Announcement of the World Bank Ninety Million US Dollars Credit Extended to India on June 9, 1964

\' ::~ . 'l' 0 t/1 (J) f.. ~ () 7. QI. •:) '<' '("'t • INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STRE.ET, N.W., WASHINGTON 25, D. C. TELEPHONE· EXECUTIVE 3-6360 IrA Press Release No. fA./8 Subject: $90 million credit to India' June 9, 1964 The International Developmel!t Assoc:.ation (IDA), an affiliate of the World Bank, today extended a credit equivalent to $90 million to India for the Ptn:'POSe of expanding production in selected lines of capital goods manufacturing. The cr~dit will assist companies manufacturing commercial vehicles, industrial ma- chinery and construction equipment to make fuller use of existing capacity and to produce more goods, by enabling them to import component~ and materials on a larger scale than has been possible up to now because of the shortage of foreign • f'Xc:hange. In the :i.ndustries directly affected, the IDA credit should.make possibl~ an increase of output averaging as much as 3Cf/o in the current year, ending next March 31, of India's Five-Year Plan. The construction industry will also benefit, since the IDA credit includes fu~ds for the purchase of spare parts for heavy earthmoving and construction equip- ment already in India, of additional supplies of such equipment, and of trans- porters to move the equipment from one project site to another. The industries selected for IDA assistance are of major importance to India's economic development. There is a ready market for their products -- some have orders for as much as three years ahead -- and the demand should continue to rise. Despite numerous difficulties, the companies have been growing rapidly in recent ye6.rs. Operations are reasonably ~fficient and they have the other resourc~s -- • for example, design, technical knowledge and quality control which in many cases are being provided under collaboration agreements with foreign firms -- to make good use of the foreign exchange to be made available.  - 2 - The f'und.s being provide.d for spare parts and constru.cti6n equipment are ex- pected to speed up the execution of various development projects throughout India,. • ·particularly in the fields of irrigation and·electric power. The existing fleet c,f heavy earthmoving and construction equipment has not been fully utilized because c,f a scarcity of spare parts and problems of' distribution. The Government is taldng measures to ensure the maintenance in India of adequate stocks of spare parts and to expedite their delivery. In future, authorized representatives of foreign parts ma:!1.ufacturers are expected to undertake primary responsibility for importing and stocking replacement parts and spares. The proceeds of the IDA credit will be made available to the participating fi~ms and agencies through the regular import licensing procedures of the Government of India. About $75 million will finance imported components, materials and balancing equipment for factories prod~cing trucks and buses, machine tools, cuttinG • tools, heavy construction equipment, electrical equipment, such as switchgear, motors and transformers, and similar items of capital equipment. The balance will finance imported equipment and spares for the constructicn industry. The IDA credit, together with similar assistance from other members of the Indian Consortium, will make possible the f'irst substantial increase in three yea.rs in the allocations of foreign e,:change for imports of industrial materials and com- ponents. Adequate imports of this type must be continued if a high rate of indus- trial plai1t utilization is to be maintained. The TDA credit to India is for a term of 50 years. Repayment of' principal will begin November 15, 1974, after a 10-year period of grace. Thereafter, 1% of the principal will be repayable annually for 10 yea.rs and 'J1/o will be repayable all'.J.ually for the f'inal 30 yea.rs. The credit is free of interest but a service charge of 3/4 of' 1% per annum on the amount withdrawn and outstanding will be ma.de to meet IDA's administrative costs. ••