moderate incentive for increasing exports in the recent devaluation of the rupee. India's third major export, cotton textiles, continued to fare rather badly. Exports of these goods amounted to about Rs 600 million in recent years, but earnings from this source appear to be on a long-term downward trend. In addition to the worldwide problems of cotton textile exports, India's particular difficulties in pro- moting cotton textile exports include over-aged capital stock, specialization in rougher types of cloth, and relatively high raw material prices. 47. Iron ore was among the exports that have been growing rapidly, and earning increased from Rs 156 million in 1959/6o to Rs o million in 1965/66. As indicated above, part of this growth was due to the inclusion of Goan exports. However, if necessary preparatory steps are taken, iron ore appears to have real export potential, and export earnings from ore sales are expected to continue to rise. Exchange earnings from a number of agricultural products (e.g., coffee, oil cakes, and cashew nuts) were especially high in 1963/64. The fact that these exportable supplies - 16 - subsequently ceased to expand or even fell accounts in large part for the stagnation of exports. Although cashew exports have continued to grow (albeit slowly), they rely heavily on imports. 48. India's non-traditional exports -- leather goods, light engineer- ing products, some iron and steel -- have been increasing relatively rap- idly in recent years, but such items still account for a small portion of total exports. It should be noted, however, that this group of exports, together with jute, prevented a fall in export earnings after 1963/64. Growth of these non-traditional exports can be expected to continue,partic- ularly as a consequence of the increased incentives offered by the de- valuation of the rupee. Possible constraints on increased exports of these items arise from the fact that factor costs and domestic prices are rising,although increased imports and decontrol of industrial imports should, by increasing the element of competition, reduce production costs (by permitting higher capacity and planned production) and improve the quality of India's manufactured items. 49. Imports have continued to move up during the past five years, from a level of just under Rs 10 billion in 1961/62 to above Rs 15 billion in 1965/66. Although most categories of imports increased, the bulk of the growth was in three categories: foodgrains, machinery (including compo- nents) and, most recently, fertilizers. These three items accounted for about three-quarters of the increase in imports over the five years. In 1961/62, foodgrain imports amounted to about Rs. 1.2 billion, down from about Rs. 1.9 billion in the previous year. Thereafter, these imports continued to grow, even in the abundant 1964/65 crop year. Foodgrain im- ports rose by an additional Rs. 600 million in 1965/66 and in that year amounted to Rs. 3,300 million. Although most foodgrain purchases are financed by foreign aid -- mainly from the U.S. under PL 480 -- there is an additional and increasing foreign exchange burden on India for food. In 1965/66 this direct foreign exchange cost of foodgrain imports amounted to Rs. 740 million. Domestic production of fertilizer required to expand agriculture did not increase as rapidly as original plans or domestic demand, and,although imports expanded, total supplies of fertilizers were well below estimated requirements. Large-scale resort to imports of fertilizer is a relatively recent phenomenon; from less than Rs. 100 million in 1961/62, imports of fertilizer grew to more than Rs. 400 million in 1965/66. 50. Machinery is the largest single item on India's import bill, accounting for more than a third of commercial imports (i.e., imports other than those under PL 480). These imports amounted to Rs. 4.1 billion in 1965/66, and the value of machinery imports increased by about 75 percent over the Third Plan period. This increase accounted for 36 percent of the overall growth in imports and for more than 80 percent of the growth in commercial imports during the period. Other imports, accounting for about two-thirds of the total in 1965/66 , have shown little overall tendency to - 17 - grow over the period. Increases in some categories, such as non-ferrous metals, were offset by declines in other imports, such as steel. The increase in machinery imports was expected, since it was not technically possible to manufacture all the types of machinery required by India's investment program, and a growing volume of spare parts and components are reflected in the totals. Had the execution of some investment projects been on schedule (e.g. the Bpkaro steel plant) the increase in machinery imports would have been even larger. The over-all stability of maintenance imports does not reflect a corresponding stability in demand, which, in fact, increased substantially. India maintained strict physical controls on all imports during the Third Plan. Practically all non-food consumer goods imports are prohibited, and authorized maintenance imports were con- siderably less than demand. 51. The deterioration of the capital and invisible accounts in a sense bore the main responsibility for India's overall balance of payments difficulties, since the value of non-aid financed imports actually fell over the Plan period. Capital and invisible items were mainly responsible for the pressures on reserves. The mounting costs of debt service on official borrowing was foreseen; it rose from about Rs. 900 million in 1961/62 to above Rs. 1,500 million in 1965/66, after having remained roughly stable during the first three years of the Plan. The decrease of receipts on account of other invisibles was less predictable. Receipts on this account in the first three Plan years were Rs. 160 million, Rs. 120 million and Rs. 280 million, respectively, but these receipts practically disap- peared thereafter. The reason for this evolution is not clear, although the reduction of India's earnings on its foreign assets and an increase in private profit remittances abroad were contributing factors. Another factor may have been a diversion of transfers from Indians living abroad from official to unofficial channels. Inasmuch as some of these flows are recorded on a basis other than actual foreign exchange receipts, this switch is reflected in part in the "errors and omissions" discrepancy between the recorded inflows and actual foreign exchange receipts. This "errors and omissions" item changed from an inflow of Rs. 80 million in 1961/62 to outflows of Rs. 40 million, Rs. 470 million and Rs. 710 million respectively in the three following years. In the provisional accounts for 1965/66, errors and omissions amount to about Rs 400 million, the de- cline reflecting in part a change in export reporting. External Assistance and Creditworthiness 52. At the end of the calendar year 1965, disbursements of external assistance under consortium members'original pledges for the Third Five Mear Plan amounted to $2,718 million. This amounted to about 50 percent of the $5,472 million pledged during the 1961/62 - 1965/66 period. Approximately $4,466 million of the total aid pledged had reached the stage of signed agreements. These data and the sources of the aid are shown in the following table. In addition tothe consortium pledges shown, a substantial volume of food commodities, fertilizers, and related financial - 18 - aid for shipping has been provided by consortium members, in order to help India overcome the current food emergency. CONSORTIUM THIRD PLAN AID TO INDIA (U.S. $ million) I Iember Original Signed Orders Disbursed Pledge Agreements Placed Austria 18 14 13 9 Belgium 24 24 15 8 Canada 174 112 89 75 France 120 120 75 38 Germany 645 644 531 399 Italy 170 170 60 24 Japan 290 290 239 150 Netherlands 44 44 33 17 United Kingdom 518 487 456 322 United States 2,285 1,671 1,498 1,170 IBRD/IDA 1,185 889 643 506 Total 5,472 4,466 3,652 2,718 Source: IBRD data. 53. Total aid disbursements during the Third Plan period, including amounts carried forward from earlier Plans and aid from East European countries (but excluding PL 480), are estimated to have been Rs. 20.9 billion on a gross basis and Rs. 15.4 billion after debt servicing require- ments are deducted. Net aid amounted to about 13 percent of total Plan investment, although this proportion would be about 20 percent at the revalued.rate of foreign exchange. Sh. Members of the consortium are now considering new non-project aid for 1966/67 in an aggregate amount of $900 million which is required to support India's decontrol and devaluation measures. In addition, the Government of India has indicated that financing of $300 to $400 million for new projects would be needed in 1966/67, and it is expected that individual donors will consider the projects in question. Aid for the Fourth Plan period will be considered by the consortium when the Fourth Plan has been formulated and after it has been appraised by a Bank Mission. The Plan is expected to be issued in outline within the next few months for Parliamentary review. - 19 - 55. India's new economic policies and programs (described breefly below), and prospects for renewed growth and development provide a basis for the effective use of substantial amounts of external assistance, Policy changes involving India 's external payments are expected both to stimulate exports and to reduce India's use of administrative controls while increasing reliance on market forces for deciding the allocation of scarce resources. In agriculture, a good start has been made toward the goal of self-sufficiency in foodgrain production. The program of population control is also promising. 56. Policy changes involving India's external payments position are expected to require a level of non-project assistance for maintenance imports of about $900 million annually for at least two and probably several years. In addition, assistance for projects during the Fourth Plan (including new commitments of $300 to $400 million in the current year)has been requested to carry forward India's investment program. Although aid for new projects is needed, there has been no opportunity as yet for appraisal of the amounts suggested by the Government of India or of specific projects proposed. Considering the present and projected burden of servicing on India's existing debt, the scope for additional lending on Bark terms is quite limited. However, India is considered eligible for substantial amounts of additional aid on IDA terms. External Debt 57. India's medium-and long-term outstanding debt (excluding "frame agreements", mainly with the U.S.S.R.) amounted to some $5.3 billion at the start of 1966, and obligations have been added in the interim in connection with food and fertilizer aid for the current food emergency and for a number of new projects. Some 85 percent of the debt outstanding -- $4.5 billion -- is due consortium members, with the largest share $1.1 billion, representing debts to the U.S. Debt outstanding was equal to about one-eighth of India's annual income in 1964/65 and was some three times the level of export earnings in that year (on the basis of the exchange rate in effect during that year). 58. Annual servicing requirements have also grown at a fairly rapid rate. As indicated below, servicing of outstanding debt (exclusive of debt payment obligations to the U.S.S.R. and East European countries) is expected to entail payments of $317 million in the cur- rent fiscal year. Some $180 million of this amount represents principal payments and the balance is for interest. Total debt servicing in 1965/66 (including East European credits) was equal to approximately 19 percent of India's exports. - 20 - INDIA'S DEBT REPAYMENT OBLIGATIONS, 1966/67 a/ (U.S. $ million) Creditor Principal Interest Total IBRD/IDA 49.0 36.0 85.0 U.K. 33.0 23.1 56.1 Germany 25.6 23.5 49.1 U.S.A. 34.2 27.2 61.4 Japan 16.5 13.9 30.4 Canada 5.1 2.5 7.6 Subtotal 163.4 126.2 289.6 France 4.5 3.2 7.7 Italy 2.5 1.8 4.3 Netherlands - 0.8 0.8 Austria 1.0 0.7 1.7 Belgium 0.7 0.4 1.1 Switzerland 1.1 1.2 2.3 Kuwait 6.7 1.9 8.6 Subtotal 16.5 10.0 26.5 Other 0.1 0.4 0. Grand total 180.1 136.7 316.6 Source: IBRD Data. a/ Excludes rupee payment obligations to East bloc. CHAPTER 3 ECONOMIC POLICIES AND MANAGEMENT 59. As indicated earlier, India has undertaken a number of new policy and program initiatives, and still others are under consideration. Of those already underway, most significant are the new departures in agricultural policies and programs, population control, exchange valuation, and import decontrol. These are summarized below. Indicated changes in Indian transport policy are still to be formalized and put into effect, and measures in the field of foreign trade and finance in addition to those described below are expected in the near future. Agriculture 60. India is now taking some major steps to overcome her agricultural deficiencies. The revitalized program for increasing agricultural production, while long overdue, holds great promise if implemented with dispatch and if resources adequate to the task are provided. As set out in a Food and Agri- culture Ministry report, "Reorientation of Programmes of Agricultural Production", issued last fall, the new program adopts a number of measures that have been considered necessary by agricultural experts. The program consists of the mutually reinforcing short-term (1966/67) and longer-term (1970/71) components summarized below. It is essentially designed to change agricultural technology rather than to extend the area under cultivation. The key element is a considerable expansion of physical inputs, particularly of improved seeds, irrigation, plant protection materials, and fertilizers, for which India's farmers have shown an unexpected degree of receptivity. 61. In the short-term, highest priority is being assigned to quick-yielding programs in areas with assured water supplies. About 4.5 million acres are being planted with high-yielding seed varieties (for paddy, wheat, maize, etc.). Additional areas will be brought into this program as supplies of improved seeds become available. Related inputs, such as fertilizers, water, pesti- cides etc., are to be provided under special priority arrangements. Production and distribution of required seeds for 1966/67 planting are being co-ordinated centrally and an estimated 164 thousand tons of nitrogenous fertilizers required for the intensive program during 1966/67 are to be made available on a high priority basis (in addition to estimated requirements of 1 million tons for "nomal" expansion). Greater importance is being assigned to meeting pesticide needs; increased production and use of improved agricultural implements, including a seed-cum-fertilizer drill, are to be fostered; use of compost and green fertilizer is encouraged; potatoes, tapioca and other root crop production is being promoted; and special attention is being focused on vegetable cultivation in urban areas. Water supplies are being increased by completion and extension of minor irrigation systems already underway, by improving existing systems, and by expansion of public and private tubewells, rather than by undertaking further large-scale irrigation projects. 62. In a longer-run perspective, the 1966/67 program is to be considerably expanded and a number of new elements M to be added, all with a view to reaching 125 million tons of foodgrain production by 1970/71, along with corresponding increases in output of cotton, jute and other cash crops and of poultry, fish, milk etc. The foreign exchange needed for imports of fertilizers and other inputs, of raw materials for domestic manufacture of such factors, and for related plant and equipment under the revised program is expected to amount to over $2.2 billion during the Fourth Plan period. - 22 - 63. Measures to increase output over the longer term include the folloving: (a) Some 32.5 million acres are to be devoted to intensive food production (principally, wheat, paddy, maize, jowar and bajra). This area, already assured of adequate rainfall or irrigation, is to be planted with newly developed high-yielding seed varietioa as supplies are expanded and is to receive adequate Certilizer, pesticides, improved cult- ivation practices, etc. An added 25 million tons of foodgrain is expected from these efforts. A similar package of concentrated inputs, improved seeds, etc. is planned to achieve corresponding increases in cotton, jute, oilseeds and other cash crops. (b) States have been urged to undertake emergency measures for introducing additional crops, cultivation of subsidiary root crops, organizing vegetable,cultivation, cultivating idle land within existing irrigation command areas, etc. (c) Use of improved seeds, chemical fertilizers, pesticides, agricultural machinery, irrigation and agricultural credit facilities is to be greatly expanded. Consumption of nitrogenous fertilizer is expected to reach 2.L million tons and of phosphatic and potassic fertilizers 1.7 million tons by 1970/71, considerably higher than envisaged a year ago. Similarly,pesticide and plant protection is to be extended to 210 million acres by 1970/71 (compared with 160 million acres proposed earlier), and. parallel expansion in the use of high-yielding seed varieties is contemplated. Use of tractors, power tillers, and other machinery is also to be stepped up. Where cooperatives have not met agricultural credit requirements, Agricultural Credit Corporations are to be used to provide credit to producers. Legislation has been prepared for this purpose. Other institutions,including the Food Corporation of India, the Reserve Bank, the State Bank and the Life Insurance Corporation, are also to play larger roles in meeting agricultural needs for production and marketing credit. (d) Indian agricultural research, extension services, education and training are being reorientated. Research is to be directed from the Center and the Agriculture Ministry is to exert greater control over such programs. - 23 - (e) Minimum support prices for agricultural commodities have been raised to increase the incentive for producers. An Agricultural Prices Commission has been established to set support prices each year, and arrangements for procurement have been made by both the Central and State Governments. (f) The concept of irrigation has been changed from one of drought protection to one of irrigation for intensive production. New projects are being designed on this basis. In addition, cropping patterns are being reviewed with a view to introducing short and medium duration crops in place of present.long duration ones. (g) Subsidiary food production is to be emphasized, particularly with respect to the development of cattle, poultry, sheep and fish. (h) A number of administrative changes are being introduced. At the center, an Agricultural Production Board has been established to coordinate the several Ministries and agencies involved in the agricultural program. Similar arrangements are being made at the State level. 64. Greater official concern with agriculture is evidenced by recent policy changes taken with respect to fertilizer investment, pricing and distribution, and the use of free reserves for financing fertilizer imports. In conjunction with the recent U.S.$50 million loan for financing fertilizer imports, India has decided to use about Rs. 385 million of additional exchange resources (including Rs. 240 million of free foreign exchange, Rs. 90 million under trade arrangements with the U.S.S.R. and Eastern Bloc countries and the U.A.R., and about Rs. 20 million of foreign credits) for fertilizer imports. All such imports are to be used for the 1966/67 crop year. Not only are fertilizer imports being greatly expanded to meet the rapid rise in demand, but steps are being taken to encourage foreign and private domestic investment in fertilizer manufacturing capacity along with additional investment in public sector fertilizer plants. Population 65. The dimensions of India's population problem are well known, even through precise demographic data are not available. India's population is expected to reach 500 million during the current year; the rate of annual growth, now about 2.5 percent, has been increasing as mortality rates decline while fertility rates remain relatively unchanged. A few comparative statistics illustrate these developments. During the first decades of this century, there were more than 40 deaths per 1,000. This has now declined to well below 20 per 1,000, and a further fall in mortality rates is predicted as health and nutrition standards improve and the age structure of the population shifts. The birth rate, on the other hand, has remained at above 40 per 1,000 over most of the past 25 years. No natural decline is foreseen; improved health and an increase in the child bearing age group may, in fact, work in the other direction. - 24 - There is,thus, a clear and pressing need for an effective program of population limitation. The recent major step forward in family planning techniques represented by the intra-uterine contraceptive device (IUCD) has facilitated the undertaking of such a program centered around this device but including,of course, other modes of control. 66. Although the Indian record in population control was not impressive prior to 1965, there has been considerably speed in mounting and financing a population control program centered around the use of the IUCD. The program now enjoys the full support of Indian Government leadership, and there is an evident willingness to provide the priority and resources required for a successful program. Funds for the population control program during the Fourth Plan period are expected to be provided as rapidly as the program can absorb them. The status of the program has also been elevated. A Department of Family Planning has been organized within the Ministry of Health, and a Cabinet-level committee has been created to ensure that deqisions -are taken and implemenied with speed. 67. The target of the revitalized family planning program is to reduce the birth rate from about 40 to 25 per 1,000 by 1975. Taking into account the expected decline in the death rate (including infant mortality), this would reduce the annual rate of population expansion from 21 percent to 16 percent and would involve the prevention of 10 million births a year by 1975. The program has four main features: education, training, service and supply, and research. A broad array of propaganda techniques and devices -- including lectures by village leaders, films, posters, and programs on All-India radio -- is being used to motivate and encourage Indian villagers to limit the size of their families. This educational part of the program appears to have met with some success: a sample survey indicated that almost three-quarters of some 100 million couples in the reproductive age groups sampled have expressed some willingness to limit the size of their family to three children. The central problem is how quickly this potential demand can be met. One of the main gaps in the population program has been in training of family planning staff. A recent evaluation of this aspect of the program has led to a strengthening of the 16 existing training centers and the start of 28 new centers so that there will be one center for every 10 million of population. The focus of the program has also undergone some changes in the past few years. The previous approach, essentially to provide part-time clinics to dispense birth control services to families who sought them, has been changed to a more aggressive promotion of birth control at the village level. 68. The advent of the IUCD has brought with it the need and opportunity to integrate the services of private physicians and to involve India's Oedical colleges in the program. Some steps have already been taken in this direction. A stipend of Rs. 100 a month is now being offered to women medical students who contract to serve the program upon graduation for the same number of years as they receive the stipend. By March of this year, over 480 women had taken up this contract, and it is expected that a larger share of the 2,700 women medical graduates each year will be enlisted. All medical colleges are now reported to have started training in birth control methods, with special emphasis on the IUCD. Practicing physicians are given free training in most recent birth control methods. Some 10,000 doctors and medical personnel have already been trained in IUCD techniques, and over - 25 - 30,000 technical staff have been given short training. IUCD insertions are now being made by about 80 mobile teams of doctors, nurses and operating attendants, and the numbers of such units, as well as of stationary centers, are being increased. About 18,000 family planning centers, of which almost 16,000 are in rural areas, are now operating, and a family planning sub- center for each 10,000 of population is planned. These centers provide facilities for IUCD insertions and sterilization, and provide other contra- ceptive devices and information. 69. It is currently estimated that sufficiently widespread use of the IUCD could result in a reduction of about 4 million births by 1973, this total representing about 40 percent of the reduction necessary to bring the birth rate from 40 to 25 per 1,000. It is estimated, however, that the prevention of one birth per year will require no less than 4 or 5 IUCD insertions. To effect a h million reduction in births, then, will require an estimated 20 million IUCD's in use. The Fourth Plan target is, in fact, about 29 million insertions. Other means of birth control are expected to result in an equal number of birth reductions. 70. Substantial progress has been reported since the decision was taken to emphasize the IUCD. Between March and December 1965, some 561,000 IUCD insertions were completed, and IUCD were being installed at a rate of 100,000 a month. The target of 1 million insertions for 1965/66 may therefore have been met. India is now producing the IUCD domestically. A public sector plant at Kanpur began producing the device in August 1965, and production, now about 14,000 per day, is expected to go up to 20,000 a day. Although the manufacturing equipment was imported, the raw materials required to manufacture the devices are available indigenously. 71. Voluntary sterilization was officially accepted as part of the Indian population program during the Second Plan period, and by the end of March 1966, some 1.5 million sterilizations had been performed. At present, about 70,000 of these operations occur each month. There are now about 575 stationary and 175 mobile sterilization units in India as well as about 1,800 medical centers equipped to perform surgical sterilization. The sterilization target for the Fourth Plan is about 3.5 million operations. However, the wide acceptance of the IUCD may result in reduced resort to this irreversible technique in the future. Other types of contraceptives are also being distributed in India, and existing facilities for manufacturing these devices are being expanded. In rural areas, supplies of such devices are provided free; in urbanaeas, payment is tied to the income of the purchaser. 72. The higher priority being assigned to the family planning effort evident in the pattern of expenditures under the program. During the decade of the first two Five Year Plans, outlays for family planning purposes amounted to Rs. 23 million. During the Third Plan, expenditures were about Rs. 260 million, much of which occurred in the last two years of the period. The amount indicated for the Fourth Plan is some Rs. 950 million, and added funds will be made available if the program requires them. - 26 - Exchange Rates, Trade Incentives and Controls 73. India has recently announced a decision with the effect of de- controling maintenance imports, and the value of the rupee was reduced from 4.76 to 7.5 per U.S.$1.00 effective on June 6, 1966. This devaluation of 36.5 percent was intended to bring the rupee into closer relationship with its actual value. The devaluation was accompanied by downward adjustments in import duties (other than those on consumer goods) which somewhat moderated but did not offeet the impact of the devaluation on the landed costs of imports. The Indian authorities have decided not to raise immediately the domestic selling prices of imported foodgrains. On the export side, the previous system of selective incentives (through import entitlements and tax rebates) has been eliminated, and export dutie4 ranging from 10 to 40 percent have been imposed on a dozen items (including tea, jute goods, raw cotton, coffee, oil cakes, etc.) in order to avoid export sector windfalls or a deterioration in export prices. 7h* The change in the rupee rate is an important step toward achieving a long-run improvement in India's balance of payments situation. The new rate is expected to increase incentives for exporters. The rate is expected also to reduce many of the investment and production distortions previously arising from the under-valuation of external resources and exchange. In addition, the adjusted rate should help stem the flow of hard currencies outside official channels, thereby strengthening India's payments position. A problem underlying India's export program still requiring more adequate attention relates to the cost structure and quality of potential export commodities. Continued rises in domestic production costs could erase the gains achieved by devaluation; and indifferent quality could adversely affect the volume of Indian sales abroad. The decontrol and liberalization of imported production material should, by permitting a higher level of productionl and introducing competition, help to effect a reduction in costs and an improve- ment in quality. A corollary need is, of course, for expanded markets for Indian manufactures. 75* It is worth pointing out that India had previously taken some steps in the direction of these policies. The previous two years had, in fact, seen a restructuring of Indian import duties, an expansion of export incentives, and some limited relaxation of controls designed to achieve similar objectives. The revisions of import duties in the August 1965 supplementary budget consti-- tuted an encouraging step toward more realistic pricing for imports. The duty on imports of most machinery and equipment was set at 45 percent; an exception was made for agricultural machinery, however, for which the rate was 25 percent. Imports of basic industrial raw materials such as prime steel and non-ferrous metals were subject to duties at a rate of 50 percent, and the duty on most processed materials was set at 70 percent. Consumer goods imports were generally subject to a 110 percent duty. Foodgrains, fertilizers, books and family planning items were exempt from import duties. These rates included the regulatory duty of 10 percent ad valorem levied on most imports that was in effect since February 1965. The net effect of the revisions in import duties was to raise the average rate of duty on imported goods other - 27 - than foograins from about 33 percent to about 55 percent. As indicated, some of these duties were reduced in conjunction with the recent devaluation of the rupee. 76. On the export side, financial incentives had been offered in order to stimulate sales abroad. Of these, import entitlements assumed increasing significance in view of the reduced availability of foreign exchange for maintenance imports from other sources. Under the import entitlement scheme, exporters were given a formal entitlement to import specified commodities. The amount of the entitlement depended on the type of goods exported and the amount of foreign exchange earned. The entitlements could be transferred or sold to other manufacturers in similar lines of production, and an active market for these entitlements developed. 77, An important but short-term incentive for increasing foreign exchange remittances from abroad was started late in November 1965, under the name of the National Defence Remittance Scheme. This scheme, originally to have terminated after four months, was extended until May 31, 1966. Essentially, the remittance scheme was designed to encourage transfers of foreign exchange to India through official banking channels. The Indian beneficiary of the foreign exchange remitted was given a certificate which was freely transfer- able and against which import licenses equal to 60 percent of the exchange actually remitted were issued. According to recent reports, about Rs. 500 million of foreign exchange were remitted to India under these arrangements. Further export incentives were offered in the form of tax concessions, although these were of less interest to exporters than the import entitlement. Under this scheme,most exporters who didn't have access to the import entitlements were granted certificates ranging from 2 percent to 15 percent of the value of foreign exchange earned on exports. These certificates were in fact worth approximately double their face value at existing rates of corporation taxation. 78*4 An interesting consequence of the various incentives mentioned above was the emergence of a range of exchange rates. In mid-April exporters of traditional, unsupported items received the official rate of 4.76 rupees (in terms of U.S.$1.OO); the rate was about 7 or 8 rupees, including customs duties, for importers of producer goods who received official allocations of exchange; beneficiaries of remittances under the National Defence Remittance Scheme received about 8 rupees (down from a maximum of about 10.5 rupees in February, when most remittances were made); and, importers under NDRS entitlements paid effective rates of 12 or 13 rupees, including customs. The revised rate of 7.5 rupees per U.S.$1.00, is thus more in line with the rates that emerged in the various exchange-using markets. 79.. On the domestic scene, some relazation of controls was realized during the past two years. Responsibility for prices and distribution of many steel products was vested in a mixed private-public Joint Plant Committee, rather than in the Government. Controls of cement pricing and distribution were also relaxed in December 1965. Distribution and price were put in the hands of the Cement Allocation and Coordinating Organisation of the Cement - 28 - Manufacturers' Association. Under the terms of the agreed upon arrangements, one half of future cement production is to be reserved for the Government. In addition, a Rs. 10 per ton increase in price on sales to the Government and of Rs. 16 per ton on private sales was agreed upon, with the increased income to be placed in a special reserve for expansion of manufacturing capacity. The arrangements are to be reviewed after one year of actual operaticns has been completed. Early indications are that this revision has stimulated additional investment sufficient to meet current needs and planned targets. This contrasts sharply with the previous lack of private interest in investing in this industry. 80. In December 1965, the Government took a significant step toward making private investment in the Indian fertilizer industry more attractive. In view of the pressing need for fertilizer, the Govern- ment has agreed to private investment in manufacturing facilities sufficient to raise productive capacity to 1 million tons of nitrogen. Foreign firms that decide to invest in manufacturing facilities before the end of March 1967 will be permitted to determine their own prices and to establish their own distribution outlets for a period of seven years. However, the Government of India is to have an option to purchase 30 percent of their production at a negotiated price (presumably the wholesale price), primarily for distribution in remote areas. This departure appears to have renewr.d foreign interest in investing in fertilizer production in India, and negotiations are now in progress with respect to several manufacturing plants. Joint ventures between Government and private foreign and/or domestic investors in fertilizer manufacturing with management (but not controlling interest) by the latter has now been accepted as public policy. Projects in which private foreign investors hold a controlling interest have been assured rupee financing through Indian financial institutions. 81. More recently, the Government has decided to waive licensing in 11 industries for specified investments not requiring imported capital goods and not otherwise reserved for small industry production. Included in this list are paper and pulp, chemicals and soda ash plants. In addition, prior to the recent decontrol, a significant element of flexibility had been introduced in import licensing procedures which provided for unlimited fungibility among the items approved for importing under the import authorization. This procedure was initially tried under the IDA industrial import credits and was found to work satisfactorily. - 29 - Transport 82. The evolution of the role of transport in Indian development, concurrent changes in the patterns and composition of traffic, and the emergence of alternative forms of transport have led to a comprehensive review-cum-recon- sideration of India's transport policies, structure and organization. This task was undertaken by a Committee on Trasport Policy and Coordination whose final Report was published early in 19661/ and is under consideration by the Government at this time. It is still too early toknow how soon and effectively the recommendations presented will be acted. upon. 83. The Committee's broad terms of reference and the manner in which it approached its task are documented by the wide range and frequently contro- versial nature of its conclusions and recommendations. The Report takes the view that the transport system must be considered. in its entirety and that investment, routes, traffic and related. planning shouldcover all means of transport. The transport system, it is stated, must be designed, coordinated. and permitted. to develop so that the various transport media complement each other; services should be provided by each type in combinations that will meet the needs of the nation at each stage of development at a minimum cost to the economy. In these calculations, social as well as financial costs and benefits must be taken into account. 84. The Report concludes that new investment in railways should. be devoted mainly to increasing efficiency nnd capacity on existing routes. Road transporI on thd other hand,should be expanded much more rzpidly in order to open up neu areas,to cariy development to the villages,to promote growth of agriculture and the rural economy, and to provide intra-urban transport. Regulation of road transport, the Report states, shouldbe considered. a positive tool for achieving transportation objectives rather than as a means of providing pro- tection to the railroads. 85. The Report also recommends a rationalization of transport fees, improved accounting practices, realistic pricing policies, and a number of far-reaching organizational changes affecting all modes of transport. It recommends that pricing policy for major undertakings should be such as to yield a net return which corresponds to the scarcity value of capital in the economy, and each system of transport should earn equal returns at the margin. The Report also proposes a redefinition of transport regions for purposes of State motor vehicle licensing and control, a shift of focus from local to State-wide road. transport planning, and an inter-State road transport system designed to facilitate inter-State movements of goods which are now subject to a variety of State and local fees and charges and to numerous delays on transit. 1/ Committee on Transport Policy and Coordination, Final Report, January 1966. CHAPTER 4 THE 1966/67 PROGRAM 86. While the Fourth Five-Year Plan period began on April 1, 1966, no Fourth Plan document has thus far been issued. Completion of the Plan was delayed by a number of factors, principal among which was the uncertainty about likely foreigi exchange availabilities and economic policies. As a result, only an Annual Plan for 1966/67 has thus far been issued (dated March 1966) providing for a trans- itional program. The comprehensive Fourth Plan, which is now in preparation, is expected to be issued in outline form later this summer for discussion and review by the Indian Parliament. It is also expected that the Fourth Plan will be subject to appraisal by a Bank Mission before the end of this year. The program for 1966/67 is fundamentally a plan for collecting and allocating public sector resources during the current year. 87. The Bank has not had an opportunity to review the 1966/67 Annual Plan, an. the information presented below is a summary of the program as presented by the Government of India. Emphasis of the 1966/67 program is principally on increas- ing agricultural production. Some 13 percent of total planned outlays is to be directed to the agricultural sector, compared with about 10 percent in 1965/66 The greater emphasis on agriculture is reflected also by the fact that outlays for agricultural programs are scheduled to increase by about 15 percent in 1966/ 67, while the increase in outlays in industry and mining is to be held to about 3 percent, and outlays for all other sectors are expected to decline. The broad outlines of the 1966/67 program are as indicated in the following table: INDIA - ANNUAL PLAN, 1966/67 ANTICIPATED OUTLAYS (Rs. million) Amount Sector 1965/66 est. 1966/67 plan Agriculture 2,320 2,678 Community Development 801 648 Irrigation and Power 5,505 4,647 Industries and Mining 5,096 5,248 Transport and Communications 4,953 4,284 Social Services and Other 41293 3,311 22,965 20,815 a/ Source: Government of India, Annual Plan, 1966/67. a/ Since certain types of expenditures are transferred from Plan to non-Plan totals after completion of the Plan period in which they were started, the annual totals and details are not strictly comparable. Agriculture 88. In the agricultural sector, top priority has been given to quick-yielding schemes that will help to augment production in the shortest possible time. Planned outlays are expected to total Rs. 2,673 million which is in addition to current, non-Plan expenditures of about Rs. 970 million. Major shares of plannet outlays have been allocated to minor irrigation works, seed multiplication, - 31 - fertilizers and other inputs, and soil conservau.ion. The Plan indicates thai consistent with the agricultural reorientatI.on initiated earlier., the previous fragmented approach to agricultural production is being replaced by a unified strategy based on the premise that insufficient modern agricultural inputs have been the principal impediments to increased agricultural output. Accordingly, quick-yielding minor irrigation works, greatly increased supplies of fertilizers, high-yielding seed varieties, pesticides, and soil conservation and reclamatioln are all part of the 1966/67 program. Irrigation is to be extended to some 3.4 million acres of additional land, an additional 3.8 million acres will be improved by conservation measures, improved seed varieties are to be introduced on 17.8 million acres, and plant protection is to be extended to some 22 million acres of crop land. Consumption of fertilizers is to expand substantially. 89. The use of nitrogenous fertilizers is expected to grow from 600,000 tons in 1965/66 to 1 million tons (in terms of N) in 1966/67; phosphatic fertilizers (P205) consumption is to increase from 200,000 tons to 370,000 tons, and potassic fertilizers (K20) is expected to increase from 150,000 to 200,000 tons. This program is expected to yield substantial improvements in agricultural crop production. Foodgrain production is expected to reach 97.0 million tons in 1966/67, up about 20 million tons from 1965/66 levels, oilseeds output is ex- pected to reach about 10 million tons, compared with about 8 million tons in 1964/65, and about 7 million tons in 1965/66; cotton output is to reach 6.3 million bales in 1966/67, compared with about 5.4 million bales in 1964/65 and 5.2 million bales in 1965/66; and jute is to reach 6.9 million bales, com- pared with 6.1 million bales in 1964/65 and 5.0 million bales in 1965/66. 90. In recent years, the Center has assumed a more positive role in implementing the program for achieving higher agricultural production, althouCi agriculture remains primarily a State responsibility. To assure expeditious implementation of the new agricultural program,formal memoranda have been agreed upon by the Center and each State outlining their joint and several responsi- bilities. Specific areas in which greater Center activity is intended include research, education, seed distribution, supply of fertilizers, plant protection, horticulture, milk production, forestry, fisheries, subsidiary foods and ware- housing. The Center is also taking a more dynamic role in strengthening and expanding consumer cooperatives, assisting State Agricultural Credit Stabiliza- tion Funds, and supporting the establishment of large-scale food processing plants. Principal State programs include improved seeds, plant protection, minor irrigation, and soil conservation. Groundwater surveys are to be inte- grated with the program of tubewells and distribution of pump sets. It is planned that about 1 million pump sets and tubewells will be energized in the current year. In addition, the States are expected to provide the major support for programs in animal husbandry, fishing, forestry, and local crop credit for producers. The main features of the 1966/67 program for agriculturea are indicated in the following table: - 32 - AGRICULTURAL SECTOR OUTLAYS, 1966/67 (Rs. million) Program Center States Total Agricultural production 15i 700 851 Area development 12 40 52 Hinor irrigation 22 857 879 Soil conservation 35 254 289 Animal husbandry 16 148 163 Dairying and milk supply 4 91 95 Forests 31 135 166 Fisheries 27 89 116 Warehousing and marketing 50 17 67 Total 347 2,331 2,678 Source: Government of India, Annual Plan 1966/67. a/ Including Union Territories. 91. In the related field of major and medium-size irrigation projects, priority has been assigned to utilizing the irrigation potential of projects already completed or near completion. Projects in early stages have been delayed in order to make necessary resources available for quicker-yielding projects. Outlays for irrigation and flood control are accordingly expected to decline from Rs. 1,675 million in 1965/66 to Rs. 1,21r3 million in 1966/67. It is expected that about 2.5 million acres of additional irrigation potential frommajor and medium irrigation projects will be created this year, and additional utilization is expected to be some 2 million acres. 92. The program in power is expected to involve an outlay of Rs. 3,400 million in 1966/67, some Rs. 416 million below 1965/66. Most (i.e., about 85 per cent) of the power program will be carried out at the State level, and about two-thirds of total outlays will be directed to increasing generating capacity. Installed capacity is, as a consequence, expected to increase from about 10 million kw (1965/66) to about 12 million in 1966/67, and, assuming adequate rainfall for hydroelectric power needs, the Indian power situation is expected to be satisfactory for the year. As in the case of other investment, priority has been assigned to finishing 'power projects nearing completion. The policy of inter-connecting neighboring States' power lines, and the electrification of rural areas are being pressed forward as part of the program to increase agricultural output. - 33 - Industry and Transport 93. In the industry and mining sector, Plan emphasis is similarly on the expeditious completion of projects that are well along and in which substantial investments have already been made. New projects included in the 1966/67 program were evaluated in terms of their priority for the defense effort, in the promotion of exports, or in developing substitutes for imports. Other important criteria in the selection of projects for the investment program have been the degree of readiness for implementation, arrangements for foreign exchange financing, and the possibility of expanding existing facilities rather than starting new ones. Important new projects included in the 1966/67 program, however, are the Bokaro steel plant (for which Rs. 275:million have been allocated), fertilizer plants at Madras and Cochin, and the Gujerat petro-chemical complex. Major additions to capacity in 1966/67 are expected in steel, aluminum, fertilizers, cement, caustic soda, paper and machine tools. In total, the 1966/67 program in the organized industries and mining sector is expected to involve outlays of Rs. 4,780 million, up by Rs. 223 million from the past year. The program for village and small industries is planned at an outlay level of Rs. 470 million in 1966/67, compared with Rs. 540 million in 1965/66. Similar tests of export promotion and defense have been applied in the selection of schemes for inclusion in this program. 94. The 1966/67 program in the transport and communications sector provides principally for continuing programs and is expected to require outlays of Rs. 4,284 million, some Rs. 670 million below 1965/66. Investments in railways, roads and civil air transport provide almost entirely for projects already in progress, while those for port development, tourism and communications include essential new activities. Highway and road transport programs are, however, to receive increased priority. Social Welfare 95. Outlays for education are also planned at a lower level in 1966/67 than in the preceding year. Most of the program consists of continuing activities. Outlays on building construction are to be kept to a minimum. About 30 per cent of the 1966/67 program is to be devoted to technical education, with the balance going to general education at the elementary, secondary and university levels. The 1966/67 plan also makes provision for programs in scientific research, health and water supply, housing, development of backward classes, and related programs, most of which are of modest size and show declines in outlays between 1965/66 and 1966/67. The major exception is in the family planning program for which outlays are expected to increase from about Rs. 80 million in 1965/66 to over Rs. 150 million in 1966/67. (The principal features of this program were outlined in paragraphs 63-70). Internal Finance 96. Although the external assistance picture is subject to considerable uncertainty, the Government of India has provided estimates of the sources of financing for the Central Government programs summarized above, as shown in the following table. - 34 - INDIA - ANNUAL PLAN, 1966/67 FINANCING PLANNED OUTLAY (Rs. million) Source Amount Domestic budget resources Current revenues (excl. taxes added from April 1965) 2,030 Railway contribution (1965/66 rates &fares) 340 Public enterprise surpluses (1965/66 product prices) 2,180 Additional expected taxation (measures to increase state incomes, and surpluses of public enterprises including railways, etc.) 4,220 Loans from public (net) 2,090 Other domestic sources (small savings, gold bonds, annuity deposits, etc.) 4,020 Subtotal, dcmestic resources 14,880 Budget receipts corresponding to external assistance 5,810 Deficit financing 120 Total 20,810 Source: Government of India, Annual Plan 1966/67. STATISTICAL APPENDIX Title Table No. Net Domestic Product by Industry of Origin 1 Growth of Per Capita Output 2 Index Numbers of Agricultural Production 3 Area Planted to Principal Crops 4 Production of Principal Crops 5 Average Yield per Hectare of Principal Crops 6 Industrial Production 7 Production in Selected Industries 8 Wholesale Prices 9 Working Class Consumer Prices 10 Wholesale Prices of Selected Agricultural Commodities 11 Security Prices 12 Security Yields 13 Money Supply and Allied Data 14 Causes of Variations in Money Supply 15 Credit Extension to Government 16 Net Absorption of Government Securities by the Pubic Since 1951/52 17 Current Budget of Central Government 18 Capital Budget of Central Government 19 Current Budget of States (Consolidated) 20 Capital Budget of States (Consolidated) 21 Debt Position of Government of India 22 Debt Position of States 23 India's Balance of Payments Selected Invisible Transactions 25 India's Foreign Exchange Reserves 26 Import and Export Indices 27 Payments for Imports 28 Imports by Source 29 Receipts from Merchandise Exports 30 Exports of Selected Commodities by Quantity 31 Exports by Destination 32 Utilization of External Assistance 33 Composition of IndiaPs External Public Debt 34 Table 1 Net Domestic Product by Industry of Origin (Rs. crores: current prices) 1955/56 1960/61 1961/62 1962/63 1963/64=, Agriculture 4,520(45%) 6,890(49%) 6,960(47%) 7,000(45%) 8,100(47%) (inc. fishery & forestry) Mining 100( 1%) 160( 1%) 170( 1%) 190( 1%) 220( 1%) Factory establishments 780( 8%) 1,320( 9%) 1,540(10%) 1,680(11%) 1,910(11%) Small enterprises 970(10%) 1,120( 8%) 1,170( 8%) 1,210( 8%) 1,260( 7%) Commerce, transport and communications 1,880(19%) 2,340(17%) 2,480(17%) 2,650(17%) 2,790(16%) Professions and liberal arts 560( 6%) 740( 5%) 790( 5%) 840( 6%) 900( 5%) Government administration 570( 6%) 900( 6%) 1,000( 7%) 1,130( 7%) 1,300( 8%) House property 460( 5%) 530( 4%) 550( 4%) 560( 4%) 570( 4%) Domestic service 140( 1%) 190( 1%) 210( 1%) 220( 1%) 240( 1%) Net domestic product at factor cost 9,980 14,190 14,870 15,480 17,290 Source: Central Statistical Organisation a/ Preliminary estimates. Table 2 Growth of Per Capita Output 1955/56 1959/60 1960/61 1961/62 1962/63 1963/64a' Net national output at current prices (Rs. crores) 9,980 12,950 14,140 14,800 15,400 17,200 Net national output at 1948/49 prices (Rs. crores) 10,480 11,860 12,730 13,060 13,310 13,910 Per capita output at current prices (Rs.) 255 305 326 334 339 371 Per capita output at 1948/49 prices (Rs.) 268 279 293 294 293 300 Perceitage change in real per capita output over previous year quoted - +4% +5% negl. neg1. +2% Source: Central Statistical Organisation a/ Preliminary estimates. Table 3 a/ Index Numbers of Agricultural Production7 (Agricultural years beginning July: 1949/5o=l00) Weight 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 FOODGRAINS Rice 35.3 88 114 138 142 127 147 154 Wheat 8.5 101 131 163 179 160 146 179 Barley 2.0 106 110 118 134 103 86 105 Jowar 5.0 90 97 141 115 138 131 141 Bajra 2.7 84 108 103 114 122 117 140 Maize 2.1 84 112 147 154 164 163 163 Ragi 1.2 88 120 122 132 123 128 125 Small millets 1.5 89 105 98 105 95 104 102 Total Cereals 58.3 90 115 138 143 132 141 152 Gram 3.7 98 139 160 148 137 116 148 Tur 1.1 92 99 106 70 80 69 96 Other Pulses 3.8 86 104 105 110 lo8 100 113 Total Pulses 8.6 92 118 127 122 117 103 126 Total Foodgrains 66.9 91 115 137 140 130 136 149 NON-FOODGRAINS Groundnut 5.7 101 112 142 148 142 154 182 Sesamum 1.2 102 105 77 90 112 106 112 Rape and mustard 2.0 95 106 166 166 159 111 169 Linseed 0.8 88 97 95 11 104 91 112 Castorseed 0.2 81 96 82 84 78 78 78 Total Oilseeds 9.9 99 109 134 140 138 133 163 Cotton 2.8 111 154 202 175 202 209 206 Jute 1.4 106 136 125 193 165 187 184 Mesta 0.3 100 175 169 281 250 276 234 Total Fibres 4.5 109 150 176 188 194 207 201 Tea 3.3 104 107 121 133 130 130 142 Coffee 0.2 112 196 246 230 280 342 342 Rubber 0.1 94 146 167 179 208 246 293 Total Plantation Crops 3.6 104 113 129 140 141 145 157 Table 3 (cont'd) Weight 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 Sugarcane (in terms of Gur) 8.7 114 120 184 174 157 174 202 Tobacco 1.9 97 113 114 126 132 130 132 Potato 1.0 107 120 169 152 193 149 201 Pepper (black) 1.2 97 133 135 135 124 116 115 Chillies (dry) 2.0 119 123 1)42 130 143 155 155 Ginger (dry) 0.3 94 106 116 124 129 141 140 Total Miscellaneous 15.1 110 120 163 156 151 159 179 Total Non-Foodgrains 33.1 106 120 153 153 152 156 195 ALL COMMODITIES 100.0 96 117 142 145 138 143 158 Source: Ministry of Food and Agriculture a/ The indices for 1962/63, 1963/64 and 1964/65 are all subject to revision. Table 4 a/ Area Planted to Principal Cropsa 1950/51 1955/56 1960/61 1961/62 1962/63 153/64 1964/65 (million hectares) Rice 30.8 31.5 34.1 34.7 34.9 35.6 36.1 Wheat 9.7 12.4 12.9 13.6 13.7 13.5 13.4 Coarse grains 37.7 43.5 45.0 44.7 43.4 43.1 44.0 Total Cereals 78.2 87.4 92.0 93.0 92.0 92.2 93.5 Pulses 19.1 23.2 23.6 24.2 24.0 24.1 24.0 Total Foodgrains 97.3 110.6 115.6 117.2 116.0 116.3 117.5 Groundnuts 4.5 5.1 6.5 6.9 6.9 6.8 7.1 Castor 0.6 0.6 0.5 0.5 0.4 0.5 0.4 Sesamum 2.2 2.3 2.2 2.2 2.5 2.4 2.5 Rape and mustard 2.1 2.6 2.9 3.2 3.1 3.0 2.8 Linseed 1.4 1.5 1.8 2.0 1.9 2.0 2.0 Total Oilseeds 10.7 12.1 13.8 14.8 14.8 14.7 14.8 Sugarcane 1.7 1.8 2.4 2.5 2.3 2.3 2.5 Cotton 5.9 81 7.6 8.0 7.8 8.2 8.2 Jute 0.6 0.7 0.6 0.9 0.9 0.9 0.8 Mesta n.a. 0.2 0.3 o.4 0.4 0.4 0.4 Tobacco 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Chillies 0.6 0.6 0.7 0.6 0.6 0.7 0.7 (thousand hectares) Tea 314 316 331 331 333 334 n.a. Coffee 91 101 114 116 n.a. n.a. n.a. Rubber 58 70 129 139 144 152 n.a. Coconut 622 647 717 723 791 799 n.a. Source: Ministry of Food and Agriculture a/ Data for 1962/63, 1963/64 and 1964/65 are subject to revision. Table 5 a/ Production of Principal Crops' Unit 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 Foodgrains, total million tons 50.8 66.8 82.0 82.7 78.4 80.2 88.4 Cereals, subtotal million tons 42.4 55.8 69.3 71.0 67.0 70.2 76.0 Rice million tons 20.6 27.6 34.6 35.7 31.9 36.9 38.7 Wheat million tons 6.5 8.8 11.0 12.1 10.8 9.9 12.1 Coarse grains million tons 15.3 19.4 23.7 23.2 24.3 23.4 25.2 Pulses million tons 8.4 11.0 12.7 11.8 11.4 10.1 12.4 Oilseeds, total t000 tons 5,158 5,734 6,982 7,284 7,113 7,038 8,584 Groundnuts '000 tons 3,481 3,862 4,812 4,994 4,821 5,215 6,175 Castor '000 tons 103 125 107 109 101 102 101 Sesamum '000 tons 445 467 318 372 464 439 466 Rape and mustard '000 tons 762 860 1,347 1,346 1,294 903 1,375 Linseed '000 tons 367 420 398 463 433 379 466 Sugarcane- '000 tons 5,705 6,075 11,141 10,563 9,544 10,596 12,315 Cotton '000 tons 518 711 953 825 956 989 973 Jute '000 tons 596 762 744 1,144 981 1,113 1,094 Mesta '000 tons n.a. 209 203 338 305 337 286 Tobacco '000 tons 261 303 307 339 366 358 370 Chillies (dry) '000 tons 351 361 419 389 420 456 455 Tea million kgs. 275 285 321 354 347 346 n.a. Coffee million kgs. 25 34 43 40 n.a. n.a. n.a. Rubber million kgs. 14 22 25 27 32 36 n.a. Coconuts million nuts 3,582 4,226 4,639 4,478 4,963 4,736 n.a. Source: Ministry of Food and Agriculture a/ Data for 1962/63 - 1964/65 are provisional estimates. b/ Yield expressed in terms of gur. Table 6 Average Yield per Hectare of Principal Crops (Kgs.) 1950,/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 Rice 668 874 1,013 1,028 914 1,036 1,074 Wheat 663 708 851 890 793 731 898 Coarse grains 408 448 485 519 558 Shh 573 Total cereals 5h2 639 753 763 728 761 813 Pulses 441 476 539 485 477 418 516 Total foodgrains 522 605 710 705 676 690 752 Groundnuts(nut in shell) 775 752 745 725 702 766 873 Castorseed 186 218 230 224 232 214 225 Sesamum 202 204 1-47 165 186 183 186 Rape and mustard 368 336 467 425 416 299 489 Linseed 262 275 222 234 228 189 232 Total oilseeds 481 474 507 493 481 478 578 Sugarcane (gur) 3,342 3,289 4,613 4,303 4,186 4,695 4,841 Cotton (lint) 88 88 125 103 122 121 119 Jute 1,03 1,082 1,183 1,248 1,153 1,283 1,301 Tobacco 731 739 766 811 880 814 874 Chillies (dry) 593 598 628 631 668 626 637 Tea 876 902 970 1,069 1,042 1,036 - Coffee 270 341 379 342 - - - Source: Ministry of Food and Agriculture a/ Figures for 1962/63, 1963/64 and 1964/65 are subject to revision. Table 7 Industrial Production (Index numbers: 1956= 100) October Industry Group Weight 1951 1955 1960 1961 1962 1963 1964 1965 Mining and quarrying 7.47 87 97 137 147 162 176 169 182 Food manufacturing 13.99 80 93 117 129 127 122 136 145 Beverages and tobacco: cigarettes 1.49 82 87 141 150 156 155 176 210 Cotton textiles 32.10 80 95 103 109 109 116 123 123 Woollen textiles 1.10 71 82 101 107 139 166 128 111 Silk and synthetic fibres 2.94 65 77 135 145 154 170 211 220 Jute manufactures 5.62 79 94 99 90 110 117 121 126 Footwear (including leather) 0.28 92 86 144 166 180 214 212 237 Wood (except furniture) 0.24 55 88 148 150 169 195 203 230 Paper products 1.39 67 96 173 182 191 227 238 248 Leather and fur products 0.18 110 93 167 116 125 149 138 140 Rubber products 3.04 75 92 141 157 170 187 198 218 Chemicals and products 3.56 73 96 148 171 186 205 226 238 Petroleum products 3.79 6 78 148 157 169 197 217 230 Non-metallic minerals 2.47 64 88 168 181 220 205 216 232 Basic metals 9.25 84 97 183 182 225 259 261 269 Metal products .99 54 97 106 152 179 219 226 242 Machinery (non-electrical) 1.10 45 83 237 269 293 365 411 480 Electrical machinery 2.41 44 72 176 183 211 238 282 311 Transport equipment 2.86 46 73 119 131 151 151 193 204 Electricity 3.68 61 88 171 199 223 258 297 322 ALL INDUSTRIES 100.00 74 92 130 138 151 163 175 184 Source: Central Statistical Organisation Table 8 Production in Selected Industries 9 Months Product Unit 1951 1956 1961 1962 1963 1964 (Jan-Sept.) 194 97_ / MINING Coal in. tons 35 40 56 62 67 64 48 52 Iron ore mn. tons 3.7 4.3 12.3 14.3 14.8 14.9 11.0 10.0 METALS Pig iron '000 tons 1,736 1,836 4,946 5,796 6,60k 6,593 4,850 5,130 Finished steel '000 tons 1,092 1,356 2,798 3,56k 4,258 4,342 3,210 3,380 Aluminium '000 tons 3.9 6.6 18.4 35.2 53.4 Sh.5 41.2 43.9 Copper '000 tons 7.2 7.8 8.7 9.8 9.6 9.5 7.0 7.0 MECHANICAL ENGINEERING Machine tools mn.rupees k.7 12.0 85.2 118.2 179.9 237.0 172.0 212.0 Sugar machinery mn.rupees - 3.2 46.7 6k.3 57.4 80.6 5k.0 61.0 Power-driven pumps '000s 1 47 127 130 150 168 120 163 Automobiles '000s 22 32 5k 58 52 67 50 55 Bicycles 000s 114 664 1,049 1,116 1,182 1,408 1,038 1,15k Sewing machines '000s 44 130 307 343 346 255 165 316 Railway wagons '000s - 16 11 17 19 2k 19 19 Motor cycles & scooters '000s - 5.8 2k.4 23.1 2k.5 33.9 23.1 31.0 Typewriters '000s - 13.4 31.1 36.3 k2.k 44.1 33.6 31.3 ELECTRICAL ENGINEERING Power transformers '000 KVA 196 919 1,796 2,306 2,639 3,308 2,352 2,213 Electric motors '000 HP 143 359 829 986 1,182 1,318 959 1,2k7 Radio receivers 'Oo0s 73 151 326 343 k19 475 345 klo House rent meters '000s - 230 632 878 1,194 1,216 965 829 Electric lamps b/ millions 15 30 45 55 67 67 55 54 Electric fans '000s 212 338 1,07k 1,129 1,144 1,142 792 1,103 Bare copper wire '000 tons 3 10 10 5 k 6 5 3 Aluminium conductors '000 tons - 11 22 29 32 45 33 33 CHEMICALS Ammonium sulphate '000 tons 11 79 79 84 89 86 61 65 Superphosphate '000 tons 10 1k 62 75 97 118 86 90 Sulphuric acid. '000 tons 109 168 422 469 568 679 50k 503 Soda ash '000 tons k8 86 177 223 267 282 208 236 Caustic soda '000 tons 15 k0 120 127 159 18k 135 160 Cement mn. tons 3.2 5.0 8.2 8.6 9.4 9.7 7.1 7.8 Refractories '000 tons 241 323 626 671 659 660 k89 526 Table 8 (cont'd) 9 Months Product Unit 1951 1956 1961 1962 1963 196k (Jan-Sept.) Paper and paper board '000 tons 134 196 364 388 463 491 368 391 Auto tyres & tubes millions 1.7 1.9 3.0 3.4 4.0 4.5 3.2 3.7 Bicycle Tyres & tubes millions 8.8 12.7 24.2 23.5 27.5 31.3 23.4 27.5 Footwear (rubber & leather) mn. pairs 28.8 42.7 55.8 61.6 60.0 53 39 45 Soap '000 tons 85 112 149 152 159 166 128 123 Petroleum products tOOO tons 249 3,890 6,090 6,584 7,650 8,450 6,290 6,645 TEXTILES Cotton yarn mn. kgs. 591 758 862 860 893 96k 711 718 Rayon yarn c/ '000 tons 2.5 16.9 49.5 60.0 65.5 74,7 56.8 5h.7 Cotton cloth (mill sector) mn. metres3,727 4,852 4,701 4,560 4,423 4,654 3,475 3,502 Cotton cloth (decen- tralised) mn. metres 1,013 1,634 2,369 2,410 2,874 3,066 2,249 2,267 Jute textiles mn. tons 889 1,111 971 1,187 1,236 1,272 959 1,014 Woolen fabrics mn. metres 11.1 14.9 13.2 18.3 20.4 11.7 8.9 7.6 FOOD PRODUCTS e/ 2/ Sugar d/ '000 tons 1,128 1,884 3,029 2,716 2,160 2,568 2,568 3,261 Tea mnn. kgs. 286 302 353 3k3 343 373 262 270 Coffee '000 tons 18.4 35.0 65.7 47.5 58.k 67.3 59.5 56.4 Vanaspati '000 tons 175 260 339 369 38k 360 279 321 ELECTRICITY Power generated mn. KWH 5,858 9,611 1,91121,473 4,79128,5002V20.23,200 Source: Central Statistical Organisation a/ Provisional. b/ Excluding fluorescent lamps. T/ Staple fibre, viscose yarn and acetate yarn. '/ Figures relate to crop year (November to October) and are in respect of cane sugar only. e/ Figures relate to crop years 1963/6k and 1964/65 respectively. Table 9 Wholesale Prices (Index numbers: 1952/53= 100) Jan. Weight 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 1966 Cereals 192 76 104 102 106 116 139 15h Pulses 43 62 93 92 105 115 165 162 Fruit and vegetables 23 101 119 138 136 141 179 183 Milk and ghee 84 90 116 116 124 128 147 158 Edible oils 47 85 150 157 152 151 200 254 Fish, eggs and meat 17 96 124 135 144 150 171 216 Sugar and gur 48 89 133 120 145 189 188 153 Other foods 50 134 168 172 172 179 179 197 Total Food 504 87 120 120 126 137 160 172 Liquor and tobacco 21 81 110 100 101 120 181 135 Industrial raw materials 155 99 145 143 137 140 163 199 Manufactures 290 100 124 127 129 131 137 152 Fuel, power, light, etc. 30 95 120 122 124 139 145 152 All Commodities 100 93 125 125 128 135 153 170 Source: Office of the Economic Adviser to the Government of India. Table 10 Working Class Consumer Prices (Index numbers: 1949=100) 1951/52 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 All India 105 96 124 127 131 137 157 Calcutta 106 93 113 115 121 a/ a/ Bombay 107 110 137 142 145 150 172 Delhi 108 100 121 128 130 137 153 Madras 104 100 146 149 150 153 177 Hyderabad 109 100 133 138 142 a/ a/ Bangalore 115 104 147 151 154 a/E/ Kanpur 94 79 100 103 106 a/ a/ Ahmedabad 104 89 120 121 121 129 138 (Index numbers: 1960=100) b/ 1960/61- 1961/62 1962/63 1963/64 1964/65 Calcutta 100 102 108 114 124 Hyderabad 100 104 108 115 128 Bangalore 101 106 109 114 124 Kanpur 101 102 105 113 136 Source: Labour Bureau Government of India a/ Compilation of working class consumer prices index (1949=100) for Calcutta, Hyderabad, Bangalore and Kanpur was discontinued. The indices for these cities are being compiled with 1960=100. b/ Estimates. Table 11 Wholesale Prices of Selected Agricultural Commodities (Index number: 1952/53=10) 1950 1955 1960 1961 1962 1963 1964 1965 Rice 91 76 109 105 109 122 133 135 Wheat 94 70 91 89 92 91 123 14o Coarse grains 97 65 118 114 117 110 164 197 Pulses 86 56 93 91 104 109 153 167 Groundnuts 127 71 141 157 145 140 175 212 Sugarcane 106 92 102 102 102 105 120 122 Tea 172 206 202 202 173 193 191 190 Coffee 75 80 87 88 91 97 107 114 Tobacco (raw) 97 78 107 100 93 108 122 136 Cotton 105 95 113 108 112 117 124 130 Jute 128 122 179 208 146 147 159 197 Source: Office of the Economic Adviser to the Government of India. Table 12 Security Prices (Index numbers (Index numbers: 1952/53=100) 1961/62=100) Jan. 1960/61 1961/62 1962/63 1963/64 1964/65: 1964/65 1966 Government securities 101 101 99 100 98 97 94 Industrial debentures 101 101 98 98 97 95 94 Preference shares 86 83 80 82 81 100 91 Variable dividend industrial securities 183 193 160 168 158 82 74 Table 13 Security Yields Dec. 1960/6i 1961/62 1962/63 1963/64 1964/65 196c Government 3% conversion 1986 or later 4.06 4.16 4.49 4.66 4.80 5.53 Industrial debentures (tax-free rates) 4.11 4.15 4.35 4.65 5.54 6.16 Preference shares (tax-free rates) 5.32 5.64 5.87 5.88 6.h2 7.31 Variable dividend industrial securities 4.88 4.67 4.85 4.90 5.58 6.92 (tax-free rates) Source: Reserve Bank of India Table 14 a/ Money Supply and Allied Data7 (Rs. crores) 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 1965/66 Money supply with public, total 2,022 2,220 2,868 3,045 3,310 3,752 4,080 4,401 Currency with publicb/ 1,405 1,571 2,098 2,201 2,379 2,606 2,769 2,961 Deposit money with public c/ 617 649 770 844 931 1,146 1,311 1,440 Index d/ 100 110 144 154 168 190 207 223 Rupee securities held by RBI e/ 595 738 1,852 1,957 2,194 2,403 2,567 2,743 Advances to Governments by RBI 2 - 39 81 55 71 74 189 Banks' investments in Government securities 347 398 591 634 629 676 755 865 Central Government.'s deposits with RBI 162 67 76 71 56 84 91 52 Foreign assets held by RBI 884 746 136 130 116 126 86 95 Bank credit to private sector c/587 823 1,494 1,631 1,844 2,078 2,300 2,534 Time liabilities of bank 331 466 1,095 1,198 1,243 1,285 1,418 1,628 of which PL 480/665 deposits f/ - -. (189) (135) (68) (30) - - Source: Reserve Bank of India and infor- mation received by Mission. a/ Revised series. Figures are with reference to the last Friday of each fiscal year except for 1965/66 when figures are as of February 25, 1966. b/ Data on currency have been revised to include circulation of small coin. 7/ Data on (i) deposit money and (ii) time deposits with banks have been revised so as to exclude inter-bank deposits of scheduled banks for the entire period and non-bank "other" deposit liabilities from 1960/61. /l Index numbers of total money supply with the public have been calculated after making adjustments in the money supply figures for (i) non-bank "other" deposit liabilities and (ii) withdrawal of currency (Rs. 34.2 crores) from Kuwait during 1961/62. e/ Including rediscounts of Treasury Bills by RBI. f/ This represents time deposits made to the Special Account held by the U.S. authorities with the State Bank of India. Table 15 a/ Causes of Variations in Money Supply (Rs. crores: expansionist effect +, contractionist effect -) 1951/56 1956-61 1960/61 1961,/62 1962/63 1963/64 1964/65 1965/66 Total increase in money b/ supply with public +198 +706 +194 +212- +264 +41h2 +328 +321 Credit extension to Government c/ +245 +1,211 +114 +313 +277 +300 +287 +504 Credit extension to d/ d/ d/ others +240 +674 +238 +138 +214 +233- +222- +234 Effect of changes in time liabilities of banks t/-136 -462 -106 -156 -112 - 80 -195 -227 Effects of external transactions e/ - 96 -674 - 52 - 66 - 27 + 31 - 28 - 41 Other causes (residual item) -55 - 43 - - 17 - 88 - 42 + 42 -149 Source: Reserve Bank of India and infor.- mation received by Mission. a/ Variations are as between the last Fridays of each fiscal year except for 1965/66 when data for February 25, 1966 were used. b/ Adjusted for the return of currency (Rs. 34.2 crores) from Kuwait during 1961/62. c/ Adjusted for the net changes in PL 480/665 deposits with the State Bank of India and also for the changes in other U.S. fundstransferred from the State Bank to the Reserve Bank during 1964/65 and 1965/66; also inclusive of Government's currency liability to the public arising from issue of one rupee notes and small change. d/ Excludes Reserve Bank credit to private Sector. ./ Equal to changes in (net) foreign assets of Reserve Bank. Table 16 Credit Extension to Government (Rs. crores) 1960 1961 1962 1963 1964 1965 / /61 /62 /63 /64 /65 /66 I. Increase in RBI's rupee securities (inc. Treasury Bills) 124 105 237 209 164 176 II. Loans and advances to Government by RBI 17 42 -26 16 3 115 III. Decline (+) in Central Government deposits with RBI -13 5 15 -28 -7 39 IV. Decline (+) in State Government deposits with RBI 1 13 -16 15 -9 15 V. One rupee notes b/ 5 5 5 5 5 5 Total deficit financing, according to GOI definition c/ 147 170 215 217 156 350 VI. Commercial Banks investment in Govern- ment securities (inc. Treasury Bills) -154 43 -5 47 79 110 VII. Increase (.-) or decrease (+) of PLh80/ 665 deposits with State Bank d/ +121 +54 +67 +38 +62 +17 Total deficit financing, according to IBRD definition 11 267 277 302 297 477 Source: Reserve Bank of India a/ Up to February 25, 1966. b/ Notes printed by Government and sold to RBI. cE The IBRD (such as used in the IBRD 1960 report) and the Indian definitions differ with respect to the treatment of credit extended to the Government by the commercial banking system. d/ These figures reflect, among other things, changes in PL 480 arrangements. PL 480 counterpart Funds were previously deposited with the State Bank, which invested them mainly in Government securities. Since May 12, 1960, they are deposited directly with the RBI which invests them in non-negotiable Special Securities. The gradual transfer of past accumulations of PL 480 funds from the SBI to RBI leads to depletion of the State Bank's portfolio of Government securities, During 1964/65 and 1965/66 other U.S. funds were alsotransferred from the State Bank to the Reserve Bank. Table 17 a/ Net Absorption of Government Securities by the Public Since 1951/522 (Rs. crores) Cash _Open Market Net market borrowings by Receipts purchases (-) Net absorption(+) Central andState Governments (net from from/sales(+) by the public c/ Cash Cash Net the public) to the b/ (4+5) Receipts Payments Receipts public (1-2) 1 2 3 4 5 6 First Plan 1951/52 24.3 49.2 - 24.9 + 1.7 - 11.3 - 9.6 1952/53 15.8 2.9 + 12.9 + 12.9 + 20.5 + 33.4 1953/54 60.4 63.9 - 3.5 + 46.3 + 34.2 + 80.5 1954/55 160.7 50.0 +110.7 + 67.2 + 25.3 + 92.5 1955/56 98.6 16.6 + 82.0 + 64.2 + 28.9 + 93.1 Total 359.8 182.6 +177.2 +192.3 + 97.6 +289.9 Second Plan 1956/57 143.7 3.0 +140.7 + 89.7 - 19.1 + 70.6 1957/58 99.7 29.0 + 70.7 + 28.1 + 85.2 +113.3 1958/59 241.6 14.8 +226.8 +105.6 + 89.0 +194.6 1959/60 208.3 33.6 +174.7 + 82.5 + 60.6 +143.1 1960/61 179.4 45.4 +134.o + 61.4 -125.1 - 63.7 Total 872.7 125,8 +746.9 +367.3 + 90.6 +457.9 Third Plan 1961/62 187.2 50.4 +136.8 + 72.6 - 37.0 + 35.6 1962/63 225.6 41.2 +184.4 +134.1 - 24.1 +110.0 1963/64 214.0 64.0 +150.0 + 56.0 + 44.7 +100.7 1964/65 253.5 68.4 +185.1 + 98.2 + 74.6 +172.8 1965/66 d/ 234.5 27.1 +207.4 +117.8 - 7.5 +110.3 Source: Reserve Bank of India a/ Figures from 1956/57 onwards are inclusive of investment of PL 480 funds. Those for 1960/61 through 1963/64 are not strictly comparable to the figures for the earlier years consequent on the change in the arrangements in regard to PL 480 funds from May 12, 1960. (See Table 16, footnote Id"). b/ On the Reserve Bank's Investment Account and the Central Government's Cash Balance Investment Account. c/ Figures do not take into account transactions on the State Government's Cash Balance Investment Accounts, the Bank's operations in State Government loans and repayment of State Loans held by State Governments. d/ Up to February 25, 1966 and based on partial data. Note: There was also a collection of Rs. 10.36 crores and Rs. 16.25 crores on account of National Defence Loan 1968 and 1972 respectively up to February 1966 which is not included in the above statement. Table 18 Current Budget of Central Government (Rs. crores) 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 (accts) (Accts) (Accts) (Accts) (Accts) (Accts) (Accts) (RE) (BE) Revenue, total 406 481 1,037 l42? 1,846 2 081 2300 2,479 Tax revenue, subtotal 405 485 909 1,053 1i28 1,634 202 2,304 Share of States (48) (74) (179) 178) (224) (260) (258) 276) (361) Tax revenue retained by Centre 357 411 730 875 1,061 1,374 1,563 1,756 1,943 Non-tax revenue 49 70 147 162 366 472 518 544 536 Expenditure, total 347 441 826 912 1,314 1,659 1,807 2q18 2 Defence 164 172 248 290 425 704 693 769 798 Debt service a 37 43 77 83 245 278 316 373 415 Grants in aid to States 16 36b/ 491/ 199c/ 198c/ 2332/ 273c/ 340 cl 401c Civil administration 21 34 59 59 75 78 82 92 110 Social and development services 40 b/ 82 236 176 186 172 200 212 230 Miscellaneous 69 74 157 194 243 14 405 85 209 1 05 1285 /4 ,2 2032 214 Net surplus 59 40 51 125 113 187 274 282 311 Source: Reserve Bank of India Report on Currency and Finance 1964/65 and Central Budget 1966/67. a/A reform of the budgetary accounting structure has been carried out recently. The. main change relates to debt accounting: whereas formerly debt/servicing of the Central Government were recorded on a net basis, the disburse- ments and receipts on this account are now shown separately. This accounts for the rise in the figures from 1962/63 onwards. This change renders the figures for those recent years non-comparable with previous years. b/ Part of grants to States included in items "Civil A4dmninistration", "o-ocial and Development services" and "Iiscellaneousll a/ Incluc6es n/n-statutory grants from 1961/62. Table 19 Capital BudF-et of Central Government (Rs. crores) 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 (Acots) (Accts) (Accts) (Accts) (Accts) (Accts) (Accts) (RE) (BE) Receipts, total a/ 51 183 905 815 831 961 1 188 1,303 1,273 Disbursements, total 129 373 778 ,L029 1,081 l,340 1 619 1,758 1 67 Developmental, subtotal 120 257 327 486 606 616 527 494 Railways 25 68 89 145 215 261 275 240 181 Post and telegraph 7 9 11 11 21 31 31 30 24 Civil Works 9 25 39 42 48 81 80 77 61 Industrial development 9 11 91 111 171 200 195 131 178 Other 7 7 27 18 31 33 35 49 50 Non-developmental, subtotal 14 - 9 136 93 110 190 308 275 425 Defence 4 18 33 23 49 112 113 119 121 State trading - 2 -30 34 2 -22 14 41 1 -25 Other 12 3 69 68 83 64 154 155 329 Grants to States - 16 13 16 16 18 23 40 34 Loans to States (net) 53 216 233 310 366 404 496 584 388 Other bJ 5 30 139 283 103 122 176 332 266 Surplus (+) or deficit (-) -78 -190 +127 -214 -250 -379 -431 -455 -334 Source: Reserve Bank of India Report on Currency and Finance 1964/65 and Central Budget 1966/67. a/ Some receipts have been netted out against disbursements; excludes receipts from Treasury Bill. Excludes items whi-ch have been netted out against receipts. b2/ Mainly various loans and advances. Table 20 a/ Current Budget of States (Consolidated) (Rs. crores) 1960/61 1961/62 1962/63 1963/64 1964/65 1965/66 (Accts) (Accts) (Accts) (Accts) (RE) (BE) Revenue, total 1,012 1,073 1,284 11h90 1?614 1,759 Tax revenue, subtotal 625 663 794 939 984 1,120 Transferred from Centre b/ 182 179 224 258 262 273 Collected by States c/ 443 484 570 681 722 767 Non-tax revenue, subtotal 387 410 490 551 630 719 Administrative receipts d/ 140 85 93 109 113 118 Net contribution of public enterprises e/ 47 46 58 63 62 62 Other revenue T/ 78 84 130 150 160 185 Grants in aid c/ 122 195 209 229 295 354 Expenditure, total 987 1,121 1,261 1,412 1,641 1,841 Development expenditure, subtotal 570 660 720 798 941 1,082 Education 195 235 251 279 321 366 Health 81 94 107 117 132 152 Agriculture, Community development 118 133 148 163 201 237 Irrigation, Electricity schemes 37 39 42 50 56 60 Civil works 67 84 89 89 107 128 Other h/ 72 75 83 100 124 139 Non-development expenditure, subtotal 417 461 541 614 700 759 Collection of taxes and other revenue 66 62 59 64 74 79 Debt services 1/ 84 100 153 198 222 256 Civil administration 167 185 202 210 233 247 Other non-development j/ 100 114 127 142 171 177 Source: Reserve Bank of India, Report on Currency and Finance, 1964/65. a/ Figures (from 1958/59 onwards) relate to the reorganized States. Figures for Jammu and Kashmir have been included (since 1957/58). / continued Table 20 (cont?d) b/ Estate duty, part of Income Tax and Union Excise Duties. / Until 1961/62 receipts from tax on railway fares are included in Tax Revenue, since 1961/62 the Rs. 12.5 crores grant in lieu of such taxes are included Grants in Aid. d/ Includes receipts from civil works, receipts from various departments and until 1961/62 certain grants from the Central Government. e/ Forests, irrigation, electricity schemes, road and water transport, etc. f/ Comprises receipts on account of debt services, which from 1962/63 also include recoveries of interest from commercial departments hitherto adjusted in reduction of expenditure, stationery and printing and miscellaneous receipts; exclude transfers from reserve funds. g/ Classification of development and non-development expenditure has been done on the basis of broad budget heads. h/ Scientific and miscellaneous departments, aviation, ports and pilotage. i/ Includes appropriation for reduction or avoidance of debt, figure from 1962/63 onwards includes interest charges on capital advanced to commercial departments, hitherto booked in the accounts as reduction of expenditure. j/ Expenditure on displaced persons, grants to local bodies, famine, stationery and printing etc. Table 21 a/ Capital Budget of States (Consolidated) (Rs crores) 1960/61 1961/62 1962/63 1963/64 1964/65 1965/66 (Accts) (Accts) (Accts) (Accts) (RE) (BE) Receipts, total 397 477 525 540 739 742 Expenditure on capital account, total b/ 450 h6 496 590 750 733 Developmental, subtotal 294 315 330 350 429 h06 Multi-purpose river valley schemes 46 56 55 55 59 59 Irrigation and navigation 81 84 95 105 135 137 Electricity 25 26 25 29 4o -4 Public works 115 116 122 117 134 144 Industrial developments 15 23 23 23 35 46 Others 12 10 10 21 26 24 Non-developmental c/ 24 5 24 13 51 31 Loans and advances by States (net) 132 126 142 227 270 296 Surplus (+) or deficit (-) -53 +31 +29 -50 -11 + 9 Source: Reserve Bank of India, Report on Currency and Finance, 1964/65. a/ Figures (from 1957/58 onwards) relate to the reorganized States. Figures for State of Jammu and Kashmir have been included (since 1957/58). b/ Excludes some items which have been netted out against receipts. c/ Mainly state trading and compensation to landholders. Table 22 Debt Position of Government of India (Rs. crores: end of fiscal years) a/ a/ a/ a/ a 1950/51 1955/56 1960/61a 1961/62 1962/63a 1963/64j 1964/65 Total Debt 2,500 3,193 6,247 6,967 7,692 8,722 9 601 Internal debt, subtotal 2,468 3,079 5,486 5,856 6,313 6,913 7?09 Undated 258 258 258 258 258 258 258 Over 10 years 519 241 690 b/ 807 b/ 870 b/ 558 b/ 627b/ Between 5 and 10 years 343 617 756 F/ 699 T/ 711 b/ 1,245 E/ 1,128/ Under 5 years 319 393 867 E/ 925 -/ 1,002 5/ 1,052 5/ 1,255 / Treasury bills 365 c/ 595 1,106 - 1,175 - 1,300 - 1,382 - 1,W66 Small savings 334 - 576 975 1,061 1,136 1,263 1,375 Other obligations 330 399 834 d/ 931 d/ 1,036 d/ 1,155 d/ 1,322 d/ External debt 32 11.4 761 1,111 1,379 e/ 1,809 e/ 2,192 e/ Source: Reserve Bankts Report on Currency and Finance, 1964/65. a/ Including Prize Bonds issued from April 1, 1960, Premium Prize Bonds 1963 issued from January 1963 and Premium Prize Bonds 1964 issued from January 1964. b/ In July 1958, Treasury bills to the amount of Rs. 3 billion were converted into special long-term debt. This debt is held by the Reserve Bank of India as cover against note issue. In December 1959, Treasury bills to the amount of Rs. 1.5 billion were converted into long-term debt (of which Rs. 1.3 billion between 5 and 10 years, Rs. 0.2 billion under 5 years). Again in January 1961, February 1962, and December 1962, Rs. 50 crores each of Treasury bills and Rs. 75 crores in January 1964 and Rs. 50 crores in January 1965 of Treasury bills were converted into long-term securities. c/ Including Treasury deposit receipts. / Includes investment of Rs. 240 crores, Rs. 300 crores, Rs. 355 crores, Rs. 408 crores and Rs. 441 crores respectively of U.S. Government, counterpart funds in "special securities". e/ Includes outstandings of the "defence certificates" which are being issued in foreign countries. Table 23 Debt Position of States (Rs. crores: end of fiscal years)a/ b/ b/ b/ 1951/52 1955/56 1960/61 1961/62 1962/63 1963/647 1964/65- Total debt 4h5 1,232 2,737 3,148 3,595 4,081 4,712 - ~c/ c/ --- Permanent debt 134 265 493- 570- 653 648 723 Floating debt 16 8 42 50 25 43 40 Loans from Central d/ d/ d/ Government 238 876 2,016 2,314 2,677 3,112- 3,6237 Unfunded debt 57 83 135 150 163 183 206 Other debt a/ - - 51 64 77 95 120 Source: Reserve Bank of India, Report on Currency and Finance, 1964/65. a/ Includes loans from National Agricultural Credit (long-term operations) Fund, National Cooperative Development and Warehousing Board, Khadi and Village Indus- tries Commission, Employees State Insurance Corporation, Life Insurance Corpora- tions, etc. b/ Revised estimates. c/ Excludes the amounts provisionally allocated to Kerala on the population ratio. d/ Excluding share of outstanding pre-partition loans amounting Rs. 195 lakhs in respect of -.Test Bengal. Table 24 India's Balance of Payments (Rs. crores) 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 196/65 1. Imports, c.i.f. 65o.3 773.1 1 081.4 996.3 1,073.5 1 202.4 1 362.9 (a) PL 480 nil nil 82.1 't l. 17.2 229.3 (b) Others a/ 650.3 773.1 896.3 910.0 952.1 1,035.2 1,133.6 2. Exports 646.8 640.3 630.5 668.3 682.2 801.7 802.7 3. Trade Balance (2-1) - 3.5 -132.8 -450.9 -328.0 -391.3 -400.7 -560.2 4. Invisibles (net) excluding grants +40.3 +87.6 + 3.4 -21.7 -30.5 -18.3 -57.6 (a) Interest and service payments on foreign loans and credits - - -26.8 -37.2 -42.4 -45.9 -51.6 (b) Other invisible transactions (net) - - +30.2 +15.5 +11.9 +27.6 - 6.0 5. Current Account (net) excluding grants +36.8 -45.2 -447.5 -349.7 -421.8 -419.0 -617,8 6. Private capital (net) -13.6 +10.4 +16.5 - 6.0 + 0.6 -13.5 - 2.7 7. Banking capital (net) +22.3 + 8.9 + 9.7 - 2.6 + 5.7 - 4.7 - 8.9 8. Amortisation payments (gross)3.1b/- 3.6 -33.6 -56.1 -47.3 -48.6 -66.7 9. Repurchases of rupees from IMF - - 7.1 -10.7 -60.7 - -23.8 -47.6 10. Other capital transactions (net) -16.9 -8.9 - 3.8 - 2.2 + 3.8 + 7.0 + 3.8 Total 6 to 10 -11.3 - 0.3 -21.9 -127.6 -37.2 -83.6 -122.1 11., Errors and Omissions - 6.7 - 5.3 - 6.3 + 7.8 - 4.3 -46.6 -71.2 12. External Assistance 9.8 61.3 416.5 344.1 449.1 560.0 691.3 (a) Loans 7.7 T 17990 -2-2' 3ET -3-76- -ZT1T7 (b) Grants 2.1 51.9 33.4 32.6 22.3 16.1 20.8 (c) PL 480 - - 185.1 86.3 121.4 167.2 229,3 13. Drawings on IF - - - 119.1 11.9 - 47.6 /continued ... Table 24 (cont'd) 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 14. Change in foreign exchange reserves c/ (Increase +) (Decrease -) +28.6 +10.5 -59.2 - 6.3 - 2.3 +10.8 -72.2 Note: Figures in the above table for some items would differ from Reserve Bankts published statements from 1960/61 due to the following adjustments: (i) all receipts and payments in respect of PL 480 assistance have been grouped together and shown as PL 480 imports financed by PL 480 assistance; (ii) interest and capital repayments which are made in rupees (other than East European countries) have been excluded; (iii) from 1964/65, the Reserve Bank is showing under "private capital", receipts of direct official loans by the private sector and corres- ponding amortisation payments. In this table, these elements have been taken out from private capital and receipts are shown under "loans" and repayments under "amortisation". The RBI is similarly from 1964/65 showing Indus Basin payments under official transfer payments (donations). In this table, as in the past years, these are shown under "invisibles". Similarly, donations under PL 480 Titles II and III shown under "private transfers" by the RBI since 1964/65 have in this table continued to be shown under "grants"; (iv) non-monetary gold movement in 1964/65 has been deleted as a receipt; decline in reserves has been correspondingly raised; (v) U.S. freight reimbursements have been excluded from import payments and invisibles receipts. a/ Includes that portion of the PL 480 charges (50fa) which is financed out of India's own resources. b/ This is a net figure. c/ Include changes in foreign assets held by the Reserve Bank and in balances held by Government abroad. Table 25 Selected Invisible Transactions (Rs. crores) 1950 1955 1960 1961 1962 1963 1964 /51 /56 /61 /62 /63 /64a/ /65 a/ Transport: Receipts 30.1 38.3 h.6 47.6 49.3 57.4 56.4 Payments 8.6 15.0 24.6 26.5 27.8 28.5 32.7 Net 21.5 23.3 20.0 21.1 21.5 28.9 23.7 Insurance: Receipts 8.3 9.5 8.1 7.4 7.7 8.3 7 2 Payments 2.9 5.1 5.8 5.6 4.9 5.5 4.9 Net 5.4 4.h 2.3 1.8 2.8 2.8 2,3 Foreign Travel: Receipts 4.6 11.8 15.3 15.0- 12.0 2.2 2.3 Payments 17.0 12.1 12.1 11.4 11.8 10.5 10.3 Net -12.h -0.3 3.2 3.6 0.2 -8.3 -8.0 Investment Income: Receipts 7.2 29.8 14.2 12.2 10.8 10.7 11.2 Payments 31.3 29.9 61.9 80.4 94.1 98.0 118.6 Net -2.1 -0.1 -h7.7 -68.2 -83.3 -87.3-107.4 Private Donations: Receipts c/ 0.8 57.6 44.9 41.2 41.1 45.7 52.0 Payments 5.8 20.5 16,8 16.2 14,0 13.3 16,6 Net 35.0 37.1 28.1 25.0 27.1 32.4 35.4 Source: Reserve Bank of India a/ Provisional b/ Data regarding foreign travel receipts are incomplete. c/ PL 480 Titles II and III grants shown as receipts under official donations till 1963/6. are included as receipts under private donations. Table 26 India's Foreign Exchange Reserves (Rs. crores: end of period) 1950/51 1955/56 1960/61 1961/62 1962/63 1963/64 1964/65 Gold held by RBI 118 118 118 118 118 118 134 Foreign assets of RBI 884 746 136 129 116 126 86 Total RBI holdings of gold and foreign exchange 1,002 864 254 247 234 244 220 Government balances abroad 27 38 49 50 61 62 30 Total foreign exchange reserves 1,029 902 303 297 295 306 250 Change over previous period - -127 -599 - 6 - 2 +11 56 Source: Reserve Bank of India and Ministry of Finance. Table 27 Import and Export Indices Exports Imports Year Average Average Terms of Quantity unit value Quantity unit value Trade (Base 1952/53-100) 1950/51 112 92 106 80 115 1954/55 105 98 110 89 110 1955/56 115 90 116 87 103 1956/57 110 94 137 91 103 1957 119 94 156 98 96 1958 108 93 140 92 101 (Base 1950=100) 1959 107 100 110 93 107 1960/61 100 110 128 96 115 1961/62 105 109 121 98 111 1962/63 112 106 131 94 113 1963/64 126 105 135 97 108 1964/65 135 107 146 99 108 Source: Office of the Economic Advisor to the Government of India Table 28 a/ Payments for Imports- (Rs. crores) b/ b/ b/ c/ c/ 1959/60 1960/61- 1961/62- 1962/63 1963/61- 1964/65- Cereals: PL 480 87 150 65 108 142 217 Others 68 64 53 59 57 90 Total 155 214 118 167 199 307 Fruits, nuts and vegetables 18 17 13 13 lb 19 Milk, fish, spices 12 6 6 9 7 10 Tobacco 1 1 1 2 2 1 Vegetable oils 4 4 4 4 4 4 Copra 11 10 7 8 8 4 Gums, lacs, resins 2 2 2 1 1 2 Hides and skins 2 2 2 3 3 3 Rubber 7 11 13 11 10 6 Wood and cork 6 1 2 2 1 1 Pulp 7 7 5 8 6 7 Newsprint, paper and board 11 9 10 8 7 9 Textile yarn and thread 13 16 12 12 11 14 Raw cotton d/ 39 81 63 56 46 51 Raw jute 3 5 6 3 2 7 Raw wool and wool tops 8 11 9 12 13 8 Fertilizers (manufactured) 16 6 15 15 13 15 Dyes and colours 10 12 11 10 9 9 Drugs and medicines 10 9 8 7 5 5 Other chemicals 53 33 36 41 35 36 Petroleum and products 86 87 88 83 98 86 Iron and steel 47 81 90 77 71 74 Non-ferrous metals 39 30 31 41 35 41 Metal manufactures 25 13 16 13 15 16 Electrical goods 15 17 20 20 21 18 Machinery 214 216 241 276 382 417 Transport equipment: e/ Road transport 32 43 40 31 30 36 Railways 16 22 18 29 30 18 Shipping f/ 11 5 2 2 2 4 Other imports 59 135 117 127 151 168 Total 932 1,106 1,006 1,091 1,231 1,396 a/ Based on balance of payments data and are unadjusted for PL 480 freight reimbur- sements. b/ Revised. / continued ... Table 28 (cont'd) c/ Preliminary. d/ The figures for this item are inclusive of PL 480 imports of RS. 6 crores in 1959/60, Rs. 35 crores in 1960/61, Rs. 21 crores in 1961/62, Rs. 12 crores in 1962/63, Rs. 20 crores in 1963,/64 and Rs. 9 crores in 1964/65. e/ Excludes aircraft. f/ On private account. g/ Includes defence equipment, civil aircraft and communication stores on Govern- ment account and other items on private account. Table 29 Ianorta t Surce (Ra. million) Regions/Countriea 1951/52 1955/56 1959/60 1960/61 1961/62 1962/63 1963/64 l64/6 1. U. 5. A. L2 (30.4%) __2 (13.1%) LM (21.7%) 2Z2 (28.7%) Lj (23.5%) 2,f. (30.6%) 4J50 (36.8%) ,.61 (.: '. Canada _ ( 2.0%) ( 1.0%) fjZt ( 2.9%) _)22 ( 1.M%) jf ( 1.8%) ,AU ( 1.5%) _24 ( 1.9%) 265 ( ?.1%) 3. West Ehuroe LM (29.3%) 1jW (47.9%) LJU (43.2%) Lffi (39.3%) &.W (39.9%) U=2a (32.8%) 3åa (28.3%) ..656 (28.9<A U. X. L2OU (17.6> LM (25.4%) L2a (20.3%) LM (19.1%) L41 (18.5%) L§U (16.3%) Lm (14.0%) 1.621 (1.P<) European Common MarkIt 4 ( 8.6%) L (17.5%) L (19.9%) L2M2 (17.2%) L (17.6%) L21 (13.9%) 4 0 (11.5%) L624 (13.'A) of which: Belgium 129 121 114W 152 19 92 å0 P? France 112 155 213 211 174 142 144 167 Germany (West) 289 - 603 1,165 1,225 1,249 987 905 1,087 Italy 181 165 230 260 272 222 174 217 LUXebourg neg. 4 2 5 neg. eg. neg. nep. Netherlande 123 141 157 105 133 138 107 136 OUhcr West nurom ( 3.1%) ( 4.90).89 ( 3.0%) ( ).0%) ( 3.9%) _J§ JA ( 2.8%) 341('. of v?,ich: Svoadon -TI -m8 119 -75T 11? Svitserland 100 121 85 104 126 104 121 117 Irish Ropublic neg. necs neg. neg. neg. neg. neg. neg. 4. Asia and Oceania LM (28.7%) 1,W (25.7%) LftZ (21.3%) LAZ (18.1%) LjYO (20.8%) L&82 (20.2%) 2.212 (18.1) 2j95 (17.i.) A rl (25.9%) , (20.7%) J (17.5%) L (15.7%) L (17.8%) L (18.0%) L (15.5%) 1. 62 (15. ) o hh: Australia 176 135 -195 178 242 243 179 245 Burma 235 96 205 137 112 91 85 p Ceylon 56 94 53 41 45 82 59 57 Malaysia 42 45 108 135 129 107 174 143 New Zealand 21 25 11 15 12 18 13 9 Indonesla 32 15 40 36 18 14 17 27 Iran 289 144 374 296 474 459 480 28P China 159 44 43 26 15 10 neg. nog.. Pakistan 875 271 86 140 139 167 94 158 Thailand 116 5 7 7 20 10 8 ?8 Japan 255 334 385 608 640 649 659 773 Rest or Asla and Ocaiå 26 (2.8%) ( 5.0%) (3.8%) 7( 2.4%) _= ( 3.0%) (2.2%) (20 2.6%) 2 ( 1.94) of which: Aden 9 2113 20 25 29 22 19 Bahreln 109 82 40 50 44 51 51 25 Kuwait 1 43 31 1 4 2 4 2 Saudi Arabia 100 152 243 142 189 124 212 135 5. Africa 81 (8.6%) 7o?(o10.4%) 4 ( 6.7%) (Q7 6.2%) (4< 5.8%) 6 ( 5.0%) ( 4.2%) 658 ( sf) o he F4Wypt (U.L.Rj) 405 231 138 164 120 98 153 1?4 Kenya 186 219 117 124 117 57 34 74 Mozambique 34 45 57 54 57 53 81 108 Nigeria - 5 3 5 18 1 8 in Rhodesia and Nyaaaland 6 6 118 136 125 44 24 12 Sudan 143 127 113 94 106 171 85 90 6. 5yv i ( 0.5%) ( 1.6%) (3.8%) 44( 3.9%) (7.9%) 1.OU ( 9.8%) (10.6%) ).Ž2 (1 of which: U.S.S.R. 162172 159 399 WM57Po Czechoslovakia 28 29 45 88 150 197 173 108 Germany (East) neg. 4 27 33 56 78 98 n9 Poland 3 4 42 44 92 81 105 151 Yugoslavia 1 2 30 44 75 79 109 11n 7. Latin America rgnna( 0.5%) 3( 0.5%) 2( 0.3%)-- ( 0.2%) 3( 0.3%) 1( o.1%) . ( 0.1)j4 ( o.u) of which: Argentina 16nog. n471 ng Cuba neg. 7 neg. 1 Total World (100%) j (100%) å 0 0 (100%) 1139 (100) 11.071 (100)) 1L232 (100%) 12.229 (100,) (104) Souroem D.0.C.I.S.S., Caleutta Note: The break up of itema 1 to 6 may not add up to total due to revisions. Table 30 Receipts from Merchandise Exports (Rs. crores) 1959 1960 1961 1962 1963 1964 /60 /61 /62 /63 /64 /65 Fish and fish preparations 6 5 4 4 6 7 Cashew kernels 16 19 18 19 21 29 Other fruits and vegetables 6 7 7 7 9 8 Spices 14 17 18 14 16 17 Sugar 2 3 15 18 27 18 Coffee 6 7 9 8 8 13 Tea 129 124 122 129 123 125 Tobacco 15 16 15 19 23 25 Total Food, drink and tobacco a/ 194 198 208 218 233 242 Oilcakes 21 14 17 31 35 40 Vegetable oils b/ 17 13 11 17 23 10 Hides and skins 11 9 8 11 10 9 Raw cotton and waste 15 12 20 17 17 14 Raw wool and hair 12 8 9 7 7 9 Other textile fibres 6 2 4 5 . 7 8 Gums, resins and lac 8 9 7 7 8 8 Total Other agricultural products a/ 90 67 76 95 107 98 Mica 10 10 10 10 9 10 Iron ore 15 17 35 35 36 37 Manganese ore 12 14 11 8 8 13 Other ores and scrap 9 8 9 4 6 8 Coal and coke 5 3 2 3 2 5 Petroleum products 3 4 4 5 7 8-f Total Minerals 54 56 71 65 70 81 Leather and manufactures 31 25 25 23 26 27 Footwear 3 3 2 3 4 4 Cotton fabrics 64 58 48 48 54 58 Artsilk fabrics 2 3 7 7 10 7 Woollen manufactures 6 6 5 5 9 7 Jute manufactures 110 135 145 148 155 169 Coir manufactures 3 3 11 12 11 11 Total Leather and fibre manufactures a/ 219 233 244 216 269 283 Iron and steel (excluding ferro-manganese) 1 5 4 2 2 5 Ferro-manganese neg. 4 6 1 2 6 Metal manufactures 1 2 2 3 4 4 Machinery and transport equipment 3 4 4 4 6 9 Other exports 68 81 60 73 96 84 Re-exports 10 10 5 7 4 3 Total other exports and re-exports 83 106 81 90 114 111 / continued ... Table 30 (cont'd) 1959 1960 1961 1262 1963 1964 /60 /61 /62 /63 /64 /65 Total exports and re-exports (customs data) 640 660 680 714 793 815 Adjustments to bring into line with balance of payments figures -13 -29 -12 -32 + 9 -12 Total exports and re-exports (payments data) 627 631 668 682 802 803 Source: Government of India, Ministry of Finance. a/ Excludes certain items which are not identified separately and are included in "other exports". b/ Includes "essential oils". Note: Items may not add up to the subtotals due to rounding. Table 31 Exports of Selected Commodities by Quantity 1958 1959 1960 1961 1962 1963 1964 Commodity Units /59 /60 /61 /62 /63 /64 /65 Tea million kgs 217 215 199 207 220 210 212 Jute manufactures '000 tons 774 863 793 798 844 930 950 Cotton textiles million metres 547 812 628 513 514 568 525 Manganese ore '000 tons 924 961 1,166 995 762 966 1,562 Iron ore '000 tons 1,860 2,890 3,150 9,800 8,800 9,400 10,600 Mica '000 tons 20 26 28 28 34 30 31 Raw cotton '000 tons 83 49 33 62 59 56 47 Sugar 1000 tons 50 6 56 285 416 433 271 Tobacco million kgs 48 41 47 46 63 66 81 Lac '000 tons 27 27 27 21 21 21 17 Linseed oil '000 tons 14 17 7 neg. neg. neg. neg. Castor oil '000 tons 19 47 47 25 30 36 19 Groundnut oil '000 tons 6 38 1 7 58 97 10 Oil cakes '000 tons 318 565 433 506 835 936 1,263 Coffee '000 tons 16 15 20 30 20 23 31 Coir manufactures '000 tons 75 78 71 75 77 76 72 Hides and skins undressed '000 tons 13 13 12 12 14 12 12 Source: D.G.C.I.S.S., Calcutta Table 32 Exporta þ' Destination (Ra. million) Regions/Countries 1951/52 1955/56 1959/60 1960/61 1961/62 1962/63 1963/64 i s64 " . . k. LMa (18.0%) (14.6Ø) 961 (15.0%) LM (15.5%) L Z (17.0%) jJ3» (16.2%) 1,.22 (16.],) 1 i( Canada 2 (2.2%) _40 ( 2.4%) ~53 ( 2.4%) ?6 ( ?.7%) _U2 ( 2.6%) 2 ( 3.1.) 12 ( 2.7') -' 3. e0_ lurope Ljj2 (34.9%) LIL (39.9%) Lt (38.6%) L (36.32<)?,,, (34.3%) ! (34.4%) 2.512 (31.?) ? ( U. K. ljýSZ (25.9%) L (27.8%) LZU (27.9%) I= (26.1%) LØ12 (23.7%) L{k4 (23.0%) 2 (?o.6) LQ o c Bgrokeant ( 6.1%) ( 9.4%) ( 7.9%) (7.8%) (8.3) (7.9%) 6 ( 7. ___ owhc:Bllx57 5 59 P3 France 114 71 82 88 82 93 11() 121 Germany (West) 94 149 210 199 226 187 202 Italy 80 96 61 93 112 117 113 101 Luxembourg neg. . neg. n. ne neg. neg. neg. - Netherlande 79 154 85 83 99 114 92 uther West Europe ...2ý. ( 2.9%) __1 (2.7%) .JZ.(2.7%) _W.J ( 2.4%) __1ý (>.4%) .....4( 3.4%)...j2 3 .(j ( . of which: Sweden 1 15 17 18 19 Switzerland 21 10 11 14 17 35 55 ' Irish Rlepublic 65 58 61 50 39 48 45 . Asla and Ocearia L= (30.7) L24 (29.8%) Lia (26.2%) Lk= (25.1%) L22 (25.9%) 1.68 (23.4%) 2.149 (27.1%) 2,03? ('.' ') uAtralUa (28.0%) L (25.4%) 14& (22.4%) å (21.6Ø) l (22.4%) L (20.3%) 1.850 (?3.3) L2 1..%) of which7 A.ustral.ia 476 281w5 224 166 IS7 177 7'00 Burma 198 125 124 66 53 51 64 6' Ceylon 168 205 223 184 170 134 192 144 Malaysia 38 44 49 60 68 67 304 1,1 New Zealand 79 46 53 74 74 63 73 5s Indonesia 45 117 49 31 70 41 24 lp Iran 42 52 43 54 45 64 47 1o China 71 65 77 53 2 1 neg. Pakistan 453 84 72 103 95 95 72 Thailand 88 32 21 32 26 20 11 Japan 148 302 349 353 559 441 589 "02 Restw o Aia nd cana (2.7%) 6 ( 4.4%) ( 3.8%) (3.5%) (39 3.4%) (U 3.2%) 30 ( 3.8%) 60( 1,) of w)ilch: AIden __353 5455 51 64ýý Bahrein 14 23 22 23 21 18 21 21 Kuwait 38 35 37 34 40 42 47 1 Saudi Arabia 19 61 49 33 33 27 32 3 . frica ( (6.9%) (8.3%) ( 7.5%) ( 7.4%) _5§1 ( 8.3%) (00 7.0%) (64 5.8%) 464(''~ of which: Egypt (U{.A.R.) 103 134 129 131 125 1,il Kenya 88 61 49 49 55 55 51 Mozambique 9 8 4 12 10 8 7 14 Nigeria 71 82 40 57 71 62 38 Rhodesia and Nyasaland 36 30 15 16 28 22 17 Judan 77 56 153 95 103 90 "9 6. z hoviet b .o . 88( 1.2%) ~U ( 0.9%) ( 7.8%) 46( 7.5%) 64 ( 9.5%) (13.0%) 1.0P9 (13.7) 14L3 (17.6>) of which: 1.... '~33 304 288 322 -383 521 71'ý Czechoslovakia 13 13 50 73 87 116 162 ? Germany (East) neg. neg. 29 33 46 85 120 Poland 3 3 49 39 45 116 971 Yugoslavia 3 3 26 33 62 113 9311 hai :£ Aretn (7 6. 5%) (ÅL 3.7%) (.1 2.4%) ( 2.5%) ( 2. 25) _ 2(,4)-2 ?.4%) 191 ( 1 3 b a 177 45 50 81 101 7J. Cuba 114 45 25 73 52 35 40 17 Total World 7.329 (100%) 5.963 (100%) 6.397 (100%) 6,602 (100%) 6,797 (100%) 7,136 (1004) 7,932 (100%) 8,146 (l') Source& D.0.C.I.S.S., Calcutta Note: The break up of items 1 to 6 may not add up to total due to revisions. Table 33 a/ Utilization of External Assistance (US $ million) Estimated 1961/62 1962/63 1963/64 1964/65 1965/66 Total spillover (esti- Third to Fourth mates) Plan Plan Grand Total 711.6 942.3 1,246.4 1,508.1 1,829.6 6,238.0 3,357.9 Loans, subtotal 483.4 651.9 829.0 1,018.3 1,221.9 4,204.5 3,053.2 Austria - - 2.5 2.9 7.0 12.4 5.6 Belgium - - - 2.5 9.9 12.4 11.6 Canada - - 1.7 12.2 14.6 28.5 103.2 France - - - 27.3 9.6 36.9 103.2 Germany b/ 138.6 56.8 64.7 104.2 121.7 486.0 189.0 Italy - 0.4 4.7 14.0 13.9 33.0 137.8 Japan 17.8 23.9 43.8 53.1 65.4 204.0 126.8 Netherlands - - - 5.8 13.2 19.0 25.1 United Kingdom 48.3 62.5 73.0 83.9 101.3 369.0 150.8 United States, subtotal 149.0 349.0 409.8 380.7 485.2 1,773.7 946.3 DLF/AID 76.7 276.8 351.9 321.3 414.3 1,441.0 n.a. Ex-Im Bank 65.7 64.2 52.5 40.3 61.2 283.9 n.a. Other Govt. 4.2 8.0 1.7 2.2 9.7 25.8 n.a. Private banks 2.4 - 3.7 16.9 - 23.0 - IBRD and IDA 78.0 89.5 119.7 159.6 254.6 701.4 613.3 Denmark - - - 0.9 2.0 2.9 2.2 Switzerland - 0.5 3.4 0.3 9.1 13.3 22.2 Sweden - - - - 2.0 2.0 2.2 Yugoslavia - - 0.8 8.2 10.1 19.1 25.9 Czechoslovakia - - 1.7 10.9 12.2 24.8 107.7 Poland --0.1 1.2 3.9 15.4 13.3 23.9 62.6 U.S.S.R. 51.6 68.1 99*.3 136.4 86.8 442.2 417.7 PL 480, subtotal 183.8 258.0 388.9 452.2 562.5 1,845.4 252.6 Grants, subtotal 44.4 32.4 28.5 37.6 45.2 188.1 52.1 Canada 19.9 11.7 19.1 24.4 28.0 103.1 24.9 /continued ... Table 33 (cont'd) 1961/62 1962/63 1963/64 1964/65 1965/66 Total Estimated (esti- Third spillover mates) Plan to Fourth Plan United States, subtotal 21.0 17.6 6.2 9.0 13.2 67.0 9.6 U.S. Govt. (TCA) 18.0 17.2 5.9 5.7 10.5 57.3 7.7 Ford & Rockefeller Foundations 3.0 0.4 0.3 3.3 2.7 9.7 1.9 Others 3.5 3.1 3.2 h.2 4.0 18.0 17.6 a/ Including all aid committed up to September 30, 1965, estimated spillover to Fourth Plan including uncommitted consortium pledges. b/ Including all German credits (extended up to September 30, 1965). Table 34 Composition of India's External Public Debt Estimated amounts outstanding, including undisbursed, as of April 1, 1965 in respect of debt incurred up to March, 1965 (US $ million equivalent) Debt Outstanding as of April 1, 1965 TOTAL EXTERNAL PUBLIC DEBT 5,341 b/ Consortium members, subtotal 4,547 Austria 12 Belgium 13 Canada 67 France 47 Germany 596 Italy 42 Japan 291 Netherlands 23 United Kingdom 648 United States A.I.D. 1,141 Ex-Im Bank c/ 331 Wheat Loans 186 U.S. Bank loans to Air India 18 IBRD loans 647 IDA credits h85 Non-Consortium Countries, subtotal 743 Czechoslovakia 53 Denmark 3 Kuwait 47 Sweden 5 Switzerland 32 Poland 29 U.S.S.R. 5h Yugoslavia 26 Other debt, subtotal 51 Suppliers credits to the public sector 51 /continued ... Table 34 (conttd) Source: Government of India, Ministry of Finance. a/ Figures derived from report of June 25, 1965, Ministry of Finance, India, entitled "Estimated Payments in Foreign Currencies of Interest Charges and Capital Repayments in respect of Foreign Loans and Suppliers Credits author- ised/committed up to 31st March 1965". b/ Substantial amounts are estimated to be as yet undisbursed. c/ Figures include loans to the private sector. d/ Inclusive of interest payments in future. SINKIANG C H INA AFGHANISTAN A Armj. a- KCA 5 IR --T l B E T | C,.,PRAOESH PAKSANPngP DE Hi N E P A L1úlv tf- R A Jhý%A S T .A N LUCKNOW4 Bam JAIPUR SHILLO Gnes PATNA PA STAN MANIPUR B . ..H.,B I H A R ANDRAL HMEYDR TAB AD RPUR ISL ANDS NICOA R Ab.ve 10,000f ISLANDS TRIVANDRUM LUNE 192 4BRD- 720R