India - Thirteenth Industrial Credit and Investment Corporation Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-2783-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA WITH THE GUARANTEE OF INDIA April 24, 1980 This document has a restricted distbution and may be used by recipients only in the performnnce of their offcal duties. Its contents may not otherwise be disclosed without World Bank authoriation.  CURRENCY EQUIVALENTS (as of April 21, 1980) US$1.00 Rs 8.04 Rs 1.00 = US$0.1243 Rs 1 million - US$124,300 Since September 24, 1975 the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1 to Rs 8.4). ABBREVIATIONS AND ACRONYMS DFC - Development Finance Company DIC - District Industries Center GOI - Government of India ICICI - Industrial Credit and Investment Corporation of India IDBI - Industrial Development Bank of India IFCI - Industrial Finance Corporation of India IIM - Inter-Institutional Meeting IRCI - Industrial Reconstruction Corporation of India KfW - Kreditanstalt fur Wiederaufbau LIC - Life Insurance Corporation of India NDP - Net Domestic Product RBI - Reserve Bank of India SFC - State Financial Corporation SIDC - State Industrial Development Corporation UTI - Unit Trust of India FISCAL YEARS GOI - April - March 31 ICICI - January 1 - December 31  FOR OFFICIAL USE ONLY INDIA THIRTEENTH LOAN TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LOAN AND PROJECT SUMMARY Borrower: Industrial Credit and Investment Corporation of India Limited. Guarantor: India, acting by its President. Amount: US$100 million. Terms: Repayable in accordance with the amortization schedule for sub-loans for which withdrawals from the loan account are approved or requested. Interest rate would be 8.25% per annum. Relending Terms to Interest of 11% per annum for ordinary loans and 10% ICICI Borrowers: per annum for loans in backward areas. Commitment charge of 1% per annum. ICICI's standard lending terms provide for loan maturities of up to 15 years, including up to three years of grace. Exchange risk to be borne by ICICI sub-borrowers. Project The project would finance the foreign exchange cost Description: of industrial projects carried out by productive enterprises in India. It would assist ICICI in diversifying its sources of foreign exchange by facilitating blending of Bank and commercial funds, and in promoting developmental activities. By help- ing to fill a gap in the availability of foreign exchange resources to finance capital goods imports, the project would contribute to investment in the modernization and expansion of productive industrial capacity in India. The risks associated with the project are minimal due to the strong management and experience of ICICI. Estimated Commitments and Disbursement: FY 1981 1982 1983 1984 1985 (US$ illion7) Commitments: 30 40 30 Disbursements: Annual: 1.4 6.8 211.3 51.4 13.1 Cumulative: 1.4 8.2 35.5 86.9 100.0 Appraisal Report: No. 2890-IN of April 18, 1980 I This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not othrwise be disclosed without World Bank authorization.   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA WITH THE GUARANTEE OF INDIA 1. I submit the following report and recommendation on a proposed loan to the Industrial Credit and Investment Corporation of India (ICICI) with the guarantee of India for the equivalent of US$100 million to help finance ICICI's operations through September 1982. The interest on the loan will be 8.25% per annum. Amortization of the loan will conform substantially to the aggregate of the amortization applicable to subloans financed out of the loan, subject to a maximum of 15 years, including three years grace. 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 Cashewnut Project (Report No. P-2770-IN), dated April 10, 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 position, and the large foodgrain stocks have greatly eased the pressures to deal 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 the 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.  - 6 - 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 development 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. India 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.  PART II - BANK GROUP 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 million, 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. Projects supporting water supply, sewerage, and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of 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 - THE INDUSTRIAL SECTOR Industrial Structure 26. In 1950 when the first Five-Year Plan was initiated, industry was heavily oriented towards the production of consumer goods, with traditional light industries--e.g., textiles and food processing--responsible for about half of manufacturing output. Over the next 15 years, industrial production expanded by 7-8% annually, with emphasis on the expansion of capital goods production and of "basic" industrial inputs such as iron and steel, cement and fertilizers. Substantial structural transformation took place over this period, 1950-1965, with capital goods production representing about 60% of out- put of the manufacturing sector by 1965. Since then, the rate of industrial expansion has slowed down to an average of about 4% per annum. Structural change has continued, with production of "basic" industrial inputs and heavy machinery and equipment growing at a significantly higher rate than industry as a whole. India now has a diversified and fairly advanced industrial sector that can produce most of the country's needs for manufactured products. In  - 10 - 1978, India's industrial sector contributed about 23% of GDP, of which manu- facturing contributed 16-17%. Imports are mainly of industrial materials and some sophisticated machinery and equipment for which India lacks supply capacity to meet her needs. Since the early 1970s, exports have started to grow more rapidly (19% per year in current US dollars between 1970 and 1978). Exports of engineering goods rose particularly rapidly. 27. About two thirds of manufacturing output comes from firms registered under the 1948 Factories Act. The other third comes from non-registered small scale units, which together employ about 70% of the industrial labor force. Almost 80% of the registered units are relatively small, having less than 50 workers, and the rest are medium and large scale production units and produce about 88% of the total value added by the registered units. Taken as a whole, the factories of all sizes are labor intensive. 1/ About 66% of industrial value added by registered units originates in the private sector. The propor- tion of output coming from the public sector units has increased from 20% in 1970 to 28% in 1976/77, as the result of increased Government investment in certain subsectors, including power generation, steel, cement and paper and of the nationalization of part of the textile industry. The joint sector, com- prising mainly new large units established with public and private participa- tion, has also expanded and by 1976/77 contributed about 6% of industrial value added. Some 93% of registered factories are in the private sector and employ about 70% of the workers in registered firms, using about 30% of total fixed assets. By comparison, the public sector firms are much larger, with over 400 workers on average, and have six times as much capital invested per employee as the private firms. Productivity in the use of capital, as mea- sured by the ratio of fixed capital to value added, appears substantially higher in the private sector units. While the differences between the public and private sector productivity are partly attributable to the differences in subsector mix, with public sector investment concentrated in the more capital- intensive subsectors, more efficient management in the private sector is also an important factor. Industrial Policies and Priorities 28. The basic strategy for industrial development in India has focused on achieving a high degree of self-sufficiency in manufacturing through import substitution and curbs on foreign ownership. In addition, a program of ex- panded public ownership has been pursued, particularly in heavy industries supplying basic inputs to the other industrial and agricultural sectors. The Government has also sought restriction on the concentration of economic power of large private undertakings, while extending special support to small-scale industries and backward regions. The principal instruments of industrial policy have been central licensing of investment, controls on imports and exports, allocation of 'scarce' raw materials, price controls and reservation of production of certain items for small-scale firms and the public sector. While such industrial strategy was successful in promoting rapid industrial- ization up to 1965 and in enabling India to develop a broad based industrial 1/ The average fixed capital per employee in 1976 based on depreciated book values of fixed assets is about US$3,000. It would rise to about US$8-10,000 on the basis of replacement values and 1979 prices.  - 11 - structure, certain shortcomings have become apparent in later years. In the protective environment in which industry developed, adequate attention was not always paid to product quality, economies of scale and technological development, with the result that many industrial firms were not well placed to compete in export markets as opportunities for further import substitution declined. Domestic demand for consumer goods was constrained by the relatively slow growth of per capita incomes and demand for investment goods was highly dependent on the level of public investment which tended to fall after 1965. 29. Over the past several years, there have been a number of new dev- elopments in industrial policy. Important modifications have been made with the intention of boosting the industrial growth rate, encouraging greater efficiency in capacity utilization and encouraging industrial exports. The new industrial policy statement issued in 1977 gave greater weight to employ- ment creation and decentralization of industrial activity by increased support for small scale activities in rural areas. Although the new policy statement did not signal any major change in the character of the regulatory system, the process of liberalization and streamlining initiated earlier has continued since 1977. 30. Liberalization of Industrial Licensing and Imports. Several changes have been made to liberalize licensing requirements. Diversification of production by a number of engineering industries is now permitted to facilitate better utilization of installed capacity in the face of varying market condi- tions. Certain export-oriented engineering industries are allowed to grow over a five-year period by 25% over their licensed capacity. The upper limit for the size of investment exempt from licensing was raised for certain firms. In April 1979, the Committee of Industrialists appointed by the Government of India (GOI) submitted its report proposing further liberalization of licensing. The recommendations of this Committee, which include an expanded role for private firms in activities currently reserved for the public sector, are under review by the Government. A more liberal import policy has been followed since 1976/77 aimed at relieving domestic supply constraints and production bottlenecks, encouraging industrial investment and facilitating exports. The import licensing procedures have been simplified and controls eased, and import duties on a number of capital goods items have been reduced. 31. Export Promotion and Incentives. The principal instruments of export promotion, including cash compensatory support (partly compensation for payment of indirect taxes), reduction of import duties or duty drawback arrangements, and concessional interest rates on export credits, have continued to be made available. Important improvements initiated during the last few years include rationalization of the export licensing system, decentralization of administrative functions and strengthening of the export promotion systems. Some steps also have been taken to strengthen the role of trade houses in pro- moting exports, particularly those deriving from small and cottage industries. Price and distribution controls have been in force for several years in respect of 'essential' products such as iron and steel, sugar, cement, paper and fer- tilizers. Over the past few years some price controls have been eased and improvements in price control mechanisms have been made. 32. Support for Small and Cottage Industries. In view of their pre- dominant role in industrial employment, various support measures have been  - 12 - introduced by the Government--e.g. exemptions from licensing requirements, reservation of production of certain items exclusively for small units, and a host of special programs (concessionary credit, technical assistance, raw material supplies, etc.). The Government's 1977 Industrial Strategy Statement seeks to strengthen support for the small-scale sector by additional production reservations and a substantial increase in funding for the special programs. The District Industries Center (DIC) Program was launched in 1978 in an attempt to improve the institutional and organizational framework for implementing small industry support programs. The intention is to establish a DIC in each of India's 400 districts to provide at the local level a single center for coordinating all types of assistance to small industry. The DIC program has partly been implemented, but it is too early yet to judge the success of the program. 33. These various changes mark a cumulatively significant effort on the part of the Government to enhance industrial development within the context of the overall policy framework. In order to achieve sustained growth of the economy in the long run, an adequate level of investment in modernization and capacity expansion needs to be maintained. Industrial firms will need to rely increasingly on external sources of credit to finance their investments. The Industrial Credit and Investment Corporation of India (ICICI) plays an import- ant role in providing the required funds and, through its project appraisal and promotional activities, helping to ensure that available resources are used for efficient, high-priority investments. Industrial Finance 34. Financial Institutions. India has an extensive and well established framework of financial institutions serving the industrial sector. The prin- cipal all-India industrial finance institutions are: the Industrial Develop- ment Bank of India (IDBI), ICICI, the Industrial Finance Corporation of India (IFCI), the Life Insurance Corporation of India (LIC), and the Unit Trust of India (UTI). These institutions mainly provide term financing for large and medium-sized public limited companies in the private and joint sectors and also for some public sector firms. At the State level, the major institutions are the State Financial Corporations (SFCs), which finance small and medium scale industries and the State Industrial Development Corporations (SIDCs), which mainly promote and help finance larger industries having direct State share- holding. While these term-lending institutions finance only about 6% of total fixed investment in industry, their importance in financing private industrial investment has been increasing. 1/ Their total disbursements were equivalent to about 30% of private fixed investment in industry in 1976/77, compared to 18% in 1970/71. Commercial banks are important mainly as providers of working capital finance to industry, but they also provide some term loans. 1/ In recent years, between two-thirds and three-quarters of gross fixed investment in industry has taken place in the public sector units financed largely out of Central and State budgets. In the private sector, external financing contributed 57% of total sources of funds of large and medium sized industries in 1975/76, compared to 45% in 1961/62.  - 13 - 35. IDBI coordinates the activities of the other all-India and State- level institutions and provides financing to SFCs and SIDCs through refinance facilities and equity participation. 1/ The direct financing operations of IDBI, ICICI and IFCI--i.e., term lending, equity investments and underwriting of share and debenture issues--are similar in character. In the past, IDBI and IFCI concentrated rather more on the traditional subsectors--e.g., tex- tiles, sugar, food products, cement and power generation--and on joint/public sector projects. ICICI is more heavily represented in the non-traditional sub- sectors, including chemicals and petrochemicals, electronics and mechanical engineering. ICICI is also the most important institutional source of foreign exchange financing for private industry, accounting for about three-quarters of foreign exchange financing by all of the institutions. Joint financing of the local currency requirements of the larger projects among the all-India institutions is becoming increasingly common, and there is now substantial overlap in their clientele. 36. Interest Rates and Credit Policy. Credit expansion has been quite rapid in real terms. Commercial bank interest rates on short-term loans were reduced from 16.5% to 15% early in 1978. (Interest rates on savings were also reduced, from 8% to 6% on deposits of 1-3 years and from 9% to 7.5% on deposits of 3-5 years and from 10% to 9% on deposits of over 5 years.) Since the in- flation rate began to rise in late 1978, the Reserve Bank of India (RBI) has taken steps to curb credit expansion, including higher statutory liquidity ratios for the banks, credit ceilings for industrial borrowers and increases in interest rates. Short term interest rates have now risen to 16-18% and term deposit interest rates by one percentage point. Interest rates charged by the industrial term-financing institutions on long term loans have remained at 11-12% for several years. India has traditionally been a low-inflation country, and the authorities in the past have demonstrated their ability to deal rapidly with inflationary surges. However, should current high rates of inflation persist for some time, it is likely that interest rates would be adjusted upwards. 37. The Capital Market. Direct issuance of shares (and debentures) for subscription by the public and by institutions has been a relatively minor source of investment financing for private industry. Total capital issues by non-Government firms have generally accounted for only about 5% of private industrial investment and are equivalent in size to about one-fifth of the disbursements by the term-financing institutions. Because of the thinness of the market for equity shares, almost all issues are underwritten and fre- quently the underwriters have to take up part of the issue. With public demand for share and debenture issues likely to remain small, it is expected that private industry would have to rely heavily on the financial institutions for investment finance over the next few years. 1/ The Bank Group has made to IDBI one credit of US$25 million (Credit 356-IN of February 1973) and one loan of US$40 million (Loan 1260-IN of June 1976) to help refinance small industry loans made by SFCs, and one loan of US$25 million (Loan 1511-IN of March 1978) to finance joint/ public sector projects.  - 14 - Bank's Operational Experience with ICICI 38. The Bank has been closely associated with ICICI since its founda- tion in 1955. This long association has resulted in substantial Bank Group resources being channeled through ICICI to high priority investments in India's private industry. Since 1955, the Bank has made twelve loans to ICICI total- ling US$490 million (net of cancellations). The relationship with ICICI has also been valuable to the Bank and helped shape the Bank Group's approach to other DFCs. In 1973, a major study undertaken jointly by the Bank and ICICI concluded that ICICI's impact had been substantial, particularly through helping to ensure that scarce foreign resources were allocated to priority industries mounting financially and economically sound projects. This finding has also been supported by Operations Evaluation Department performance audits for the sixth, seventh and eighth loans, issued in January 1980. In line with the recommendations made in these reports, the eleventh and twelfth loans were designed to encourage and assist ICICI to diversify its sources of local and foreign currency and broaden the scope of its activities so as to enhance further its developmental impact. Progress to date has been satisfactory. ICICI raised its first syndicated Euro-dollar loan in 1978 and rupee resources have also been significantly increased through domestic bond issues and joint financing operations with other institutions. The previous twelfth Bank loan of US$80 million was made in July 1977, and by March 31, 1980, US$76 million was committed and US$43.7 million was disbursed. ICICI expects to have fully committed the twelfth loan by June 1980 and has therefore requested the Bank, with endorsement of the Government of India, to continue to support its operations with a further loan. PART IV - THE PROJECT 39. The project was appraised by a mission which visited India in November/December 1979. A report entitled "India - Staff Appraisal Report of a Thirteenth Loan to the Industrial Credit and Investment Corporation of India" (No. 2890-IN, dated April 18, 1980) is being distributed separately to the Executive Directors. Negotiations were held in Washington, D.C., in April, 1980. GOI and ICICI were represented by a delegation which was coor- dinated by Mr. B.S. Lamba of the Department of Economic Affairs, Ministry of Finance. A supplementary Project Data Sheet is attached as Annex III. The Proposed Loan 40. The proposed loan of $100 million would be made to ICICI with the guarantee of GOI, under standard Bank terms for loans to development finance companies (DFCs), including the normal commitment fee. The proceeds of the loan, together with other foreign loans, would be relent by ICICI to cover the foreign exchange costs of high-priority projects. The loan is expected to be committed by September 1982 and disbursed by end-1985. In those cases where a parallel foreign exchange loan is being made for the same project out of ICICI's commercial borrowings, ICICI would be permitted to tailor the amorti- zation schedules of the Bank subloan so as to permit the commercial funds to be repaid more rapidly. Subborrowers would bear the foreign exchange risks  - 15 - on the currencies disbursed. Projects for which total Bank financing does not exceed $6 million equivalent in Bank funds would not require the Bank's prior approval (Section 2.02(b) of Loan Agreement). Procurement for projects financed would be in accordance with ICICI's standard procedures, which conform to the Bank's recommended practice for DFCs. Disbursement would be for 100% of foreign exchange expenditures for directly imported goods and services or 100% of the estimated C.I.F. costs of imported goods purchased through local suppliers. Oblectives of the Loan 41. The objectives of the proposed loan would be to build on the pro- gress achieved in recent operations by continuing to use ICICI as an efficient channel of resource transfer for financing high-priority industrial projects in India. The loan would also assist ICICI in progressively diversifying its sources of foreign exchange by facilitating blending of Bank and commercial funds in its operations. The proposed loan would encourage ICICI in carrying out its program of industrial studies and other developmental activities that would complement mainstream financing operations, address major problems and constraints affecting the industrial sector, and make the best use of ICICI's experience and resources. Institutional Aspects of the Borrower 42. Ownership and Resources. Ownership of ICICI is dominated by public sector corporations, including Government-owned banks and insurance companies. Of ICICI's presently paid-in share capital of Rs 225 million, public institu- tions hold 81% and foreign shareholders (mainly commercial banks) hold 11%, while the balance of 8% is owned by private Indian investors. As the public sector holds more than 50% of its shares, ICICI is considered a Government company in terms of the Companies Act. However, this classification does not affect ICICI's operational autonomy except in respect of the procedures for appointing auditors. Relations between GOI and ICICI continue to be good. As of September 30, 1979, ICICI's resources totalled Rs 6.37 billion (US$767 million). Foreign exchange equivalent to Rs 3 billion (US$362 million), accounted for 47% of the total, while domestic resources provided the balance of Rs 3.37 billion or 53%. Most of ICICI's foreign currency resources have come from the Bank. Of the total foreign exchange resources raised by ICICI up to September 30, 1979, the twelve Bank loans accounted for US$490 million, net of cancellations, or 77%. Seventeen lines of credit from Kreditanstalt fur Wiederaufbau (KfW), totalling about US$80 million equivalent, accounted for 13% and eight UK tied lines of credit for 6% of total foreign currency resources. The remaining 4% was made up of one USAID loan and two commercial borrowings: one Swiss Franc bond issue and a Eurodollar syndicated loan. ICICI's attempts to mobilize foreign commercial funds have been limited so far to the Swiss Franc bond issue and the syndicated loan. However, in connection with the proposed thirteenth Bank loan, ICICI proposes to diversify its resources (para 55). 43. Management and Staff. ICICI is well-managed and operates effec- tively under its competent and experienced Board. Mr. S. S. Mehta is the Chairman and Managing Director with responsibility for all operational aspects of ICICI. The Board consists of fifteen directors. In addition to two officers  - 16 - of ICICI, the Board members represent the Government of India (2), public financial institutions (2), foreign shareholders (2) and leading professional and business groups (7). The Board meets regularly and sets ICICI's overall financial and operational policies, and decides on project proposals above Rs 2.5 million. ICICI's organizational structure has continued to develop soundly as its operations have grown. As of September 1979, ICICI's staff numbered 595, including 244 professionals. The overall quality of ICICI's staff remains high and turnover remains low. Operating Policies and Performance of ICICI 44. Operating Policies. While ICICI has no formal policy statement, its Memorandum of Association, together with Government guidelines and the resolu- tions of the Board over time, have provided a satisfactory policy framework for ICICI's operations. In 1977, ICICI's Board approved a Statement of Finan- cial and Operating Strategy which set out its broad intentions in lending and specifically identified six priority areas: (a) export industries; (b) power and transport; (c) agricultural inputs and outputs; (d) industries basic to industrial expansion; (e) mass consumption goods; and (f) balancing and modern- ization projects. The Statement also noted ICICI's commitment to assistance in the designated backward areas and to new entrepreneurs. ICICI has recently updated this statement to reflect certain aspects that warrant increased emphasis within the priority areas, and to include a detailed description of its strategy for the mobilization and utilization of different sources of funds. The updated Statement was reviewed during negotiations and was found satisfactory. The Statement was approved by ICICI's Board on April 17, 1980. 45. As of September 1979, ICICI had approved assistance totalling Rs 12.2 billion (US$1.5 billion equivalent) for some 2,600 projects. ICICI continues to emphasize lending to the technologically advanced industries, including mechanical and electrical machinery and transport equipment (36% of the total), and to the chemical and petrochemical industries (19%). Other subsectors receiving a significant proportion of ICICI financing were tex- tiles (11%), pulp and paper (6%) and cement (5%). During the last three years, ICICI's average financial assistance per project was Rs 7.2 million, corresponding to about 20% of total project cost. About 86% of ICICI's financing has gone to private sector companies. ICICI has increased the proportion of its financing to projects in the designated backward areas (about 40% in 1978 and 1979). The financial performance data of ICICI's clients indicate that they are reasonably profitable. For a sample of about 400 ICICI clients analyzed in 1977 and 1978, nearly all companies other than the sugar manufacturers, who were affected by price and distribution controls, showed pre-tax profits. The economic and employment impact of ICICI-assisted projects has been significant. For example, the average investment cost per job created is estimated at about US$25,000 for sub-projects approved in 1977 to 1979. This appears reasonable bearing in mind that ICICI's clients are mostly medium and larger-sized companies operating in the technologically more advanced subsectors.  - 17 - 46. Terms of Onlending. For both domestic and foreign currency loans, ICICI's standard rate of interest has been set at 11% per annum since 1975. 1/ However, funds deriving from ICICI's 1978 Eurodollar borrowing have been relent at a floating rate of interest of 1-1/2 percentage points above LIBOR (equiv- alent at present to an interest rate of about 21%). Subborrowers bear the foreign exchange risk. ICICI also participates in the equity of its clients and reserves the right to convert up to 20% of its domestic currency loan amount to ordinary shares. ICICI charges a 1% p.a. commitment fee on foreign currency loans and a fee on domestic currency loans ranging between 0.25% and 1% per annum. These rates generally conform with those offered by other term lending institutions in India. ICICI proposed to review the adequacy of its interest rates in consultation with the other financial institutions, taking account of the cost of resources. ICICI's standard lending terms provide for loan maturities of up to 15 years, including up to 3 years of grace. ICICI is a member of the Inter-Institutional Meeting (IIM) which comprises the leading all-India term financial institutions. ICICI refers project proposals in excess of Rs 30 million to the IIM for joint financing; about 65% (by amount) of its business in 1978 and 1979 was jointly financed. This enables members of the IIM to limit their individual exposures, while ensuring that adequate financing can be provided for the project. 47. Appraisal and Follow-Up Standards. ICICI's appraisals continue to be of a high standard and incorporate a thorough treatment of technical, financial, market and economic aspects. Follow-up procedures and project supervision are also satisfactory. Clients submit detailed quarterly pro- gress reports to ICICI for review, and follow-up personnel make frequent client visits. Financial Operations 48. Operational Results. ICICI's total net approvals reached about Rs 1,990 million (US$245 million) in 1979, an increase of 39% over the figure for 1978. Disbursements amounted to Rs 1,240 million (US$154 million) for 1979. (ICICI's loan disbursements account for about 15% of those of all-India financial institutions and about 5% of total private industrial investment in India.) From 1976 to 1978, domestic currency loan approvals more than doubled (from Rs 425 million to Rs 1,029 million), while foreign currency approvals declined (from Rs 415 million to Rs 242 million). The trend to increased volumes of domestic currency loans reflects the improved access of ICICI to domestic resources, while the decline in foreign exchange approvals was due to the increased availability of free foreign exchange for certain categories of capital goods imports. Moreover, some of ICICI's clients who were not granted access to free foreign exchange delayed investment decisions because of the relatively high foreign exchange risk inherent in borrowing Bank and other foreign resources from ICICI. However, in 1979, ICICI's foreign currency approvals picked up substantially, partly because of the introduction of the Bank's special currency disbursement scheme for DFCs, which reduced the per- ceived exchange risk and enabled ICICI to place Bank funds more easily. By 1/ Foreign currency loans to designated backward areas generally receive a 1% interest rate concession and domestic currency loans a 1.5% concession.  - 18 - the end of 1979, foreign currency loan approvals reached Rs 621 million; domestic currency loans remained at a high level and reached Rs 1,180 million for the year. 49. Investments, Guarantees and Merchant Banking. ICICI's direct sub- scriptions and underwriting of share and debenture issues account for 11% of its total approvals since inception and 7% of the total in 1979. These investment operations increased from Rs 73 million in 1976 to Rs 114 million in 1979. About 75% of ICICI's investment operations derive from underwriting activities. ICICI's guarantees, which are largely issued to foreign suppliers, constitute a small part of its total operations--about 1.5% of total net approvals since inception. In addition, ICICI has continued to broaden the range of financial services offered to clients through its merchant banking services--e.g. the management of underwritings, debenture and share capital issues, private loan placements. The growth of ICICI's merchant banking activities has been particularly rapid over the last few years. Other Developmental Activities 50. In addition to its mainstream lending and investment operations and merchant banking activities, ICICI is undertaking a broad range of complemen- tary activities and services with a view to enhancing its overall impact on industrial development. These activities include (i) undertaking industrial subsector and policy studies; (ii) identification and promotion of new project ideas; (iii) backward area development programs; and (iv) training and advisory support for other domestic and foreign financial institutions. Most of these activities have been initiated following a joint Bank/ICICI study in 1973 of ICICI's developmental impact. The Bank has been encouraging ICICI to expand selectively these activities in the context of recent loans. 51. Under the twelfth loan (Loan 1475-IN), ICICI carried out studies of selected engineering industries, starting with a study of the automotive pro- ducts subsector. The draft report has been completed and is under discussion by the Bank and ICICI. ICICI has also completed a number of studies on, for example, price and distribution controls in the sugar and cement industries, the impact of industrial licensing, and the economics of small-scale cement and paper plants. These studies have been well received by various Government committees and some of their recommendations have been implemented. Under the proposed loan, ICICI intends to carry out studies on the electrical equipment industry and efficiency of energy utilization in industry. For project iden- tification and promotion, ICICI established a new unit within the Development Department in 1974. In addition, ICICI has actively participated in the establishment of a Foreman Training Institute and a private company offering pilot plant facilities on a commercial basis to test new industrial processes. In the field of backward area development, ICICI's activities comprise: (i) a series of area potential studies focusing on availability of raw materials, infrastructure, human skills and markets; (ii) collaboration with other financial institutions in setting up State technical consultancy institutions to assist new entrepreneurs; and (iii) helping to organize and finance volun- tary rural development agencies using grant funds made available by KfW. ICICI has also extended training facilities to the staff of IDBI and to several of the State-level financial institutions and runs an annual training program for the personnel of overseas development banks.  - 19 - ICICI's Portfolio 52. As of September 30, 1979, ICICI's overdues of principal and interest were Rs 169 million, compared with Rs 41 million as of September 1973. The total principal outstanding of loans affected by arrears was Rs 688 million, or about 2.1% of the outstanding loan portfolio, compared with 1.6% in 1973. The bulk of the increase took place before 1979 and arrears ratios since then have shown relatively little change. The continuing arrears were due in part to the effects on ICICI's clients of continuing power shortages. The effects of the recent increases in prices on working capital requirements, combined with credit restrictions imposed by commercial banks, has also had an adverse effect on clients' liquidity position. ICICI expects, however, to maintain its current collection ratio of about 90% of amounts falling due, which is acceptable. Five industries--spun pipes, paper and paper products, sugar, plastics and mini-steel plants--account for a major portion of the increase in arrears. ICICI has been making efforts to intensify its follow-up and management consultancy work, and continues to consult with the Government and the other financial institutions on possible measures to deal with the companies facing long term problems. ICICI's equity portfolio comprised common share investments of Rs 232 million in 346 companies and preference share investments of Rs 98 million in 146 companies as of June 30, 1979. Some 41% of the investment portfolio was in companies operating profitably and pay- ing dividends, 19% was in companies under construction and 40% in companies experiencing some difficulties. The average dividend yield on the ordinary shares was about 7%, considerably higher than the 4% recorded in 1976. As of December 31, 1979, ICICI also held Rs 190 million in debentures, which yielded 8.8%. ICICI's overall investment portfolio continues to be sound and well managed. Financial Performance 53. ICICI's net profits after taxation increased from Rs 38 million in 1976 to Rs 81 million in 1979, reflecting ICICI's reduced taxation liabilities. With special allowances, reducing ICICI's taxation rate (from 44% in 1976 to an estimated 32% in 1979), ICICI's return on equity increased from 12% in 1976 to 17% in 1979. The rate of dividend was maintained at 12%, plus a 1% special bonus for 1979, allowing a satisfactory retention of profits of 64%. Although margins continued to be constrained by the increase in the average cost of borrowings and the growing volume of ICICI's loans at concessional rates, this was offset by the relatively larger volume of domestic currency lending, which carries a larger margin than foreign currency loans. As a result, the average spread on lending operations increased from 2.4% in 1976 to 2.6% in 1978, which is satisfactory. Total assets increased from Rs 3.3 billion (US$398 million) in 1976 to RB 5.9 billion (US$710 million) in December 1979. The level of shareholders' equity remained at about 11% of the loan and investment porfolio. The debt/equity ratio at December 31, 1979, was 9.5:1, below the 11:1 limit which was agreed in 1979. ICICI's debt service coverage perfor- mance has been adequate: the debt service coverage ratio increased from 1.1:1 in 1976 to 1.3:1 in 1979, which is an acceptable level.  - 20 - Operations Forecast and Resource Requirements 54. In view of the difficult economic conditions which prevailed in 1979 and the expectation that growth of the economy would be relatively modest in 1980, total net approvals are projected to grow by 8% to Rs 2,150 million in 1980, compared to a 39% growth in the previous year when the level of foreign exchange approvals was exceptionally high. For 1981-83 approvals are projected to grow by 10% per annum. With the tightening of availability of free foreign exchange for capital goods imports expected to continue, ICICI believes that demand for foreign exchange loans will stabilize at about 30% of total approvals. ICICI estimates that its additional foreign exchange requirements for commit- ment in the period up to September 1982 will amount to US$182 million. Of this amount, about US$27 million are expected to be available from new UK tied lines of credit and from KfW and a further US$100 million from the proposed Bank loan. ICICI intends to raise the remaining US$55 million mainly from commercial sources. 55. Commercial Borrowings and Blending Arrangements. Following consult- ations with international banks, ICICI intends to raise about US$30 million in 1980 and to approach the market for further borrowing towards the end of 1981. In February 1980, ICICI reached basic agreement with a syndicate, managed by Standard Chartered Bank, on a Euro-loan (20 million in US dollars and US$10 million equivalent in Deutsche Marks). The loan, guaranteed by the Government of India, will be repayable in 10 years with four years' grace and will bear interest at 1/2% above LIBOR for the first five years and 5/8% above LIBOR thereafter. The drawdown period is 30 months and a commitment fee of 3/8% and an initial management fee of 3/8% are to be charged. These terms are signi- ficantly more favorable than those on ICICI's present Eurodollar loan, 1/ and ICICI will enjoy additional flexibility in its blending of these funds with Bank and KfW funds. During negotiations, ICICI's plans for raising foreign currency resources were reviewed. ICICI intends to raise another US$25 mil- lion from commercial or other sources before September 1982 but the timing and amounts of ICICI's future foreign borrowings would be determined in the light of prevailing market conditions and Government policies. Since ICICI's commercial borrowings have a fixed repayment schedule, limited maturity, and restricted drawdown period and would carry a floating interest rate, ICICI would need to make parallel commercial and Bank financed subloans for individ- ual projects so as to provide for adequate disbursement and repayment periods and to help balance interest rate and currency risks. On the average ICICI would expect to blend its commercial funds with longer term Bank and kfW funds in the ratio of approximately 30:70. To facilitate its blending operations, ICICI would be allowed to tailor the amortization schedules of Bank subloans so as to allocate relatively more of the early maturities for repayments to the commercial lenders. Since the overall repayment schedule of the proposed Bank loan would be based on the composite of the amortization schedules of the individual subloans, this would result in repayment to the Bank being slower than normal in the initial years. On the basis of a 30:70 average 1/ Interest at 1% over LIBOR, a 7-year maturity with three year's grace and a 30-month drawdown, a commitment fee of 3/8% and an initial management fee of 1%.  - 21 - blending ratio for all projects, about 25% of the loan would be repaid in the first seven years, compared to 40% under the previous Bank loans. ICICI would be permitted the flexibility to allocate early disbursements for individual subprojects preferentially to the commercial subloans so as to draw down its commercial borrowings within the required 30-month period and avoid the for- eign exchange risks involved in premature drawing down of these borrowings. This would have the effect of slowing down disbursement of the Bank loan ini- tially, although the overall disbursement period of about five years would not be affected. Financial Prolections 56. ICICI's financial projections, indicate a sharp increase of opera- tional profits; profits before taxation are expected to increase from Rs 117 million in 1979 to Rs 256 million in 1983. After-tax profits are expected to grow from Rs 81 million in 1979 to Rs 175 million in 1983, a return of between 17% and 19% on average equity, which is somewhat higher than ICICI has achieved in the past. ICICI would be able to maintain the dividend rate of 12%. Total assets are expected to grow from Rs 5,850 million (US$710 mil- lion) in 1979 to Rs 11,940 million (US$1,450 million) in 1983, an annual growth rate of 19% per annum. The loan and investment portfolio would increase at about the same rate from Rs 5,170 million in 1979 to Rs 10,370 million in 1983. Shareholders' equity is expected to remain at 10% of the portfolio. The debt/equity ratio is expected to increase from 9.5:1 in 1979 to 10.6 in 1982, which is within the agreed limit of 11:1. ICICI would increase its share capital by Rs 72 million by 1983. ICICI expects to maintain its col- lection ratio at 90%, which is attainable in the light of past performance. On this assumption, the debt service coverage ratio would remain above 1.2 throughout the period, which is satisfactory. Benefits and ProJect Risks 57. By helping to fill a gap in the availability of foreign exchange resources to finance capital goods imports, the proposed loan would contribute to sustaining the desirable rate of investment in the modernization and expan- sion of industrial capacity of private, public and joint sector enterprises. The loan would assist ICICI in raising foreign commercial funds and enable it to utilize such funds effectively in its operations. Subloan beneficiaries would mainly be medium sized and large private firms mounting high priority industrial projects, many of which are export oriented. Around one-third of loan proceeds are likely to be used for projects established in the backward areas, including projects sponsored by new entrepreneurs. Based on previous experience, it is expected that the projects would create some 20,000 jobs at an average investment cost of about US$30,000 per job created. Economic rates of return for subprojects are expected to average about 20%. The primary institution building effects of the loan would be to assist ICICI to focus better and selectively expand its program of developmental activities. Since ICICI is a mature and capable institution with a sound record in industrial financing, the proposed loan does not involve significant risks. ICICI's financial projections and the proposed loan amount have been based on real- istic assumptions. Significant delays in loan commitment and disbursement are not expected.  - 22 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 58. The draft Loan Agreement between the Bank and ICICI, the draft Guarantee Agreement between India and the Bank, the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately. 59. Special conditions of the Project are listed in Section III of Annex III. 60. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 61. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President April 24, 1980 By Ernest Stern  ANNEX I INDIA - SOCIL INDICATOS DAsA S8m Page 1 of 5 fDMIA C SREFCE GROUPS (AJUSTD APGS LAND A" (TROUSAMD SO. AN.) 1 - MOSST RCuRT ESTIMATE TOTAL 3287.6 WAM wS an EGHEE AGCUCLTURL 1818.3 MmtS RECET GEOCGAC ICO n;coil 1960 lb 1970 a EsTIIA A REGIO.N GROUW a GROUP A Q PU CAPITA (US$) 60.0 90.0 180.0 191.1 209.6 467.5 EGY CoNSuK?TIoN. Pn CAwITA (KILOGWRS OP COAL ERQIVALZT) 142.0 181.0 218.0 69.1 83.9 262.1 POPUlATION AIMD VISL SZATIMSCS POMULATION, KD-TRA M IONS) 434.9 547.6 631.7Lj U018 POPATION (PnUc 0 TOTL) 17.9 19.7 20.7. 13.2 16.2 24.6 POPULATION PIOJICONS POPULATION IN YEAR 2000 (MILLIONS) 973.0 STATIONARY POPLASIO (IILLIONS) 1643.0 YSRS STIONARY POPULATION 7S UCKED 2150 POPULATION D NSIT PER SQ. D(. 132.0 167.0 192.0 8t.6 49.4 45.3 PR SQ. IN. AGICULTUIAL LAND 247.0 08.0 347.0 330.2 252.0 149.0 POPMLATION AGE STRUCTUs (PUCsT) 0-14 US. 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 AlOVZ 3.5 2.9 3.0 3.1 3.0 2.8 POPULATION GROWI1 RATS (PERCZNT) TOTAL 1.9 2.3 2.1 2.4 2.4 2.7 URBAN 2.5,L 3.3 3.1 4.1 4.6 4.3 CRUDS BIRTE RATE (PU TBOUSA) 43.0 40.0 35.0 44.4 42.4 39.4 CRUDE DOR RTZ (PE ThOUSAND) 21.0 17.0 14.0 16.4 15.9 11.7 CROSS UPRODUCTION RATE 3.2 2.9 2.4 3.2 2.9 2.7 FAMILY PLANltIN CCEPTORS. ANNUAL (TSOUtSADS) 64.0 3782.0 4518.0 USERS (PERCMNT 0 MAIYUD WCt) .. 12.0 16.9 7.9 12.2 13.2 F00D AND NUltXTION DtDEX OF F00D PRODUCTION PU CAPITA (1969-71-100) 100.0 102.0 101.0 99.4 98.2 99.6 PER CAPITA SUPPLY OF CALORIES (PERCENT OF RqU7IRtnENTS) 95.0 92.0 89.0 93.0 93.3 94.7 PROTINS (GRAMS PER DAY) 51.0 53.0 4S.0 56.1 52.1 54.3 0 WCH ANIMAL AD PULSE 19.0 16.0 12.6 10.4 13.6 17.4 CHILD (ACES 1-4) NQTALITY RATE 28.0 22.0 18.0 19.2 18.5 11.4 HEALTH LIFE EXPECTANCY AT BIRTH (YEAS) 43.0 48.0 51.0 49.1 49.3 54.7 INFANT MORTALITY UTE (PE THOUSAND) .. 134.0 .. .. 105.4 68.1 ACCESS TO SAFE WATER (PURCENT 0P 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 eXCRZTA 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 RtJRAL .. 1.0 2.0 2.5 3.5 27.7 POPULATION PER PHYSICIAN 5800.O0h 4890.0 3135.0 7107.9 11396.4 6799.4 POPULATION PER NURSING PERSON 963O.Oh 5220.0 6320.0 12064.0 5552.4 1522.1 POPULATION PER HOSPITAL BED TOTAL 2590.0/L 2020.0 1231.0 2738.4 1417.1 726.5 U.RBAN .. .. .. .. 197.3 272.7 RLRAL .. .. .. .. 2445.9 1404.4 ADMISSIONS PER HOSPITAL BED .. .. .. .. 24.8 27.5 HOUSING AVERAGE SIZE OF HOUSEHOLD .OTAL 5.2 .. 5.2 .. 5.3 5.4 'JRSAN 5.2 .. 4.8 .. 4.9 5.1 RURAL 5.2 .. 5.3 .. 5.4 5.3 AVERAGE NU1WER OF PERSONS PER ROOM CTCAL 2.6 '.3 .. 'JRAN .. .. .. RLRAL .. .. .. ACCESS .0 -LECTRICI'Y (FECENT OF DWELL:NGS, 'OTAL . . .. .. 22.5 2S. 1 L'.RSd: .. .. . .. 17.8 .5.1 IR9AL .. .. .. .. .. 9.3  MANEX I Page 2 of 5 INDIA - SOCIAL INDICATORS DATA SHEET nrDIA REFERENCE GlOUPS (ADJUSTED AYERAGES - MOST RECENT ESTIMATE) - SAME SAME NE1T HIGHER lOST RgCENT GEOGRAPHIC IliCOME INCO(E 1960 lb 1970 /b ESTIMATE lb REGION /c GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLtMNT RATIOS PUUARY: TOTAL 61.0 72.0 79.0 59.5 63.3 82.7 MAlZ B0.0 87.0 94.0 74.9 79.1 87.3 FEMALE 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 PIMZ 10.0 17.0 18.0 10.0 10.2 15.5 VOCATIONAL ENROL. (1 OF SECONDART) 8.0 6.0L .. 1.3 5.6 9.8 PUPIL-TEACHER RATIO PR IMARY 29.0 40.0 42.0 42.2 41.0 34.1 SECONDAiY 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 ATTINDANCE PER CAPITA 4.0 6.3 3.8 .. 1.1 2.5 LABOR FORCE TOTAL 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 HALE 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 INCCME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/1 .. .. .. 15.2 HIGHEST 20 PERCENT OF ROUSEHOLDS 51.7 48.9W .. .. .. 48.2 LOWEST 20 PERCENT OF HOUSEHOLDS 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 (USS PER CAPITA) URBAN .. .. 83.0 86.5 99.2 241.3 RURAL .. .. 73.0 74.2 78.9 136.6 ESTIMATED 'ELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. .. 91.9 179.7 RURAL .. .. 50.0 50.4 54.8 103.7 ESTIMtATED POPULATION BEILW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) UR3AN .. .. 47.0 44.3 44.1 24.8 RURAL .. .. 52.0 52.4 53.9 37.5 Not available Not applicable. NOTES /3 The adjusced 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 countries among the indicators depends on availability of data and is not uniform. lb Unless otberuise 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; Id Low Income (S280 or less per capita 1976); /e Lower Mtiddle income ($281-550 per capita, 1976); !'f 1978 mid-year population is estimated at 640.. nillion; ai 1951-60; 'h 1962; 1953; ' i 1967; /k 1978 mid-year labor force is estinated at 261 million; 1 1964-o5. Most Recent Estimate of GNP per capita is for 1978. August. 1979  ANNEX Z PZW41IUIN bF SOIAI, MIA0TOf Page 3 of 5 3Notes:Although the bdat.ear drews froe, sources generally Judged the meat sothoritative. end rsiiable, it should als be noted that thsy ey not he intarna tioneli comparble beas f the lack Of steuddi.ed definitions and concepts used by differee t coutries in tolleotiug the date, The date are, nomethelees, useful to dearribe orders of esgoitode, tndioate trands, sod characteris4 oertein major differences bet.nen coou,trie. The gdAaete.d..rup.. evesg for .seobindi cetor us popliation-eeighted geoaetroc means, -1oldlog the entraee values of the indioetor sud the Moet populated oouniiFWiiWeru~Tis to lack of date, group averegee of .11 indicators for Capital Surplue Oil Exporters sad of indiostore of Access ton Water sod Excret. bhaposal, Hlousing, Income Distribution and Poverty For other country grmtpe are p.;ap.taioo-oaghted geummirt means without ouuieOf the soiree vaussd the moatpopulated country. Pieethecvrg fc outistwgte nie drfpon,s onvaieiltyofdta n is Ou"tuniorm "c'ntion wet he eusroised in_relating_averagesof_one_ludjcoatr to soother Tes evereaoftse are 1.th n-goron iodicator at a times swa the coutry and refer.eeetno. LAND AoOk (th ousoand s.m)Acces.s to Eocreta Dismss (prcent f.u0 tlton) - ,toa. urbp. gadrurl - Total - Total suraeDareatopriing lend area end inland eaters. mnumerof pepe(oa,ubn ndrr evdA erets dipoela rgtutrl a eet siaeofarclualae sd eprrlrpratgsof thetr repective populations. Eenrete dispsi. eqiold or permanetly for crops, pastr s,mrket sad kitce gaden or to the collection sad disposal, nith or ,ithout treateant, of huxs secrete. lie fallo. end cute-water by octer-horne aysteem or the use of pit pricies sod s-uiia, installations. GNP PERAITQ~ - N e aiaetmas tcretmre prices, PDoplatio ucPaiio-opltion dirtded by nuber of Practicing physicians nc,oaed Opl sencoPeraton method as Wnrld Numb Atla i(d9fr-78 haste)' -leO 1970 and 197L9data.7 bet' Iormaa elehe a ncr ylvl Pouato oorNusn Per-s - Population divided by number of practicing mali oncec CObiirfOO PT CAPTA Anoai onsuptio ofconeuie enea sd fealegraduate nursens, practical ourees, sod aseostaet nurse, coa sd lgnte peroeto ntual eeandbyro, nclar ndge- Pouatoo e H"snit4 had- toa,uban and rural - Population (total, urban, themLIeetict)inkiorm of coal quivalsot pac ca pita 1960, andrural -.divdd by thercsciv nube ohspitai beds somilahle in i97 sod 1976 data, public and private general and apecialined host;ita1 and rehabilitation center,. Hospitals are establishments permasnently staffed by at least one phpsician. POPULATION ANI)1 VITAL STATISTICS EstablishmentsProviding prico.ipally ..ustodial care are nut includd, Rural Total Popultion. id-Year mIllions.) - As of July 1; 1960, 19'70, and foptl,hwvr uld nloan eia eir u ecnn taf In 19177 data. by a pbysibin(ut by a Madinal assistant,tnurs, midwife, etc.) which offer rhaen Popuaulon (peroen.t of total) - hatio of urban to total Population; In-patinot accomaudetion end prooi de limited range of Medical facilitiea. different defniton of oru narese m Maffcy prblt fdt Adoleadoo. ner Hospital had - Total number of adisosto or disohargen fron smo ontle 960, 190,ad 1975 da fI op,aiiyo ta.houspital divided Oftb number of heds. ~p4p~pjpyenP0t Curet poultio projeniun are bad on. dHloInBIl I 5Fi7jiito) by age, edpseelend their mtrtality and fertility Avrsbisonueod(nrn 5rhshl)-tta,ub,edrrl- r:en. Projection parcoetern for Mortality rates coprise of thosee h ..ouchoid consists ofagopo niiul hr iigquarters and I,evlo as.uniog lilf.e.npettopy at birth increasing nubh country's their main pe.Io. A hoarder or lodger may or may not in Lncluded inthe Per caioboe ee,ad f I'l life opeotancy stabilising ait oouehuld for staistioa1 yP-yosne. 77.5 year. The Par tenrs for fertility rate alno nave three levels Avrag nunher o prsons per froomb - toal, urta drua vrseone oa-iOnl d.eitne In fertility acodng to income level sod Past ofprosprrc naLubn n ua cuied cnetiona doellio., fanily ulenoing p.erforsen. Each country is then assigoed one of these repet -ey. 1nling.exsclude num-psromanet structures end unoccupied par::.i clecombinations of mortality ad fertility trende for projenition Access to Electricint (perce:nt of dn i )-.gtotal, urban. and rual-_ on porpoene. oentiooal deellings nith eletricityi livig q arter as percetetgo Stationary populatin- In a tlatioa population there is no gronth total, urban, end rura dwellings repspctively. nince tOo birth ratn e eqaltoIthe death rate, and lan the age otruture renl olntat Thin in aohie-d ooly after fertilitp rates POETIIN isMo t teenlss"n leve of unit net repoution rstl he Ajuted Ioor.ment Patios each gen-aun o. f -om replaoea itself seaculy. The statonary pope. Primac school -xtotl' male' a 'ndfmlel ;GIros ltonl, aeeofnl ao Iat,o cleco tiated on the bsnla of the projcted oharaterlotics neto l gsat the Primay lee as percetaegee of res.pect'ive preary of uho pop`,benlo in the year Pooh, and the rate of deciline of fertility cblaepopulatios .. ocau.'lly includes children aged (-1 l ea hut' rate to repl.eceet level edjuoted for differen.t lengths of primary education;for ..uetrI", oith Yoar ntetiocary oo-oltion ia reached - The pnar h.en stationary Population uivrad eductionsrin nay seceed 100.. ..er.et 020cr som "Pitl nice han been -actd. am heln or above the offloii1 school age. pcpulanion Deocito becon3-1daryco -tta, .ml end female - Computed ac,at.), ur;onooar Pe! c.ho 11-y-a population per oqu-re kilonet-r (100 heotares) of euainrqrsat'leat four years ofpproved pImar itroo1i,un; total re provides general voctional , orteache training instructio.- for ,puil. Perni1w agri-ultura1l bo - Cosputed an above foe agricultural lend ueal of IP to 17 eare of ageorrap -eneor-c woe g,O-rally Pl..i. a trucuure,ereOt) - Children (0-lu per),wrin-ge-ctioa .. orIliunot (perneot of aeco-dary) - Vocational -toeituti-n nl )15I6 ejInii 6l d retliredTWear en d ovr) ac percenaesof adid-yea.ebool iduwtia, or other pr9rem chicb operaen nodepeodently ur ac popula.tin 10, 1970, en 1977 daa.epartmento f .noudary institutions. Population Growth Pate ~nroent - total A-Anua orcwth ratna of total Ddo- Pupil-tahr ratio -primar.29 and secodar - Total et,,dstt rirolind in Yea. ooatoofr 90b,1907,ent907 prisr ndanndrheel _iiddb Unbrn of teachers in tie, crro- Population Ironul th (peroent -uba - u.n.a groth rates of urhen npoding level.. Po,tin for 1950-, 1960-~70, an 1970-75. Adolt'litrercy rate (percent) -Litnrste adults (chin no rea end -rit.; n Crude Birth hate (per thousand) - A-oul lIve births pnr thousend of old- aporoe,,tag of total adult population aged 15 yearsad over. populatPion; 19 0, 197,ad 1977 data. Crude Death ae (per thsousnd) - Anto1 deatho Per thcuen to ni-rnar CONbSUMPTION populathlon; 1950, 190,ed 1977 dote.Pas...ger C-n (per thounand popultion) - P-esegne oars o prsewurnr Oroo eprdotin tteAvrag onlr of d-odhtoronon ll ovreoaiglote ih pesos socLudee anhulences, hearwee enTd eilitry in her cormaI re`production perood ifPohenuper icoc- preset age- -ehiolv. ip_cific frt _tyrten; .....alyip hepn a-eg- count0 In 1960, Radit pecciocr (nrt 7o d nP,ultion) - All types of reos.iver for redo,. 190, and 1975. badatsn gnra- ubi pe "huad of population; .ocludee unliceni- PFmily Plenoing_- AcooptoroAnnua (thousads) -Annual number cf rfec iver- on countrina sod ic yeare hen, r-giut-ation of rdtuI "eta "uI in accteptors of birth-ountro1 dn,I1eo undor asioof ostion..l femlp~ effet; data for recnt yeara cay not be voeparsile sniee n..:tvoire planning Program. bh1iohcd lioennsing . numit Plitin -1 srog .. on-t of earriedtn - Pern...tegn of earned fTV tncivers )onr thousand noplationi - TV enon.i-rra for hr-adoso t.. gcnnre seo ofI hild-bEarn eg 5-4fasohouhirtbhotrldeiosbulh peeth.. touesd population; eo-ludes unlicensed TV raeceivro in oootro to all marrid ...e. it cae age group. ed in yeara ohen eInt t ton of TV nets ca in effect. P 'oPpe, Circuato prthousand wpulatlon) - Sboos the -vergeorcatu ~ovn 01 IItTIT0I ofi. 16 OFdaily general intees enpapr , dsfined as a Periodical publication Onde of ovdProdctIn Se faota 196-71-100) - loden of per capita devoted pcimrily to recording general nes. t is considered t.o he daily' -Ioa production of all food coawdities. P-odutioc enclodee sed and if in anpe-sr . 1i lsat four tia. a een.. feed and is - calendar year b.wis. Comditien coer primar good5nt Cicema AnnualI Att-nduce P., Canita er tear - toe.d on tIe vuaher of tirketn (g.ngaraeisea fsmc uhibaeeiladconncurot slduigthya, inoludicg adminstosto driv- in o"Mes, and Motle (no. vofee ad tea ae -ucldeo). Aggregate production of each cou-o trity is based on notiot average prdu-er prionolights. Per S.pito sooip of valrico (P.eroent of reoureemnta) - Cnpoted from LABOR FRooE enrgy euialet of net food suppies _eiIIb io . cootry Per capita Total lao Port (thousands( - Econom.icallyacispro, innludio0 arenA per I d albespleocriedatIc p'rodoton iprsls fcrcna ao unemplyed bu -ulodihgOueiot cdents, etc. beflinit- noportn, end change In snok, wet oupplien soolud aiared, sees in vaious cout r. oeare o oprbe quanities ou-d io food pr-cening, andI..noe io distributioo. Require- Peo 'P e...ot ;F-1res le or foroc ase ecntg f tonal labor force neninter-ccoboutediiby,fiG' lass on ..physcological oreds f rnoma Agiult-r (prcnt I Lt brlorce in farming, forestry utn n activity dh ncth cooideriMinocoln ...tal tesperat-r, hody Onoghts,, rhiming se par ...ates of total labor forc.. aget000t000 _t-trlbutitos of populati,n, ad ailoniog 10 percet for Industry (percent) - labor force in laing' onstruotion, -snfactoring nod oa Iet hoebld int.l. e.levtricity, .tate ad gao aspercetage of total labor force, Pcr osv wood of "proto- 'gram pr UsPI - rrot-,tcOtcnt ,01r Prtcpto hate(prcet) oa i,ed female - lerticipatio- or Icapitaceo nupl of food per dey. pNt spplp of food io defi-rca antivit, ra.tesre copted as totl, me,en female~ labor lorce as per- abov.- Peqoirnents for all.. ooutcies esteblished by U0DA proide for a -entages of total, Male end female populatIon of all ages eespcctively; lnies-uc alva ofo 60 crams of total protein per day sod OpGgrams of 196o, 1970, end 1975 data. These are ELOAn participotice rates refleoting ania and polne prtei.c, of hoch 10 grmcn shoud ha animal "rotei. accotructure of the population, end lnng time trend. A feo etimanen Thes,e stndad ar vurthan those of 75 grem vf total protei'n so nr n natioa . our.nI 15 ram o enou prtcio an- noavrage for the norld, propose d by PAt '.soloPed yo atit -RPatio of ppltinuder 15 end 61 and over to in the Third Uorld Pool S-rny the laborfrceinage, group of 15-61 Yeears.. Prcct rein supifo noinal and polue - Pr otein supply of food drvd frotnmt andpuse in grams -e day. TCOPPPNT Child age 1-) Moralt Pte (Per thousand, - Annual deaths per thousand Perc...tene of Privat Ie-ioa (nt.t in cash and kind) - Pene.i-e by rioheat in age rouP -17te pera, to children ic this.Mg grop; for Most devel- 5 percent, richestt pA Percent, POOres.t 2A percent, and pocredt 40 Peroent oPing --otrieo dnta derived from life tahlen. of househlds. ODALTA POVETYT TARGET 000OUfPS lifeI iooctanov an limor yers A- I age nosier of years of life catimated Absolu_te PoveryIlncome Level (00:$ pcr capi'ta). -uban and -rurl remloig a bith 19, 1970, and 1977. deta hbsolute Povryicm.ee sthticm ee eo hkich a iiniml Infant liurtalty Pate P (prthooand) _-1Avca deaths of infants under one nutrititonally adequate dint plus es..entialoo-fo requiremnts is tot Yeabfaeprthoadlv irtts. affordable. Accees to befe Waster berc-ntof opl u)- total, urban, end rura - cE.timatd Relative Porerr 'Incm level bS cer cani'ta) - uarban and rurl chmber of people (total, URba, and rual) nith reaoal acs oRural relat ivepvet inoe'cl n-hirdo. vrg per capita enfe cater supply (inceludes treated surface sater or untreted but Persona l Income of the country. Urban level is derived from the cra levI Iel ,.Ioceliminated uster ..oh an that from protected borebole, spriags, cith adjustent fur higher cost of living in urban arease. and sanitary sell.) (as percentages of the in reapsctiv Populations. In le.tlmasted Populaionho Aslte Poery Incom Incel )ercept') --uban and aurba arem n public.fooctale or tatndpoet located not more thanrra ereti of"populaion (ubaad rurl Ib r asltepr" 200 meters fro house ..Y he considered as being oithiio reasnable ovcso hao oue. ua fla re..eOnble crso would imply 04ev the hoeieo noeso the household do not have to apend aE-iomic and boo. De.Pte Div-nio dlnyptp-tiooave parv f the day it fetching the family' e-cter seeds ccovio eA.lysic and Projectione Dnpartowtt Augus.t 1979  ANNEX I scouac PSWUMMM DM Page 4 of 5 a/ i Z5 C2UIT7 IN 1977: US. l0 b/ S9 CGOS NuATOoaL PoDUCT is 1977/78 * n5 OW gu m . cwatat .ricesl 1960/61-193/5 1965/ "O9/70 1970/71-1976/f7 ON? at market Prices 101.47 100.0 3.9 3.8 3.2 Gro Domestic Investeat 21.65 21.3 Gross National aving 22.77 22.4 Current Account Rlaent e/ ;.04 1.0 Resource Relace d/ - 0.31 - 0.3 OUTP. U6016 Tom An0 ?rInTT IN 1971 Value Labod (at ctor coat1 Jabor For" F. r worker U# lhln. j 1ffi1 . . , of Ratinl Averea Agriculture 24.5 46.6 130.0 72.1 IS 64 indstry 11.8 22.3 20.2 11.2 582 19 S:rvices 16.3 31.1 30.2 16.7 5U 1 Total/aVOar&S 52.6 100.0 180.4 100.0 292 1W GOVIT P1FNUCI Oenral Gowermant Central o et ". blnM& of I T51n %ef 'ME17 As7B7 lS.7-