India - Second Gujarat Irrigation Project

Document of The World Bank jILE COfY FOR OFFICIAL USE ONLY Report No. P-2765-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE SECOND GUJARAT IRRIGATION PROJECT April 9, 1980 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (As of April 1, 1980) US$1.00 = Rs 8.278765 Rs 1.00 = US$0.12079 Rs 1,000,000 = US$120,790 (Since September 24, 1975, the Rupee has been fixed against a "basket" of currencies. As these currencies are now floating, the US Dollar/Rupee exchange rate is subject to change. Con- versions in the Staff Appraisal Report were made at US$1.00 to Rs 8.40, which represents the projected exchange rate over the disbursement period.) FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS GOI - Government of India GOG - Government of Gujarat CADA - Command Area Development Authority RWS - Rotational Water Supply  FOR OFFICIAL USE ONLY INDIA SECOND GUJARAT IRRIGATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiary: State of Gujarat. Amount: US$175 million. Terms: Standard. Relending As part of Central assistance to States for develop- Terms: ment projects on terms and conditions applicable at the time. Project Description: The proposed project would support the introduction of improved planning, design and management of irrigation schemes in Gujarat. Specifically it would help finance a five-year time slice of Gujarat's investment program for irrigation which would comprise: continuation of construction of three on-going major irrigation schemes and improving the village-to-market roads network in their command areas; modernization of parts of Gujarat's largest existing irrigation scheme (Ukai-Kakrapar) including reclamation of coastal lands; catchment pro- tection and construction of irrigation facilities in the coastal areas of Saurashtra peninsula; operational and management improvements on existing and on-going irrigation projects; establishment of an institute for training of land development and water management specialists; and project monitoring and evaluation. In addition, the proposed project would include the preparation of future irrigation projects in India for possible Bank Group financing, including Narmada devel- * opment projects. The project is designed to increase agricultural production and the standard of living of the farmers in Gujarat. The risks under the proposed project are those normally associated with irrigation projects in India. This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without Wlorld Bank authorization.  Estimated Costs: Local Foreign Total ---(US$ Millions)---- New Major Schemes 126.3 29.9 156.2 Modernization of Ukai-Kakrapar 26.7 4.7 31.4 Saurashtra Coastal Development 20.7 6.5 27.2 Training Institute 3.0 0.8 3.8 Operational Improvements 2.0 0.4 2.4 Monitoring and Evaluation 1.7 0.1 1.8 Engineering -and Adminis- tration 33.9 - 33.9 Base Cost of Gujarat Project 214.3 42.4 256.7 Physical Contingencies 23.3 5.7 29.0 Expected Price Contingencies 54.0 10.3 64.3 Total Cost of Gujarat Project 1/ 291.6 58.4 350.0 Preparation of Future Irrigation Projects 9.4 0.6 10.0 Total Project Cost 301.0 59.0 360.0 Financing Plan: Local Foreign Total ---(S Millions)----- IDA Credit 116.0 59.0 175.0 Local Financing (GOG) 185.0 - 185.0 301.0 59.0 360.0 Estimated (US$ Million) Disbursement: FY81 FY82 FY83 FY84 FY85 FY86 Annual 5 30 44 45 40 11 Cumulative 5 35 79 124 164 175 Rate of Return: 18%. Appraisal Report: No. 2843-IN dated April 9, 1980. 1/ Taxes and duties included are negligible.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE SECOND GUJARAT IRRIGATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to India in an amount equivalent to US$175 millen on standard IDA terms to help finance a five-year time slice of Gujarat State's investment program for irrigation, and the preparation of future irrigation projects in India. GOI would channel US$165 million from the proceeds of the credit to the Government of Gujarat (GOG) in accordance with GOI's standard terms and arrangements for financing state development projects. Part of the remaining US$10 million for project preparation would also be chann l-d to the six concerned Indian states on the same terms. The exchange risk would be borne by GOI. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (2431-IN dated April 9, 1979), was distributed to the Executive Directors on April 13, 1979. Country data sheets are attached as Annex I. Background 3. India is a large, low-income country with 652 million people (in mid-1979) whose average income is US$150 per annum. The agricultural sector dominates the economy, employing over two-thirds of the labor force and con- tributing over 40% of value added. Although smallholder agriculture provides a fullsome subsistence to many, the land base is inadequate to provide all families in rural areas with an adequate livelihood under current conditions, and many who are landless or nearly landless have only an insecure grasp on the means of existence. Industrialization in India has not been rapid enough to bring about the economic transformation that has led to higher productivity and rapid urbanization in some other countries. The urban population was 18% of the total in 1960, 20% in 1970 and is 21% now. The share of manufacturing has grown slowly and since the late 1960s has remained roughly constant at 16% of GDP. 4. Economic growth has been slow in the past, with GDP growing at a trend rate of 3.6% per annum from 1950 to 1975. Agricultural output grew at 2.4% per annum over the same period. Slow growth in agriculture acted as a drag on overall growth, not only because of its sheer weight in the total, but also because of the need to use scarce foreign exchange to import food. Growth in industrial output has been higher at 5.2% per annum between 1950 and 1975, but not as high as in many other developing countries nor as high as can be expected. 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Report for the Tamil Nadu Nutrition Project (Report No. P-2753-IN), dated March 27, 1980.  - 2 - 5. This slow growth has persisted despite a quite creditable domestic saving and investment performance. Domestic saving has grown from 9% of GDP in 1951 to the current high level of 22%. Gross domestic investment has risen from 10% to 21% of GDP over the same period. Foreign savings have never financed a large portion of domestic investment and have financed no more than 5% of investment since 1970. Foreign savings have been important in financing imports, and a shortage of foreign exchange has acted as a constraint on the economy for most of the period. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance is less than 2% of GDP now, has never risen above 3% and fell to less than 1% in the early 1970s. Exports have grown relatively slowly--5.4% per annum in US dollar terms and 2.8% per annum in volume terms between 1950/51 and 1975/76. So far during the 1970s, exports have grown much more rapidly, by 18% per annum in US dollar terms and 8% in volume terms over the period 1970/71 to 1976/77. During the same period imports grew by 17% per annum in US dollar terms but only by 2% per annum in volume terms, reflecting a 28% fall in India's terms of trade over the period. 6. India has the capacity to grow and develop at a more rapid pace than has been achieved so far. Although the industrial sector is small compared to the size of the total economy, it nevertheless has a highly diversified struc- ture and is capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure--irrigation, railways, telecommunications, roads and ports--is extensive compared to many countries, although considerable gaps remain. India is rich in human resources and institutional infrastruc- ture, although there is much scope for improvement. India is reasonably well-supplied with natural resources, not only land and water but minerals, including oil, gas and coal. With good economic policies and sufficient access to foreign savings, India should be able to manage these considerable resources to accelerate the longer-term growth trend. Recent Trends 7. India has managed faster growth during the recent past. Growth of GDP in 1978/79 is estimated to be between 3% and 4%; this is a strong perform- ance coming on top of the previous year's 7.2% growth in GDP and considering agricultural output grew less than 2%. Even this agricultural growth is highly creditable given the previous years' record harvests in most crops. Industrial output grew by 8-10% in 1978/79. Over the four years, 1975/76 to 1978/79, growth in real GDP, agricultural output and industrial output has averaged 5.3%, 4.4% and 6.9% per annum, respectively. Although these rates represent growth over the depressed base of the early 1970s, they are signi- ficantly higher than the longer-term past trend and comparable to the target growth rates for the medium-term future. Buoyant domestic demand, stagnating output and world inflation have led to significant increases in prices during the first half of the 1979/80 fiscal year. The wholesale price index for September 1979 was 18.4% above that of the previous September. Together, the rise in the prices of food products, crude petroleum and mineral oils accounted for over two-thirds of the increase in the index. However, prices of almost all commodities moved up significantly over this period as reflected in the 9.6% increase in the prices of the residual commodities. Government attempts to regulate the supply and price of commodities like sugar and edible oils,  - 3 - ceilings on credit, adjustment of some interest rates and the seasonal downturn of the fruit and vegetable prices after summer helped the wholesale price index to level off after September. However, if allowance is made for the seasonal factors, prices are still rising at approximately an 18% annual rate. The Indian economy will no doubt continue to face inflationary pressure during the 1980/81 fiscal year. Its intensity will to a large extent depend on the developments in world inflation, especially the rise in oil prices and India's success in alleviating the supply bottlenecks that emerged during 1979. Although the current inflationary pressures need not seriously impair medium- term growth prospects, given available aggregate resources and production capacity, significant improvements are likely to be required in the organ- ization of key sectors if an economic slowdown is to be avoided. 8. The 1978/79 foodgrain crop exceeded the 1977/78 record crop of 126 million tons, and many non-food crops did well. The 1978 monsoon rains were timely and adequate, although severe flooding in some areas destroyed both lives and property and ruined some crops. The basic inputs into agricul- tural production continued their rapid growth of the recent past. Additions to area under irrigation have doubled from 1.3 million hectares a year during the five-year period ending 1973/74 to 2.6 million hectares a year during 1977/78 and 1978/79. Fertilizer consumption in 1978/79 reached 5 million nutrient tons, an increase of 18% over 1977/78. This growth has been impres- sive, particularly since it followed two successive years of very high growth-- 18% in 1976/77 and 26% in 1977/78--so that fertilizer consumption in 1978/79 was 75% higher than in 1975/76. However, prospects for agricultural produc- tion in 1979/80 are not good. India experienced a severe drought in 1979. The monsoon was delayed and subsequent rainfall was deficient throughout the country. Consequent damage to the kharif crop has been substantial. Tenta- tive estimates indicate a shortfall of 13-15 million tons in kharif crop from last year's level of 78.7 million tons. Delayed sowing, lack of soil moisture, low levels of water in tanks and wells as well as power cutbacks and recent shortages in diesel fuel for irrigation pumps are adversely affecting the rabi crop. Depending on the performance of the rabi crop, total shortfall in grain crop is expected to be 17-20 million tons below the 1978/79 level. 9. The growth of industrial output in 1978/79 came from a sharp rise in the output of food industries, particularly sugar, a modest increase in textiles, important increases in the hitherto depressed engineering sector and the revival of demand for consumer durables. Production would have been still higher but for recurring shortages of steel, coal, railway wagons and electric power and capacity constraints in fertilizer, cement, vegetable oils and petroleum products. Labor unrest also constrained output in some indus- tries, particularly in textiles, steel and mining; man-days lost in 1978 ex- ceeded the high level of 1977 and only in 1974 were the number of days lost higher. Power production increased by 12% but continuing shortages in many States necessitated power cuts and curbs on new demand. During the first half of 1979/80 supply bottlenecks in basic industrial inputs began to retard overall industrial production. In addition to coal and steel, cement, sugar, cotton textile and cotton yarn output fell below last year's levels. Strong demand has continued to sustain other important industries such as fertilizers and chemicals, but it appears increasingly unlikely that these can counter- balance the constrained sectors.  - 4 - 10. The trade deficit grew and both the current account surplus and the balance of payments surplus of recent years shrank in 1978/79. The import bill is expected to reach US$8.4 billion, which brings the average rate of increase in US dollar terms to 19% per annum since 1976/77. Non-foodgrain imports rose even more dramatically by 28% per annum over the past two years. The growth of imports and the liberalization of import control policies represents a desirable adjustment to enhanced foreign resources. Although exports grew much faster during the 1970s through 1976/77 than earlier, export growth in 1977/78 and 1978/79 has slowed somewhat. After rising by 12% in 1975/76 and 23% in 1976/77 in US dollar terms (virtually all growth in export volume), export earnings rose by only 9% in 1977/78 (with little or no volume growth) and an estimated 8% in 1978/79 (with 5-8% volume growth). Although part of the decline is attributable to unfavorable conditions in foreign markets, export profitability has been allowed to deteriorate somewhat. With net invisible receipts in 1978/79 estimated the same as in 1977/78--US$2 billion-- the widened trade deficit resulted in a significantly reduced current account surplus, from US$1 billion in 1977/78 to US$400 million in 1978/79. Despite some increase in net aid disbursements from their low level in 1977/78, the increase in reserves declined from about US$2 billion in 1977/78 to about US$1.5 billion in 1978/79 to reach US$7.4 billion. Exports during the first three months of this fiscal year are 32% higher than the same quarter of last year. Although part of the increase is due to the dollar depreciation and recovery in coffee prices, the prospects of sustaining a volume growth of at least 7% during 1979/80 appear good. Imports in the first quarter of 1979/80 are around 7% higher than the same period of the previous year. However, the impact of recent increases in petroleum prices are only partially reflected in this figure. India's total POL import bill for 1979/80 is likely to reach $3.2 billion, $800 million higher than earlier estimates. As a result, there should be a sharp deceleration in the rate of growth of reserves sufficient to significantly reduce the number of months of imports covered by reserves during 1980. Development Prospects 11. The faster growth of the recent past has been made possible by the much-increased inward flow of foreign exchange from increased exports, workers' remittances and external assistance; greatly improved agricultural performance; the impressive saving effort; the liberalization of import controls; and ex- panded public expenditure on development programs. Although sustaining the high growth rates of the recent past in the medium-term is by no means assured, especially if there is a repeated drought in 1980, India has a level of re- sources with which to manage the economy that had not existed before. The comfortable foreign exchange posit-ion, and the large foodgrain stocks have greatly eased the pressures to dea:L with short-term crises and freed India's economic managers to continue planning a more ambitious course for the economy. The policy improvements needed to achieve the better performance now possible have begun in some important areas but in others have yet to be initiated. 12. The Draft Plan, which was released in March 1978 and is expected to be finalized and approved by thes National Development Council later this year, sets out India's development strategy for the five years 1978/79 to 1982/83. The principal objectives of the Draft Plan are to achieve within  - 5 - a period of ten years: (i) the removal of unemployment and significant underemployment, (ii) an appreciable rise in the standard of living of the poorest sections of the population, and (iii) provision by the Government of some of the basic needs of the people in these low-income groups. While the Plan recognizes the importance of achieving more rapid expansion of the economy than in the past to meet the employment and welfare objectives, the targeted rate of growth at 4.7% per annum is lower than projected in most earlier Plans. According to the planners, this reflects in part the increased emphasis given to the distribution rather than the level of income generation, and in part the need for greater realism in the macro-economic assumptions underlying the Plan. While the trade-off between growth and distribution is not immediately obvious from the Plan model, the adoption of a more realistic growth target is in itself well justified -- even at 4.7% per annum, the targeted growth rate is higher than actually achieved during any of the previous Plan periods, and is substantially above the longer-term trend growth rate. 13. In agriculture, despite the 1979 drought, economic policies, dev- elopment programs and secular trends all seem favorable for resuming a period of sustained high growth after 1979/80. Fertilizer prices have been reduced progressively from their very high level in early 1975 and despite some fall in market foodgrain prices, the fertilizer: foodgrain price ratio has fallen to a clearly profitable range. Good harvests and higher farm incomes provide the money to finance higher fertilizer purchases, creating something of a virtuous circle. Pricing policies for many crops--rice, wheat, sugarcane, pulses and'others--have concentrated recently on supporting prices to maintain incentives to farmers rather than trying to administratively control prices to contain inflation. The ambitious irrigation and rural electrification investment program in the new Five-Year Plan, if fully funded, will help pro- vide the water control needed to increase yields directly and to induce further productivity-increasing investments. The effective reorganization of the agricultural extension service will raise yields as it takes hold gradually across India. Finally, there are several heartening trends in foodgrain pro- duction: one is the steady growth of area planted to high-yielding varieties of rice; another is the growing adoption of summer rice cultivation in the traditional wheat-producing areas (Punjab and Haryana). These two trends along with the other favorable developments have caused rice production to rise impressively in the last two years. Another good omen for foodgrain production is the rapid growth of winter wheat cropping in traditional rice areas (West Bengal, Assam and Orissa). 14. In industry, despite some uncertainty in industrial policy and the lack of strong policy stimulus to improve efficiency in the industrial structure, recently strengthened demand forces, increase in planned invest- ment along with adroit input supply management should allow the industrial sector to continue to grow at the improved rate of the recent past, at least for the near- and medium-term future. Over the longer term, growth of indus- trial production at or above the rate experienced in the recent past--e.g., 7% per annum during the last four years--will require some changes in policy to induce a more efficient industrial structure. Recent industrial policies have sent mixed signals to private manufacturers and investors. Some, such as reserving certain lines of production for small-scale enterprises or prohibit- ing the location of new firms in municipal areas, have been restrictive.  Others have been stimulative, such as the raising of the exemption limit of industrial licensing for capital investment or favorable adjustments in the pricing and production controls in several major industries, including cement, steel, and textiles. In addition the liberalization of import controls is of considerable benefit to increasing industrial production. However, there are some worrisome supply shortages that are currently threatening continued rapid industrial growth. Many can be handled through imports, if needed, as long as India maintains a healthy foreign exchange position. However, two supply constraints likely to persist in the future -- namely, rail transport and power -- cannot be eased through imports. The new Plan contains a major power investment program to increase capacity rapidly. The railway investment pro- gram is more modest. Another crucial input into both of these sectors, and into most other major sectors, is coal, whose supply needs careful management. 15. The main reason for expecting sustained growth in industrial pro- duction is improvement in demand prospects for each of the four major sources of industrial demand. The first is market demand for manufactured consumption goods, which is expected to pick up in response to the increase in disposable income due in particular to improvement in agricultural output. Although its effect has been delayed somewhat, this broad-based demand is finally making itself felt and is expected to continue into the future unless the growth in agricultural output is constrained by repeated droughts. Another source of demand is public expenditure on clevelopment projects, which has grown in a major way in the last few years and is scheduled to continue to grow under the new Five-Year Plan. A third source of growth is export demand for indus- trial goods. There has been a sustained growth in the export of manufactures such as engineering goods, garments, gems, finished leather and some chemical products. This export growth should continue in the future with proper policy support. A final source of growing demand is private investment by both the household and corporate sectors. There are as yet only a few signs of this growth, such as increased disbursement by term lending institutions and in- creased use of inputs; investments should become stronger as growth in the other sources of demand continues and as capacity limitations begin to con- strain production in more industries. The net result of increasing demand should be continued high growth in industrial production in the near and medium term within existing policies. 16. Import policy is an area where there has been significant improve- ment in the recent past; but some improvement in export policy is required to raise incentives to export. Indiia has liberalized import control policy significantly in the past two years and imports have responded. Future growth in imports, and in the benefits of price stability, enhanced production and increased efficiency which imports bring, will depend to a great extent on how the now liberalized policy is administered. A delicate touch is required to yield the benefits without bringing about undesirable damage to vulnerable industries. India has the foreign resources to allow imports to grow at the rapid rates of the past two years for a few more years and continue to relax the very severe restraints imposed on the economy during the early 1970s by suppression of imports. But, given the import liberalization undertaken so far and the expected growth of imports, by the end of the Plan period (1982/ 83), foreign exchange reserves will have fallen to six months of imports, or less, and some adjustment in the balance of payments will be required. Part  -7- of the adjustment will very likely be a reduction in the growth rate of imports; the import bill need not grow 15% in volume terms indefinitely to sustain the target growth in GDP. Part of the adjustment must come from the achievement of a growth rate of exports in the vicinity of 7-8% or higher in volume terms. Faster export growth is needed not only to provide the foreign exchange to sustain the rapid growth in imports but also to allow foreign demand and competition to improve the efficiency of Indian industry. Finally, part of the adjustment should come from an increased net transfer of external assistance. 17. India's population policy continues to aim at reducing the birth rate to 30 births per thousand people by 1983 through completely voluntary acceptance of fertility control methods supplied by a family welfare system integrated with the supply of basic health, maternal and child health and nutrition services. Since 1977, the family planning achievements in terms of number of acceptors have been below that needed to achieve the 1983 goal or even to keep the birth rate from rising above its current level. The low performance is primarily the result of the reaction to the harsh birth control policies introduced during 1976. Since then family planning performance has been gradually returning to the rising trend which was discernible before it was disrupted by the intensive drive of 1976/77. Given continued support for the program of family welfare, Bank estimates indicate that India's rate of population increase should remain below 2% per annum and fall to 1.5% by about the year 2000. Despite the declining trend in the rate of population increase, a net reproduction rate (NRR) equal to one (replacement level) would only be achieved around the year 2020. At this time, the total population is estimated to reach 1.2 billion persons, an increase of about 84% over the mid-1979 level of 652 million. 18. In addition to stimulating overall economic growth and constraining population growth, reduction of poverty in India requires special attention to ways of raising the income and productivity of low-income groups. More than one-third of the world's poor live in India and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. The prospects for alleviating their poverty by providing these families with more land are not good because of the virtual absence of uncultivated arable land, the slow progress in implementing land reform and the limited amount of land that would be available if land reform were carried out. Estimates of the amount of land that would be available if land reform were carried out vary greatly. One estimate is that there would be about 9 million hectares avail- able for distribution. This compares to roughly 45 million families in the two poorest groups in rural India: landless families and families owning less than one hectare of land, whose average holding is 0.31 hectares. An approach to the amelioration of poverty more promising than land reform is the creation of more employment opportunities for the landless and small farmers in rural areas. Although the basic thrust must come from the market by a more rapidly increasing agricultural output, there will be a role for employment-intensive rural works programs. The new Plan provides for increased rural employment both through direct employment schemes and through ambitious programs of investment in rural infrastructure in addition to the more general rural development programs.  - 8 - PART II - BANK GROUIP OPERATIONS IN INDIA 19. Since 1949, the Bank Group has made 57 loans and 118 development credits to India totalling US$2,529 million and US$7,255 million (both net of cancellation), respectively. Of these amounts, US$1,051 million had been repaid, and US$3,377 million was still undisbursed as of February 29, 1980. Bank Group disbursements to India in the current fiscal year through February 29, 1980, totalled Us$366 rnillion, representing an increase of about 32% over the same period last year. Annex II contains a summary statement of disbursements as of February 29, 1980, and notes on the execution of ongoing projects. 20. Since 1959, IFC has made 18 commitments in India totalling US$72.6 million, of which US$17.4 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$40.7 million, US$31.6 mil- lion represents loans and US$9.1 million equity. A summary statement of IFC operations as of February 29, 1980, is also included in Annex II (page 5). 21. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit 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 capacity utilization in industry. The Bank Group has also been active in supporting infrastructure development for power, telecommunications, and railways. Family planning, water supply development, and urban investments have also received Bank Group support in recent years. 22. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, 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, improved water management and intensification and stream- lining of extension systems, form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to proj- ects benefitting small farmers. ProjBcts supporting water supply, sewerage, and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infra- structure and industrial investments will focus on agriculture-, export- and energy-related projects. 23. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has success- fully adjusted to the changed world price situation. However, the basic need  - 9 - for foreign assistance, to augment domestic resources, stimulate investment and accelerate economic growth, remains. As in the past, Bank Group assist- ance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Con- sequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, rural water supply and medium- and small-scale industry. 24. Although the growth prospects of the economy have improved, India's poverty and needs are such that as much as possible of India's external capi- tal requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support, and India may be regarded as creditworthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was 12% in 1978/79 and is projected to remain below 20% through 1995/96. As of February 29, 1980, outstanding loans to India held by the Bank totaled US$1,519 million, of which US$579 million remained to be disbursed, leaving a net amount outstanding of US$940 million. 25. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 62%, 27% and 38%, respectively, in 1978/79. On March 31, 1979, India's outstanding and dis- bursed external public debt was US$15.3 billion, of which the Bank Group's share was US$4.6 billion or 30% (IDA's US$4.0 billion and IBRD's US$0.6 bil- lion). Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1978/79, about 17.5% of India's total debt service payments were to the Bank Group. PART III - AGRICULTURE AND IRRIGATION IN INDIA _/ General 26. Agriculture is the most important sector in India; it engages 70% of the labor force, has recently contributed about 43% of value added and accounts for a major share of exports. Investments in agriculture have been given priority by GOI and the State Governments, especially since the mid- 1960s, and deserve continued emphasis in the future. 1/ Paragraphs 26 to 33 are substantially the same as the corresponding paragraphs in the President's Report for the Second Maharashtra Irriga- tion Project, Report No. P-2624-N, dated September 26, 1979.  - 10 - 27. Since independence, the overall growth rate of agricultural pro- duction has averaged about 3% per annum. This low overall rate of growth obscures considerable variations over shorter periods of time, between crops, and between regions. The overall rate is very much affected by the serious droughts in 1965 and 1966 and again in 1972 and 1974. At the see time, the success of high yielding varieties of wheat led to annual increases in wheat production of about 20% between 1967 and 1971, and three consecutive favorable monsoon seasons in 1975, 1976 and 1977 resulted in bumper crops in these years. Other foodgrain crops have not enjoyed anything like the same success as wheat, mainly because of the difficulties of developing high yielding seeds adapted to local conditions. The effects of the green revolution have been concentrated in northwestern India. In 1979, the late on-set of this year's southwest monsoon has caused considerable concern. Rainfall has been deficient in many parts of the country, which as a whole has experienced a renewed dry spell since mid-August. Severe drought conditions are reported in 49 out of the 56 districts in Uttar Pradesh as well as in areas of Haryana, Himachal Pradesh, Madhya Pradesh, Andhra Pradesh, Bihar and Eastern Rajasthan. Shortages in electrical power and diesel fuel required to run irrigation pumps have aggravated the situation. In the absence of good September rains, summer foodgrain production in 1979/80 will likely fall short of 1978/79 summer production levels (85 million tons) by at least 10 million tons. The total shortfall for the year may even be higher, as the winter crop (35-40% of total production) may be adversely affected by a low level of residual soil moisture and stored irrigation water and continuing shortages of diesel and power for irrigation pumps. 28. Despite the progress made in many aspects of food production India's agriculture remains heavily dependent upon the weather. A major factor in reducing this dependence is the expansion of irrigation and the extent to which more effective use can be made of the existing investment in irrigation facilities. The Government is also placing emphasis on the improved supply of inputs, such as seeds and fertilizer, agricultural credit, and extension services. Irrigation 29. Up to 1964/65, the irrigated area in India increased, at a rate of only 2.1% per year, of which about two-thirds was from surface water resources and one-third from groundwater. Since then, the rate of increase has about doubled, mainly through an accelerated program of groundwater development. At present, the total irrigated area is approximately 50 million ha, of which about three-fifths is irrigated from surface sources and two-fifths from groundwater. 30. The pace of surface water development remained roughly constant at about 0.5 million ha per year until the end of the Fourth Plan (1969/70- 1973/74). During this period, actual increases in the surface irrigated area lagged behind GOI's physical plan targets for more rapid development. A major problem was the continuing tendency of the States to start a large number of projects, which, given the limited financial resources, could only be con- structed slowly so that benefits accrued with much delay. However, in recent  - 11 - years, budgetary allocations have grown rapidly and the authorities have in- creased their efforts to complete on-going projects. As a result, the new area brought under command in 1976/77 was 1.1 million ha or about twice that achieved in any single year before the start of the Fifth Plan in 1974/75. However, while the increase in area brought under the command of new surface irrigation projects is impressive, the increase in area actually irrigated has been more modest than the figures imply, particularly in the case of major and medium irrigation schemes, due to incomplete distribution and inadequate drainage systems. In areas actually receiving water, irrigation efficiencies remain low and water supply is unreliable. 31. The Second Irrigation Commission of 1972 and the National Commis- sion on Agriculture, which reported in 1976, also found that the underutili- zation of irrigation potential was attributable to the lack of integrated development in the irrigation areas, insufficient farmer training, lack of effective extension services and poor administrative coordination. It has been estimated that the majority of recently completed irrigation projects require additional investments up to US$600 per ha to make them fully produc- tive. Accordingly, GOI and the State Governments have adopted various measures to improve utilization, and a Command Area Development Department has been set up in the Ministry of Food and Agriculture to coordinate work on selected high priority projects. Such measures for command area development (CAD) include public investment in irrigation-associated infrastructure - such as drainage, roads, markets, agricultural extension and research - and private investments, mainly at the farm level - such as land shaping and leveling, watercourse lining, field channels and drains. 32. In view of the emergence of high productivity farm technologies dependent on effective water control - and given India's already substantial investment in surface irrigation - the economic return on investment that improves water delivery or facilitates better use of the water provided, can be very high. Consequently, rehabilitation and modernization of irrigation infrastructure as well as command area development are being given high prior- ity by GOI, and a relatively large proportion of public sector investment in irrigation has been allocated for these purposes. Plan allocations have been supplemented by the resources of agricultural and commercial banks participat- ing in financing command area development programs through farm credit. In addition, major institutional changes have been introduced affecting the coordination of services in command areas and the administration of credit. 33. While emphasizing the need to improve water utilization through command area development, the Government is at the same time pursuing the objective of increasing the area under irrigation, in particular where rela- tively sma'll incremental investments are required. Thus, modernization of existing irrigation infrastructure and development of groundwater are also given high priority, and new projects are being designed, implemented and operated on the basis of improved irrigation technologies. Agriculture and Irrigation in Gujarat _~~~~~~~~ 34. Gujarat, with an area of about 196,000 km and a population of about 32 million in 1979, is one of India's most advanced States. It is relatively  - 12 - urbanized (about 30%) and has a large modern manufacturing sector, which together with related secondary sector industries and mining activities con- tributes about 30% of Gujarat's domestic product. But agriculture and allied activities, whose contribution to Gujarat's domestic product averages 36%, is predominant in the State's economy. While the industrial sector in Gujarat has grown over the last ten years at a slower pace (3.3% p.a.) than industry nationwide (4.7% p.a.), growth of agriculture in the State has been faster (2.9% p.a.) than nationally (2.3% p.a.). Agriculture employs about 65% of the labor force in Gujarat. 35. The State consists of2thrtse distinct geographical areas. First is the Gujarat mainland (85,000 km ) formed by extensive coastal plains flanked by hilly terrain in the east. This area slopes gently towards the west and southwest. The State's four major rivers (Tapi, Narmada, Mahi, and Sabar- mati) and numerous small streams, wlhich traverse these plains, cause wide- spread floods at frequent intervals. Poor natural drainage resulting from the low gradient has caused waterlogging and salinity 2n a significant scale. The second area is the Saurashtra p(eninsula (65,000 km ). A number of small rivers originate in its central tabLe and run radially into the sea. In recent years over-exploitation of groundwater in the coastal areas has resulted in salt water2intrusion into the aquif(er. Finally, there is the Kutch land mass (46,000 km ) where large areas are saline and unsuitable for agricultural pro- duction without reclamation and the provision of irrigation. 36. 6f the 18.8 million ha area of Gujarat, for which land use is reported, about 9.8 million ha are under cultivation. There is little scope for increasing cultivable land except through reclamation of desert, saline and ravine areas. The cropping int(ensity is only 107%, one of the lowest in India; but, given the low rainfall, it cannot be significantly increased with- out irrigation. At present, only about 18% of the cropped area (1.76 million ha) is irrigated. This figure is l(ess than two-thirds of the national average, and only two States (Madhya Pradesh and Maharashtra) have a lower percentage of their cropped areas irrigated. The ultimate pot5ntial of irrigation water3 resources in Gujarat is estimated al: 38.3 billion m , of which 13.1 billion m would be derived from groundwater development and 25.2 billion m from surfac3 schemes. So far, 34% of the potential has been developed, with 4.3 billion m coming from groundwater and 8.85 biLlion m3 from surface irrigation. Develop- ment of irrigation from surface sources, however, is limited by a number of factors. All rivers, except Narmada and Tapi, are seasonal. The topography is unfavorable and makes construction of major infrastructure costly. The catchment areas of the major rivers extend into other Indian states, which subjects Gujarat to water sharing agreements with the upper riparian States. 37. Gujarat's climate and soiLs are particularly suitable for cotton, groundnuts, and tobacco, and the State produces about one-quarter of India's cotton and groundnuts and one-third of its tobacco. Cotton and groundnuts are the most widely grown crops in the State. Cereals - primarily pearl millet,  - 13 - sorghum, wheat, paddy, and maize - and pulses account for less than half of the cropped area. As a result, Gujarat is a net importer of foodgrains, and in a normal year foodgrain production is about 1.4 million tons short of the State's requirement of 5.7 million tons. 38. Gujarat has a tropical monsoon climate with temperatures suitable for year-round cropping. Annual rainfall ranges from less than 300 mm in the northwest to over 2,000 mm in a small area in the southeast, but most of the State receives 500-800 mm. However, rainfall is highly unreliable in terms of both timing and quantity, and this has made Gujarat extremely susceptible to droughts, which the State experienced not less than 25 times since 1900. The latest drought years were 1972/73 and 1974/75 when foodgrain production fell to 50% of its normal level. 39. Gujarat's labor force constitutes 31% of its total population. Farmers and agricultural laborers account for 43% and 22%, respectively, of the labor force. About one fifth of the population belong to traditionally disadvantaged groups: tribes (14%) and scheduled castes (7%). In a normal year, about 40% of the rural population has incomes below the poverty line (US$75). Poverty is heaviest in the eastern and southern parts of the State, where two-thirds of the population live below the poverty line. The average farm size in Gujarat is 4.1 ha, but there are large regional variations and in general, due to agro-climatic conditions, farms in the low rainfall areas of Sauraslatra are significantly larger than in the high rainfall areas of Mainland Gujarat. The land ceiling in Gujarat is 4.1 to 10.9 ha for land irrigated from a Government source, depending on soil type and reliability of irrigation water. In rainfed areas, the ceiling ranges from 8.1 ha to 21.9 ha. For each family member in excess of five, the ceiling is increased by 20%, up to a maximum increase of 100%. 40. Because of the generally low and unreliable rainfall in Gujarat, irrigation development is a prerequisite for a significant increase of agricul- tural production, and consequently has been given increasing priority by the Government of Gujarat (GOG) since India's Independence (1947). At that time, there were only two small ancient canal systems in Gujarat and the area irri- gated from wells was only 400,000 ha. In the early 1950s, three major surface schemes were started: Mahi Right Bank Canal with a cultivable command area (CCA) of about 143,000 ha; Kakrapar with a CCA of about 225,000 ha; and Shet- runji with a CCA of about 57,000 ha. On all three projects, progress of head- works construction was relatively rapid but canal construction lagged far behind. The Bank Group's first financing for surface irrigation development in India financed the construction of the Shetrunji canal system (Cr. 13-IN of November 22, 1961, US$4.5 million). Like other irrigation projects of that time, the Shetrunji project failed to achieve its agricultural potential due to inadequate agricultural supporting services and lagging construction of field channels and drains by the farmers. The problems encountered with pro- jects such as Shetrunji have since led GOI, the State Governments concerned and the Bank Group to reorient their concept of sound irrigation development toward a more integrated approach., In 1960, the Ukai project was started to provide carry-over storage for the Kakrapar project and to extend the CCA to a total of about 375,000 ha. Part of the distribution system in the Ukai  - 14 - project is still under construction; a major program of on-farm development, drainage and modernization works on the Kakrapar system, part of which would be financed under the proposed credit has been undertaken. The Kadana Irriga- tion Project in Gujarat (Cr. 176-IN of February 9, 1970, US$35 million) was the first of a second generation of Bank Group-financed irrigatir'n projects in India designed to avoid the weaknesses encountered by the earlier projects like Shetrunji (see above). Besideis the traditional irrigation infrastructure, this project included some elements of command area development, in particular the construction of field channels, drains and landshaping and financing of these works through institutional credit, the construction of market roads, and an agricultural support program. This project is now basically completed, about two years behind schedule due to two extreme floods, which disrupted dam construction. A project completion report is under preparation. Difficulties encountered in this project included a too heavy reliance on farmer coopera- tion in project implementation, particularly on-farm development, and--related to this--too little emphasis on the need to generate an absolutely reliable water supply. These shortcomings were identified early, and Bank Group financed irrigation projects in India approved after about 1974 contain cor- rective measures. In 1978, the Banlk Group financed the (First) Gujarat Irri- gation Project (US$85 million credit of July 17, 1978; Cr. 808-IN) which provides for construction of about twenty new, and modernization of about ten existing, medium irrigation systems located in most parts of the State. This project represented one of the Bank Group's first sector lending operations for irrigation in India. It is progressing fully in line with expectations. Groundwater development in Gujarat has accelerated since Independence. In the 1950's, the area irrigated from wells increased by about 3.5% annually. In the 1960's, the pace of groundwater development almost doubled, and diesel pumps replaced the traditional lifting devices. In several areas, the limit of groundwater resources is being approached. The Bank Group has been directly involved in groundwater development in Gujarat through the Gujarat Agricultural Credit Project (Cr. 191-IN of June 3, 1970, US$35 million), which was fully disbursed on March 31, 1975. A project completion report found that about 81,000 farms representing a total population of 480,000 benefitted directly from the minor irrigation component of the project, rather than 25,000 farms as estimated at appraisal. The overall economic rate of return for the project's minor irrigation component was 28%, compared to the appraisal estimate of 23%. PART IV - THE PROJECT Project Formulation 41. Expansion of the irrigated area is one of the cornerstones of Gujarat's agricultural development strategy. Since the scope for groundwater development is limited, GOG gives high priority to surface irrigation. The plans for the next five-year period emphasize: completion of all on-going major and medium projects in order to minimize the gestation period and achieve a more rapid buildup of irrigation benefits; construction of new medium pro- jects, especially in drought prone and backward areas; start on the Narmada irrigation scheme; and modernization of existing projects, primarily through the provision of additional control structures, canal lining, drainage works  - 15 - and construction of watercourses/field channels. Investments in major and medium surface irrigation schemes for the 1978/79-82/83 five-year plan period are projected to total about US$750 million (in constant 1978/79 terms), of which US$240 million would be spent for Narmada development, US$200 million each for new major and new medium projects, US$70 million for modernizing existing projects, and the remaining US$40 million for other irrigation developments. 42. The proposed project would reflect the priorities in both the national and State Five-Year and Annual Plans. It would combine: the comple- tion of three new major schemes in the backward areas; first-phase modern- ization of Gujarat's largest project; coastal area development; operational and management improvements; and a training institute for land development and water management. The major objectives of the proposed project would be to achieve an economic use of scarce surface water resources and to ensure a reliable and equitable supply to individual farmers. In order to meet these objectives, planning, design, construction, implementation and management of the irrigation systems would be improved under the project. Under the first Gujarat Irrigation Project (Credit 808-IN), a special set of criteria for improved planning, design, construction and operation of the medium irrigation schemes covered by the project were agreed with GOG. These and additional criteria would be adopted for all the components under the proposed project (Section 2.07 (a) of the Project Agreement). They were developed after a comprehensive review of the performance of existing irrigation projects in Gujarat (see "India - Staff Appraisal Report - Second Gujarat Irrigation Project, Volume II - Sectoral Background," Report No. 2843a-IN, dated April 9, 1980). 43. The criteria would establish specifications to ensure that all new irrigation projects would be planned and designed to such standards that the water would be supplied to each farm in the command area in a reliable and timely fashion with a minimum of losses in conveyance between the dam and the plant. Programs for modernization of existing projects would be geared to raise current distribution and water use efficiencies. Responsibilities both for systems/operation and for the development of agriculture in the command area would be vested in a newly established separate command area development wing in the Agricultural Department of GOG and special circles in the exist- ing command area development authorities for the Project systems. Water allocation and operational procedures that would help promote equity and efficiency inside the command areas would be introduced. More comprehensive technical, agricultural and socioeconomic investigations would be carried out as the basis for project planning. 44. The project was prepared by GOG, with substantial assistance by Bank staff. It was appraised in September 1979. A supplementary Project Data Sheet is attached as Annex III. A report in two volumes entitled "India - Staff Appraisal Report - Gujarat Irrigation II Project", Report No. 2843-IN, dated April 9, 1980 is being circulated separately to the Executive Directors. Negotiations were held in Washington in March 1980. The Borrower and GOG were represented by a delegation coordinated by Mr. S.C. Jain, Director, Department of Economic Affairs, GOI.  - 16 - The Project 45. The proposed project would consist of financing a five-year time- slice (April 1980 - April 1985) of Gujarat's investment program for irrigation, as far as this program is not covered under the (First) Gujarat Irrigation Project (US$85 million credit of July 17, 1978; Cr. 808-IN, see paragraph 40 above) which focussed on GOG's development program for medium irrigation schemes. The project would have three main components. They would be located in distinctly different areas of the State: In the backward southeastern parts of mainland Gujarat, construction of three on-going major irrigation schemes (Karjan, Heran, and Damanganga) would be continued and the village-to-market road network in their command areas would be improved. On the fertile coastal plain of southern Gujarat, the existing Ukai-Kakrapar irrigation scheme, Gujarat's largest, would be modernized. Along the Saurashtra coast, where a very productive area irrigated from wells is threatened by intrusion of saline groundwater from the sea, catchment protection and construction of irrigation facilities would comprise the third main component of the proposed project. 46. Under the new-schemes-component of the project, construction work on three major dams would be financed. The Damanganga and Heran dams are comprised of earth fill embankments with clay cores to impermeable bed-rock, and masonry non-overflow and spillway sections provided with drainage galleries. The spill- way gates are of radial design and operable by both electric powered and manual lift mechanisms. The Karjan dam was originally designed as a masonry struc- ture, but is now planned for concrete construction. The design and construc- tion methods of the dams have been reviewed by GOI and IDA and found adequate from the standpoint of structural stability, functional efficiency and safety. To ensure continued adequacy of design and construction, GOG would maintain its existing independent panel of experts who would periodically examine the concept, the design and the construction of the dams and spillways. After their completion, these structures would be periodically inspected to deter- mine whether there are any deficiencies in their condition or in the quality and adequacy of maintenance or methods of operation, which may endanger their safety (Section 2.06 of the Project Agreement). The dams are designed to store surplus monsoon inflow during July through September for later releases during the rabi and hot weather seasons and for early kharif waterings. The Heran Dam would also provide carry-over storage from one year to another. Water supply in all the schemes is adequate for the proposed cropping pattern. Some 86 villages would be submerged by the project reservoirs and their present population of about 5,700 farm families would be resettled under the project. GOG has a well developed policy for land acquisition, resettlement and rehab- ilitation of families displaced by major irrigation schemes. The most impor- tant feature of this policy is not the monetary compensation for property lost but the aim of rehabilitating dislplaced families by providing alternative means for their future livelihood. For the reservoirs under the proposed project, GOG would, as part of its resettlement plan, allocate land suitable for cul- tivation to the farmers to be resettled from the Heran, Karjan and Damanganga reservoir areas (Section 2.09 of the Project Agreement). In the allocation of irrigable land and the provision of irrigation facilities, preference would be given to those farmers, whose submerged land had been irrigated. New village sites are fixed in consultation with the displaced families, and  - 17 - include amenities such as water and power supply, roads, school and community buildings. 47. The entire conveyance systems of the Heran and Karjan schemes would be lined from the dam intake down to irrigation turnouts serving approximately 8 ha blocks, in order to ensure a timely and reliable water supply to all farmers in the command area. The lining would reduce conveyance losses and maintenance and, more importantly, would allow improved operation of the system. The Damanganga scheme, with high rainfall, ample water available in the river and relatively impermeable soils, would be lined on a selective basis. The distribution system from minors down would be in pipes wherever sufficient natural head is available (Damanganga 30-40%, Heran 10-20%, and Karjan 20-30% of the culturable command area). Chak sizes would be based on topography, soils, cropping patterns and farm sizes but would not normally exceed 20 ha. Measuring devices would be provided throughout the systems down to the chak outlet. All-weather service roads or bicycle/motorcycle paths would be provided along all channels according to size. A radio-telephone communication system would be provided. Planning and construction of field drains within the chaks and drains connecting to the main drainage system would proceed concurrently with the distribution system. 48. The road program under the new-schemes-component would comprise improvements to about 237 km of existing roads, reconstruction of about 138 km of roads and tracks and construction of some 204 km of new roads. The network would be plranned so as to provide all-weather road access within a distance of about 3 km to almost all parts of the command areas and to villages having over 1,500 inhabitants. Existing road alignments and new canal embankments would be utilized whenever technically and economically appropriate. Village centers would be by-passed as far as possible. All roads would have adequate drainage, hard shoulders and waterbound macadam pavements with black top surfacing. In addition to the project roads, wherever necessary, GOG would upgrade to appro- priate road standards, in phase with project road development, existing black top roads that constitute essential links in the networks (Section 2.07 (b)) of the Project Agreement). 49. The Ukai-Kakrapar modernization component of the proposed project would comprise, over a five-year period, a complete package of works in specific areas of the Kakrapar part of the command. Irrigation, drainage and road infrastructure in this part of the scheme was constructed to standards prevail- ing in the early 1950s, and its upgrading to more modern standards, together with the introduction of improved management practices, could yield exception- ally high benefits. In a staged approach, necessitated by the on-going agri- cultural production in the area and designed to optimize the data base for decisions affecting large areas, distributaries would be enlarged and select- ively lined, all minors and sub-minors down to chaks of manageable sizes would be lined, drainage works would be constructed or improved on a sub-catchment basis, and necessary control structures and measuring devices would be con- structed. These works would be implemented in two blocks of 9,820 and 28,200 ha, respectively, in the Kakrapar Right Bank Area and in the 14,000 ha command of the Umbrath Branch canal of the Kakrapar Left Bank Area. Some 5,000 ha of salt-affected coastal lands at the tail-ends of the distribution system would be protected from tidal flows, provided with irrigation and drainage works, and then fully reclaimed. A special feature of the Umbrath Branch modernization would be a pilot operation with farmer participation. It would test the  - 18 - technical, administrative and economic feasibility of conjunctive use of groundwater and surface water. Drainage works would be completed for about 20,000 ha of the 50,000 ha Surat Branch Canal command in the Kakrapar Left Bank area to remove serious waterlogging. A program for construction or rehabilitation of about 190 km of command area roads in the i:rigation areas to be modernized is also included in the project. 50. The Saurashtra component of the proposed project would be part of a comprehensive scheme, developed by GOG, for water conservation, direct irri- gation and artificial recharge along the southern coast of Saurashtra, which has been adversely affected by the intrusion of saline groundwater from the sea. The scheme includes a comprehensive package of run-off conservation measures and small reservoirs for direct irrigation. Under the scheme, IDA assistance over a five-year period would focus on the following components: construction of 14 tidal regulators at the mouths of the rivers and provision of lift irrigation facilities at the reservoirs; and construction of about 150 small check dams along nallas and rivers and of about 1,000 small check struc- tures across natural drains. A reservoir scheme for regulated releases to downstream lift schemes would also be included. About 10,000 ha of government waste land and community owned land in the upper catchment areas, where slopes are too steep for cultivation would be afforested. In support of the scheme, GOG will undertake a research and demonstration program for developing and introducing water-conserving irrigation techniques to reduce groundwater use, and for growing more salt-resistant fruit crops in areas where the groundwater is already saline. 51. In 1978/79, GOG introdured Rotational Water Supply (RWS, i.e. to farmers in the same outlet command) as a pilot scheme on three of the minors of the Mahi-Kadana Right Bank Command, with encouraging results. Since RWS would be the basis for operation of the new projects financed from the pro- posed credit, it would be essenti-al that sufficient experience can be gained rapidly. Consequently, the proposed project includes the required works (primarily construction of cross regulators, measuring devices and group outlets within the chaks) on an area of about 60,000 ha, about half of which would be in the Mahi-Kadana command. Project Implementation 52. Planning and implementation of the new irrigation schemes and the main civil works in the Saurashtra Coastal Development Scheme would be the direct responsibility of the GOG Irrigation Department. The Irrigation Depart- ment is organized into six branchoes, headed by Chief Engineers (five of whom are also Joint Secretaries) who work under the guidance of the Secretary, Irrigation. The Irrigation Projects Branch is responsible for planning, design and construction of all medium and some major irrigation projects in the State. It would be responsible for implementing the Saurashtra component of the proj- ect. The Projects Banch's responsibilities cover selected major projects in central Gujarat, including the Heran and Karjan schemes. The Narmada Branch is in charge of planning and consi:ruction of the Narmada project, part of which has been proposed, tentatively, for Bank Group financing at a later stage. The Damanganga Branch is responsible for implementing the Damanganga scheme. The  - 19 - Irrigation Branch operates all major and medium irrigation schemes and assists local authorities in the design and construction of minor irrigation projects. It has also planned, and started to implement, the Ukai-Kakrapar modernization component of the proposed project. The Irrigation Department's construction organization is flexible and adjusted to the implementation program. It's branches are divided into construction circles, each headed by a Superintending Engineer. Each construction circle has a design office, which prepares all designs of canals and minor canal structures for the circle. The Central Design Organization, under three Superintending Engineers, prepares detailed designs of earth and masonry dams and major canal structures, and formulates design standards and provides typical designs for minor canals and canal structures to the construction circles. In 1977, a Project Preparation and Monitoring Cell, with a multidisciplinary staff, was established within the Irrigation Department (then a branch of the Public Works Department) to integrate agricultural development aspects in the planning of irrigation projects. This Cell would be responsible for monitoring and evaluation of the proposed project. Its activities would include a variety of hydrological, agricultural and economic measurements and data tabulation, on a continuous basis, both during and after project execution. Work programs for the planning organization would be formulated annually. Under the proposed project, funds from the US$10 million project preparation component (paragraph 60 below) would also be made available to GOG to finance eligible expenditures, for the next two years, of Narmada development preparation. 53. The Building and Communications Department of GOG would survey, plan, design, supervise construction, and maintain the command area roads in close consultation with the CAD Administrators (see paragraph 54 below). Two Command Area Roads Circles would be created to be engaged exclusively on command area road works. Maintenance of these roads is currently the resonsibility of the semi-autonomous Panchayats. Since this arrangement has not been satisfactory, responsibility for maintaining all project roads as well as all existing roads forming an integral part of the command area road networks, would be transferred to the Building and Communications Department. 54. Operation and maintenance of the completed irrigation and drainage networks under the Project are the responsibility of Command Area Development Authorities (CADAs) within the Department of Agriculture, in addition to their tasks of on-farm development and coordination of agricultural supporting services. There are currently three such CADAs in existence, one each for the Mahi-Kadana Scheme, for Ukai-Kakrapar, and for smaller schemes in Saurashtra and North Gujarat and each headed by an Area Development Commissioner. Special circles are being established within the existing CADAs for the Damanganga, Heran and Karjan command areas. In addition, a separate Command Area Develop- ment Wing for water management is being set up in the Agricultural Department, initially with staff deputed from the Irrigation and Agricultural Departments, with the ultimate objective to transform the Wing into a separate department for water management with its own cadre of land development and water manage- ment specialists. These specialists would be recruited from graduates of a training program in water management and land development, which GOG would commence under the project as a first step in a long-term program to build up a professional cadre for irrigation management. The project would assist the establishment of a new training institute for land development and water  - 20 - management, and would provide financing for residential and training accommo- dation, equipment, incremental staff salaries and training allowances, consul- tant services and, to a limited extent, overseas training for the institute's staff. The training program would commence not later than October 1, 1981 (Section 2.08 of the Project Agreement) and 700 students are expected to be trained by 1985. Agricultural Supporting Services 55. Agricultural research is the responsibility of the Gujarat Agri- cultural University, whose four campuses are located in different agroclimatic zones. The university has seven main research stations, specializing in differ- ent crops, and about 50 regional stations. Research on irrigated agriculture is carried out primarily at the Navsari campus of the university, located in the Ukai-Kakrapar command, and on 15 trial-cum-demonstration farms. The main focus of this research has been on water requirements in relation to soil types, climate and critical stages of crop growth. 56. Agricultural extension is the responsibility of the Department of Agriculture. The administrative set-up is presently being reorganized, with financial assistance from IDA under the Composite Agricultural Extension Project (US$25 million credit of February 16, 1979; Cr. 862-IN) in accordance with the new Training-and-Visit-System. Under the new schemes, village level workers (who are the primary contact with the farmers) would work only on extension, covering 500 to 800 families, through a system of visiting groups of 60-100 farmers every two weeks cn a regular schedule. 57. There is a well developed system for distribution and sale of seeds, fertilizers and pesticides throughcut the State. Certified seeds are produced by the panchayats and by the State Cooperative Marketing Federation. They are distributed primarily through the cooperative marketing societies. Gujarat is more than self sufficient in fertilizer production. Fertilizers and pesti- cides are distributed through both cooperative marketing societies and approved private retailers. Inputs are usually available within easy reach of the markets. 58. Gujarat has a well developed system for agricultural marketing and processing. Most of the trade is through regulated markets, which serve a specified area, usually within a 10 km radius. About three-quarters of the storage and processing facilities are owned by the private sector. 59. The organization for institutional credit to farmers follows the normal pattern in India. Sihort and medium term credit is provided by the cooperative banks. The State Cooperative Land Development Bank, with about 182 branches, provides long term credit. Commercial Banks, which provide all types of credit, account for about 15% of all loans to farmers. GOI Project Preparation Fund 60. Over the coming years GOI and the State Governments intend to step up their investment programs for irrigation substantially. Preparation of projects under these programs to modern standards would involve substantial expenditures for consultant services, equipment, selected pilot operations  - 21 - and incremental staff cost for the establishment or strengthening of Project Preparation and Monitoring Cells at the Center and in the States. Since many of the future schemes would be proposed for Bank Group financing, the proposed project would include a US$10 million fund for the preparation of such future irrigation schemes including Narmada development in Gujarat and Madhya Pradesh. Project Cost and Financing 61. The estimated total cost of the project, including the GOI project preparation fund, is US$360.0 million equivalent. Taxes and duties included in the cost estimate are negligible. The foreign exchange component of project cost is estimated at US$59.0 million (16%). The principal cost components, net of physical and price contingencies and of engineering and administration, are: construction of new major schemes (US$156.2 million), Ukai-Kakrapar modernization (US$31.4 million) and Saurashtra coastal development (US$27.2 million). The balance is made up by the training institute (US$3.8 million), operational improvements (US$2.4 million), monitoring and evaluation (US$1.8 million), engineering and administration (US$33.9 million), physical contin- gencies (US$29.0 million), price contingencies (US$64.3 million), and prep- aration of future irrigation projects (US$10.0 million). 62. The proposed credit of US$175 million would cover 49% of total project cost, including all foreign exchange cost and 39% of local cost. COG would finance the remaining project cost. The proceeds of the credit would be used to finance: civil works (US$125.5 million); equipment and vehicles (US$28.0 million); training, and monitoring and evaluation (US$6.5 million); and preparation of future irrigation projects (US$10.0 million). The remaining US$5.0 million would be left unallocated. Procurement and Disbursement 63. The proposed project includes about US$174 million worth of civil works (net of contingencies and engineering and administration). Of these, contracts totalling US$40 million for dams and main canals in excess of US$6 million per contract would be let following international competitive bidding. To encourage participation of small contractors, tenders would be designed to allow alternative tendering on individual schedules. For bid evaluation, a preference of 7.5% would be granted to Indian contractors. Tender documents would specify this preference and the manner of its application. Four of the eighteen ongoing multiyear contracts for construction elements of dams and main canals, awarded after January 1979, when a pre-appraisal mission identified them as components of the project, on the basis of local competi- tive bidding in accordance with standard GOG procurement procedures, have been found acceptable for financing under the project. The value of work under these contracts, outstanding as of April 1, 1980 and eligible for financing under the project would be about US$3.4 million worth. 1/ The remaining civil works (US$130 million) are individually small, scattered over 1/ The remaining fourteen contracts were ineligible because they were let before January 1979 and/or not in accordance with Bank Group procurement guidelines. The cost of these contracts, about US$20 million, are included in Total Project Cost (paragraph 61 above).  - 22 - a large area and carried out interimittently as determined by weather conditions and agricultural activities. Therefore, US$98 million worth of these works would be carried out by local contractors, after local competitive bidding on the basis of standardized competitive bidding procedures and guidelines recently developed by GOI's Central Water Commission and approved by the Association. The balance of these civil works (US$32 million) would involve a variety of technical constraints wlaich would make these works impractical for tendering. They would be carried out under small piecework contracts or by force account. Force account, limited to US$16 million equivalent, would be used only if required by safety or quality considerations or when the quanti- ties are exceptionally difficult to estimate in advance. 64. The estimated cost of vehicles and equipment to be procured under the project is approximately US$28 million. Of this total, equipment valued at about US$20 million (all heavy equipment and instrumentation) would be pro- cured through international competitive bidding. A preference limited to 15% or the prevailing customs duty if lower would be extended to local manufac- turers in the evaluation of bids. The equipment and vehicles will be grouped to promote efficiency and attract competition; however, bids will also be accepted on individual schedules to attract small manufacturers. The balance (US$8 million), comprising light equipment and vehicles, would be procured locally after local competitive bidding, in order that they could benefit from existing servicing and spare parts supply benefits. 65. The proceeds of the credit would be disbursed against the foreign exchange cost of directly imported equipment and vehicles and against the ex-factory price when procured locally. Where the ex-factory price is not readily available, 70% of expenditure would be reimbursed. Disbursements for civil works would be 70% in the case of expenditures incurred up to March 31, 1983 (which marks the end of the current Five-Year Plan), and 50% thereafter. For training, and monitoring and evaluation, all foreign and 70% of local expenditures would be reimbursed. Eligible expenditures for the preparation of future projects would be fully reimbursed. Full documentation would be required for all disbursements, except for payments of up to Rs 300,000 for civil works and Rs 150,000 for equipment and vehicles, and for force account, as well as for expenditures for the preparation of future projects, for which disbursements would be made against certificates of expen- diture. The supporting documents for these payments would not be submitted to IDA but would be retained by GOG or, in the case of project preparation expenditures, by GOI and the concerned State Governments for inspection by IDA review missions. It is expected that disbursements would be completed by June 30, 1986. Benefits and Economic Justification 66. The proposed investment would lead to completion of three ongoing major irrigation schemes, modernization of Gujarat's largest irrigation scheme, increased irrigation potential for coastal areas in Saurashtra, and would assure operational and management improvements. Expected incremental annual production of major commodities at full project development is estimated to be 200,000 tons of foodgrains, 20,000 tons of cotton and 185,000 tons of fruit. The project would generate year-round employment opportunities for an addi- tional 10,500 farm family members, 21,300 landless laborers, and 58,500 workers  - 23 - in non-farm sectors such as marketing, transport and processing. Net farm income for the 136,000 directly benefitting farm families in the project area, which presently averages Rs 990 in the three new major schemes, is expected to increase to an average of Rs 4,720 (of which about Rs 3,220 would be due to the project). The percentage of farm families below the poverty line (US$75), presently about 70% in the project areas, should decline to about 20%. 67. As a result of the project, local capabilities for the planning, design, monitoring and evaluation of the irrigation schemes would be strength- ened. The establishment of formal training and a pilot component would lay the groundwork for improved and more reliable and equitable water supply to individual farmers throughout the State which in turn will provide incentives to farmers to invest in on-farm development. As a whole, the project would lead to improvements in the efficiency, and thus in the economic returns, of future developments in Gujarat's irrigation sector. 68. The economic rate of return has been calculated for each major scheme or project component. The economic cost of all civil works, equipment, land acquisition, administration and engineering, operation and maintenance costs have been included in the derivation of the economic rate of return. Discounting costs and benefits over a 50 year priod, the economic rate of return for the project schemes are: Heran, costing US$41.7 million or 19% of base cost--17%; Karjan, costing US$61.4 million or 29% of base cost--21%; Damanganga, costing US$53.1 million or 25% of base cost--16%; Ukai-Kakrapar, costing US$31.4 million or 15% of base cost--20%; and Saurashtra, costing US$27.2 million or 13% of base cost--18%. The overall economic rate of return is 18%. Cost Recovery 69. The "project rent" (net incremental income less the necessary rewards to the farm family for its labor, entrepreneurship and cultivation risk) is estimated to average about Rs 2,660/ha at full development. The annual financial requirement to recover total capital cost of the project and the supplementary on-farm development (at 10% interest over 50 years for infrastructure and over 10 years for other investments) and O&M expendi- tures would be Rs 1,733/ha. At current rates, direct and indirect revenue from the irrigated lands would total Rs 470/ha, equivalent to a total cost recovery index of 27% and a project rent recovery index of 18%. However, this overrates the net impact of the project cost on the budget since the increased farm incomes would lead to further increases in GOG and GOI revenues through other indirect taxes. Under the project, such incremental revenues from non-agricultural taxes would be about Rs 250/ha. Also, if these taxes are taken into account, the project cost recovery increases to about 42%. 70. In general, volumetric water rates should promote a more efficient water use than area-based water charges, but the unlined distribution systems existing at present permit neither a reliable irrigation supply nor an accurate measurement of the water supplied to each farmer. The new technical standards for the distribution network and the rotational water supply introduced under the credit are specifically designed to ensure that each farmer in the command areas receives a fixed volume of water in a reliable fashion. Thus, it would be technically feasible to charge the farmers on a volumetric basis. When the  - 24 - farmer is allocated a fixed amount of water, he tends to select his crops and his intensity of irrigation in such a way that he optimizes his returns to water. In the absence of major distortions in the price structure of major crops, this allocation system generally leads to an efficient use of water. Conversely, an area based water charge provides an incentive to the farmer to use his water allocation on a smaller area than would be desirable from society's point of view. Consequently, area-based charges might adversely affect production if they are set at too high a level. Volumetric charges would allow farmers to vary their c1-ops and the irrigated area to maximize the private and social returns to water irrespective of the level of water charges. Efficiency considerations, therefore, imply that the introduction of a charge related to the volume of water delivered is of high priority. Consequently, by December 31, 1981, GOG would review the water and water-related charges in the State and, based on the outcome of the review and after paying due regard to IDA's comments, it would begin to experiment with different systems of volumetric charges. By December 31, 1984, when GOG will have evaluated the experience from these experiments, and if their results have been favorable, GOG would start implementing a volumetric system of charges in all areas of the project (Section 3.03 of the Project Agreement). The level of these charges would be set to recover, to the extent possible, the cost of the irrigation infrastructure; at the same time, due consideration would be given to farmers' incentives and payment capacity and to the overall budgetary requirements of the State. Project Risks 71. The project would be implemented by agencies with proven experi- ence who would employ criteria for its design construction and operation that take into account the experience gained in many years of irrigation development and which represent substantial improvements over those now in use. Given these considerations and the commercial orientation of project area farmers, the risks associated with the project are small and acceptable. PART V - LEGAL INSTRUMENTS AND AUTHORITY 72. The draft Development Credit Agreement between India and the Association, the draft Project Agreement between the Association and the State of Gujarat, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement are being distributed to the Executive Directors separately. 73. Special conditions of the project are listed in Section III of Annex III. 74. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association.  - 25 - PART VI - RECOMMENDATION 75. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President April 9, 1980 By Ernest Stern   ANNEX I INDIA - SOCIAL INDICATORS DATA S Page 1 of 5 RhPERNCE GROUPS (ADJUSTED AVERAGES LAND AREA (THOUSAND SQ. 01.) inu - NOST RECENT ESTIMATE) L4 TOTAL 3287.6 SAME SAME NEXT HIGHER AGEICULTURAL Is1S.3 MOST RECT GEOGRAPRIC INCOME INCOME 1960 /b 1970 /b ESTIMATE /b UEGION L GROW /d GROUP A GNP PU CAPITA (US$) 60.0 90.0 180.0 191.1 209.6 467.5 ESUOY CONSUM0TION PER CAPITA (ILOGRMS o0 COAL EQKIVALUT) 142.0 181.0 218.0 69.1 83.9 262.1 POPULATION AND VITAL STATISTICS POPOLATION. NID-YEAR (MILLIONS) 434.9 547.6 631.7 L DuAl POPULATION (PERCUT or TOTAL) 17.9 19.7 20.7 13.2 16.2 24.6 POPULATION PROJETONS POPULATION IN YEAR 2000 (MLIONS) 973.0 SIATIONARY POPULATION (MILLIONS) 1643.0 TEAR STATIORARY POPULATION 1S REACD 2150 POPULATION DENSITY PER SQ. IN. 132.0 167.0 192.0 86.6 49.4 45.3 PrR SQ. 124. AGRICULTURAL LAID 247.0 308.0 347.0 330.2 252.0 149.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YES. 40.8 42.5 42.0 44.3 43.1 45.2 15-64 nS. 55.7 54.6 55.0 52.4 53.2 51.9 65 YRS. AND ABOVE 3.5 2.9 3.0 3.1 3.0 2. 8 POPULATION GROWTH RATE (PERCENT) TOTAL 1.9 2.3 2.1 2.4 2.4 2.7 URaAN 2.5,^ 3.3 3.1 4.1 4.6 4.3 CRM30E BIRTH RATE (PER TaoUsND) 43.0 40.0 35.0 44.4 42.4 39.4 CRIDE DEATR RATE (PER THOUSAIW) 21.0 17.0 14.0 16.4 15.9 11.7 GROSS REPRODUCTION RATE 3.2 2.9 2.4 3.2 2.9 2.7 FAMILY PLANNING ACCEPTORS. ANNUAL (THOUSANDS) 64.0 3782.0 4518.0 USERS (PERCENT OF MARRIED UOKEN) .. 12.0 16.9 7.9 12.2 13.2 POOD AND NUTRITION INDEX OF FOOD PRODUCTION PEM CAPITA (1969-71-100) 100.0 102.0 101.0 99.4 98.2 99.6 PER CAPITA SUPPLY OP CALORIES (PERCENT Of RtEQUREM4ENTS) 95.0 92.0 89.0 93.0 93.3 94.7 PROTEINS (GRAHS PER DAT) 51.0 53.0 48.0 56.1 52.1 54.3 OF WHICE ANIMAL AaD PULSE 19.0 16.0 12.6 10.4 13.6 17.4 CHRLD (AGES 1-4) MOTALITY RATE 28.0 22.0 18.0 19.2 18.5 11.4 H.EALTR LIFE EXPECTANCY AT BERTH (YE4RS) 43.0 48.0 51.0 49.1 49.3 54.7 INFANT MORTALITY RATE (PER THOUSAND) .. 134.0 .1 .. 105.4 68.1 ACCESS TO SAFE WATER (PERCENT OP POPULATION) TOTAL * 17.0 33.0 31.5 26.3 34.4 URBAN *- 60.0 83.0 63.9 58.5 57.9 RURAL .. 6.0 20.0 20.1 15.8 21.2 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 15.7 16.0 40.8 URBAN .. 85.0 87.0 66.8 65.1 71.3 RURAL .. 1.0 2.0 2.5 3.5 27.7 POPULATION PER PHYSICIAN 5s8OO.. 4ss890.0 3135.0 7107.9 11396.4 6799.4 POPULATION PER NURSING PERSON 963O.O/ 5220.0 6320.0 12064.0 5552.4 1522.1 POPUATION PER HOSPITAL BED TOTAL 2590o.0c 2020.0 1231.0 2738.4 1417.1 726.5 URBAN .. .. 197.3 272.7 RURAL .. .. .. .. 2445.9 1404.4 ADMISSIONS PER HOSPITAL BED .. .. .. .. 24.8 Z7.5 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 .. 5.2 .. 5.3 5.4 'JUAN 5.2 .. 4.8 .. 4.9 5.1 RLRAL 5.2 .. 5.3 .. 5.4 5.5 AVERAGE HNUMBER OF PERSONS PER RO00M -OTAL 2.6 2.3 .. JRBAN .. .. .. RURAL . .. ... ACCESS TO -LECTRICITY (PERCENT OF WFELL.NGS) TOTAL .. 2. .. .. Z2.5 S.1 TESAN .. .. .. .. (7.6 45.1 RURAL .. .. .. .. .. 9.9  ANNEX I Page 2 of 5 INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (ADJUSTED AVERAGES - MOST RECENT ESTIMATE) - SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE lb REGION /c GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLME1T RATIOS PRIMARY: TOTAL 61.0 72.0 79.0 59.5 63.3 82.7 MALE 80.0 87.0 94.0 74.9 79.1 87.3 FEHALE 40.0 55.0 63.0 43.7 48.4 75.8 SECONDARY: TOTAL 20.0 29.0 28.0 19.5 16.7 21.4 MALE 30.0 39.0 38.0 27.8 22.1 33.0 FEIALE 10.0 17.0 18.0 10.0 10.2 15.5 VOCATIONAL ENROL. (2 OF SECONDARY) 8.0 6.OL .. 1.3 5.6 9.8 PUPIL-TEACHER RATIO PRIMARY 29.0 40.0 42.0 42.2 41.0 34.1 SECONDARY 16.0 17.0 .. .. 21.7 23.4 ADULT LITERACY RATE (PERCENT) 28.0 33.0 36.0 25.5 31.2 54.0 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.0 1.2 2.3 2.8 9.3 RADIO RECEIVERS PER THOUSAND POPULATION 5.0 21.0 24.0 15.5 27.2 76.9 TV RECEIVERS PER THOUSAND POPULATION .. 0.1 0.5 .. 2.4 13.5 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 11.0 16.0 16.0 6.2 5.3 18.3 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 .. 1.1 2.5 LABOR FORCE MTAL LABOR FORCE (THOUSANDS) 188670.0 226870.0 261000.0/k FEMALE '(PERCENT) 31.3 32.6 32.2 21.4 24.8 29.2 AGRICULTURE (PERCENT) 73.0 73.0 73.0 66.3 69.4 62.7 INDUSTRY (PERCENT) 11.0 11.0 11.0 9.6 10.0 11.9 PARTICIPATION RATE (PERCENT) TOTAL 43.0 40.2 39.2 35.8 36.9 37.1 MALE 57.1 52.3 51.3 52.3 52.4 48.8 FEMALE 27.9 27.1 26.2 15.7 18.0 20.4 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.1 1.3 1.2 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/1 .. .. .. 15.2 HIGHEST 20 PERCENT OF ROUSEHOLDS 51.7 48.971 .. .. .. 48.2 LOWEST 20 PERCENT OF ROUSEHOLDS 4.1 6.77 .. .. .. 6.3 LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.27 .. .. .. 16.3 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 83.0 86.5 99.2 241.3 RURAL .. .. 73.0 74.2 78.9 136.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER. CAPITA) URBAN .. .. .. .. 91.9 179.7 RURAL .. .. 50.0 50.4 54.8 103.7 ESTILMTED POPULATION BELOW ABSOLUTE POVERTY IYCOME LEVEL (PERCENT) CRBAN .. .. 47.0 44.3 44.1 24.8 RURAL .. .. 52.0 52.4 53.9 37.5 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of coumtries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1977. /c South Asia; /d Low Income (S280 or less per capita 1976); /e Lower Middle Income (5281-550 per capita, 1976); /f 1978 mid-year population is estimated aL 640.4 =illion; /j 1951-60; !h 1962; 1958; S j 1967; /k 1978 mid-vear lalbor force is estimated at 261 million; '1 196465. Most Recenc Estimate of GNP per capita is for 1978. August. 1979  ANNEX PEttNrITIIN OF SOCIAL iEpICATORS Page 3 of 5 Notes: Although the data are drau fce soures generally judged the met auth-iathe and reliable,it thold also he noted that they asp sot ho ist.oen- tiocaily cosaps-sle becaue of the hack of etasdmdioed deftoitions aod concpts usd by diffeectcutrie h -olletisg the dts. The data are, aco-theleos, useftil to deo-ie orders of -9gsitsde, hodiomte treado, acd oharstero- certal_mjo differbesro ee _ -. The adjsoe rupscso for each htdicator are poplatios-eghted geoseteho men, cldig the eotre- oslues of the bodic-to- and the -ot populated ocutry ho sob grouP. Dit to lark of date, goupacer~- of all iedi-atore far Capitl harplos Oil Eooters end of indicator of Access tc Wtter and trE-ts hispooi, Pousicg, born.e Clatrihutios ard Pheety for other oustry groups ar poplatics-eightedi geomtric ocan uihakot etc luso of the eutr-o onuosd the sot psssltd routry. Shoce the coeaeofcutie mo the iodheatera depeod on avilahility cf data and is sot u-hfcr-. outi- eust be eoerc1oh in relatiog oesge of ou id_oto_ to anthe.The. asavrges are inotly usefu asapchsha f "e-ptetd" values ahe..sae the osue of 00 IAND0 AREA (oh-uud sq-ha.) ocAs to TEoreta Dhsposl ( poroest of popula1tiot) - totti. orhr sadrua- Total - Total -srf- arro orplh -ad are sad island eaters. umeofppl(totl, urba, and rur) seed by -erta diop-l as Agriculturl - W-it retes eatiate of egeh-utura are used teisperaily peerstge- of their -epecti-e poplatiths.. oreta disposal eq teoludI to pe-emettly f- or-rp, pauture, macht and kitchen gardens or to the -clletioo sad disposal1, aith or etoh-t treetanot,of hk.n ... eorte lie fllie. and sate-eater by eater-horse systea or the usetfpitporces end c-iolar GNP PEP CAPITA (hSd) - 1V Per capita eatteatt oh crent. erht prices, Po ellato pe l0iin.Puoaibdcdd pone fpacilgpyiin t ca~~~~~~~lunted by on ccvr' nthod at Wcrld Bank Atlas (1976-78 basis); 1ualifhEd fro- a -edica cha at unkorsty level 1960, 1970, eoo 1978 data. P.pe tios per Nursig Presto - Ppulatioo divided by ooi-ertof peacticig male ENERGYi CONSUPITSION PER CAPITA - AnsuI -ot-pti-s of co-orcial oeegy and feene grsdoate tes,prathoal cures, sod saoit_art--eo (coal sad 11igit, tipeveoloun, etuel gat and hydvo-, oucleu sad geo-Pculatios el Hospital hed - , toal urban and rurl - Ppolatlco Itotu.1 urLoc, th-era ivtrocot) it kiloen of coa oqulv-lect Per caPita; 196o, sad ru-I) divided by thei- epcio ubro hosia ctsahhci 1970, sod 1976 Ants. public and prct ee o PeoaIced hoopislsd roohiiitot-oto-t-ro koipits.t are eutsliishnttt peranetly staf fed by at beotcc thyso PbPUi