Announcement of India to Expand Export-Oriented Industries on May 15, 1989

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. *Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 89/65 Contact: Leandro V. Coronel (202) 477-3641 INDIA TO EXPAND EXPORT-ORIENTED INDUSTRIES WASHINGTON, May 15, 1989 -- India is launching a $730 million project to modernize and restructure export-oriented industries and enable them to compete in international markets. The country will use two World Bank loans totaling $295 million to partially finance the project. The project will support an integrated export-development program in four financial institutions, which will play a major role in helping private indus- tries develop plans for producing and marketing their products. The program includes: export-development funds that will provide matching grants to export- ers as they develop their export plans, technical assistance funds that will help the four financial institutions strengthen their operational capabilities through staff training and information systems, and a term-lending component to provide investment funds to industries that are expanding their operations or improving the quality of their products. The four financial institutions participating in the project are the In- dustrial Credit and Investment Corporation of India, Limited (ICICI), the Export-Import Bank of India (Eximbank), Bank of Baroda and Canara Bank. The export-development funds are expected to assist about 300 firms and the term- lending component will finance 350 expansion projects. India has recently adopted measures to liberalize export policies, includ- ing a more realistic and flexible exchange rate and new duty-exemption schemes. Primarily because of these reforms, manufacturing grew at an annual rate of 9 percent over the last four years, compared with less than 5 percent during the 1965-85 period. Manufactured exports, which account for close to 80 percent of total exports, have also grown in real terms, by 13 percent in 1987 and 25 percent in 1988. But many industries need to modernize and restruc- ture their processes and products to be able to sustain the growth of exports. Other financing for the $730.4 million project will be provided by parti- cipating industries ($212 million), capital-market sources ($120.1 million), commercial banks ($47.6 million), ICICI ($45 million), Eximbank ($8 million) and Japan ($2.7 million). The two World Bank loans--$120 million to the Government of India and $175 million to ICICI--are for 20 years, including five years' grace, with a variable interest rate, currently 7.65 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balance. NOTE: Money figures are expressed in U.S. dollar equivalents.