India - Fourth Agricultural Refinance and Development Corporation Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY FUYA COPY Report No. P-3196-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT AND LOAN TO INDIA FOR THE FOURTH AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT February 1, 1982 This document has a restrieted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as of January 20, 1982) US$1 = Rs 9.043654 Rs 1 = US$0.110570 Rs 1 million = US$110,570 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 to Rs 8.0, which represents the projected average exchange rate over the disbursement period. FISCAL YEAR GOI - April 1 - March 31 ARDC - July 1 - June 30 ABBREVIATIONS USED IN THIS REPORT ARDC - Agricultural Refinance and Development Corporation CALCOB - Committee on Agricultural Loan through Comunercial Banks GOI - Government of India LDB - Land Development Bank NABARD - National Bank for Agriculture and Rural Development RBI - Reserve Bank of India RRB - Regional Rural Banks  FOR OFFICIAL USE ONLY INDIA FOURTH AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT CREDIT, LOAN AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiaries: Agricultural Refinance and Development Corporation (ARDC) for on-lending to farmers for on-farm investments through participating banks. Amount: US$350.0 million (US$190 million IBRD Loan and US$160 million equivalent IDA Credit). Terms: For Bank Loan: Repayment over 20 years, including five years' grace, at 11.6% interest per annum. For IDA Credit: Standard. Relending The Government of India (GOI) would provide US$4 million Terms: equivalent to ARDC on a grant basis to carry out a training program and would relend US$346 million to ARDC on the terms specified below: From GOI to ARDC, interest would be 6.5% per annum in respect of ARDC refinancing for up to 9 years and 7.0% for re- financing up to 15 years. GOI to carry the exchange risk. From ARDC to banks, interest would be 6.5% per annum for all minor irrigation loans; for other agricultural loans, 6.5% to small farmers 1/ and 7.5% to other borrowers; repayments to extend up to two years beyond initial amortization schedules of loans to ultimate beneficiaries. From banks to ultimate borrowers, interest would be 10.25% per annum for all minor irrigation loans; for other agricultural loans, 10.25% to small farmers and 12.5% to other borrowers; repayment periods to be based on borrowers' repayment capacity and the types of investments financed. Project The purpose of the project is to help India increase Description: agricultural production and to strengthen agricultural credit 1/ Small farmers are defined as those cultivating land providing a predevelopment net return to family income not exceeding Rs 3,100 annually (at 1978 prices). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - institutions by supporting a two-year ARDC program of refinancing loans for investments in agriculture and an intensive training program for the staff of participating banks. Lending under the project would be for minor irrigation (including land development), plantation and horticulture, livestock and fisheries, market yards and storage. The only serious project risk would be the continuation of high loan overdues of the participating banks. Special measures are included in the project to deal with this situation. Estimated Cost: (US$ million) Local Foreign Total Minor Irrigation 1,038.4 130.8 1,169.2 Diversified Lending 571.3 133.0 704.3 Training 4.0 4.0 Sub-total 1,613.7 263.8 1,877.5 Price Contingencies 179.5 29.2 208.7 Total Project Cost 1,793.2 293.0 2,086.2 1/ Financing Plan: (US$ million) Local Foreign Total Bank/IDA 57.0 293.0 350.0 GOI/ARDC 1,140.3 1,140.3 Banks 382.9 382.9 Ultimate beneficiaries 213.0 213.0 (farmers) Total 1,793.2 293.0 2,086.2 1/ Including taxes and duties of about US$108 million.  - ii.i - Estimated (US$ million) Disbursements: FY82 FY83 FY54 Annual 40.0 150.0 160.0 Cumulative 40.0 190.0 350.0 Rate of Return: About 44%. Appraisal Report: No. 3629-IN, dated February 1, 1982.   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT AND LOAN TO INDIA FOR THE FOURTH AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT 1. I submit the following report and recommendation on a proposed loan to India for the amount equivalent of US$190 million and a proposed develop- ment credit to India for the amount equivalent to US$160 million (SDR 139 million) to support activities of the Agricultural Refinance and Development Corporation (ARDC) in providing credit to borrowers for agricultural invest- ments. The Bank loan would have a term of 20 years, including five years' grace, with interest at 11.6% per annum. The Government of India (GOI) would channel US$346 million equivalent through ARDC to cooperative and commercial banks for on-lending to farmers; the remaining US$4 million equivalent would be passed on to ARDC on a grant basis to cover part of the costs of its training program. On-lending from GOI to ARDC would be at 6.5% and 7% inter- est per annum for up to 9 and 15 years, respectively. ARDC would on-lend the funds to banks at 6.5% and 7.5% annual interest for up to 15 years and the banks would lend to farmers at 10.25% and 12.5%, the repayment period depend- ing on the type of investments refinanced and the repayment capacity of the ultimate borrowers. The exchange risk would be borne by GOI. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (3401-IN, dated April 15, 1981), was distributed to the Executive Directors on April 16, 1981. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 688 million (in mid-1981) and an annual per capita income of US$190. Agriculture continues to dominate India's economy, employing over two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to all those engaged in agricultural activities, especially the landless or nearly landless who have only an insecure grasp on the means of existence. Over the past 30 years, the share of agriculture in GDP at factor cost (measured in 1970/71 prices) has declined from 60% to about 40%, while the share of industry has increased from 15% to about 24%. But industrialization has not been rapid enough to absorb the growing labor force, nor to bring about the economic transformation that has led to sig- nificantly higher productivity in some other developing countries. 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Reports for the Second Ramagundam Thermal Power Project (No. P-3164-IN), dated November 30, 1981.  -2- 4. Economic growth has been slow in the past, averaging about 3.5% per annum over the past 30 years. Slow growth of value-added in agriculture -- 2.1% per annum over the three decades -- has constrained overall growth, not only because of the high share of agriculture in GDP but also because scarce foreign exchange has often been required to import food. Industrial value-added has grown more rapidly, at 5.4% per annum between 1950/51 and 1979/80. Over the same period, gross domestic savings more than doubled from 10% of GDP to 21.2%, while gross domestic investment rose from 10% of GDP to just over 21.8%. Foreign savings have never financed a large portion of domestic investment: a peak of about 20% was reached during the early 1960s; by the end of the 1970s, the proportion had returned to below 3%. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of GDP, and was less than 1% at the end of the 1970s. 5. Over the past 30 years as a whole, India has placed relatively little emphasis on exports and has tended to pursue a strategy of import substitu- tion. The volume growth of exports between 1950/51 and 1979/80 averaged only 3.6% per annum, about the same as the volume growth of imports over the same period. Between 1970 and 1977, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. The volume of India's exports grew on average about 9% per annum between 1971/72 and 1976/77. Although export growth has slowed in recent years, due in large part to domestic supply constraints, this experience demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. Recent Trends 6. Over the period 1975/76 to 1978/79, growth in real GDP (at factor cost), agricultural value-added and industrial value-added averaged 5.4%, 3.1% and 7.9% per annum, respectively. These trends represent a substan- tially better growth performance than the historical 30-year trends (paragraph 4). However, GDP declined by about 4.5% in 1979/80 due both to the severe drought which reduced agricultural production and to input con- straints in other sectors. Agricultural output fell by about 16% in 1979/80. Industrial production stagnated, largely due to shortfalls in the production of major inputs such as coal, steel and cement, as well as infrastructural constraints, notably in power and transportation. As a consequence of these developments, the remarkable price stability that India had enjoyed after 1975 came to an abrupt end at the close of fiscal year 1978/79, with prices increasing 21% during 1979/80. 7. In 1980/81, the economy recovered substantially, so that real GDP growth for the year was about 6%-7%. During the summer and fall of 1980 foodgrain prices rose, but more slowly than other prices and more slowly than the drop in production in 1979/80 would have suggested. This was made pos- sible through the drawdown of substantial buffer stocks built up by the Government in years of good harvests. These stocks ensured adequate supplies of grain to low-income groups in urban areas through the public distribution  -3- system and also provided resources for a large-scale drought relief employ- ment program for low-income groups in rural areas. Aided by a normal monsoon in the summer of 1980, agricultural production rose by about 17%-19%. The industrial sector recovered more slowly, with production in 1980/81 rising only about 4% above the average for 1979/80, but output increased substan- tially during the year so that production in April 1981 was about 9% higher than in April 1980. The rise in prices slowed during the second half of 1980/81 so that by March 1981 the wholesale price index was 15.7% above its level a year earlier. 8. In agriculture the positive results of large investments and appropriate policies in the past years are becoming increasingly apparent. The rate of expansion of irrigation has increased significantly from 1.3 mil- lion ha per year in the early 1970s to about 2.3 million ha in 1980/81. Fertilizer use reached about 5.6 million tons of nutrients in 1980/81, more than double 1974/75 levels. Over the decade before 1979/80, foodgrain production grew at about 2.75% per annum -- sufficient to meet consumer demand, to eliminate imports (which had averaged nearly 5 million tons per year for the 15 years preceding 1976), and to reduce real foodgrain prices for consumers. At the same time, India was able to build up substantial foodgrain buffer stocks which made it possible to limit the effects of the 1979/80 drought, and to export a modest amount of grain in 1980. While the management of the foodgrain economy after the drought was a significant achievement, the effect of the drought on production re-emphasized the con- tinued importance of the monsoon in India's agriculture. The normal monsoon of 1980/81 brought foodgrain production back to around the previous record level of 132 million tons. While the performance of the recent past and the probable future trends suggest that on average foodgrain supplies will exceed demand, the balance remains delicate and the need for foodgrain imports to maintain consumer supplies or adequate buffer stocks could arise from time to time. For example, some wheat imports are likely in 1981/82 to ensure ade- quate build up of stocks. Programs to expand irrigation, strengthen exten- sion and encourage the efficient use of other agricultural inputs continue to receive high priority. 9. The Indian economy has shifted back from a situation of resource surplus, which had been a temporary phenomenon of the late 1970s, to one of resource scarcity. Investment has again overtaken domestic savings, and the scope for further increases in the latter appears limited. Marginal savings rates have recently been well above 30% in the household sector. Future increases in savings will depend heavily upon the enhanced profitability of public sector enterprises. Impending resource scarcity is even more apparent in the foreign sector. Between 1975/76 and 1978/79, India's current account deficit had remained comfortably small in relation both to GDP and to a growing pipeline of aid commitments. This was due to favorable terms of trade movements after 1977 and to rapidly growing workers' remittances as well as to the growth of exports. In 1980/81, however, the balance of pay- ments deteriorated sharply, with the current account deficit rising from US$850 million in 1979/80 to nearly US$3.4 billion in 1980/81. In part this was due to unique events during the year, such as the disruption of oil production in the Northeast, which, though the flows resumed again in February 1981, alone added over US$1 billion to the oil import bill. Com- bined with unprecedented oil price increases, this caused the oil import bill to rise by over 75%, to a level equivalent to three-fourths of India's mer- chandise export earnings. The deficit on current account rose to 2% of GDP.  -4- India was able to finance this gap through a substantial drawing on IMF resources (the Trust Fund and the Compensatory Financing Facility), anci through an increase in aid disbursements and a modest drawdown in foreign exchange reserves. 10. The trends in the volume and terms of India's trade indicate that significant adjustments will need to be made in the economy to bring India's external accounts into reasonable balance at a high level of growth. In particular, there is a need to increase the growth of exports, to increase production of commodities such as fertilizer, cement and steel which India can produce efficiently in order to reduce imports of these items, to moderate the rise in oil imports through greater domestic production and slower demand growth, and to reduce the constraints in transportation and other infrastructural facilities which are retarding growth in a wide range of activities, including exports. It is encouraging that, in response to the present balance of payments difficulties, the Government has not reacted by placing more stringent controls on imports, but rather has left in place the more liberal policies evolved in the past several years. Recent improvements in the availability of power, a major constraint facing exporters, and the adoption of several new export policy measures have improved the prospects for accelerating export growth. Development Prospects 11. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufac- turing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, the power grid, roads and ports - is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institu- tional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and sufficient access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 12. A new Sixth Five-Year Plan (1980-85) was approved in February 1981. The new Plan continues to assign priority to agriculture and power. Further- more, the Plan reflects the Government's efforts to bring about the necessary adjustments in the economy by emphasizing several priority areas. These include: (i) expansion of exports and an investment program to support increased production to replace imports of goods such as fertilizer, cement and steel which India produces competitively; (ii) an investment program and policy framework for more efficient development and use of energy resour- ces; (iii) removal of bottlenecks in infrastructure and related constraints on production of basic industrial inputs; and (iv) continuing emphasis on the development of agriculture. 13. The higher capital formation rates of the past few years augur well for future income growth. However, there are signs that the past programs and policies have led to relatively low growth in certain crucial sectors, namely power, coal, transport services, steel and cement. Potential output  -5- growth in sectors which have benefitted from large investments in the recent past may not materialize unless these input bottlenecks are alleviated. In the case of coal, steel and cement, domestic production appears to be clearly justified on grounds of comparative advantage, indicating an a priori case for policies to promote further investment. In 1980/81 these commodities were not imported in sufficient amounts to eliminate the shortages; increased short-term reliance on imports may be necessary to alleviate slowdowns and dislocation in user industries. In the case of sectors in which there is little scope to import the final product -- power and transportation -- the planning of capacity expansion becomes even more crucial. Although there is scope for improvement in the short-run performance of these sectors, major investments in balancing and modernization programs as well as in new capacity are essential for adequate growth in the medium term. 14. Despite the relatively large investment programs for the develop- ment of domestic energy resources such as coal and hydroelectricity, and the recent development of offshore petroleum resources, India has not been able to eliminate the gap between its total energy demand and domestic production. During the past year, India continued to face power and coal shortages, but the situation improved substantially during the year so that power generation in June 1981 was around 20% higher than a year earlier. India is entering the Sixth Plan period with an ambitious energy production program backed by substantial financial commitment. In the oil sector, GOI is now accelerating its oil exploration capabilities and is opening up prospective areas for exploration by foreign firms. Prices of petroleum products were raised substantially in 1980 and again in July 1981 to bring domestic prices into line with world market prices, to raise resources for further oil and gas development and to encourage efficient use of energy. India is now committed to an expanded power program that emphasizes exploitation of its large hydro potential and development of its transmission and distribution system. In the coal sector, a policy decision in favor of mechanization has been made in order to achieve more rapid growth of coal production. 15. Agricultural policies, development programs and secular trends all seem favorable for sustaining the past agricultural growth during the 1980s. India ended 1980 with grain stocks of about 12 million tons, without having imported foodgrains during the year. This reflects the trends of the last decade which point to an improvement in foodgrain availability in the economy. Growing output, combined with the projected fall in the population growth rate, suggest favorable long-run prospects for foodgrain supply and demand balances. An occasional need to import grains, particularly wheat, could arise, but if the efforts to develop agriculture over the past decade are sustained and intensified, as suggested in the new Plan, persistent shortage seems unlikely. This development could give rise to a range of policy options including a slowly falling real price of foodgrains to increase the affordability of foodgrains to low-income families, foodgrain exports, and diversification to the production of other, higher-value crops. 16. Foreign exchange reserves are providing a cushion that helps the Government of India in short-term supply management. In March 1981, however, gross reserves were $320 million lower than the level of a year earlier and, in terms of import coverage, fell below the six-month level for the first time since 1977. A much larger decline in the reserve level would have been necessary in 1980/81 had IMF Trust Fund and Compensatory Financing Facilities, amounting to over US$1 billion, not been available. India's  -6- reserves provide some limited scope for narrowing the financing gap over the nlext few years, but successful management of the balance of payments will depend mainly on improved export performance, on import replacement, on the maintenance of aid flows and workers' remittances, and on a moderation in price increases for oil imports. While India's current account balance of payments deficits are not expected to be large relative to the size of the economy (e.g., on the order of two percent of GDP), the absolute amounts are large and will necessitate external borrowing beyond levels expected to be available from normal concessional sources. Accordingly, India has recently begun to undertake substantial borrowings in the financial markets to help finance selected major investment projects. 17. India's medium-term development prospects are mixed. Considerable progress continues to be made, particularly in agriculture, but the economy faces a period of difficult adjustments in the coming years. Investments required to relieve short-term supply constraints must compete with longer-term programs to accelerate growth and to develop India's considerable physical and human resources. The balancing of these objectives will place a difficult burden on those implementing India's Sixth Five-Year Plan. The primary focus must be on the implementation of appropriate domestic adjust- ment policies, although the aid community can and should play an important role in ensuring that India's efforts do not fail due to inadequate foreign resources. 18. Preliminary results from the March 1, 1981 Census, combined with 1971 Census figures adjusted for under-enumeration, suggest that the popula- tion growth rate declined from 2.3% p.a. in the late 1960s to about 2% at present. The rate of increase of population is expected to continue falling to around 1.8% by the first half of the 1990s. While the growth rate appears to be declining slowly, the 1981 Census population estimate was substantially higher than previous Government projections. The 1981 Census data are still incomplete but preliminary reports indicate that the rise in life expectancy was more than anticipated, suggesting that, on average, Indians can expect to live five years longer than they did a decade ago. This no doubt reflects improved availability of food and health services. This implies, however, an even greater need to reduce the birth rate to bring about the needed reduc- tion in the rate of growth of population. The Census results, therefore, re-emphasize the need for continuing efforts to strengthen a broad range of famaily planning aetivities to develop a wider clientele and to provide that clientele with a professional, technically competent advisory service which can provide the full variety of available birth prevention methods. The new P-lan continues thie hiiglh priority given to these efforts in earlier Plans. Plie ambition of its targets - implying a rise in the proportion of protected couples In the reproductive age group from its present estimated level of aibout 23% to over 35% by 1984/85 - seems fully justified. Such targets imply a serious long term commitment to moderating the population growth rate through an improved family planning program. 19. Reduction of poverty remains the central goal of Indian economic growth. More than one-third of the world's poor live in India, and more than 8n% of tthe Indian poor belong to the rural households of landless laborers ard small farmers. About 51% of the rural population and 38% of the urban population subsist below the poverty line (estimated at about US$114 and US$132 per capita per year for rural and urban areas, respectively). Yinprovements in the living standards of the poor will depend to a large  -7- extent on the overall growth of the economy; the circumstances require increases in agricultural production and employment, in non-farm rural employment, and also in employment opportunities in urban areas. These developments will have to stem in large part from market forces which, however, must be encouraged and reinforced by appropriate Government policies and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1979 reflects such develop- ments. There is also a role for direct Government action in faster implemen- tation of land reform (though the scope for significant reduction in poverty through land redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans, and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program, which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary education, the extension of rural health facilities and the provision of secure village water supplies. Innovations such as the community health volunteer program and the national adult literacy campaign provide encourag- ing evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India's poor. PART II - BANK GROUP OPERATIONS IN INDIA 20. Since 1949, the Bank Group has made 62 loans and 134 development credits to India totalling US$2,931 million and US$10,283 million (both net of cancellation), respectively. Of these amounts, US$1,188 million had been repaid, and US$3,590 million was still undisbursed as of September 30, 1981. Bank Group disbursements to India in the current fiscal year through Septem- ber 30, 1981 totalled US$164 million, representing an increase of about 6% over the same period last year. Annex II contains a summary statement of disbursements as of September 30, 1981, and notes on the execution of ongoing projects. 21. Since 1959, IFC has made 24 commitments in India totalling US$148.6 million, of which US$22.6 million has been repaid, US$27.7 million sold and US$7.5 million cancelled. Of the balance of US$90.8 million, US$81.9 million represents loans and US$8.9 million equity. A summary statement of IFC operations as of September 30, 1981, is also included in Annex II (page 4). 22. In recent years, Bank Group lending has emphasized agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit operations and in providing direct support to major and medium irrigation. Marketing, seed development, agricultural extension, dairying, and forestry 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. The Bank Group has also been active in supporting infrastruc- ture development for power, telecommunications, and railways. Family plan- ning, water supply development, urban investments and the development of oil and natural gas have also received Bank Group support in recent years.  -8- 23. 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, power, water supply and other infrastructure sectors remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs, particularly water and credit for on-farm investments, will continue to receive emphasis. Improved water management and intensification and streamlining of extension systems form an important institution-building aspect of the Bank Group's program for the next several years. Special emphasis will continue to be given to projects benefitting small farmers. The Bank Group's continuing role in the fertilizer sector assists India in the more efficient provision of another key input in the agricultural growth process. Projects supporting water supply, sewerage, urban development and investments in the petroleum sector also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on those subsectors which have recently emerged as key constraints on India's overall growth, primarily power and transportation. 24. 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 part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, there is now a need for increased foreign assistance to adjust to an even greater deterioration in balance of payments anticipated during the 1980s by augmenting domestic resources and stimulating investment. As in the past, Bank Group assistance for projects in India should aim to include the financ- ing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sec- tors as agriculture, irrigation, and water supply. 25. India's poverty and needs are such that whenever possible, external capital 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. Therefore, India should be eligible and regarded as creditworthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was about 10% in 1980/81 and is projected to remain below 20% through 1995/96. As of September 30, 1981, outstanding loans to India held by the Bank totalled US$1,828 million, of which US$819 million remain to be disbursed, leaving a net amount outstanding of US$1,009 million. 26. 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 49%, 36% and 44%, respectively, in 1980/81. On March 31, 1981, India's outstanding and disbursed external public debt was about US$17 billion, of which the Bank Group's share was US$6.2 billion or 36% (IDA's US$5.3 billion and IBRD's US$0.9 billion). Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1980/81, about 18.0% of India's total debt service payments were to the Bank Group.  -9- PART III - AGRICULTURAL CREDIT IN INDIA Background 27. Historically, the cash needs of India's millions of rural households were met entirely by the traditional system of family financing and village money-lending, normally at usurious interest rates and for short periods. But these sources were not well-suited to the investment needs of modern agriculturists nor to the growth objectives of the nation. Therefore, in recent years, specialized agricultural institutions -- with the ability to appraise projects and lend for them on the basis of their productivity, with access to funds outside the rural sector, and with the ability to fulfill farmers' needs for production credit at reasonable cost -- have come to play a crucial role in facilitating and accelerating private agricultural investments. 28. Institutional agricultural credit in India started with the adoption of the Cooperative Credit Societies Act in 1904. Yet, by the early 1950s, institutional credit financed less than 5% of the financial needs of the rural population. Since then, the share of institutional finance has been growing rapidly, reaching 10% in the early 1960s and 25% in 1971/72. The recent growth in institutional finance can be attributed not only to social pressures and to borrower protection legislation, but also to its lower cost and the growing accessibility of credit institution outlets. In 1980, the agricultural banking system had over 100,000 outlets, and less than 1% of India's 5,000 administrative blocks remained without any outlet of an institutional credit facility. Annual institutional agricultural credit to farmers increased from Rs 16,750 million in 1976 to Rs 29,400 million in 1980, and GOI's Sixth Five-Year Plan (1980-1985) calls for its doubling by 1984/85. Agricultural Credit Institutions 29. Agriculture credit operations are guided and regulated by the Reserve Bank of India (RBI). RBI is also the main source of refinance for short-term 1/ cooperative institutions. Medium- and long-term agricultural credit funds come mainly from: open-market bond operations, time deposits, refinance from the Agricultural Refinance and Development Corporation (ARDC) and share capital contributions from State Governments. At present, the main institutions in the field of medium- and long-term lending are the cooperative banks and the commercial banks, each sharing roughly one-half of lending. Since 1975, the Regional Rural Banks have also entered into agricultural lending. All these banking windows offer similar terms and conditions to the farmers under RBI guidance. 1/ Short-term credits are seasonal production loans to farmers for a period of up to 18 months; medium- and long-term credits are investment loans, for 18 months to 3 years for medium-term credit, and for over 3 years for long-term credit.  -10- 30. Cooperative banks are organized by individual States into two independent groups of institutions: (a) land development banks (LDBs) for long-term credit, and (b) State cooperative banks for short- and medium-term credit. There are 19 land development banks, each consisting of a State Land Development Bank which lends through its branches or refinances affiliated primary land development banks (PLDBs). LDBs do not make seasonal loans or lend for non-agricultural purposes. The State cooperative bank structure is much larger and more diversified. In 1979, 26 State cooperative banks (SCBs) provided funds for 344 district-level Central Cooperative Banks which, in turn, supported about 94,000 Primary Agricultural Credit Societies. These societies, which specialize ig seasonal and medium-term credit, also provide a variety of other services to their members, including savings, input supply, staple consumer goods supply and crop marketing facilities. Participation of SCBs in long-term lending has been insignificant. 31. The split cooperative structure has disadvantages. Above all, farmers are unable to obtain all their credit requirements from a single cooperative organization. A study of the advisability of integrating the two systems, conducted by GOI under the first ARDC Credit Project, (Credit 540-IN of April 1975), recommended a gradual merger of the two banking systems, but the recommendation met with considerable opposition from most LDBs. More recently, another RBI committee re-examined the issue and concluded that merger of the two systems would not be practical at this time. Instead, the committee recommended that Primary Agricultural Credit Societies should give agency services to LDBs for establishing contacts with potential LDB borrowers, for initial scanning of loan applications, for loan disbursements, and for receiving repayments; and that such agency assistance should be tried by some selected relatively strong and well managed primary societies. GOI has accepted these proposals. However, merger of the two credit systems has not been totally abandoned. Measures such as bringing short-, medium- and long-term refinancing together at the national level under the proposed National Bank for Agriculture and Rural Development (see para 37) can be expected to draw the two cooperative banking systems closer together to prepare the ground for a possible future merger. 32. Commercial banks' involvement with agricultural lending is relatively recent and accounts for a modest proportion of such banks' total business. Even so, the commercial banks' lending to the agricultural sector increased from 5% of their total operations in 1969 to about 12% in 1979, and it is expected to exceed 16% by the end of the Sixth Plan in 1985. The total amount outstanding in agricultural loans by the commercial banks grew from Rs 1.9 billion in June 1969 to Rs 24.6 billion in June 1979, of which 25% consisted of indirect lending (for crop storage, input stocks or rural electrification), 60% of direct lending to farmers in the form of medium- and long-term loans and the balance of seasonal loans. Commercial banks' ability to provide both seasonal and development loans and their flexibility with regard to collateral are two major advantages these banks enjoy over LDBs. However, they lack full understanding of rural operations because of the urban orientation of their staff and do not receive as much support from State governments as do cooperatives. 33. Since 1975, Regional Rural Banks (RRBs) have been increasing their activities in agricultural lending, but so far their share is less than 1% of India's rural credit. RRBs were created to lend to the weakest section of  -1 1- the population which has minimum access to other institutions. They employ and train local staff with the objective of making them true rural bankers. Each RRB is sponsored by a commercial bank. The commercial banks also contribute to RRBs' share capital together with the Central and State governments. Agricultural Refinance and Development Corporation (ARDC) 34. ARDC, a subsidiary of the Reserve Bank of India (RBI), was established by an Act of Parliament on July 1, 1963. Its main objective is to provide credit for agricultural investments by making long- and medium-term funds available to land development banks, commercial banks and other approved institutions, to refinance agricultural schemes which are judged by ARDC to be economically and technically sound and are located within a reasonably compact area. ARDC helps formulate schemes, particularly in less developed States and, consequently, it is able to influence the lending policies and procedures of the agencies it assists, thus contributing to the development of agricultural credit institutions throughout India. LDB loans have been the main vehicle of ARDC refinancing, although the LDBs' share has recently been declining with a corresponding increase in the share of commercial banks. As of June 30, 1980, the total outstanding ARDC refinance to LDBs was Rs 9.8 billion (or 56.6% of ARDC's portfolio), to the commercial banks 1/ Rs 7.3 billion (41.9%) and to the cooperative banks Rs 260 million (1.5%). 35. ARDC has about 900 professional staff, of whom about 425 are located at Head Office in Bombay. The rest are distributed between an office in Delhi to liaise with GOI and 14 State regional offices. ARDC has a nine-member Board of Directors. The Chairman is a Deputy Governor of RBI. ARDC's shareholders include RBI, State Land Development Banks, State Cooperative Banks, the Life Insurance Corporation of India, commercial banks and investment companies. It derives its operating funds through borrowings from GOI, RBI and the market as well as from profits on investments. Its GOI borrowings represent mainly the flow of IDA funds to ARDC under ongoing projects (see para 47). For the year ending June 30, 1980, ARDC's sources of funds were as follows: earnings, US$17 million; GOI borrowings, US$206 million; RBI borrowings, US$106 million; and capital market borrowings, US$50 million. ARDC's operating results have continued to be good. Its profits in 1979/80 were US$20 million, compared to US$15 million in 1977/78 and US$17 million in 1978/79. 36. Most of ARDC refinance has been for minor irrigation (63%). Other purposes of ARDC refinance include farm mechanization (16%), storage and market yards (6%), land development (4%), and plantation/horticulture (4%). The remaining 7% mainly comprises livestock, fisheries and forestry lending. The annual percentage of funds utilized for minor irrigation has been steadily declining from over 75% in 1974/75 to 55% in 1979/80. ARDC's overall lending program has made a significant contribution to rural development through financing of about 325,000 tubewells, 523,000 dugwells and 755,000 pumpsets. Land development on irrigation schemes and land 1/ Including the regional rural banks, whose portfolio is as yet negligible.  -12- improved by soil conservation total about 1.1 million ha and about 110,000 ha of plantation/horticulture crops have been established or improved. ARDC estimates that its schemes have helped to bring about 3.3 million ha under more intensified cultivation. ARDC currently supports about 40% of direct institutional term lending for agriculture in India. 37. GOI has introduced a Bill in the Indian Parliament to establish a National Bank for Agriculture and Rural Development (NABARD) by amalgamating ARDC and the Agriculture Credit Department of RBI. NABARD would provide refinance for short-, medium- and long-term credit for agriculture and cottage industries. Because the integration of activities of NABARD's constituent institutions would take time, ARDC would most likely continue to operate as at present over most of the project period. The detailed plans of the financial and administrative structures of NABARD have not yet been formulated. If the establishment of the new entity is approved, GOI would provide such plans for the Bank Group's review and would take the Bank's views into consideration in finalizing such plans (Section 3.04 of the Development Credit Agreement). Loan Overdues 1/ 38. While the development of institutional credit has been a major factor in recent agricultural successes (see paras 51 and 52), the problem of high loan overdues has been the single most troublesome phenomenon of agricultural lending in India. The problem of overdues has affected both major beneficiaries of the ARDC refinancing - LDBs as well as commercial banks. Therefore, this problem received major attention before and during the appraisal of the proposed project, resulting in the inclusion of a number of measures in the project (see para 64). 39. The land development banks (LDB), with their longer involvement in agricultural credit, have faced the most critical consequences. All-India average overdues of LDBs increased from about 28% of demand as of June 30, 1974 to 44% as of June 30, 1981. Total LDB lending has been static and their annual share of ARDC refinance declined from nearly 90% in 1974 to about 40% in 1980, with a corresponding rise in the share obtained by the commercial banks. The main reason for the decline in LDBs' share is the lending restrictions imposed by RBI and ARDC because of poor loan recovery, particularly of six large LDBs - Bihar, Gujarat, Karnataka, Madhya Pradesh, Maharashtra and Tamil Nadu. These six States collectively account for 60% of all LDB loan collection demand and 80% of all LDB overdues. Yet in 1979/80 they conducted only 29% of all LDB lending compared to about 50% in 1975/76. 40. There are many reasons for high overdues, including willful default; natural factors that result in crop failures; poor LDB organization and management that result in inadequate loan appraisal, supervision and collection efforts; and, in some instances, active discouragement of 1/ Collections expressed as percentage of demand, which includes principal and interest falling due during the year plus overdues from previous years.  -13- collection efforts by State governments for political reasons. For example, once overdues have built up, particularly following crop failure, political agitation for debt remission grows, and State governments can seek to gain political advantage by remitting collection. Such actions by some States have created expectations of similar steps in others, thus encouraging the borrowers to default on loan repayments. The main reasons for the deterioration in loan collection performance over the 1979-1980 period were a severe drought in 1979 and the effects of several national and State elections that occurred during that period. 41. While willful default and unfavorable political conditions for loan collection are major factors causing high overdues, agro-climatic factors are also important. Since LDB lending has been mainly for minor irrigation from groundwater, it is significant that most States with good loan collection records have reliable aquifers, while five of the six problem States have less reliable groundwater resources, which are adversely affected by periodic droughts. 42. There was considerable improvement in the loan collection climate in 1980/81, due to repeated injunctions from the highest GOI levels on the imperative need for loan recovery and warnings that poor recovery may mean exclusion from future Bank-Group supported lending. As a result, all State government bans on legal action against defaulters have been withdrawn and all States have organized vigorous loan recovery drives. Most States have introduced special measures to improve loan recovery. This resulted in a 50% increase in collection, from Rs 800 million in 1979/80 to Rs 1,200 million in 1980/81, in the six problem States, although such an improvement still only resulted in the collection of about 43% of demand in those States. Unfortunately, some measures introduced by States to encourage recovery may be harmful; for instance, remission of overdue interest in exchange for repayment of overdue principal can boost recovery in one year, but may discourage future payments in anticipation of similar concessions. 43. Past Measures to Improve Collection. To improve loan recovery, lending eligibility criteria were introduced during the First ARDC Credit Project (Credit 540-IN of April 1975) and, with some modifications, were continued throughout the two successor projects (Credits 715-IN of June 1977 and 947-IN of August 1979). They regulated the amount of new lending by State LDB according to loan recovery. The criteria allowed unlimited lending if recovery in the preceding year was 75% of demand or better, limited lending based on a sliding scale percentage of previous lending if recovery was between 50% and 75%, and no lending if recoveries were below 50%. To complement the eligibility criteria, any LDB with overall overdues of more than 50%, or with more than half of its branches or Primary LDB without lending eligibility, was required to implement a time-bound rehabilitation program satisfactory to ARDC, to qualify for ARDC refinance. Draft plans were drawn up by senior ARDC and RBI management for five States, but were not formally agreed between ARDC and State governments. Also, the draft plans lacked implementation timetables. 44. The criteria did not improve loan recovery; in fact, in the case of new lending, their effect was highly regressive. In Gujarat, for instance, with the longest history of high overdues, new lending fell from Rs 162 million in 1975 to Rs 40 million in 1980. As a consequence, collections (at  -14- Rs 843 million) between 1975/76 and 1979/80 were four times as high as new loans (Rs 211 million) over the same period. Excluding Maharashtra, which introduced large-scale loan rephasing 1/ and consequent high lending eligibility in 1979/80 and 1980/81, the other five major LDBs with serious overdues problems (Bihar, Gujarat, Karnataka, Madhya Pradesh and Tamil Nadu) collected Rs 2.2 billion over the last three years but lent only Rs 1.4 billion. Lending below recovery levels has caused low staff morale and a drop in interest revenue. There is some evidence that loan collection at outlets with no eligibility has decreased rather than improved. 45. LDBs' Participation in Future Lending. Despite the problems that have developed with some of them, LDBs remain important rural development institutions, and both GOT and State governments consider their continued participation essential to the objectives of increasing agricultural production and rural incomes. However, more effective rehabilitation measures and improved lending eligibility criteria are needed if their future participation in development lending is to be meaningful. Therefore, the proposed project would include a package of measures which combines such steps with measures to discourage adverse political interventions and willful default (see para 64). 46. The commercial banks have also found difficulties with loan recoveries. Their average level of overdues, although somewhat improved recently, still remains just under 50%. Much of the earlier overdues of the commercial banks were the result of their rush to meet GOI-set targets during these banks' first years of involvement in agricultural credit when they were least able to appraise and monitor such portfolios. Since the share of the commercial banks in total ARDC refinancing was fast approaching 50%, a Committee on Agricultural Loans through Commercial Banks (CALCOB) was established under the third ARDC Project (Cr 947-IN) to advise ARDC on appropriate appraisal criteria, lending policies, and procedures for improving recovery disciplines in the commercial banks. CALCOB considered the introduction of eligibility criteria similar to those employed for LDB, but rejected this 2/ in favor of standardization of loan collection, accounting and reporting, and a closer monitoring by ARDC of the poorly performing branches. CALCOB also found staffing levels used for agricultural lending to be varied and recommended studies to establish staffing norms. Under the proposed project, steps would be taken to improve these conditions and also to initiate lending discipline to the commercial banks (see para 64). I/ Allowing an extra year for repayment. 2/ The main reasons for CALCOB advising against immediate introduction of eligibility criteria were: the small proportion of agricultural loans to total commercial banks' business, existing insurance cover against losses provided by the Deposit Insurance and Guarantee Corporation, comparative newness to agricultural lending of many branches, and the need to main- tain credit flows, particularly in areas where LDB eligibility is low.  -15- Previous Bank Group Experience with ARDC 47. ARDC's association with the Bank Group dates back to the formulation of ten State-based agricultural credit projects between 1969 and 1973. They were implemented through ARDC and are fully disbursed. In the subsequent phase, ARDC was entrusted with three general lines of credit, ARDC I (Cr 540-IN of April 1975), ARDC II (Cr 715-IN of June 1977) and ARDC III (Cr 947-IN of August 1979) which has recently been fully disbursed. In addition, ARDC has taken an active part in the formulation and implementation of another 25 Bank Group projects, by channeling long-term finance to support investments in irrigation, tree crop development, marketing, horticultural processing, inland and marine fisheries, seed production and sericulture. The amount committed by the Bank Group for those 38 projects totals US$1,991 million. On June 30, 1981, total cumulative Bank Group disbursements to GOI for onlending through ARDC were about US$859 million. 48. The State-based projects were designed mainly to support lending programs by LDBs and commercial banks to farmers for investments in minor irrigation (80% of total program), land levelling and, in six States, farm mechanization. Most of the projects required the State Government concerned to establish or strengthen an agency responsible for monitoring the scale and quantity of groundwater investments financed through institutional credit. Each project required participating banks to adopt specific loan appraisal procedures based on incremental income calculations rather than security-oriented factors, to observe uniform lending terms and, for several, to implement improvements in their staffing and management methods. 49. Physical targets for minor irrigation components were achieved or surpassed. Farm mechanization targets were also reached in most cases, but land development loans were hampered by organizational or legal difficulties; these have been solved since completion of the projects. Groundwater resource evaluation improved in all project States. However, spacing and density criteria used for siting minor irrigation investments were not applicable to privately financed investments and were therefore only partly effective in regulating groundwater abstraction. 50. With the improving capability of ARDC to appraise and supervise lending schemes and with growing experience of participating banks in development lending, the Bank Group agreed to change the lending pattern to a general line of credit to support lending approved by ARDC throughout India. This was expected to bring better coverage of the whole nation and allow more flexibility in the type of lending, since ARDC can appraise schemes that would be too small for the Bank Group to approve individually. The First ARDC Project was completed three months ahead of schedule, and the Second ARDC Project was completed on schedule. Implementation of the Third ARDC Project is ahead of schedule. Three major institution-building accomplishments of the projects were establishment and expansion of groundwater monitoring agencies, initial involvement and rapid expansion of the commercial banks in agricultural lending, and the expansion of ARDC itself from small beginnings to a major development banking institution with a large professional staff handling annual lending of about Rs 5 billion (US$625 million).  -16- 51. Project results confirm the major contributions to increased agricultural production and improved rural incomes projected at appraisal. Physical targets were achieved but the trend towards diversified lending for plantation/horticulture, fisheries, forestry, animal husbandry, farm mechanization and a number of other areas has been faster than anticipated. The commercial banks' lending has grown more quickly than expected, but LDB participation has stagnated due to mounting overdues (see para 39). A notable feature of the projects was the successful direction of lending towards less developed areas and to small farmers. Instead of the 25% of lending to less developed areas targeted, over 40% was achieved; and from a base of about 25%-30% of lending to small farmers prior to the ARDC projects, about 50% of the lending of the Second ARDC Credit Project was to small farmers. 52. A review of the 12 Bank Group financed projects completed up to 1980 indicates that about two million investments were made in tubewells, dugwells, and pumpsets; these resulted in an estimated two million ha of incremental irrigation. Based on evaluation studies by ARDC the extra irrigation has brought about production of about 1.8 million tons of additional foodgrain per year, valued at about Rs 3.8 billion and giving about 2 million beneficiaries total net incremental income of about Rs 2 billion. Additional employment resulting from the projects is estimated at about one million man-years. The Bank Group finance also played some part in diversified lending by ARDC that resulted, for instance, in the development of 50,000 ha of plantation or orchards, the financing of about 3,500 motorized fishing boats, the construction of 5 million tons of grain storage and a miscellany of animal husbandry investments. 53. Project completion reports and audits by the Operations Evaluation Department have been prepared for the ten State-based credit projects that were financed by the Bank Group, and for the ARDC I and ARDC II credit projects. In addition, the Operations Evaluation Department has prepared a report with overall reviews of nine State-based projects and the first ARDC Credit Project, which were all completed between 1975 and 1977 1/. The review confirmed the important contribution of the credit projects to agricultural development in India. The review found that while, due mainly to methodological shortcomings, project benefits may have been somewhat overestimated, "there is sufficient evidence to conclude that this set of projects was very timely, generally received strong institutional support and achieved an impressive measure of success..." The review concluded that the change from State-based projects to ARDC line of credit projects was timely and justified, despite the loss of influence by the Bank Group on State-based institutions. This feature has been taken into account in the design of this project. The review suggested that the Bank Group may have replaced some resources that could have been raised locally and that may consequently have been used for less useful purposes. GOI and ARDC are convinced that without the Bank Group funding, and the other international funding that was attracted as a consequence of the success of the projects, development lending would not have expanded so quickly. 1/ Report No. 3415, "Agricultural Credit Projects: A Review of Recent Experience in India," April 8, 1981.  -17- 54. The review also drew attention to the continuing controversy over benefits of farm mechanization. In general, the review agreed that there are areas of north India where, due to rapid development and increasing labor shortage, farm mechanization, particularly for tillage and transport, has become necessary. In other parts of the country, with the exception of sugarcane areas, tractor use remains controversial. ARDC is trying to ensure that its farm mechanization lending is channeled to areas where it will be clearly beneficial. 55. The review also elaborated on tubewell and dug-well spacing and possible inequities caused by monopoly of resources given to early investors by spacing criteria. However, over the last two years, controversy about the appropriateness of well spacing criteria has practically disappeared with replacement of such criteria by more intensive groundwater resource evaluation. Results of such evaluation studies generally find resources less depleted than previously assumed. In addition, in most cases, resources tapped by an investor do not extend measurably beyond his land holding. At appraisal of this project, well spacing or possible deprivation of some farmers from minor irrigation sources was not considered an issue. 56. The review found that the loan overdues had been the most critical problem of participating banks due to deficiencies in lending procedures, effects of inclement weather, inadequate short-term financing available to farmers, and political pressure in various forms. The measures included in the proposed project (see para 64) are specifically.designed to deal with this problem. PART IV - THE PROJECT 57. The project was prepared by ARDC. It was appraised in May 1981 and negotiations were held in Washington in November 1981. The Borrowers' delegation included Mr. Kohli of the Ministry of Agriculture (GOI); Mr. V.P. Sawhney, Joint Secretary, and Mr. Ranga Rao, Director, of the Ministry of Finance (GOI); and, Mr. Sant Dass, Managing Director and Mr. P. Kotaiah, Senior Director of ARDC. A report entitled "Fourth Agricultural Refinance and Development Corporation Credit Project" (Report No. 3629-IN), dated February 1, 1982 is being circulated to the Executive Directors separately. A Supplementary Project Data Sheet is attached as Annex III. Project Description 58. The project would continue Bank Group support, over two years (from about January 1982 to December 1983), for ARDC's program of lending to farmers. The proposed Bank Group financing would support the whole of ARDC's lending operations in virtually every district of India. However, for administrative simplicity, the Bank Group would restrict its own disbursements to several major categories -- minor irrigation, land development, soil conservation and land reclamation, plantation and horticulture, livestock, fisheries, and market and storage construction. The  -18- project would also continue to support further training, mainly for staff of participating financing institutions. The project would give emphasis to lending to small farmers, which is expected to reach at least 60% of the proposed loan and credit. Small farmers are identified on the basis of their predevelopment annual family income from farming (up to Rs 3,100 at 1978 prices). 59. Minor irrigation and land development activities would predominate, accounting for about 60% of lending under the project. Minor irrigation investments would include both groundwater and surface water development, although groundwater would constitute the major portion of the project and most of the loans would be to individual farmers. Loans to individual farmers for investments in groundwater development would be for new wells, improvement or rehabilitation of existing wells and provision of pumpsets. Loans for medium-duty tubewells serving areas of 10 to 30 ha would be made to groups of farmers. Loans for deep, high-capacity tubewells serving command areas of up to 100 ha would be made to cooperatives and State corporations. Loans for surface water development would be made to individual farmers, cooperatives, and State corporations and consist mainly of river lift schemes ranging in size from single farm commands to several hundred hectares. 60. To avoid the risk of over-exploitation, lending for groundwater programs would continue to be linked to the systematic and controlled resource evaluation system introduced under the Third ARDC Project (para B.1 (f) ii of, and Annex 1 to, Schedule 1 to the Project Agreement). Under the terms of the Third ARDC Project, ARDC has prepared an all-India compensation scheme for failed wells, which would provide a safeguard to investors in dugwells. ARDC would finalize this scheme for adoption by December 31, 1982 (Section 3.05 of the Project Agreement). 61. The share of lending to agricultural activities other than minor irrigation would be increased under the proposed project. Such activities include: plantation and horticulture, livestock, fisheries, storage, market yards, farm mechanization, and forestry. Farm mechanization, pumpset electrification and forestry lending form part of the total program but, for the sake of administrative convenience, they are not refinanced out of the proceeds of the proposed Bank Group financing. The increase in the share of non-irrigation lending reflects a rapidly growing demand for such loans as well as the increasing importance attached by GOI to such activities, particularly as a means of reaching the landless and near-landless rural poor. 62. The training program, started in 1975, would be continued and intensified. By March 1981 some 2,500 senior and middle level staff and about 18,000 junior LDB staff had been trained. In addition 1,000 senior and middle level commercial bank staff, 350 ARDC and RBI staff and 100 staff from other institutions were trained. The proposed project would continue to emphasize training in loan appraisal and in monitoring and evaluation techniques, at the College of Agricultural Banking, Poona and at 14 LDB training centers.  -19- Implementation 63. Project financing and organizational arrangements would follow the pattern successfully established through the previous projects. The proceeds of the Bank Group financing would be channelled through and supervised by ARDC, which would refinance up to 90% of participating banks' loans. ARDC continues to be an organization of high caliber. To keep pace with its rapid growth, ARDC would continue to intensify training programs, strengthen its project monitoring and evaluation and increase its staff to handle specialized activities. 64. To deal with the loan overdues problem of the participating banks (LDBs), a package of measures would be introduced, which include revised lending eligibility criteria as well as steps to improve the management and operations of the institutions. These measures are summarized below. (a) Eligibility criteria would be revised to regulate lending at the lending outlet level (LDB branch or Primary LDB). Under the new criteria: unlimited lending would be allowed by those outlets which recover over 75% of demand; lending up to highest level in the preceding five years or up to actual recovery by those outlets which recover between 60% and 75%; and lending up to actual recovery by those which recover less than 60% (Paragraph A.1. of Schedule 3 to the Project Agreement). State assistance to any outlet by subscription of equity would be permitted for notional reduction of overdues by up to 10% of overdues, but exemptions allowed in the past for special programs would be discontinued. These criteria would be simple and would avoid the regressive effects of present regulations (para 44). They would still control lending levels and would provide easily understood incentives to improve loan recovery by direct linkage of new lending to recovery. Since no State LDB would be completely disqualified, good outlets would not suffer from the failures of the bad ones. To avoid any unforeseen and undesirable effects of applying the criteria, the operation of the new eligibility criteria would be reviewed and evaluated by a joint GOI/Bank Group/ARDC team by October 31, 1982, and thereafter if found necessary; modifications will be introduced, as required (Section 3.02 of the Development Credit Agreement and Section 2.10 of the Project Agreement). (b) State Government interventions have sometimes caused unfavorable conditions for loan recovery and have been among the main reasons for high overdues of some lending institutions (para 40). ARDC would not refinance any loans in a State where the State authorities take any action which, in the opinion of the Reserve Bank of India (RBI) or ARDC, would adversely affect the ability of the participating banks to collect their loans (Paragraph F of Schedule 3 to the Project Agreement). This provision should discourage the State Governments from writing off loans or remitting or reducing interest charges without the agreement of RBI and ARDC.  -20- (c) Rescheduling, rephasing and blocking 1/ of accounts are useful to alleviate financial distress of borrowers caused by climatic hazards. All these measures have been used in the past, but in some cases indiscriminately, to the benefit of willful defaulters. To avoid possible misunderstanding, ARDC has drawn up guidelines for these measures for use by LDBs and all other participating institutions. Blocking of accounts is expected to be a one-time operation and can only be undertaken with the express approval of RBI and ARDC. These guidelines were reviewed by the Bank Group and are satisfactory. (d) Special financial measures to strengthen the six weakest LDBs 2/ (see para 39) and schedules for their implementation, which were approved by the respective State governments, were discussed and finalized during the negotiations. These measures include immediate rephasing of loans in hardship cases and one-time blocking of chronic overdues. (e) The results of past attempts to improve LDB organisation and management have been disappointing because of insufficient analysis of LDB problems and inadequate follow-up arrangements to supervise rehabilitation measures. To overcome these shortcomings, GOI has already established a Standing Committee to review and to supervise the implementation of the rehabilitation programs of LDBs with priority given to the six weakest LDBs. The Committee, which would be assisted by a team of management consultants, would carry out organization and management studies of these LDBs by May 31, 1982; based on these studies, the Committee would prepare management rehabilitation programs, satisfactory to the Bank Group, by June 30, 1982; and these programs would need to be accepted by each of the six LDBs, by September 1, 1982, and thereafter implemented as a condition of continued ARDC refinancing of the loans made by them (Section 3.03 of the Development Credit Agreement, Section 2.11 of the Project Agreement and Paragraph B of Schedule 3 to the Project Agreement). (f) To ensure proper implementation of the management rehabilitation programs of LDBs, ARDC would carry out, in consultation with the Bank Group, the review and evaluation of the progress achieved in carrying out the programs, at least three times each year. Eligibility to receive additional ARDC refinancing by such LDBs 1/ Chronic overdues are entered into a blocked account, under which the LDB continues to collect from the debtors under a new five-year repayment schedule, but any shortfall in collection is paid by the State government to the LDB and the amounts outstanding would no longer appear as such in the LDB accounts. 2/ The States of Bihar, Gujarat, Karnataka, Madhya Pradesh, Maharashtra and Tamil Nadu.  -21- would be determined on the basis of these reviews and evaluations (Section 2.12 of the Project Agreement). (g) To extend LDB type lending eligibility criteria to the commercial banks, RBI's Committee of Agricultural Loans through Commercial Banks would identify, by December 31, 1982, modifications required in the LDB eligibility criteria, and measures required to apply such criteria by ARDC and the commercial banks. Based on this identification, ARDC would, by July 1, 1983, apply the criteria to refinance loans advanced by the commercial banks (Section 2.13 of the Project Agreement). As an interim measure, before refinancing any scheme by any branch with over 50% overdues, ARDC and the concerned bank would agree on a program to improve that branch's operations (paragraph C.2 of Schedule 3 to the Project Agreement). 65. To strengthen the monitoring of progress in lending operations, ARDC has initiated "district-oriented monitoring" for a sample of important schemes and of participating bank branches. Further refinement of this method is required and staff need to be increased. ARDC would draw up a plan, by June 30, 1982, to strengthen regional staff sufficiently to allow it, by December 31, 1983, to supervise schemes in each District at least once every two years (Section 3.02 of the Project Agreement). To improve and standardize the commercial banks' progress reporting system, ARDC would prepare a standard format by June 30, 1982 and introduce such format to all ARDC-refinanced schemes by September 30, 1982 (Section 3.03 of the Project Agreement). Project Cost and Financing 66. The total project cost, which is the total cost of investments for ARDC refinance over two years (January 1, 1982 to December 31, 1983), is estimated at US$2,086 million (including duties and taxes of about US$108 million). The foreign exchange component is about US$293 million or 14%. Included in this cost is about US$1,169.2 million for minor irrigation, land development and related activities, US$704.3 million for diversified lending (non-irrigation on-farm investments), US$4.0 million for training and US$208.7 million for price contingencies. 67. The proposed Bank Group financing of US$350 million would cover about 18% of the cost net of duties and taxes (about 17% of the total project cost). The remaining 83% of the total project cost would be financed by ultimate beneficiaries (10%), participating banks (18%) and GOI/ARDC (55%). A financial arrangement, satisfactory to the Bank Group, would be executed between GOI and ARDC under which GOI would make US$4.0 million of the loan proceeds available to ARDC as a training grant and would onlend US$346.0 million to ARDC, repayable partly over nine years and partly over 15 years at 6.5% and 7% annual interest, respectively (assuming ARDC will continue to qualify for the standard 0.25% rebate for prompt payments of principal and interest), to refinance approved lending by participating banks to final borrowers, in accordance with appraisal criteria which have been reviewed by the Bank Group and are satisfactory. Further details of the lending terms are outlined in the Credit, Loan and Project Summary. Interest rates to  -22- final borrowers are expected to remain positive (see paragraph 68). Execution of the financial arrangements between GOI and ARDC would be a condition of loan and credit effectiveness (Section 5.02 of the Development Credit Agreement). GOI is having discussions with a number of other donors for possible additional external support for the ARDC lending program during the project period. The UK, Canada, Netherlands, EEC, and others may wish to contribute towards ARDC lending, but the identity of donors and the amounts of assistance have not been finalized. GOI would provide ARDC with all the resources required to execute the project, either from the proceeds of external assistance or from its own resources. 68. In 1979/80, due primarily to a sharp decline in agricultural output together with heavy increases in the price of imported oil, the remarkable price stability which India had enjoyed since 1975 came to an abrupt end, with prices increasing at 21%. From this peak, the inflation rate has since receded to a current annual level of 10-11% and the average annual rate over the next five years is not expected to exceed 8%. Interest rates to final borrowers of 10.25% and 12.5% (depending on loan type) should therefore be pOSitive in real terms for the foreseeable future. Over the last fifteen months, GOI has increased these rates by between 0.75% and 2%, indicating a willingness to respond to inflationary pressures which should safeguard future real interest rate levels in the event that prices rise more quickly than projected. These rates, at the bottom end of the overall GOI prescribed long- and medium-term rates ranging from 10.25% to 15%, reflect GOI's aim of supporting agriculture. They are broadly in line with lending rates to small scale industry. Short-term rates are generally somewhat higher, ranging up to 19.5%. Procurement and Disbursement 69. Procurement under schemes involving relatively small investments by individual farmers would be based on farmers' choice through local dealers and contractors. Typical items would be pumpsets, tubewells, dugwells, dairy cattle, bullock-carts and pneumatic-tire carts, motors for fishing boats and farm mechanization equipment such as tractors, power tillers and sprayers. ARDC would establish guidelines for the selection of pumpsets which would include equipment performance standards established by the Indian Standards Institute, and standards for a given investment item (e.g., size and horsepower of pumpset) relating to farmers' typical situations (e.g., size of area to be irrigated). Normal commercial channels provide an adequate choice of locally manufactured equipment and good servicing facilities, and prices are competitive with those on world markets. Procurement under such schemes as construction of storage warehouses, market yards, and agro-processing facilities would normally be based on local competitive bidding procedures satisfactory to ARDC and the Bank Group. International competitive bidding would not be practical given the relatively small size of investments involved and their scattering throughout the country and over time. 70. The Bank Group's disbursements would be against ARDC certified statements of loans made by participating banks and refinanced by ARDC, and of expenditures on training. The Bank Group's disbursement would be against: (i) 34% of ARDC refinance for minor irrigation and diversified agricultural lending, and (ii) 90% of the cost of training. Documents would not be submitted to the Bank Group for review, but would be retained by ARDC and be  -23- available for inspection by the Bank Group during supervision. This procedure has been applied to all Bank Group supported agricultural credit project disbursements because of the extremely large number of individual loans involved. Disbursement forecasts are based on the performance of three predecessor ARDC line of credit projects; the Bank-wide disbursement profile for agricultural credit projects does not fit in this case. Economic Benefits and Risks 71. The project's primary economic benefit would be an increase in agricultural production for domestic consumption and export. At full development, the annual value of incremental production is estimated at about US$650 million in 1980/81 farmgate prices. 72. Economic rates of return have been calculated for a sample of investment models used in the financial analysis of the project. As they are based on the experience gained under on-going ARDC schemes, they can be regarded as indicative of the rates of return which would accrue. Results of the calculations indicate that the economic rates of return range from about 32% for coffee plantation to over 50% for shallow tubewells and pumpsets, land development and inland fishery schemes. The overall economic return of the project, calculated as a weighted average of all models, would be 44%. 73. Project beneficiaries would include about 1.4 million farmers spread throughout India. At least 60% of the beneficiaries would be farmers with annual per capita incomes of US$114 or less; US$114 per capita is the current absolute poverty line in India. Implementation of the investments will itself generate an increase in the demand for rural labor amounting to nearly 150 million man-days, over 75% of which will be accounted for by minor irrigation. A permanent increase in employment, amounting to almost 140 million man-days per year, will in turn be created through increased crop, livestock, forestry and fishery production, involving more intensive cropping, improved farm practices, and higher standards of animal husbandry. 74. Besides the generation of directly productive benefits, a central aim of the project will be to secure and, where necessary, strengthen the institutional framework for long-term agricultural credit in India. Under the three previous ARDC projects, significant progress has been made in the development of ARDC itself as an effective apex institution. Under this project, these gains will be consolidated through measures to improve the appraisal and supervision capabilities of ARDC. As the lending program is stepped up, the management and staffing needs of ARDC, at both the regional and central levels, will be kept under continuous review. In addition, technical and managerial standards in the participating banks will be upgraded both through training and through the inclusion of organizational and managerial reviews as integral components of LDB rehabilitation programs. 75. The only serious risk attending the project would be continuation of poor loan recovery, described in para 38 of this report. In recognition of this risk, the project is introducing specific measures to improve the ability of participating institutions to deal with the problem, and to permit close monitoring of their progress by the Bank Group. Part of the loan repayment problem arises from climatic hazards that pose risks to investors which may cause genuine difficulties in punctual loan repayments,  -24- particularly in the case of investments for dugwells in hardrock areas. An analysis of the potential effects of drought on borrowers' repayment capacity in such areas shows that project investments will themselves contribute to reduction of drought-induced risks and that loan repayment difficulties arising from climatic risks can be overcome by a sufficiently flexible loan repayment schedule. Appropriate repayment flexibility would therefore be introduced into project lending terms. PART V - LEGAL INSTRUMENTS AND AUTHORITY 76. The draft Development Credit and Loan Agreements between India and the Association and the Bank, respectively, the draft Project Agreement among the Association and the Bank and the Agricultural Refinance and Development Corporation, and the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement of the Association and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement of the Bank are being distributed to the Executive Directors separately. 77. Special conditions of the project are listed in Section III of Annex III. 78. The execution of a Financial Arrangement between GOI and ARDC is an additional condition of effectiveness of the Credit and the Loan (Section 5.02(b) of the Development Credit Agreement). 79. I am satisfied that the proposed credit and loan would comply with the Articles of Agreement of the Association and the Bank. PART VI - RECOMMENDATION 80. I recommend that the Executive Directors approve the proposed credit and loan. A.W. Clausen President February 1, 1982  ANNEX I Page 1 of 5 TAHLE 3A INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVIRACES LAND AREA (THOUSAND SQ. KM.) MOST RECENT ESTIMATE- TOTAL 3287.6 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 1809.5 1960 /b 1970 /b ESTIMATE /b ASIA 5 PACIFIC ASIA & PACIFIC GNP PER CAPITA (USS) 60.0 100.0 190.0 232.3 1136.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 111.1 152.5 241.8 499.4 1150.6 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUS.) 434850.0 547569.0 659217.0 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 22.0 17.3 40.8 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 974.7 STATIONARY POPULATION (MILLIONS) 1621.0 YEAR STATIONARY POPULATION IS REACHED 2115 POPULATION DENSITY PER SQ. KM. 132.3 166.6 200.5 153.6 373.1 PER SQ. KM. AGRICULTURAL LAND 246.7 308.0 355.8 360.3 2382.8 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.1 42.4 41.1 37.4 39.8 15-64 YRS. 56.8 54.7 56.0 59.2 56.7 65 YRS. AND ABOVE 3.1 2.9 2.9 3.5 3.5 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 2.3 2.1 2.1 2.3 URBAN 2.5 3.3 3.3 3.4 3.8 CRUDE BIRTH RATE (PER THOUSAND) 44.2 40.3 34.0 27.7 29.7 CRUDE DEATH RATE (PER THOUSAND) 22.7 17.4 13.5 10.2 7.5 GROSS REPRODUCTION RATE 3.1 2.8 2.3 2.5 1.9 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 5619.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 22.6 20.4 44.1 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 102.0 93.0 107.1 123.7 PER CAPITA SUPPLY OP CALORIES (PERCENT OF REQUIREMENTS) 93.0 92.0 91.0 98.6 112.6 PROTEINS (GRAMS PER DAY) 52.0 51.0 50.0 56.9 62.5 OF WHICH ANDIAL AND PULSE 17.0 15.0 13.0 14.2 19.7 CHILD (AGES 1-4) MORTALITY RATE 27.1 20.4 14.8 14.6 4.8 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 42.2 47.5 51.9 57.7 64.0 INFANT MORTALITY RATE (PER THOUSAND) .. 134.0 125.0 89.1 50.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 17.0 33.0 30.1 45.9 URBAN .. 60.0 83.0 65.8 68.0 RURAL .. 6.0 20.0 20.1 34.4 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 17.6 53.4 URBAN .. 85.0 87.0 71.0 71.0 RURAL .. 1.0 2.0 4.8 42.4 POPULATION PER PHYSICIAN 4850.4/c 4889.0 3617.4 3857.7 4428.7 POPULATION PER NURSING PERSON 9630.0OT 8296.5 6429.4 6411.8 2229.7 POPULATION PER HOSPITAL BED TOTAL 2149.0/d 1612.9 1311.1 1132.8 588.5 URBAN .. .. 363.5 322.3 579.6 RURAL .. .. 10429.1 5600.5 1138.5 ADMISSIONS PER HOSPITAL BED .. .. HOUS ING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 LRANA 5.2 5.6 4.8 RURAL 5.2 5.6 5.3 AVERAGE NUhBER OF PERSONS PER ROOM TOTAL 2.6 2.8 JRtAN 2.6 2.8 RURAL 2.6 2.8 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL .. ..  ANNEX I Page 2 of 5 TABLE 3A INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVE7GES - MOST RECENT ESTIMATE)- MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b ASIA 6 PACIFIC ASIA 6 PACIFIC EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 73.0 79.0 85.9 99.8 MALE 80.0 90.0 94.0 94.4 100.6 FEMALE 40.0 56.0 63.0 64.5 98.8 SECONDARY: TOTAL 20.0 26.0 28.0 38.0/aa 53.5 MALE 30.0 36.0 37.0 34.6baa 58.4 FEMALE 10.0 15.0 18.0 18.0/aa 48.6 VOCATIONAL ENROL. (1 OF SECONDARY) 8.0 1.0 1.0 3.8 21.1 PUPIL-TEACHER RATIO PRIMARY 29.0 41.0 41.0 32.8 34.2 SECONDARY 16.0 21.0 .. 19.9 31.7 ADULT LITERACY RATE (PERCENT) 28.0 33.4 36.0 52.8 86.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.1 1.3 1.7 12.7 KADIO RECEIVERS PER THOUSAND POPULATION 4.9 21.5 32.5 35.3 174.1 TV RECEIVERS PER THOUSAND POPULATION 0.0 0.0 1.0 3.7 50.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 11.0 16.0 16.9 14.6 106.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 3.4 4.3 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 189761.4 220670.5 256699.4 FEHALE (PERCENT) 31.2 32.4 31.9 29.3 37.4 AGRICULTURE (PERCENT) 74.0 74.0 71.0 69.8 50.2 INDUSTRY (PERCENT) 11.0 11.0 11.0 14.1 21.9 PARTICIPATION RATE (PERCENT) TOTAL 43.6 40.3 38.9 39.7 40.2 MALE 58.0 52.6 51.3 51.5 49.8 FEMALE 28.2 27.1 25.7 23.3 31.1 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.1 1.1 1.1 INCOME DlSTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/e 22.2 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.9/e 49.4 LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.77i 7.0 LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.27T 16.2 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 134.1 248.6 RURAL .. .. 114.0 111.6 193.7 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 249.8 RURAL .. .. .. .. 234.3 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 40.3 41.7 21.2 RURAL .. .. 50.7 51.7 32.2 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. laa China included in total only. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979. /c 1962; /d 1958; /e 1964-65. May, 1981  ANNEX I Page 3 of 5 ltPlNlTtONS OF _SOCLAl. lICiATORS Nots.: Although the data ore dro- fot. srcsgnrlyuddth oeatrtto ndribe,It should also ho octd that tioysy no Ie et ostlo..eIlYconpareble because. of the lack of stander loe .daficihcoo -ud cocets usedi byd d Iiffen ceeoeTnholeigth ae b dots ss, Ion- thelt.... useful to descr ibe orders of aedittude, dicto treds, sod orateIa .. reol mejo' dtff.I. .betwee oa:tII.. The theac rup r hons otoygopo b subject coutr osd 12) a cooe-y grc'p eith snnhot big her arrae nrt Ibso thn Ieu..try grou.P of heoujec outr fnopi or"Cpiolluyls iltopothe gou Eer."lItIl Trea icobMoreen Kiddls East" In chcse bacaua of stonger sajoocY of c hroccclt in r-P has dais for thet lodi--or ttors cbonh ag f cnote e tetdtscedepedorcseaailtofes adirouoforn oato es boe.. carlsd ttroelreerge f -r id -eo to enotber. These acraaser only -cafot Ic copsig the auao LANtD ARiA fcboasPd.D.c.) n iano parhopit1al td -Icit ra,ed rurelI - Popo,~lutio (total, Total- Toal er tar ara coprisng lcdoraerdtolad oenos.cohot, sd rusi) ividd bychtao ropocti-a canbr of hoeplra1 beds oeclolcars - loisocoof egriculcoa areacoed tooporeotly to per..s..tty acatlebl to. robir sod Priuste generaI ardiepecislisad hoerite adfon- too roopa, p-acre, eI.aoit ad kitoe adnso c10foion; 19IS dote. ialtit Ieneter I. Hospitals see eetrblteehn posotrtIaafe GNP PER CAPTA (USt) - COP pa-o r aroa atircraI vaie k; rn cel- dyialcr o eroe.rrlhsptl,berr cectoIPi= ds hsatOh culsoad by eon coterecon seibod as cold leek Otlec (1977-79 as);1960, and sediot cnestoParst=atly acffod by s ohyslorse ibut by 19I n 99dt.edclsgeor cs,sdia oto.) ohih offeo inptat ro dati. and po Id e lietd roege. of sealce1 ro.-raro Io ear ENtRGY CONStttPTION PER 0 APITO - Aeca .. ocu-eytion of oomnearial ..oogy (coal tital porposee urban hospitals inlad Wm. prce-ipellgeerI h bopisla, sod lienlta,ptret,_ o...rI get end bydr-,. -cl-a and geotheottuirIr- and roro boapitalfO leoni or roro1 hrpitele and eadital sa saterty ntcty oklgeor ol qiaerptcFt;1960, 1970, ard 1979 r ttse..tsIeisdhaiasselro nyudrttl daa Adetssioe. a TtstalMd - It rater of edalsirn t o disohargee free hosPitale divided b-y the ecuber of beds. POPI'LATtIN ADOl fITL. StTATITICS Totl oultin Mid-booI (rhoosndoL - is of July 1: 1960, t970, and 1979 HOOTtt6 lohr orleio ,ioeot of total).-.R Itl of atha co cota poplation: Ahosolcnitsof aIrupo I ninidaerhsonbigqttr aeong...ntriae; 19t1, .97,ad17 date. she hootahold for _I. ettaios pross Peculaion Peolecolons Ovrse u Ie of Ier ..e per roes - total. urba. et rd s kosree1ru-- Poutolninyar tt Cron ppueio pojcios oehse o ig h fps_s.t. Perro, o lluha, odoca occpied oo toa totl ppulcio byegsandaeIan tI1istr rP,toticy sdl fasityrss. rliee reetisp 'telegsridInpeeosesrrtresd escort ortaotl oa-,ts- alec herothree o l tti he-ren dcIne. tn of total,. ure, n urldaligtreetiay Eteh ....nrry Ir th-c.e. igred one of chess riotcsirtIt of ocotality EDUICATIONr end fertility treode fo pIjctc upse Adiuenad tErIlgent eaton.