India - Twelfth Industrial Credit and Investment Corporation Project

(PY Th ~~Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2035-IN REPORT AND RECOMMENDATION OF THE PRESDIENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED TWELFTH LOAN TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA June 23, 1977 This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. |  CURRENCY EQUIVALENTS (as at June 21, 1977) Rs 1.00 Paise 100 US$1.00 Rs 8.80 Rs 1.00 = US$0.1136 Rs 1 million = US$113,600 (Since September 24, 1975, the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/Rupee exchange rate is subject to change. Conversions in the Appraisal Report were made at US$1 to Rs 9.00.) FISCAL YEARS GOI - April - March 31 ICICI - January 1 - December 31 ABBREVIATIONS DFC - Development Finance Company GOI - Government of India ICICI - Industrial Credit and Investment Corporation of India IDBI - Industrial Development Bank of India IFCI - Industrial Finance Corportion of India IIG - Inter-Institutional Group IIM - Inter-Institutional Meeting IRCI - Industrial Reconstruction Corporation of India NDP - Net Domestic Product RBI - Reserve Bank of India SFC - State Financial Corporation SIDC - State Industrial Development Corporation  FOR OFFICIAL USE ONLY INDIA TWELFTH LOAN TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LOAN AND PROJECT SUMMARY Borrower: Industrial Credit and Investment Corporation of India Limited. Guarantor: India, acting by its President. Amount: US$80 million. Terms: The tentative amortization schedule provides for repayment over 17 years in semi-annual installments starting after three years of grace. It takes account of a five year grace period for some sub-projects so as to allow for blending of IBRD funds with short-term Kuwaiti funds. It is subject to change to conform substantially to the aggregate of the amortization schedules for the sub-projects, for which loan funds are disbursed. Interest rate at 8.2% per annuum. Final date for project submission: December 31, 1979. Relending Terms to ICICI Borrowers: Interest of 11% per annum for ordinary loans and 10% per annum for loans to backward areas. Commitment charge of 1% per annum. Amortiza- tion depends on individual sub-projects; maximum 17 years. Exchange risk to be borne by ICICI borrowers. Project Description: To finance the foreign exchange cost of indus- trial projects carried out by productive enterprises in India. Estimated Commitments and Disbursements: (Calendar Year) 1977 1978 1979 1980 1981 1982 (US$ million) Commitments: 15 50 15 Disbursements: Annual: 9.0 23.0 28.5 17.5 2.0 Cumulative: 9.0 32.0 60.5 78.0 80.0 rThis document has a restricted distribution and may be used by recipients only in the perormance of their official duties. Its contents may not otherwise be discioed without World Bank authorization.  - ii - Free Limit: Every subproject involving ICICI financing of more than US$4 million, including outstanding commitments, would require IBRD approval. Appraisal Report: No. 1511a-IN of June 22, 1977  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INDUSTRIAL CREDIT AND INVESTIENT CORPORATION OF INDIA LIMITED WITH THE GUARANTEE OF THE GOVERNMENT OF INDIA 1. I submit the following report and recommendation on a proposed loan to the Industrial Credit and Investment Corporation of India Limited (ICICI) with the guarantee of the Government of India for the equivalent of US$80 million to help finance ICICI's operations through September 1979. The terms of the loan would be an interest rate of 8.2% per annum and repayment up to a maximum of 17 years, including 3 years of grace, according to the amortization schedule of sub-projects. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (1529-IN dated April 25, 1977), was distributed to the Executive Directors on May 3, 1977. Country data sheets are attached as Annex I. Background 3. India is exceptional among the Bank Group's member countries for its size and diversity; the country is divided into more than 20 States with a population of some 630 million speaking over 60 languages. Since Independ- ence the trend in growth of GNP has been about 3.5% per annum, or a little over 1% per annum in per capita terms, while over the five years 1971/72 - 1975/76 it fell to as low as 2.5% per annum, in spite of the record harvest of 1975/76. This unsatisfactory performance is in part the result of the low availability of investable resources: the net transfer of resources from abroad has never been above 3% of GNP, and fell to as little as 0.8% between 1969/70 and 1973/74; similarly, while India's domestic savings effort compares well with other countries at the same average income levels, the rate has very rarely exceeded 17% of GNP. The investment rate puts India in the lower third of all developing countries. More significant perhaps is the fact that in spite of a marked rise in the investment rate from about 10% in the early 1950's to about 18% over the past fifteen years, the trend in GNP growth has remained about the same. This indicates a marked decline in the efficiency of capital use, as a result of increasing capacity underutilization, long project gesta- tion, and increased emphasis on relatively capital-intensive projects and sectors. 4. Since Independence the growth of the socio-economic infrastructure (transport, education, health services, etc.) has been impressive, but has 1/ Parts I and II of this report are the same as Parts I and II of the President's Report on the Bombay High Offshore Development Project (Report No. 2062-IN), dated June 20, 1977).  often been achieved at high cost and has yielded results of variable quality. Many industrial and agricultural investment schemes have been highly success- ful, but others have taken excessively long to be completed and have operated well below full capacity. In some regions of the country, growth and struc- tural change have been rapid and compare favorably with developments in many other parts of the world; in other regions there has been stagnation, and in some, decline. Although national income has increased in most years, there has been no rise in the living standards of the vast mass of rural and urban poor, conservatively estimated at 200 million people with per capita incomes of US$70 per annum (converted at the official exchange rate) and US$250 on a purchasing power parity basis. 5. The structure of the economy has been slow to change. Agriculture remains the dominant sector, with its share of national product declining only gradually from about 50% to 42% over the last twenty years. The share of manufacturing industry has increased only slowly and, since the late 1960's, has remained approximately constant at about 16%. There has, however, been a shift in the composition of manufacturing production, with consumer, inter- mediate, and capital goods now contributing about one-third each, compared with an overwhelming preponderance of consumer goods 25 years ago. Recent Trends 6. In March, 1977, a party other than Congress formed a Government for the first time since Independence. Undoubtedly, changes in economic policies and emphasis will be formulated in the course of the next few months. The state of the economy was not a prominent election issue; in fact the economy was generally stronger than at any time in the last six years. Although the growth of GDP in 1976/77 is not expected to have exceeded 2%, this was on top of the very good growth of 8.8% in 1975/76. Agricultural production is ex- pected to have fallen by about 3%, but only because of the return to a more normal harvest of 110-114 million tons of foodgrains after the record 121 million tons of the previous year. Industrial growth was around 10% in 1976/77, which is significantly above the rates achieved in the late 1960's and early 1970's. Exports continued their bright performance, rising by 18% in US dol- lars and 12% in volume terms. The overall resource position, with record foreign exchange and foodgrain reserves, is exceptionally strong, and gives the Government considerable room for maneuver. 7. In agriculture the bumper crop of 1975/76 was largely due to remarkably good weather conditions; the good crop in 1976/77 - a foodgrain harvest in the region of 110 million tons would be the second largest on record - was produced under generally normal weather. A conspicuous change was the increase in fertilizer use, which rose by more than 20% over 1975/76, following marked declines in fertilizer prices. Industrial production bene- fited from fewer labor disputes, fuller utilization of installed capacity in both private and public sectors, a more liberal import policy, relatively good power availability, and increased demand because of higher consumer incomes, expanded exports and higher public expenditures. However, whole- sale prices, which had fallen 14% from September 1974 through March 1976,  - 3 - rose 11% from the end of March to December 1976 and continued rising into 1977. It is not yet clear whether this upsurge indicates a new inflationary trend or merely a correction of the previous sharp decline in the relative prices of a range of agricultural commodities. 8. The balance of payments situation has improved dramatically since the 1973-1975 period. In 1975/76 the trade deficit was $1,530 million, which was more than covered by US$1,560 million in net aid, US$205 million in net purchases of currency from the IMF, and US$559 million in net miscellaneous capital and invisibles (mostly private remittances); indeed, this large aggregate net resource inflow led to a US$794 million increase in foreign ex- change reserves, to a level of US$2.2 billion. In 1976/77, the trade deficit is estimated to have fallen by US$1,080 million, due to a rise of US$845 million in exports and also to a fall of US$235 million in imports, primarily because of lower prices and volumes of foodgrains and fertilizer imports. The decreased trade deficit, along with a further increase in the net inflow of miscellaneous capital and invisibles from abroad of US$540 million, more than offset the fall of US$350 million in net aid and the substantial repurchases of currency from the IMF, and allowed a US$1.5 billion addition to reserves, which reached a level of US$3.7 billion at the end of March 1977. Development Prospects 9. The favorable economic situation gives the new Government the op- portunity to address the longer-term constraints on growth. The basic task is to raise the overall rate of growth from its historic range of 3-4%. In the long run this will require raising more resources for investment. But it will also be important to achieve significantly better utilization of avail- able resources, partly through an immediate boost to industrial demand. 10. In agriculture, the basic problem remains that, despite the record foodgrain crop in 1975/76 and the good crop in 1976/77, the long-term growth rate of foodgrain production has been unacceptably low, at about 2.5% per annum over the last seventeen years, and only 2% in the last ten. This has meant that only in good years has there been any margin of production to cater to per capita growth in food consumption, and in normal years it has been necessary to import food. There is considerable scope for stepping up growth both by increasing the use of inputs and by raising the productivity of existing capacity. Three promising developments in regard to the first are the sharply higher outlays on irrigation in the Fifth Plan period along with a renewed determination to complete projects expeditiously; the indica- tions that private investment in tubewells is picking up again after a slow- down in the early 1970's; and the recent recovery of fertilizer demand. With regard to more productive use of existing capacity, there is increased aware- ness in the Government that the benefits of irrigation projects can be much increased not only through command area development but also through more efficient design and operation of major surface irrigation infrastructure. Also, hopes have been generated for increasing productivity on both irrigated and rainfed farms through a reorganized and improved extension and research system, which has been recently introduced in several States in northern and eastern India.  - 4 - 11. A strong effort to raise agricultural growth is essential, not only to meet food requirements, but also because of the pervasive influence of agriculture on the levels of activity in other sectors of the economy. This effort must also be so structured as to increase the incomes of small and marginal farmers, in order to increase production, since they operate 25% of the cultivated land and account for somewhat more than 25% of production, and for welfare reasons, since they make up about 70% of rural population and constitute the majority of those living below the poverty level. 12. The industrial sector is poised for rapid growth, as the most serious constraints on the supply side have been removed by the improved situation with respect to power, coal and imported raw materials and components. There has been a progressive liberalization of controls and the 1976/77 Central Budget announced a reduction of some taxes on private industry. In many cases management of public enterprises has improved, as is reflected in their markedly higher production and profitability as a group. In the medium term it is the demand for industrial output that will determine industrial growth. In certain industries, export demand will provide a strong pull on production; this is true, for example, for iron and steel, certain chemicals, some electrical equipment, processed agricultural products, and vehicles. But the impact of increased exports on overall industrial demand will grow only slowly given the current low share of exports in sales. If the higher growth and productivity in agriculture discussed earlier were to materialize, it would provide a significant stimulus to industry. It is difficult to specify the linkages explicitly; but because of the large share that agri- culture holds in GNP, the coefficients do not have to be large for agricul- tural growth and the concomitant growth in demand for industrially produced inputs and mass consumption goods to boost overall industrial demand signi- ficantly. A higher public deficit and increased public investments are the instruments most directly under Government control, and also those that can increase demand for industrial products most immediately. The interim budget of the new Government moves strongly in this direction with a 240% increase in the planned budget deficit over 1976/77. 13. Improvement in the supply of energy augurs well for India's ability to meet the needs of a more rapidly growing economy. Organization- al and transportation problems in the coal industry have largely been over- come; production is sufficient to meet demand, stocks are comfortable, and the industry has good prospects for meeting both domestic and export demand. Supply of electricity continues to be a concern, because of the vulnerability of hydro power to variations in the monsoon and the continued existence of local shortages, even when the overall power situation is satisfactory. But the severe power supply constraints of the past have been relaxed for the moment at least, and several institutional improvements promise to reduce the future incidence of shortages: underutilization of capacity has been virtually eliminated in well-established power stations; progress has been made in the organized exchange of power between States thus relieving local- ized power shortages; and the problems of slow implementation of power invest- ment due to delayed delivery of materials and equipment have virtually dis- appeared. In addition, the delays caused by the inability of State Electricity  - 5 - Boards to finance projects expeditiously have been eased by their improved financial position following tariff increases, and by increased Plan outlays by the Central Government. The medium-term prospects for the oil and gas sector have been further improved by major new finds of oil and gas near the large offshore Bombay High field. Crude oil from Bombay High was brought to shore for the first time in May 1976; production reached an annual rate of 2 million tons by Mfarch 1977, and will rise to a level of 12-13 million tons by 1982/83. Although India will continue to import crude at or somewhat above the current level, much of the foreign exchange burden of rapidly rising imports will be avoided by the development of these resources. Prospects are also bright for further discoveries offshore, given the current high level of exploration activity. 14. Underlying all other development issues is that of population. Al- though India's population growth rate of a little over 2% is not high in com- parison with most LDCs, the size of the absolute increment - 13 million annually - is daunting. It appears, however, that population growth may have passed its peak in the 1960's, and it is expected to continue to slow down, both because the birth rate will continue to decline and because the death rate will not fall as steeply as in the past. With a sustained family planning effort, it should be possible to lower the population growth rate to 1.1% per annum by the end of the century. Our "best guess" projection of India's population by 2000 is 880 million. Many of the benefits of family planning policy will only be felt beyond the turn of the century, but the decline in fertility will bring about an early change in the age structure of the popu- lation. The school age group will grow more slowly or not at all after 1981, thereby reducing the pressures on the primary and secondary education system. The labor force, however, will continue to grow at a fast rate until the end of the century. 15. India's balance of payments position should be comfortable for the next few years. The combination of past global inflation and increased ex- ports have reduced the proportion of export earnings needed for debt service from 30% in 1970/71 to 16% in 1976/77. The ratio is not likely to rise above this level in the next few years. Given continuing favorable policies, the volume of exports should continue to grow by 7% to 10% annually in the near future; and import needs for fertilizer, POL and foodgrains will continue to require a diminishing proportion of available foreign exchange. The large inflow of private remittances shows no immediate signs of declining and should continue to bolster the foreign exchange position in the medium term. Imports, including a variety of capital goods, have already been liberalized signifi- cantly. Increased public investment and a revival of the domestic economy is likely to generate substantial additional import demand. However, this should be quite manageable, given the currently comfortable foreign exchange position, bright export prospects, and continuation of the current real level of net aid. The present situation presents an opportunity to raise the level of investment and, consequently, reach a more satisfactory level of long-term growth.  - 6 - PART II - BANK GROUP OPERATIONS IN INDIA 16. Since 1949, the Bank Group has made 50 loans and 85 development credits to India totalling US$1,762 million and US$4,338 million (both net of cancellation), respectively. Of these amounts, US$816 million has been repaid, and US$1,432 million was still undisbursed as of May 31, 1977. Annex II contains a summary statement of disbursements as of May 31, 1977, and notes on the execution of ongoing projects. 17. Since 1957, IFC has made 14 commitments in India totalling US$58.4 million, of which US$13.0 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$30.9 million, US$24.4 mil- lion represents loans and US$6.5 million equity. A summary statement of IFC operations as of May 31, 1977 is also included in Annex II (page 2). 18. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit opera- tions. Major irrigation, marketing, seed development, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capa- city utilization in industry. The Bank Group has also been active in suppor- ting infrastructure development for power, telecommunications, and railways. Family planning, education, water supply development, and urban investments have also received Bank Group support in recent years. 19. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, industry, power, urban development and water supply remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs such as credit for on-farm investments, command area development of existing irrigation schemes, intensification and streamlining of extension systems, and seed production form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefiting small farmers. Projects supporting water supply, sewerage, and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on agriculture-, export- and energy-related projects. 20. The need for a substantial net transfer of external resources in support of India's economy has been a recurrent theme of Bank economic re- ports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has successfully adjusted to the changed world price situation. However, the basic need for readily  - 7 - usable foreign exchange assistance, to augment domestic resources, assure effective utilization of existing capacity, stimulate investment and accele- rate economic growth, remains. As in the past, Bank Group assistance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity of the domestic capital goods industry. The import component of projects tends to be especially low in such high-priority areas as agricul- ture, education, and family planning. For the Bank Group to be able to make an appropriate contribution to the financing of projects in these sectors, it is important to cover a proportion of local expenditures. 21. It is clear from the review of the Indian economy that as much as possible of India's external capital requirements should be provided on con- cessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support, and some Bank lending to India, for which the country is creditworthy, is appropriate. As of May 31, 1977, outstanding loans to India totaled US$973 million, of which US$494 million remained to be disbursed, leaving a net amount outstanding of US$479 million. 22. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 58%, 24% and 29%, respectively, in 1975/76. On March 31, 1976, India's outstanding and disbursed external public debt was US$13.1 billion, of which the Bank Group's share was 25%. The Bank Group's share is expected to remain around this level in the future. Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1975/76, about 15% of India's total debt service payments were to the Bank Group. PART III - INDUSTRIAL SECTOR Structure and Past Performance 23. India's industrial output has grown on average by only about 3.5% per annum since 1965 and manufacturing presently accounts for 16% of NDP, as opposed to 14% in 1960/61. 1/ Within the manufacturing sector, there have been gradual changes in structure which reflect the priorities of the Government's industrial development strategy with consumer goods industries now contributing less to value added than they did - for example, the food 1/ If industry is more broadly defined to include the remainder of the secondary sector - utilities and construction - then value added in industry constitutes about 23% of NDP.  -8- processing and textile industries' combined share has fallen from 43% in 1960/61 to 28% in 1974/75. Over the same period, the share of "basic" in- dustries, (defined to include basic metals industries, chemicals and fer- tilizers), together with the engineering industry, increased from roughly 40% of value added in manufacturing to somewhat more than 50%. 24. While some two-thirds of manufactured output is estimated to come from registered plants, which are predominantly medium and large scale, the more labor-intensive unregistered, mainly small scale, sector employs two- thirds of the industrial labor force. The Government sector dominates mining and power generation and, to an increasing extent, the "basic" industries within the manufacturing sector. Nonetheless, according to the 1970 Annual Survey of Industry, almost 80% of industrial value added originated in the private sector, and within the manufacturing sector, the figure was 85%. Even allowing for the recent nationalization of part of the textile industry, private industry must still account for at least three-quarters of output from the manufacturing sector. Within the private sector, food, paper, tobacco and a number of other industries make important contributions, but textiles, chemicals and engineering goods continue to be dominant. 25. In the last three years, industrial performance has improved sub- stantially. In 1973/74, industry grew by a mere 1%, and in 1974/75 growth was 2.5%. With an improved supply position the industrial growth rate rose to 5.5% in 1975/76. Production of key manufacturing inputs, like steel, coal, and electric power improved dramatically in that year; capital goods production, which had declined by 4% in 1974/75, also recovered to the level of 1973/74; but the output of consumer goods slumped by 1.9%. In 1976/77, overall industrial growth (defined to include electricity and mining) is ex- pected to be about 10%. Selected data for the first nine months of the fiscal year show that the growth in the output of capital goods over the corresponding period of 1975/76 was 8.5%, while consumer goods production has increased by 15.8%. The sustained buoyancy of intermediate goods producing industries is indicated by the 22.3% increase in steel production and the 14.2% rise in electricity generation. However, inventories of intermediate goods are high by historical standards, which indicates that final demand continues to be a constraint. The Environment for Industry 26. Over the last fifteen years, both supply and demand factors have hindered industrial growth. Supply constraints have perhaps been more per- sistent. Through much of this period prior claims on foreign exchange con- strained the availability of essential intermediate inputs not manufactured in India, and affected the supply of inputs, such as steel, at times when domestic production was unable to match demand. Equally the unpredictable effect of the monsoon on the supply of agricultural raw materials, such as cotton, has constrained industrial growth. Moreover, agricultural supply bottlenecks have tended to coincide with power shortages, since hydro supply is also dependent on the monsoon.  - 9 - 27. However, when these supply constraints have not been binding, de- mand has usually been depressed. All of the four possible sources of growing demand - import substitution, exports, the derived demand from the growth of other major sectors and investment - have been weak. The principal oppor- tunities for import substitution were largely exhausted by the mid-1960s; while exports have recently contributed to growth, they still constitute a very small part of total sales; the relatively slow growth trend of agricul- ture of little more than 2% has restricted demand for consumer goods; and, finally, Government real investment remained stagnant until recently 1/. Industrial Policies Affecting the Private Sector 28. The Government has placed central emphasis on rapid industrializa- tion and national self-sufficiency as the keys to development. At the same time, the Government has sought to curb the concentration of economic power through expanded public ownership, restrictions on the growth of "large houses" and "dominant undertakings"; reservation of many products to the small-scale sector as well as special assistance to it; and finally support for development in backward regions. The aim of self-sufficiency has largely manifested itself in the pursuit of tmport substitution as well as curbs on foreign-owned firms and other forms of foreign involvement in industry. 29. The main instruments of industrial policy have been central licen- sing of investment and imports, physical allocation of "scarce" domestically produced raw materials and controls on industrial prices. This system has itself tended to conflict with other aims, especially that of curbing econo- mic concentration, since large firms are much better able to bear the over- head costs of dealing with a centralized bureaucracy. Controls have also restricted the ability of firms to respond to changed opportunities, especially in overseas markets, and thus hampered exports. Finally, price controls appear to have had a harmful effect on investment and modernization in such critical industries as cotton textiles, sugar, and cement. 30. In the last two years, there have been a number of important devel- opments in industrial policy. In the face of poor industrial performance and much underutilized or inefficiently utilized capacity, GOI has been recon- sidering elements of its strategy. It recognized that existing capacity must be utilized more efficiently; that public sector enterprises should meet more commercially oriented criteria for output, price, and profitability; and that there must be increasing emphasis on exporting. It has taken a number of measures to boost industrial growth, including liberalization of licensing procedures, relaxation of import and other controls, fiscal in- centives and more emphasis on industrial modernization. 1/ GOI's budget for FY77 provides for a substantial increase in investments and plan expenditures. The overall plan outlay (including states) for FY77 has been increased by about Rs 19 billion or 32% on top of an increase of 25% in FY76.  - 10 - Modernization 31. GOI has announced a modernization program for the textiles, cement, jute, sugar and engineering industries. The scheme will be monitored by IDBI, although ICICI will take the lead in the engineering industry. GOI's dis- bursement targets are Rs 2,000 million per year for the next three years of which the engineering sector would account for about 20%, although it is unlikely that this level of disbursements can be achieved. The modernization funds will be on-lent at 7.5%, compared with a normal lending rate of 11%. 32. Modernization is, of course, an ongoing process which has been taking place for some time - about 10% of ICICI's approvals over the last two years have been for financing modernization, replacement and balancing equipment. Therefore, the main change will be the additional incentive for firms to modernize as a result of the availability of cheaper funds. However, the Government has yet to announce many of the details of these programs and, more importantly, to set out how the basic structural problems of these industries are to be tackled. Conclusion 33. These various changes mark a cumulatively significant effort on the part of GOI to tackle the problems of India's private industry within the context of the overall policy framework. However, major tasks remain, especially the generation of a satisfactory demand growth and increased emphasis on efficiency in the use of resources. The improved export per- formance and increased Government expenditures on top of the higher agri- cultural income from recent good harvests help explain the recent upturn in industrial demand. To sustain it, the Government will have to continue efforts to encourage exports and private investment and, of greatest im- portance for the immediate future, to raise the level of public expenditure. Within such framework ICICI has an important role to play in providing funds for investment and, through its project appraisal, in guiding resources in an efficient direction. PART IV - THE PROJECT 34. The Bank has been closely associated with ICICI since its founda- tion in 1955. This long association has resulted in substantial Bank Group resources being channeled to high priority investments in India's private industry. The Bank has also been a partner in ICICI's institutional develop- ment by supporting continuing improvements in project appraisal, supervision and evaluation, and by encouraging wider geographic dispersion of ICICI's 1/ The FY77 budget provided for a reduction in the marginal rate of income tax from 77% to 66%. The basic exemption level was also raised. To stimulate investment, the FY77 budget permitted companies an invest- ment allowance of 25% on the value of plant and machinery.  - 11 - investments. The relationship with ICICI has also been extremely valuable to the Bank and also has helped shape the Bank Group's approach to other DFC's. In particular, the Bank Group/ICICI conducted a major study in 1973 on the development impact of ICICI and the findings were covered in the report of the XIth loan. Through ICICI the Bank Group has also developed a better under- standing than would otherwise have been possible of the problems and prospects of Indian industry. The proposed loan would be the Bank's twelfth to ICICI and would bring the total amount of lending by the Bank to ICICI to US$505 million (net of cancellations). It would help finance ICICI's projected for- eign exchange requirements through September 1979. 35. The project was appraised in November/December 1976. A Supplementary Project Data Sheet is attached as Annex III. A report entitled "Appraisal of the Industrial Credit and Investment Corporation Ltd., India", Report No. 151la-IN, dated June 22, 1977, is being circulated separately to the Executive Directors. Negotiations were held in Washington on April 26, 1977. The Borrower was represented by a delegation headed by Mr. S.S. Mehta. GOI was represented by Mr. Saigal. Objectives of the Loan 36. The objective of the proposed loan of $80 million would be to con- tinue to utilize ICICI as an efficient channel for financing high priority industrial projects many of which are export oriented and/or are located in backward areas. The loan will also continue to encourage ICICI to undertake studies of specific development problems, which will be of direct assistance to ICICI in its operation and which will also have the benefit of adding to IBRD's understanding of the industrial sector. The loan will continue IBRD assistance to ICICI in a period when ICICI is making efforts to diversify its sources of foreign exchange. Ownership and Resources 37. Ownership of ICICI is dominated by public sector corporations in- cluding the Life Insurance Corporation of India, the Unit Trust of India, and a number of commercial banks, which were nationalized in 1969. Of ICICI's presently paid-in share capital of Rs 150 million, public institutions hold 76%, foreign shareholders, mainly banks, hold 14% while the balance of 10% is held by private Indian investors. 38. Most of ICICI's foreign currency resources have come from IBRD. Of total foreign exchange resources of $492 million as of October 31, 1976, eleven IBRD lines of credit accounted for 85%. Fifteen KfW lines of credit (latest 1976) accounted for 10% and six UK lines of credit (latest 1975) for 3% of foreign currency resources. The rest (1%) was provided by one USAID line of credit (1961) and a Swiss bond issue (1973). The latter was the first commer- cial diversification of ICICI's sources of foreign exchange. ICICI has mean- while continued to make attempts to mobilize funds from foreign commercial sources, and is finalizing negotiations for a loan of Kuwaiti Dinars 5 million (about $17 million) from the Kuwait Investment Company at about 8.75% and re- payable in lump sum after five years. In view of the short maturity of this  - 12 - loan, ICICI proposes to blend this Bank loan with the Kuwaiti loan where this seems appropriate and thereby defer disbursements from the Bank loan in cer- tain cases. ICICI has also been negotiating with a foreign commercial bank a $5 million loan for which the terms are still under review. 39. ICIGI's total local resources of Rs 1.6 billion as of September 30, 1976 were financed in part from ICICI's own bond issues (40%) and in part from GOI and IDBI loans (37%) and share capital and reserves (23%). Prior to 1975, ICICI had difficulties in raising rupee resources for its expanding rupee lending, because its debentures did not have trustee security status. GOI has now granted this status and as a result ICICI could issue rather large semi-annual bond issues totaling Rs 303 million in 1976, compared to only Rs 55-80 million in annual bond issues before. Management and Board 40. ICICI is well-managed and operates effectively. Mr. H.T. Parekh and Mr. S.S. Mehta continue to be Chairman and Managing Director respectively. The Board consists of 16 directors, of whom four are private industrialists, three are from public financial institutions, two represent foreign share- holders, two represent the Government of India, two represent state level in- stitutions, and the remaining three are officers of ICICI (Chairman, Managing Director and Joint Managing Director). Operating Policies and Results 41. Policies. In promoting mainly large and medium scale enterprises, ICICI has emphasized the introduction of new technologies. ICICI has no formal policy statement but has prepared a financing strategy for the next two years which emphasizes the following sectors: (a) export industries; (b) power and transport; (c) agricultural inputs and outputs; (d) industries basic to industrial expansion; (e) mass consumption goods; and (f) balancing and modernization projects. About 80% of ICICI's lending by amount in 1975, and 88% in the first 10 months of 1976 as well as 82% of ICICI's pipeline of projects is in these sectors. 42. ICICI's lending rates were last increased in December 1975. For ordinary loans, local currency rates were increased from 10.25% to 11%, and foreign currency rates from 10.5% to 11%. For concessionary loans (backward areas), local currency rates were increased from 8.5% to 9.5%, and foreign currency rates from 9.5% to 10%. The foreign exchange risk is borne by the borrowers. These rates conform with those offered by other term lending financial institutions in India. 43. ICICI's Procedures. ICICI's project appraisals continue to be thorough and sound. Technical, financial, management and market aspects are well covered and the evaluation of the projects' economic contribution is satisfactory. Follow-up procedures and project supervision are also satis- factory. ICICI is a member of the Inter-Institutional Meeting which comprises the leading All-India financial institutions and which enables these institu- tions to coordinate their activities.  - 13 - 44. ICICI generally requires that its clients procure equipment on the best terms. It insists on competitive quotations from three or more manufac- turers or suppliers of international standing. Bids are carefully evaluated. Disbursement procedures are satisfactory. Since November 1975, ICICI has opened its own letters of credit in order to provide faster service to its clients. 45. Operational Results. Recent ICICI operations have reflected the economic slow down of 1974 and 1975 and the beginnings of a recovery in 1976. For instance, ICICI's total net approvals fell slightly in 1975 to Rs 712 mil- lion as compared to Rs 723 million in 1974, but picked up substantially in the first ten months of 1976 when approvals were 18% higher (Rs 841 million) than in the total year of 1975. Disbursements, which show a time lag compared to approvals, fell from Rs 555 million in 1974 to Rs 546 million in 1975 but are estimated to reach Rs 655 million 1976. As a result of improved avail- ability of domestic capital goods, rupee loan approvals increased as a per- centage of total approvals from 24% in 1974 to 43% in the first ten months of 1976. 46. ICICI has continued to emphasize lending to sectors such as chemicals/ petrochemicals (21% of approvals), metals and metal products (17% of approvals) and machinery manufacture (10% of approvals). Joint sector projects accounted for 13% of approvals from 1974 to 1976. Half of its loans are to new clients and some 7% of its loans to new entrepreneurs. About 39% of its lending dur- ing 1975 and the first 10 months of 1976 was for projects in backward areas. The financial performance of ICICI clients improved in 1974/75 with the return on capital employed rising from 16.1% in 1973/74 to 18.2% in 1974/75. 47. Financial Results. Net profits after tax increased from Rs 25 mil- lion in 1973 to Rs 27 million in 1974, Rs 35 million in 1975 and are esti- mated at Rs 35 million in 1976. The relatively sharp increase in 1975 was mainly due to tax concessions, including the reversion of excess provisions for income tax and surtax to income. Over the past four years, ICICI's net profit as a percentage of average equity has been about 11%, which is satisfac- tory. The dividend payment in 1975 was increased from 10% to 11%, partly to show a good dividend record for its next capital issue which is expected in 1977. However, this dividend still allowed for a satisfactory profit plough- back of 53%. Administrative expenses remained under control at 0.5-0.6% of average total assets. However, because the average cost of borrowings in- creased faster than the return on loans (partly due also to increased lending in backward areas at concessional rates), the spread on lending operations declined from 2.8% in 1973/74 to 2.5% in 1975/76. As a result, profits after tax and provisions declined from 1.3% of average total assets in 1973 to 1.1% in 1976. Profitability, although relatively low, is still adequate. The declining trend should be reversed by 1978 as the 1975 increase in interest rates begins to have an impact. 48. Total assets almost doubled from Rs 1.8 billion in 1972 to Rs 3.0 billion in 1975 and Rs 3.4 billion in 1976. There was a particularly large increase (30%) in 1975 mainly because of changes in exchange rates. As of December 1975, net worth plus provisions constituted 11% of the loan and  - 14 - investment portfolio. Foreign currency loans accounted for 59% and rupee loans for 30% of total assets while IBRD borrowings were 48% of ICICI's equity and liabilities. The debt/equity ratio was 8.6:1 as of September 30, 1976, below the 9:1 limit specified in the Loan Agreement (see Section 4.06). ICICI's Portfolio 49. As of September 30, 1976, ICICI's overdues of principal and interest were Rs 98 million (but dropped slightly to Rs 94 million as of December 31, 1976), compared with Rs 60 million as of December 1975, Rs 51 million as of December 1974, and Rs 41 million as of December 1973. The total principal outstanding of loans affected by arrears was Rs 455 million, or about 18% of the outstanding loan portfolio, compared with 7% in 1973. The increase in arrears was due mainly to the problems faced by Indian industry since 1972: power cuts in 1973; credit restrictions in 1974; and, in particular, business recession in 1975. The recovery in the industrial sector, which began to take place during 1976, is expected to reduce arrears over the next twelve months. 50. Three industries - metal products, electrical equipment and chem- icals - account for a major portion of the increase in arrears (40%, 33% and 18%, respectively). As a percentage of the total portfolio affected by arrears, they account for 19%, 18% and 15% respectively. These industries were hit particularly hard by recents developments like power cuts and reces- sion. ICICI has reorganized its follow-up work and created a separate cell to concentrate upon the problems of the 30 or so companies among the 120 in arrears (out of about 1,000), that are in difficulties. 51. As of September 30, 1976 ICICI's equity portfolio comprised common share investments of Rs 147 million in 250 companies and preference shares of Rs 92 million in 67 companies. Some 50% of the equity portfolio was in com- panies operating profitably and paying dividends, 21% in companies under con- struction or start-up and 29% in companies in difficulties, of which about 2% was in some jeopardy. The average market price of the common shares was 105% above book value, substantially lower than the 132% on June 30, 1974, reflect- ing the trends in the stock market. The average dividend yield was about 4.4% in 1976, although taking into account also capital gains after tax the average yield was 6.4% which is moderately satisfactory. As of December 31, 1975, ICICI also held debentures of Rs 150 million in 67 companies. In 1975, the average yield on debentures was 7.7%. ICICI's investment portfolio continues to be well managed despite the rather difficult economic circumstances of recent years. ICICI's Role in GOI's Modernization Program 52. As mentioned earlier, ICICI has been asked to be responsible for the engineering industry under the modernization program. ICICI plans to under- take a study of selected sub-sectors of the engineering industry, an outline of which was agreed during negotiations. When determining the extent of the involvement in the modernization program, ICICI will take the necessary steps to ensure that its profitability and capital structure remain adequate.  - 15 - Resource Requirements 53. Recent dramatic improvements in India's foreign exchange position should permit GOI to pursue an increasingly expansionary macro-economic policy. If adopted, this would also increase the demand for private investment and lead to an increased demand for loans from the industrial financial institu- tions. At the same time, GOI is likely to increase the allocation of free foreign exchange for industrial purposes. In this situation, some firms may prefer to use rupees, either their own or borrowed, and convert them into foreign exchange loans. The foreign exchange financing requirements for ICICI over the next two years have been conservatively assessed in recognition of a possible shift towards rupee loans. 54. The proposed loan would cover the gap in ICICI's foreign currency resource requirements between September 1977 (the time when the loan would become effective) and September 1979. From January 1977 through September 1979 foreign currency commitments would be about $170 million. Against this, ICICI had foreign currency resources available for commitment of about $40 million on December 31, 1976 and expects to borrow through September 1979, some $30 million from traditional sources (about $4 million per year from KfW and $6 million per year from UK). It expects to obtain $17 million from the Kuwait Investment Company during 1977 and further commercial borrowings of $5 million in 1978. This leaves a gap of about $80 million which the proposed IBRD loan is intended to fill. A loan of that size would account for about 60% of ICICI's foreign currency commitments between September 1977 and September 1979. Justification of the Loan 55. This loan will provide support to a well managed DFC which has had an important impact upon the development of the industrial sector and which continues to be engaged in promotional activities and also in the improvement of industrial efficiency. (a) ICICI's Development Impact ICICI's developmental impact was examined in a Special Study under- taken in 1973 jointly by the Bank and ICICI. One of the main findings was that ex-post economic rates of return have generally been similar to those calculated ex ante, generally of the order of 20-35%. These ex-ante economic rates of return (ERR) indicate that ICICI's appraisal and project evaluation procedures have ensured the selection of projects with satisfactory benefits to the Indian economy. The weighted ERR for 1975 and the first half of 1976 were 22.6% and 29.5% respectively. Weighted financial rates of return of ICICI financed projects were 14.8% for 1975 and 15.6% for the first half of 1976 which is satisfactory. (b) ICICI Promotional Activities Hitherto ICICI's promotional activity has included (i) training of staff from State Financial Corporations and State Industrial Development Corporations; (ii) participation in industrial surveys conducted throughout  - 16 - India; (iii) coordination and cooperation with State level institutions through Inter-Institutional Group Meetings; and (iv) financing the prepara- tion of feasibility studies and supporting technical consulting services. More recently ICICI has been concerned with: (i) preparation of sectoral and policy studies; and (ii) identification of projects to fill important gaps in the industrial sector. On the former, ICICI involvement in the preparation of sector/policy studies was initiated under the eleventh IBRD loan, when ICICI undertook to prepare a study on the problems and pro- spects of manufactured exports based on a sample of its clients. The study provides a considerable amount of useful information and is unique in its attempt to analyze issues related to exports at the firm level. This study will be followed up by an analysis of "penetration pricing" in export market- ing. ICICI also plans to undertake a study of the problems and prospects of selected engineering industries (see para 52). The study would, among others, focus on (i) demand prospects in both the domestic and export markets; (ii) upgrading of technology; (iii) domestic subcontracting to ancillaries; and (iv) the overall employment impact of alternative investment strategies. ICICI is also involved in a feasibility study of a proposal to establish a specialized institution to finance lower and middle income housing for which it is seeking participation by IFC. Finally, ICICI is represented in 7 GOI Committees/Public Bodies concerned with industrial investment. On the latter objective, the Project Promotion Department was established in 1974 and has now seen one project implemented while 9 others are being prepared. Creditworthiness 56. ICICI's strong management and staff, its good financial performance to date and projections for the future show that it is a creditworthy borrower. The amount of the loan has been based upon ICICI's financing requirements and would be limited to foreign expenditures. The terms would follow those of recent Bank loans to development finance companies, including the standard commitment charge. Every subproject involving ICICI financing of more than US$4 million, including outstanding commitments, would require IBRD approval (see Section 2.02(b) of Loan Agreement). PART V - LEGAL INSTRUMENTS AND AUTHORITY 57. The draft Loan Agreement between the Bank and ICICI, the draft Guarantee Agreement between India and the Bank, the Report of the Committee provided for in Article III, Section 4 (iii), of the Articles of Agreement, and the text and draft resolution approving the proposal loan are being dis- tributed to the Executive Directors seperately. 58. Special conditions of the Project are listed in Section III of Annex III. 59. The draft legal documents conform to the normal pattern for loans to development finance companies.  - 17 - 60. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATIONS 60. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President June 23, 1977   XI 9~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~V a 01.4 9~~~~~~~~~~0 -.4.4. 9~~~~~~~~~x.. 0 09 9~~~~~~~~~~~~~~~~~~~~~ - ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ M A9 . 0 7 0 C C -90 CD .r c. 449 D 0. C O - C 0 0 - C C 0 0 - 0 999 .-S CQC0N 4jJ' .0 NO.9, c ~~~~~~~-. C U OCsOC 0.. CC. 040 C.C - P-C - -. C C 0C.9%d~~~~~~~C C 0 ft -o vv -'.7 t9' CO .79 .~~~~~~4 ,dvO 3 '.99.0~~ o9394 Z. 091 I' V 0.I9tfa *1 9 a 11W-w Wm0 C gO -A-oa m ,s 9-993 3 7 3 3.4.9. . .9. .... .Zt!. ... ... 10 .9. Z Jac M M Z *9* 94 0.9999 - Pj. S.9C #99 00 0 CAP U' C 0999 CS - 0. 999 7 *99 9~~~~~~~~~~~~~~~~~~~~~~~~~0 & . lr . . f :2-7 W W~ .. 2 9994 .9199 9~~~~~~~~~~~~~~~~~~~~~ C C - . *~Wat ~ 4 6w r 0 a A. I~~~~~~~~~~~~~~~~~~: m "Z- C ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~I 9 ~~~9- 9 St .01 941V1 9~~~~~~~~~ W 72 & S & &- 1 n99* 79 -I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~9 -.4.4 ~ ~ ~ ~ ~ ~ ~ ~ ~~~ ~~~~~~~~~~~~~~~~~~~~~~~IDa  ANNEX I Page 2 of 4 NOTES U70100 otherwise voted, data for 1960 refer to any year b.etwee 1959 and 1961, for 1970 between 1968 and 1970 and for Moat Recen.t Eotimate betee 1973Isd 19 75 00 Brazi ban be enseleted aa bjective country becoone of its ese. and catpsrable prbleca of regional tosqoclicy. INDIA 1960 Ia 1951-61 average: lb 1951460, Ic Rat io of populatin ander 15 aod 65 and over to labor force age 15 and ovr, /d Registered applican ts for work, /a 1962; If Registered, non all1 practicing in tb.e cooncry; /j Ieclodieg midive lb 1950. Ii 1960-2 1970 Ia Ratio of popolecico coder 15 and 65 and -ove to labor force age 15 aod over; lb 1967-68, Ic Iocloding oidwivee, /d 1967. moor fRECET ESTOPIATE: Ic 1971: lb Ratio of popolatian onder 15 and 65 ond ovr to lsbor force age 15 and over, Lo 1976. /d Inc,,diog cidwi-es /e 1969-71 averge; If Ppopl.tie If veers and ovr lbNlONfSl1A 1970 /a 1961-71, lb 1971; /c Iocodleg nidwi-ee, Id Tocci hospital beda ircosplete. LitI LLPP1INI_U 1970 Is ka percetag of cpleyoeot. lb Nor iocloding private voctional schoolo. FIRM/ T 1970 /0 Ltro elcalIly acti-e PoPolarion, Lb Horyital pernoone1; ~Ic lnsde only. R1IO, Apr11 II. 1977 DEFIbNTlUNS OP SOCIAL INDICATORS Land Are ibLh- no27 Poclatio'crP.ric ccc Pooolc ilo y oo.brIpro- i- lita - iaolvurloc ced oop Ioo lnd orc. o.d inland wao.cogm le n fvle grodoate oona trbc"o croid A,-Lc.M-P.itrc-c Lo:Lintc of acIc,Lt,ro c0 oved temprari ly or rooo,ad o-o1iocy Perocecclithlc traioing or cepor icc- vfirr- e po -re okct, b itc~hec gardenosoc to Lic Pocltjloc- per hoepitol led - Popolatilo decided by nehe Lic- I hospitll fal Lao. ~~~~~~~~~~~~~bode _viILabl io poblic ood pricate Aecoccl and opvclaIoc pito and oh.babliltattt contort, ooclodacc.roe-g hce oo. nd ottobliolhnote LONP per -pil,i (U15) - tSP Per .ayi,.O oiac acoc taket pricco, for_cuotdial ond PrIvo.tLco caro .1. loudby sne ccccn Ic cetad d Wold lan Atlas 119L -5 beeia); Per aPit- t -Psply of calorien 1%/ of Lecrcct) .upotod irco ci 7 ol175 dooIcogy cqcico1ct cf co food capplion oval lad, iv ---yrp erc pt pcc daly; avai11labic ppli, or opeinc d_nct- p-odo-tto, Inyor- Lone liiolatioyacooi tol etatootiuc coporte,aod thaogn in otnok;ntIopIWIa- one lde oninol feed, nerds, Foiolaio lon-c. illon)5 - An ol July ficr.t if not-ocilobicqoatctleo aoed en food procco-tog and nnc Indierbto,rqlo Iccg f too cod-ypoor ccLi tetn, 1960, 1970 and 1975 dato. ocota acr cativated by FAQ booe.d Ino phyoilogLeflOI credo for ocr..al activity.and healtb co..oidZ_rng en-ooeclcnooae oywightn, Lyoaib doi -, oc ...ooe ko 9d-a PoPoloci-c Per- oqore kilo- aend ccd Larcibationo of popolae1 , nd Ioae 07 c wat Popoldlii-a devuito -per 0000cc ko of oric. land - Conpoted 00 ob-v for Per caPiEa eapPlY of croceco (iravo pcc day) - Proteic content of per agrctiarn laA oly. colta vet nopply of ftold per day ; net aopplp of food in defiod an aboc, ceqoic,oentofo oII1 el c oorlea - orailebd by USDAE.....nLe vital oLtotltico Reenorhb lerlcr ..r..tdc for aetninon" ......no oi 160 grveo trodo lILcI:-L rotc ocr ....ao. aoe-on- Aono-1 lico, bircho per thse tota ProteIn prr dayd,bad2. gaoo anenol andpne rc. ,o of nd-por opultio, tn-yer alch et _ aeag, oIngIn960 and hbich 10 gr avohoodboio protein; thene tond-rdo ore -`r 1970 end f--yc- -earaccag ending, In 19 75 fec moot recen Lhnor.la tlio- of 75 grav 00 Locl. protoen and 23 gram of anI"a rti Crad iri a ir -lced, a--rae-hAnncal dearbo per rliv...and of nid- 00an -acecge for the' wol,pbor b A nteTird Woldp;foodi veo pooloico .. co-ya arithmetic -nerg..eo n ding to 1960 end 1970 end Some7. lic -yorcc 00 ndin In 1975 for rent monteooec Per cn ra pLrec ac-el f-o anioal and poloc- P-orolo epply of food Infact norL taly rate 1/choc) - A-n-al deothin of iateodcc on year derlod fir o.nt..a.o and pIn, to grave pcr day. of agrpcr toocao line hicb. Deatb rate (/choo) ac 1-4 - Annoal dearho pr Iboo-cond ic age groop Lifevoirytocp t clch con)- kcrag c-ber of yeor of life ro4n - yeoco, to childre in thio age groop, -gfient.d 00 ac icditcacornf "Ig at"Irth, onolipY Iii-poor -crge oinf Lc 1960., 979 Ined nontiin 1~5 ccd_ocloping __onrieo. G-o- -icocci ar-A-croir nnb-r if Lice d-ogh,ter cooo Lai Education boa a crccnl eprodocti_epeIod If nbc copeci.ccc pr-neo age- Adjotderolnn c i oiayshool - Enrollment of .1alogco 0 up-cofic Inctillip r-te, onoallyfice-eac oorgoending ic 196C,procg fptapnhe-g oaoi, eeodooidnagod 19 77 and 195 fo dI fnigootic6-lyaohtajao fo dtffocoot "lentha of primary edocaitov; Pocalatlo- growh rate (7.) - .tota - Coopoorid o.necal g-tb rotor nIf old- II for . t0r leetwIthIocinr_al odocotion, IIrLL_oe 't na ec _d 1007. prY- iioltlofcc 1950-60, 1960-70 end 1970-75. 01icc .000 .ppllo arc bellowo oboe rho ofticIal cehool age. Poclelc gr-oth care L7.) - -rban - C-npiorrd liko gooth rotc of total Adlua,ted.enro~,ll met rctio-rc .nrdorp school -,Conpa,tod 00 ooen pcplaton diferntdefintiono of ohnareas nay aff.ct corpor-o nary d edocoio reqo ic al lat fu rr fopoe rer Liey fdreaon cntla inotroorion, pconideo e Iro, oct ionaL or toacher training Uban coPc1otio (. o% f total) - Rotc of orban ro toto1 popuistion; inatrootioon for Paptil of 172t 10 yeo- of ag;crepndence difernt definiieloo 0f arbor -roo nap affect conparcbulity of data cussare goner ally vooloded. ornc00c ee foeo of onbooling Proided ifiret end -ccod levole) - lotal ye,ar of Ag Lcutrucor -Iceroet) - Children (0-I4 pears), -oriog-ago (15-64 ye.ro) schooling, atoecondary lend, -cetionaI inetrootior nap he par- ond r"tIro I65 yearn and -oorS an PIr---"g, o f mid-year popoLtion. tiolly or completely ...loded. Ag Idfodo p aig oIc f Poplt Inaro 15and 65ad on.or.to .n.loc nrollnent (7. of cVodan -Pcotionol iontiruticon thveo aer1 thrug 6R. Intlod reobrical, induntrial or other progrmo which operoto Ecoronio depoodeocy uIc - Rtio of popuIcto. order 15 and 65 and on- iodepondoently I cc00doPcr It f nodarp inattitoloo to rho, lobor forte in age grou p of 19-64 pecro. Adult literacy reto (7) - ieaeauts(bot tod n rt)a Fai ly _ _oono-ocectrs (co etine to) - Cav..lotine number fprerg f toa adLiteralteidn g bld t5 700cr and 00r.te accoptors of bIrth-control denltee aoder ..oepice. of notional failyp-ntgIf.t dlPplti aed1y -adI-- Fool0 Plancing - uwero(. of marIdwmn -Iocntg f co rned Perco pe r.coo (urban) - Average nonbor of P-.so.. per roa in "ocln of bild-b.oriog ago (15-4b yoro) who cue iIhir-ocInrIll denione occo-pied etinldarllilogs in urban cre00, doellinge eaclado to oH carried _00ciI sonago grop. non-permorn..t troctoree and unccpied porto. E.pl.y,eIt "'~~ ~ ~ ~~~~~~~~~~~ccol deling without Pipied water (7. - Ot..upiled convenional TRtalovonent thl.. ) ... -1yIi, ~.. dwe'llings.'I in rban. and rurl- res irhoat insde- or atIdopiped T do oo ac tosn)- cnnolpotv oao,including wtrfscil itiea. as erntai o : 1a'll occuped dwelings.. aredtioe ndurIloo bI noolo1dlog h-.snwivu, etodooto, etc., Actors to oleLtiityt (7. of all d-e1ilge) - oooinldue llingo doflnitosi iu onre r o coprable. with electrIcity in licing q...rtorn a perent of total do-11inge in Labor force to aurloltor 1.).Agricu1toro1 labor force (10 forcing, urbannd rrlaes forectry phbarin and flobiog)a percen.tage of otol- labor forte. grldoo'lilon conneced to olectricity (7.) - Coepoted aabon for UnemplYed (7 of labor force) - Unem.Ployed ace usually deft-d anrural dwolliogn only. pervoon o.Yho ore ab.l and..i.lling to lobe o Job, out o o jb o niimn vrcdno vcedig00 un6 00 otbockpoaleob htoee Radio tecei-ero (per thou pop1 - All type eof reco iner for radio brod- c..ntrion do- to different dofiiolions of onoplyleed and o--reI ofcon to rog -cr1 pnblic c houaand of population, -ocloden dots, -.g., aponr ffico ottocc, oplc n-rnyn, coopuinofry onlicensod rtenroncutrien und in yer hnrgerto f coonpicyneot lnourooov. ~~~~~~rad Io tots was ic effect, data for recent yernny nor he cnporuble Income Diatcibtictl, - Perceentog of prioc to cn (both in ouch and a oenr corn (erri. tboapp)-Puoigrcrechpl oocor biod.)froc,ice,d by ruchost 57., richor 297. po...oor 207., and pooront nearing lows tlhan eight persona; o..cluden aboic...es, heorses and Di.ttb.ti. et and 111 iP- P .. nt,,e. f lad -ne by lectrlioty (kob/nt per cap),-,Avosol .o...mprtnnof ihndosatrla,cn Distandiburioc If an oo ai-Perc on fln we b olbetoril pblI ad rlot elwtricltp in kilowatt oroper cpi ta, 107. aod pooreno 107. of land ocoero. gnerlybsd or prodotiur doto, withooralownc for bon..es in H..ILh and N-tri~~~~~~~~~~ien~grIds hut allowIng for inports and reports of electricity. gecith" cod NutitonNews.Print (kg/yr per cap) - Poer .epito annual onsoption in kilolgrams Ppula,tio per ..otoioia- PPoplatIon dicidod by nnher of practicing ectincted fro. domestic production pla netI Importse of newprint. pbplclns uoifd fron a csdicul shool atLri_ornit y lee.  ANNEX I Page 3 of 4 ElCOkNaC DEVELOPNT DATA CGP PMR CAPITA IN 1975 US$ 150 GROSS NATIONAL PRODuCT IN 1975/76 Ai/ 1A I RATE OF GCR( N. oonstant Prices) US$ Bln. % 1960/61-1964/65 t965/66-1969/70 970/71-i1974/75 GNP at Market Prices 82.8 100.0 3.8 3.7 2.6 Gross Domestic Investment 46.7 20.1 Gross National Saving 16.0 19.3 Current Account Balance -0.7 -0.8 Resource Gap -1.5 -1.8 OUTPUT, LABOR FORCE iND PRODUCIIVITY IN 1971 alue Added (at factor oost Labor Force V.A. Per Worker USt ~~ Bln. Mil. + VSt of National Averare Agriculture 24.5 46.6 130.0 72.1 188 64 Induetry 11.8 22.3 20.2 11.2 582 199 Servioes 16.3 1.1 30.2 16.7 S42 186 Total/average 52.6 100.0 180.4 100.0 292 100 GOVERNMENT FINANCE CGneral Government Central GovernmenI ________ Blnjof GCP (Rs. Bln) of CDP 1975/76 1975/76 1973/74t1975/76 1975/76 1975/76 1973/74-1975/76 Current Receipts 133.34 18.5 16.7 79.11 11.0 9.8 Current Expenditures 118.77 16.5 iLd 70.05 9.7 8.8 Current Surplus/Defioit 14.57 2.0 1.4 9.06 1.3 1.0 Capital Expenditures a/ 54-27 7.5 6.2 40-75 5.6 4.6 External Assistanoe (net) 13.89 1.9 1.3 13.89 1.9 1.3 MONEY. CREDIT AND PRICES 1965/66 19l71n 1972/7 t 1973/74 o974/75 1975/76 September 1975 September 1976 (Billion Rs outstanding at and of period) Money and Quasi Money 61.4 122.4 142.2 169.1 187.2 213.6 199.0 238.3 Bank Credit to Public Sector 40.8 69.0 82.5 92.9 102.6 108.5 112.8 112.7 Bank Credit to Private Sector 28.1 64.4 76.o 90.1 109.5 134.2 106.0 143.8 (Percentage or Index Numbers) January 1976 January 1977 Money and Quasi Money as % of GMP 24.0 26.4 27.9 27.1 26.2 27.9 Wholesale Price Index (1961/62 = 100) 131.6 188.4 207.1 254.2 313.0 302.8 290.0 320.5 Annual peroentage changes in. Wholesale Prioe Index 7.7 4.0 9.9 22.7 23.1 10o5fl Bank Credit to Public Sector 12.9 21.3 19.6 12.6 10.4 5.7 4.7-', Bank Credit to Private Sector 12.8 13.6 18.0 18.5 21.5 22.5 24.6 8 ./ The per capita GNP estimate is at market prices, calculated by the oonversion technique used in the World Atlas. All other conversions to dollars in this table are at the average excbange rate prevailing during the period covered. / Quick Estimates. S/ Computed from trend line of GNP at factor cost series, inoluding one observation before first year and one observation after laet year of listed period. / Transfere between Center and States have been netted out. l/ All loans and advances to third parties have been netted out. t/ Net bank credit to Government Sector. B/ ank Credit to Commercial Seotor.  ECONQIIC DEVELOPMENT DATA ANNEX I Page 4 of 4 BALANCE OF PAYMENTS 1975/74 192756 1976/77 h/ ImRCADISS EmPORTS (AVTEACE 1973/74-197J/76) Exports of Goode 3,259 4,174 4,555 5,400 Sugar 342 9 Imports of Goods -3,97t -5,794 -6,085 -5,850 Jute Manufactures 317 8 Trade Balanae - 732 -1,620 -1,530 -450 Tell 249 6 NFS (net) 1/ n.a. n.a. m.a. n.a. Cotton Textiles 415 10 Iron Ore 206 5 Resource Gap n.a. n.a. n.a. n.a. REnginering Goods 391 10 Othare 2.071 52 Interest Payments (net) - 233 - 260 - 250 - 280 Total 3,989 100 Other Faator Payments (net) n.a. n.a. n.a. n.a. Net Trenefore */ n.a. n.a. n.6. n.a. Balanoe on Current Acoounts n.a. n.a. n.a. n.6. EEa8AL DEm. MARCH 31. 1976 UIS$ Billion Official Aid Disbureemente 1,249 1,766 2,326 2,050 Repayable in foreign ourrency 12.3 Amortisation - 459 - 519 - 516 - 560 Repayable through export of goode 0.7 Transactions with I1 75 515 205 - 365 Total Outstanding and Disbursed 13.0 All Other Items 205 80 559 1,100 D1BT SVICE RATIO FOR 1976/77 15.5 peroent Increase in Reserve (s ) -105 38 - 794 -1.495 Gross Reserves (end year) 1,416 1,378 2,172 3,667 IBRD/IDA LNDI , Deoember 31, 1976 (Us$ Nln.) Net Reserves (end year) 1,341 783 1,332 3,202 IERD IDA Fuel and Related Materials Outstanding and Disbureed 452.7 3208.4 Imports 720 1,451 1,417 1,625 Undisbursed 510.3 1140.5 of whiohs Petroleum 719 1,451 1,417 1,625 Outstanding including Eirports 20 26 41 11. a. ~~~~~~~~~~Undiebursed 963.0 4348.9 Exports 2D 26 41 0.6. of whioh; Petroleum 16 17 22 n.a. RATE OF EXCBCE AB/ Prior to mid-Deoember 1971 USt1.00 = Re 7.5 After end June 1972 I Floating Rate Rs 1.00 = US$0.155333 Spot Rate March 31, 1976 Mid-December 1971 to U 5S31.00 = Re 7.27927 approx. USt1.00 - Re. 8.80475 end June 1972 R. 1.00 = U0SO.137376 approx. Re 1.00 = US$ 0.113575 Fa/ Estimated. i/ Included with 'All other Items'. J/ Aid and trade figures oonverted to US dollars using exohange rates as indicated in inside front cover of this report or notes to individual tables. 2/ Including garments. l/ Amortization and interest payments (excluding IIIF trameaotions) aa a peroentage of merchandise exports.  ANNEX II Page 1 of 12 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of May 31, 1977) Loan or USS Credit No. Year Borrower Purpose (Net of Cancellation) BANK IDA LUndisbursed 39 Loans/ 1,089.2 43 Credits fully disbursed 2,344.8 614-IN 1969 India Tarai Seeds 13.0 - 3.7 203-IN 1970 India Punjab Agricultural Credit - 27.5 3.6 226-IN 1971 India Andhra Pradesh Agricultural Cr. - 24.4 0.6 250-IN 1971 India Tamil Nadu Agricultural Credit - 35.0 3.8 264-IN 1971 India Cochin II Fertilizer - 20.0 0.8 267-IN 1971 India Wheat Storage - 5.0 3.7 278-IN 1972 India Mysore Agricultural Credit - 40.0 1.2 294-IN 1972 India Bihar Agricultural Markets - 14.0 11.1 312-IN 1972 India Population - 21.2 8.7 342-IN 1972 India Education - 12.0 11.1 356-IN 1972 India IDBI - 25.0 12.4 377-IN 1973 India Power Transmission III - 85.0 27.6 378-IN 1973 India Mysore Agricultural Markets - 8.0 7.2 902-IN 1973 ICICI Industry DFC X 70.0 - 9.2 390-IN 1973 India Bombay Water Supply - 55.0 37.8 392-IN 1973 India Uttar Pradesh Agricultural Credit - 38.0 7.4 403-IN 1973 India Telecommunications V - 80.0 15.6 427-IN 1973 India Calcutta Urban Development - 35.0 15.1 440-IN 1973 India Bihar Agricultural Credit - 32.0 17.6 456-IN 1974 India HP Apple Processing & Marketing - 13.0 10.7 481-IN 1974 India Trombay IV - 50.0 18.3 1011-IN 1974 India Chambal (Rajasthan) CAD 52.0 - 40.3 482-IN 1974 India Karnataka Dairy - 30.0 29.6 502-IN 1974 India Rajasthan Canal CAD - 83.0 56.6 520-IN 1974 India Sindri Fertilizer - 91.0 30.2 521-IN 1974 India Rajasthan Dairy - 27.7 27.4 522-IN 1974 India Madhya Pradesh Dairy - 16.4 15.8 526-IN 1975 India Drought Prone Areas - 35.0 28.8 1079-IN 1975 India IFFCO Fertilizer 109.0 - 88.1 1097-IN 1975 India Industry DFC XI 100.0 - 57.3 532-IN 1975 India Godavari Barrage Irrigation - 45.0 32.4 540-IN 1975 India ARC Credit - 75.0 32.1 541-IN 1975 India West Bengal Agrc. Dev. - 34.0 31.0 562-IN 1975 India Chambal (Madhya Pradesh) CAD - 24.0 21.1 572-IN 1975 India Rural Electrification - 57.0 54.6 582-IN 1975 India Railways XIII - 110.0 46.0 585-IN 1975 India Uttar Pradesh Water Supply - 40.0 39.5 598-IN 1975 India Fertilizer Industry - 105.0 97.5 604-IN 1975 India Power Transmission IV - 150.0 150.0 609-IN 1975 India Madhya Pradesh Forestry T.A. - 4.0 4.0 610-IN 1976 India Integrated Cotton Development - 18.0 18.0 616-IN 1976 India Industrial Imports XI - 200.0 7.0 1251-IN(TW) 1976 India Andhra Pradesh Irrigation 145.0 - 145.0 1260-IN 1976 India IDBI II 40.0 - 40.0 1273-IN 1976 India National Seed 25.0 - 25.0 1313-IN 1976 India Telecommunications VI 80.0 - 60.2 1335-IN 1976 India Bombay Urban Transport 25.0 - 25.0 680-IN 1977 India Kerala Agric. Dev. 30.0 30.0* 682-IN 1977 India Orissa Agric. Dev. 20.0 20.0* 685-IN 1977 India Singrauli Thermal 150.0 150.0* 687-IN 1977 India Madras Urban Dev. 24.0 24.0* 695-IN 1977 India Gujarat Fisheries 4.0 4.0* 1394-IN(TW) 1977 India Gujarat Fisheries 14.0 14,Q* Total 1,762.2 4,338.0 of which has been repaid 789.2 27.0 Total now outstanding 973.0 4,311.0 Amount Sold 114.6 of which has been repaid 111.5 Total now held by Bank and IDA 973.0 4,311.0 Total undisbursed 493.8 937.8 1,431.6 1/ Prior to exchange adjustments. * Not yet effective.  ANNEX II Page 2 of 12 B. STATEMENT OF IFC INVESTMENTS (As of May 31, 1977) Fiscal Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.7 0.3 1.0 1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2 1964-75 Mahindra Ugine Steel Co. Ltd. 11.8 1.0 12.8 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.0 0.1 1.1 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 TOTAL 49.6 8.8 58.4 Less: Sold 6.0 1.6 7.6 Repaid 13.0 - 13.0 Cancelled 6.2 0.7 6.9 Now Held 24.4 6.5 30.9 Undisbursed 5.6 - 5.6  ANNEX II Page 3 of 12 C. PROJECTS IN EXECUTION- Generally, the implementation of projects has been proceeding reasonably well. Details on the execution of individual projects are below. The level of disbursements was US$551 million in FY76 or 62% of Bank Group commitments to India in that year. The undisbursed pipeline of US$1,524 million as of March 31, 1977, corresponds roughly to com- mitments over the preceding two-year period and reflects the leadtime which would be expected given the mix of fast and slow-disbursing projects in the India program. Ln. No. 902 Tenth Industrial Credit and Investment Corporation of India Project; US$70.0 million loan of June 8, 1973; Effective Date: August 16, 1973; Closing Date: December 31, 1978 Ln. No. 1097 Eleventh Industrial Credit and Investment Corporation of India Project; US$100 million loan of April 2, 1975; Effective Date: July 1, 1975; Closing Date: December 31, 1980 These loans have supported industrialization in India through a well-established development finance company. Loan 902-IN is fully committed and commitments are progressing satisfactorily for Loan 1097-IN. Disburse- ments under Loan 902-IN are ahead of schedule. Ln. No. 614 Tarai Seeds Project; US$13.0 million loan of June 18, 1969; Effective Date: September 12, 1969; Closing Date: Dec- ember 31, 1977 This loan to the Tarai Development Corporation is to assist in the production, processing and marketing of certified seeds of high yielding varieties. The corporation is working effectively and has developed an ex- cellent reputation for quality seed. Expansion of three processing plants is well under way. Delivery of some equipment in damaged condition, and retendering, because of poor response for some others, has delayed delivery schedules necessitating an extension of the Closing Date by one year to December 31, 1977. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 4 of 12 Cr. No. 203 Punjab Agricultural Credit Project; US$27.5 million credit of June 24, 1970; Effective Date: September 4, 1970; Closing Date: June 30, 1977 Cr. No. 226 Andhra Pradesh Agricultural Credit Project; US$24.4 million credit of January 8, 1971; Effective Date: May 10, 1971; Closing Date: June 30, 1977 Cr. No. 249 Haryana Agricultural Credit Project; US$25.0 million credit of June 11, 1971; Effective Date: November 2, 1971; Closing Date: June 30, 1977 Cr. No. 250 Tamil Nadu Agricultural Credit Project; US$35.0 million credit of June 11, 1971; Effective Date: November 2, 1971; Closing Date: June 30, 1977 Cr. No. 278 Mysore Agricultural Credit Project; US$40.0 million credit of January 7, 1972; Effective Date: September 25, 1972; Closing Date: June 30, 1977 Cr. No. 391 Madhya Pradesh Agricultural Credit Project; US$33.0 million credit of June 8, 1973; Effective Date: October 10, 1973; Closing Date: December 31, 1977 Cr. No. 392 Uttar Pradesh Agricultural Credit Project; US$38.0 million credit of June 8, 1973; Effective Date: October 31, 1973; Closing Date: December 31, 1977 Cr. No. 440 Bihar Agricultural Credit Project; US$32.0 million credit of November 29, 1973; Effective Date: March 29, 1974; Closing Date: June 30, 1977 Cr. No. 540 Agricultural Refinance and Development Corporation (ARDC) Project; US$75.0 million credit of April 28, 1975; Effective Date: August 5, 1975; Closing Date: Dec- ember 31, 1977 Apart from the Punjab project, which consists of mechanization equipment only, all the above agricultural credit projects are similar in structure, being designed to provide long- and medium-term credit to farm- ers through credit institutions for such on-farm investments as tractors, minor irrigation and land-leveling. Disbursement of the minor irrigation components are on schedule. Tractor procurement was delayed following changes in both the supply and demand situations after the projects were originally appraised, which prompted GOI to request that indigenous as well as imported models should be eligible for IDA financing under these credits. The Executive Directors approved this request in December 1973 and those credits which have tractor components have been amended accordingly. Tractor procurement is proceeding satisfactorily. Credit 540 is a continuation  ANNEX II Page 5 of 12 nationwide of the previous program of agricultural credit projects, which were confined to individual states. ARDC will continue to act as the financial intermediary for refinancing agricultural credit. Cr. No. 267 Wheat Storage Project; US$5.0 million credit of August 23, 1971; Effective Date: November 14, 1972; Closing Date: September 30, 1978 The Food Corporation of India is making satisfactory progress in the execution of this project. Piling and foundation work is nearly com- pleted. Silo construction has begun and staff training is in progress. Cr. No. 456 Himachal Pradesh Apple Processing and Marketing Project; US$13 million credit of January 22, 1974; Effective Date: September 26, 1974; Closing Date: December 31. 1978 This project was designed to promote the development of apple processing and marketing in Himachal Pradesh, and comprises grading and packing centers, cold storages, a juice processing plant, road improvements and cableways. The project encountered initial delays due to managerial and technical problems, however, remedial measures have been taken to over- come these difficulties. A recent review mission found a satisfactory improvement in the prospects for successful project implementation. Cr. No. 403 Telecommunications V Project; US$80.0 million credit of June 25, 1973; Effective Date: July 30, 1973; Closing Date: December 31, 1977 Material supply problems which delayed the start of this project have been resolved and physical achievements were at record levels during fiscal year 1976. However, to cover the delivery and installation of im- ported transmission and switching equipment, the closing date was extended by one year to December 31, 1977. Cr. No. 377 Power Transmission III Project; US$85.0 million credit of May 9,, 1973; Effective Date: October 10, 1973; Closing Date: September 30, 1977 Cr. No. 604 Power Transmission IV Project; US$150.0 million credit of January 22, 1976; Effective Date: October 22, 1976; Closing Date: June 30, 1981 For Power Transmission III all equipment has been ordered; there will be a substantial cost overrun due to international price increases, part of which is being met from Power Transmission IV. For Power Transmission IV, bids for most of the equipment have been invited.  ANNEX II Page 6 of 12 Cr. No. 264 Cochin II Fertilizer Project; US$20 million credit of July 30, 1971; Effective Date: December 2, 1971; Closing Date: June 30, 1977 Cr. No. 481 Trombay IV Fertilizer Expansion Project; US$50.0 million credit of June 19, 1974; Effective Date: August 21, 1974; Closing Date: December 31, 1977 Cr. No. 520 Sindri Fertilizer Project; US$91 million credit of December 18, 1974; Effective Date: February 27, 1975; Closing Date: September 30, 1978 Ln. No. 1079 IFFCO Fertilizer Project; US$109 million loan of January 24, 1975; Effective Date: April 28, 1975; Closing Date: March 31, 1979 Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1980 The Cochin Fertilizer Project is being commisssioned, about 31 months behind the appraisal estimate. Progress on the Trombay IV project has been good although project completion may be delayed by about four months because of longer than expected delivery times for critical equipment. Under the Sindri project plant construction and erection is proceeding generally according to schedule except for a one-month delay due to anticipated delays in receipt of some materials. Commencement of commercial production is ex- pected by March 1978. The anticipated cost to complete the project is pre- sently running within budget. The IFFCO project was delayed by about a year as a result of a change in feedstock from fuel oil to naphtha and delays in completion of engineering contracts. The project is now progressing satis- factorily based on naphtha as feedstock. Site work has begun, process- and time-critical equipment is being ordered, and engineering work is well under way. Credit 598-IN is designed to increase the utilization of existing fertilizer production capacity. The project has encountered delays in sub- project preparation and investment approvals by the Government. Further, some of the sub-projects identified earlier may not materialize because of reconsideration by the Central and State governments. The Central Govern- ment has submitted a list of sub-projects to replace the ones that are likely to be dropped. Because of the above, the project is likely to be delayed by 6-12 months. Cr. No. 294 Bihar Agricultural Markets Project; US$14.0 million credit of March 29, 1972; Effective Date: July 31, 1972; Closing Date: December 31, 1978  ANNEX II Page 7 of 12 Cr. No. 378 Karnataka Wholesale Agricultural Markets Project; US$8.0 mil- lion credit of May 9, 1973; Effective Date: September 7, 1973; Closing Date: December 31, 1979 These projects were designed to help with establishment of whole- sale markets in a number of towns in Bihar and Karnataka. Progress under the Bihar project has generally been satisfactory. Markets construction in Bihar was delayed due to legal challenges arising out of the state's acqui- sition of land for market sites; however, these difficulties have been satis- factorily resolved. Construction of markets is well advanced and a number have opened for business. Progress under the Karnataka project is much less satisfactory, however, largely due to deficiencies in market planning, design and construction. These problems and remedial actions have been brought to the attention of the State and Central Government. The project is being mon- itored closely to try and bring about the necessary improvements in implemen- tation. Cr. No. 312 Population Project; US$21.2 million credit of June 14, 1972; Effective Date: May 9, 1973; Closing Date: June 30, 1978 This credit is designed to finance an experimental and research oriented population project in Karnataka and Uttar Pradesh. The project's infrastructure, which would provide the optimum facilities (buildings, equip- ment, staff and transport) according to GOI standards in selected districts in each state, is almost complete. The two Population Centers, which will design and monitor research aimed at improving the family planning program, are now functioning. Cr. No. 342 Agricultural Universities Project; US$12.0 million credit of November 10, 1972; Effective Date: June 8, 1973; Closing Date: December 31, 1979 The project involves the development of the agricultural uni- versities in Assam and Bihar. Initial lag in implementation on account of late appointments of project staff has been overcome. Campus plans have been approved, and construction has started in Assam and is scheduled to start in Bihar by mid 1977. Disbursement which has been slow because of initial delays should accelerate now that construction and equipment procurement are under way. Cr. No. 356 Industrial Development Bank of India Project; US$25.0 million credit of February 9, 1973; Effective Date: June 22. 1973; Closing Date: June 30, 1977 Loan No. 1260 Second Industrial Development Bank of India Project; US$40.0 million loan of June 10, 1976; Effective Date: August 10, 1976; Closing Date: June 30, 1981 The first IDBI Project (Cr. 356) had a slow start mainly due to institutional problems in the participating State Financial Corporations.  ANNEX II Page 8 of 12 However, the credit is now fully committed. In order to continue Bank Group's involvement in assisting small and medium scale industries, the second operation (Ln. 1260) was approved on June 10, 1976, and more than 10% of the loan amount had been authorized by mid-May 1977. Cr. No. 390 Bombay Water Supply and Sewerage Project; US$55.0 million credit of January 22, 1974; Effective Date: March 13, 1974; Closing Date: December 31, 1978 A substantial cost overrun on the project from US$158 million equivalent to about US$375 million equivalent has been caused by inflation and price increases resulting from delays in appointment of engineering con- sultants and redesign of certain project components. The project has been redefined and rephased to fit the financing available from the Credit, local loans and bonds, and internal cash generation of the project entity. The revised cost estimates for the implementation period 1975/76 to 1979/80 amount to US$266 million equivalent excluding interest during construction. All major contracts for civil works, equipment and materials have been awarded. This is expected to considerably speed up disbursements which has been slow. Financial performance of the project entity during 1975/76 was satisfactory, and major rate increases from April 1, 1976 should ensure continuing financial viability of the project entity. Cr. No. 616 Eleventh Industrial Imports Project; US$200.0 million credit of February 24, 1976; Effective Date: April 1, 1976; Closing Date: June 30, 1977 This credit was signed on February 24, 1976, and became effective on April 1, 1976. Cr. No. 427 Calcutta Urban Development Project; US$35.0 million credit of September 12, 1973; Effective Date: January 10, 1974; Closing Date: December 31, 1978 Following considerable increases in project costs, GOI and IDA finalized a project redefinition in April 1976, to accommodate the project to funding available. It is now expected to be substantially completed by March 1979. Agreements have been reached on consultants services and technical assistance, as provided for under the project. Cr. No. 482 Karnataka Dairy Development Project; US$30 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982 Cr. No. 521 Rajasthan Dairy Development Project;; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982  ANNEX II Page 9 of 12 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23, 1975; Closing Date: June 30, 1982 These three credits totalling US$74.1 million support dairy devel- opment projects organized along the lines of the successful AMUL dairy coop- erative scheme in Gujarat State. The Karnataka Project which got off to a slow start has begun to show improvement tinder new management appointed recently. Farmer response has been good and about 250 dairy cooperatives with small farmer participation are functioning effectively. Two Dairy Unions have been established. Close supervision is being maintained. In Madhya Pradesh good progress has been made. About 110 new dairy cooperatives societies have been established. Detailed design studies for plant construc- tion are complete. Technical services investments are being made. Contracts have been placed for livestock imports. The Rajasthan project is also doing well. Four milk unions have been formed and excellent progress has been made in organizing the servicing of nearly 350 dairy cooperatives at the village level. Plant-designs are ready, and procurement is to start soon. KDDC decision to procure plant equipment jointly with RDDC and MPDDC on the same tender should lead to a recovery of considerable time lost earlier. Cr. No. 532 Godavari Barrage Project; US$45 million credit of March 7, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Both the civil works and equipment tenders have been awarded after international competitive bidding. Work is in progress. Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1981 Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83 mil- lion credit of July 31, 1974; Effective Date: December 30, 1974; Closing Date: June 30, 1981 Cr. No. 562 Chambal (Madhya Pradesh) Command Area Development Project; US$24 million credit of June 20, 1975; Effective Date: September 18, 1975; Closing Date: December 31, 1979 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Project; US$145.0 million loan (Third Window) of June 10, 1976; Effective Date: September 7,1976; Closing Date: December 31, 1982 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructures, drainage, and land shaping are  ANNEX II Page 10 of 12 prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Progress of these projects is generally satisfactory and particularly successful with respect to agricultural extension. Cr. No. 541 West Bengal Agricultural Development Project; US$34 million credit of April 28, 1975; Effective Date: August 28, 1975; Closing Date: March 31, 1980 The project became effective on July 31, 1975. Successful reor- ganization of agricultural extension services has been a major achievement, but preparations for lending operations have been slow mainly due to poor coordination of project agencies. IDA and the government of West Bengal have agreed on measures to improve coordination and on a timetable covering a range of project activities. Progress with preliminaries for procurement of equipment, markets construction and riverlift completions are satis- factory. Cr. No. 526 Drought Prone Areas Project; US$35.0 million credit of January 24, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Overall progress is satisfactory. Expenditure to date is less than expected -- about 22% of project cost estimates -- but is reasonable because inflation has been much less than expected. The most successful component of this multi-componented project is dairying, which has a sig- nificant impact on rural incomes. Other components are, in general, meeting appraisal targets in terms of physical achievements, although with some time lag. There are, however, several technical problems which need to be overcome. DPAP is largely innovative program and the emergence of such problems was expected. The identification of these problems represents a major first step to their resolution and subsequently to establishing pro- grams which can be replicated throughout India's 72 drought prone districts. Cr. No. 572 Rural Electrification Project; US$57.0 million credit of July 23, 1975; Effective Date: October 23, 1975; Closing Date: December 31, 1979 Eleven states have now fulfilled the conditions of eligibility for on-lending under this project [compared with six at the time of appraisal] The project got off to a slow start, due principally to the need to adapt specifications and tender documents to international competitive bidding procedures, but these problems have been overcome. As of September 1976, orders had been placed for 60 approved rural electrification schemes, and tenders had been invited or were in the course of preparation for others.  ANNEX II Page 11 of 12 Cr. No. 582 Railways XIII Project; US$110.0 million credit of August 26, 1975; Effective Date: October 10, 1975; Closing Date: September 30, 1977 The project is intended to cover most of the foreign exchange requirements of Indian Railway's (IR) investment program from April 1, 1975, through March 31, 1977. Since the approval of the project, increased pro- duction in steel products in India and further developments in IR's indigen- ization program have resulted in a less than anticipated foreign exchange requirement. It is expected, therefore, that of a total Credit of US$110 million, some US$30-40 million may be undisbursed at the end of the current project period. During the year 1975/76, IR carried 223 million tons of freight traffic, 6% more than forecasted. The project is being implemented satisfactorily. Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40.0 million credit of September 25, 1975; Effective Date: February 6, 1976; Closing Date: June 30, 1980 The project had a slow start due to delays in preparation of techni- cal reports for regional and local water authorities. The technical reports for about a third of the project have now been finalized and construction works started in October 1976, about one year behind schedule. All consul- tants for engineering, organization, management and accounting services for the Jal Nigam (Water Supply Development Corporation) and the Jal Sansthans (water authorities) have been engaged. Significant institutional develop- ment can be expected only after the consultants submit their final recommenda- tions. The project is expected to be completed by March 1980, approximately 9 months behind schedule. Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4.0 million credit of February 26, 1976; Effective Date: May 26, 1976; Closing Date: December 31, 1981 This project will identify a sound resource base for pulp and paper manufacture and related industries, develop suitable logging systems, and undertake a feasibility study to determine optimal use of the existing wood resources in the Bastar District of southern Madhya Pradesh. It also includes a study of ways to integrate the area's tribal population with future develop- ment. After initial delays due to difficulties in employing key personnel, project implementation is now satisfactory. For the feasibility study, proj- ect authorities have prepared a short list of three foreign consulting firms, who are now being asked to prepare detailed proposals. On the basis of these proposals, the final selection will be made shortly. Cr. No. 610 Integrated Cotton Development Project; US$18.0 million credit of February 26, 1976; Effective Date: November 30, 1976; Closing Date: December 31, 1981  ANNEX II Page 12 of 12 Ln. No. 1273 National Seed Project; US$25.0 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1981 Good progress has been made since negotiations. The National Seeds Corporation (NSC) has withdrawn from seeds production as planned, hav- ing handed over to State Seeds Corporation (SSC). Detailed production pro- grams, by variety and responsible institution, have been prepared for breeder, foundation and certified generations. GOI and State Governments have made equity contributions to SSC thus ensuring financing of major project activity. Orders will shortly be placed for processing machinery to provide bridging capacity pending the construction of new processing plants. Tender documents for the first purchases of farm machinery have been finalized. Ln. No. 1313 Sixth Telecommunications Project; US$80.0 million loan of July 22, 1976; Effective Date: September 14, 1976; Closing Date: March 31, 1980 Disbursements have commenced and the project is progressing satis- factorily. Ln. No. 1335 Bombay Urban Transport Project; US$25.0 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30. 1980 Procurement work is well in hand. Contracts for 275 single and 175 double deck bus chassis have been awarded and bidding for corresponding bus bodies is in progress. Civil works for bus facilities have been partly commissioned and bidding for 18 of 31 traffic engineering schemes is in progress. Preparations for technical assistance envisaged under the project are under way. Cr. No. 680 Kerala Agricultural Development Project; US$30 million credit of April 1, 1977; Effective Date: July 1, 1977 (expected) Closing Date: March 31, 1985 Cr. -No. 682 Orissa Agricultural Development Project; US$20 million credit of April 1, 1977; Effective Date: July 1, 1977 (expected); Closing Date: December 31, 1983 Ln. No. 1394 Gujarat Fisheries Project; US$14 million loan and US$4 (TW) and million credit of April 22, 1977; Effective Date: Cr. No. 695 July 22, 1977 (expected); Closing Date: June 30, 1983 Cr. No. 687 Madras Urban Development Project; US$24.0 million credit of April 1, 1977; Effective Date: June 30, 1977 (expected) Closing Date: September 30, 1981 Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit of April 1, 1977; Effective Date: June 30, 1977 (expected); Closing Date: December 31, 1983  ANNEX III Page 1 INDIA TWELFTH LOAN TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken by the Borrower to prepare the project. This loan is the twelfth in a series of lending operations to ICICI and consequently preparation for each loan is a continuing process. (b) The agency which has prepared the project. ICICI (c) Date of first presentation to the Bank and date of the first mission to consider the project. The former is not applicable in this case. On the latter the appraisal mission visited India in November/December 1976. (d) Date of departure of Appraisal Mission November 11, 1976. (e) Date of completion of negotiations. April 26, 1977. (f) Planned date of effectiveness. September 15 1977. Section II: Special Bank Implementation Actions None  ANNEX III Page 2 Section III: Special Conditions. (a) Debt/equity limit of 9:1 (para 48) (b) Every subproject involving ICICI financing of more than US$4 million, including outstanding commitments, would require IBRD approval (para 56).  70 -. B~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IRD 3873R 70 s w \ 90 ,< A N AN151AF '1 c , i4NDARY 1975~~~~~~~~~~~~~~~~~~~~~~~~J~,~AY 97 70'~~~~~ 80 C ,,.- | g'D A J U 1 n