The World Bank Group in India

THE World Bank Group IN INDIA INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION INTERNATIONAL DEVELOPMENT ASSOCIATION  BASIC STATISTICS AREA : 1,270,000 square miles POPULATION ( 1966 est.) : 493 million Population Growth: 2.4 % · per annum NATIONAL OUTPUT 1964 / 65 ( Provisional ) 1 $42,000 million Per Capita 1964/ 65 1 $87 CONTRIBUTION BY VARIOUS ECONOMIC SECTORS Sector Percentage Agriculture, Forestry and Fisheries 47 Mining ..................................... 1 Factory establishments . . . . . . . . . . . . . . . . . . . . . . . . l1 Small enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Commerce and Transport . . . . . . . . . . . . . . . . . . . . . . 16 Government Administration . . . . . . . . . . . . . . . . . . . . 8 Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1 At official exchange rate (Rs. 4 . 76 = $1.00 ) in effect until June 1966. THE WORLD BANK GROUP IN INDIA October 1966 I NDIA IS THE largest single client of the World Bank and its affiliate, the International Development Association (IDA). By the end of August 1966, the two institutions had provided $1,827 million-$1,002 million in 35 Bank loans and $825 million in 20 IDA credits-to assist development projects and programs crucial to India's economic growth. India had accord- ingly accounted for 10% of all Bank lending and about 53% of all IDA lending as of that date. In addition, the Bank's other affiliate, the International Finance Corporation ( IFC) , had undertaken investment commitments in India totaling $8.5 million in six industrial projects. The Group's commitment of $1 ,835 million must be looked at against the background of the immense task of raising living standards in India, a coun- try with a population of over 490 million persons whose aver- age income is among the lowest in the world. Even before the Indian Government drafted its first Five- Year Plan in 1950, the Bank had lent funds to assist the improvement of the national railways, to reclaim large tracts of land in central India, and for a thermal power project which was the first step in a larger scheme for developing the Damodar Valley in eastern India. Later Bank loans have financed high priority projects within the framework of succes- sive Five-Year Plans . IDA credits extended to India from 1961 onward have also been used to finance Plan projects . The World Bank Group's assistance to India has been compre- hensive, covering the key sectors of the economy. Transportation-railways, roads, ports and airways-has been assisted with loans and credits totaling $720 million. In recognition of the important role played by the private sector in India's industrial development, about $715 million ( roughly 38 % of total Bank/IDA lending in India ) has been lent by the Bank with the guarantee of the Indian Government either 1 directly to large private enterprises or indirectly to medium- scale industry through the Industrial Credit and Investment Corporation of India ( ICICI) , which the Bank helped to organize on private enterprise lines . A loan of $29 million has helped private coal mines to expand production and three IDA credits totaling $340 million are helping selected capital goods industries to make fuller use of existing capacity. Bank and IDA assistance to development of electric power amounts to $254 million. The balance of Bank and IDA lending has gone to assist development of telecommunications ($75 million) and agriculture ( $64 million ) . Besides assisting specific projects, the Bank has shown a keen interest in the progress of the Five-Year Plans as a whole. In 1958, the Bank brought together a group of aid-giving countries interested in helping to finance India's further devel- opment. This group , now consisting of 10 countries and the Bank/IDA, has met regularly since then and contributed to the coordination of the external assistance for India. TRANSPORTATION Railways: The development of the Indian economy during the past 15 years has placed tremendous demands on the country's trans- port system, particularly on the railway network. The Indian Government and the Bank realized that physical limitations like inadequate transport facilities can be as serious a handi- cap to economic progress as lack of finance or lack of technical skills. Hence, transport development has received a high priority under the three Five-Year Plans. In fact , the Bank's assistance to India began in 1949 with a loan for the rehabilita- tion and development of the Indian Railways . Since then, a substantial proportion of the Bank and IDA lending, totaling some $720 million, has been devoted to development of transport. With 58,000 route-kilometers, India's railway system is one of the world's largest and handles the bulk of both freight and 2 passengers. During World War II the system deteriorated seriously because of heavy traffic demands and lack of upkeep. After the war, and especially since Independence, continuous and large expenditures have been necessary, first to restore and modernize the railways, and then to expand their capacity to keep pace with growing demand caused by the growth of basic industries, coal consumption and of industry generally. Under both the Second and Third Five-Year Plans, the railways ac- counted for about one-fifth of all investments in the public sector. The Bank and IDA have provided a large part of the foreign exchange needed for these investments, and their total lending of $575 million for the Indian Railways is easily the largest amount that they have lent for any single enterprise or program anywhere. These investments, combined with in- creasingly efficient working of the system, permitted an in- crease of 125 per cent in freight traffic and 40 per cent in passenger traffic between 1951 and 1964. After a long period of transport shortage, railway capacity in India has now managed to catch up with traffic demand. 3  The first loan for the railways, made in August 1949, pro- vided $32.8 million toward the cost of importing over 400 locomotives, boilers and other spare parts under a rehabilita- tion program. During the First Five-Year Plan period ( 1951- 56 ), freight carried by the railways grew by one-quarter, reach- ing 115 million tons in the final year. With the Second Plan, pressure on the railways mounted more rapidly; the investment program for the years 1956-61 had to provide for further increases of 50 per cent in freight traffic, and of 25 per cent in passenger traffic. Second Plan investments included the acquisition of about 2,400 locomotives, and many thousands of passenger cars and freight cars ; the replacement of 8,000 miles of rails and sleepers ; the doubling of well over 1,000 miles of track and the building of 800 miles of new track, improvements in yards and signaling equipment ; and electrification of certain main lines. Altogether this program cost the equivalent of $2,300 million, of which nearly a third was foreign exchange. Toward this foreign exchange cost the Bank has provided $295 million, in seven loans during the period 1957-60. The task accomplished under the Third Five-Year Plan was equally great. Rail freight traffic increased by more than a third, from 156 million tons to 206 million tons mostly in bulk commodities such as coal, iron ore, steel and cement, and passenger traffic by 15 per cent. A further 1,860 new locomo- tives, 8,400 passenger cars and 84,000 freight cars were ac- quired; 900 miles of new lines were added to the system, and large sums were spent on workshops, permanent way, traffic equipment and electrification. The foreign exchange cost of this Program was slightly lower than in the previous five years, as India itself could by then manufacture most of the equip- ment needed. Nevertheless, $510 million in foreign exchange was required. More than a third of this figure was provided by the World Bank Group. A loan of $50 million was made for the Railways by the Bank in 1961 , and IDA credits of $67.5 million and $62 million were extended in 1963 and 1964. 4  A further IDA credit of $68 million was made for the Indian Railways in June 1966. This credit will cover more than half of the foreign exchange required for the Railways' investment during the 13 months ending on December 31, 1966. During this period the Railways are investing the equivalent of $690 million, of which $116 million will be in foreign exchange. The continuing development program of the Indian Rail- ways is aiming at an increase in productivity and at a more efficient use of transport plant rather than at an extension of the network. The expansion undertaken during the Third Plan period, with the help of the World Bank Group, enabled the Railways to handle with ease the increased volume of traffic in recent years and, except for temporary local shortages, to cope with seasonal fluctuations . In the last five years the share of electric and diesel electric traction in goods movements increased from 10 per cent to 43 per cent. New automatic coupling and break- ing systems are now being tested, and their adoption will permit subst.a ntial increases in the weight of trains carrying bulk commodities. The Railways expect freight traffic to reach about 290 million tons by 1970/71. Passenger traffic is ex- pected to increase by 4 per cent annually as well. After making allowance both for monthly fluctuations in traffic and for unexpected increases, a capacity of about 320 million tons is planned to meet the projected 1970/71 traffic. Ports: Most of India's exports and imports, excluding iron ore, pass through the ports of Calcutta, Bombay and Madras. As the country's economy grows, the traffic they handle is increasing rapidly. The Bank has made three loans to help finance port improvements at Calcutta and Madras ; an IDA credit is help- ing to pay for improvements to the Port of Bombay. The Port of Calcutta is India's largest port for dry cargo. It serves not only India's largest city but also some of the most important industrial and agricultural regions in the country. 5  \ . The navigational difficulties created by shoaling of the Hooghly River necessitate continuous and large-scale dredging to main- tain access to the Port; despite this dredging, ships greater than 10,000 deadweight tons cannot enter the Port when fully loaded. The Bank's first loan for the Port was made in June 1958 to the Calcutta Port Commissioners, and amounted to $29 mil- lion. It helped to finance a rehabilitation program that relieved congestion and provided capacity to enable the Port to handle an additional two million tons of traffic each year. In July 1961 , with navigational conditions at their worst, the Bank made a second loan for the Port, this time of $21 million, with the main purpose of financing the purchase of dredges and other harbor service vessels. A part of the loan has also financed the foreign exchange costs of a hydraulic study of the Hooghly River which should help to find solutions to the prob· lem of siltation in the river. The study was undertaken by an Hydraulic Study Department, established for this purpose, which provides continuous guidance for dredging operations. The study confirmed that hydraulic conditions were satisfac- tory for building a satellite port downstream at Haldia to 6 accommodate larger draft vessels than can be accommodated in the existing Calcutta port. Madras is India's most important southern port and traffic there has been growing continuously. To help meet this in- crease, the Trustees of the Port of Madras borrowed $11 mil- lion from the Bank in 1958. This sum covered the foreign exchange cost of a major expansion program for the Port which was completed in 1964. It included a new dock with six berths, two new berths for coal and ore, improvement of a third berth for both passenger and cargo, and a new railway marshalling yard. Cargo traffic through Bombay, India's chief port on the west coast, has doubled in the past ten years. The number of passenger ships calling at Bombay has also increased. With a continuing increase in traffic in prospect, the Trustees of the Port are carrying out a five-year program to provide it with additional facilities. The program will provide a net gain of five berths, and includes the dredging of the main harbor channel. Part of the program's cost will be met by an IDA credit of $18 million, made in 1962, the proceeds of which are being made available by the Government of India to the Port Trustees. Airways: In March 1957, the Bank made a loan of $5.6 million to Air India International Corporation, as a part of a joint operation with five United States banks which at the same time extended credits totaling $11.2 million to the Corporation. Air India International Corporation is a government enterprise operating international air services. The purpose of the combined trans- action was to help finance the foreign exchange cost of buying three long-range jet airplanes, ten spare engines and other spare parts, a flight simulator and ancillary equipment. The new aircraft were delivered and put into operation in the first half of 1960. The Corporation has obtained additional financ- ing from private banks in recent years to assist in further expansion of its jet fleet. 7  Highways : Demand for road transport rose rapidly during the period of the Second Five-Year Plan, and continued to grow steadily dur- ing the Third Plan period. While the railways will continue to carry most of the long-distance and bulk freight, there is also a pressing need for an improved road network. An IDA credit · of $60 million , made in June 1961 , is being used mainly to build about 660 miles of highways, including 18 major bridges, in order to open up some of the less developed parts of India, to improve connections between important agricultural and industrial centers, and to relieve traffic congestion in the vicinity of Calcutta and Bombay. These works, located in some of the most densely populated areas of India, where 40 per cent of the country's vehicles are registered, should eliminate som~ of the major deficiencies in the 15,000-mile National Highways systems. The credit also financed a traffic and trans- port planning study in the Bombay Metropolitan Area. AGRICULTURE Despite the marked growth and diversification of industries in recent years , agriculture and related activities will account for almost half of the total national output. Increased agricul- tural production to meet the needs of India's rising population has b~en one of the basic objectives of the Five-Year Plans, and during the first two Plan periods ( 1951-61 ) agricultural out- put rose by about 35 % . During the Third Plan period ( 1961- 66 ), after three years of relative stagnancy, agricultural produc- tion went up by 10% in 1964/65. However, production was adversely affected in the following year due to the failure of the rains. One of the Bank's earliest loans to India, made in 1949, helped to pay for the import of equipment for land reclamation work in central India and for the experimental clearing of jungle lands. Subsequently, IDA has extended a succession of credits for agricultural development in several areas. In all, six credits 8 were made to help finance irrigation projects during the Third Plan period. A credit of $6 million made in September 1961 helped to drill and equip 800 tubewells supplying irrigation water for 320,000 acres of agricultural land in Uttar Pradesh, the most populous state in India and the source of about a third of the country's wheat and sugar and half of its barley. Three credits were signed in November 1961. One, of $8 million, is financing the Salandi project in Orissa in eastern India. It includes the construction of a dam on the Salandi River, a diversion weir, distribution canals and related struc- tures. When the project is completed , yields of rice, the main crop in the area, should rise, and new crops will be introduced. A second credit, of $4.5 million, is financing completion of the Shetrunji project for the irrigation of 86 ,000 acres in an arid but fertile area of Gujarat in western India. The main works involved are the construction of canals to distribute water stored by a recently completed dam. The third credit, of $10 million , is for flood control and surface drainage in the Punjab where flooding has caused major damage to crops, housing and communications in five out of the past eleven years . The credit has helped to finance a program of drainage works and embankments to relieve the situation over an area of some 8 million acres . A credit of $15 million for the Sane project in Bihar in north-eastern India will improve the irrigation service to about 733 ,000 crop acres , and make possible the irrigation of a further 273 ,000 acres. The project area, just west of Patna on the Sane River ( a tributary of the Ganges ), has been under irrigation for nearly 100 years . The existing diversion weir has deteriorated ; because of leakage and siltation it is being replaced by a new barrage, while the canal system will be remodeled and extended to over 1,600 miles. The sixth credit, signed in July 1962 and amounting to $13 million , is financing a project in the Purna River Valley of Maharashtra. This is a drought-stricken area in the western part of the Indian high pleateau; the project is expected to 9 make possible a sixfold increase in crop output in the area. It includes the construction of two dams-one at Yeldari and the other at Sideshwar-together with some 300 miles of canals to irrigate an area of about 152,000 acres. In addition, a 22,500-kilowatt hydroelectric station is being built at the Yeldari Dam. Each of these IDA credits for agriculture was extended in the first place by the Association to the Indian Government. The proceeds are then relent by the Indian Government to the State Governments concerned, the rates of interest ranging approximately from 4 per cent to 5% per cent per annum, and the period for repayment from 7 to 30 years. ELECTRIC POWER DEVELOPMENT Successive Five-Year Plans have assigned high priority to the development of electric power so as to ensure an adequate supply of power for expanding industry. Power generating capacity in India increased from 2.3 million kilowatts in 1951 (beginning of the First Plan) to some 8 million kilowatts 10 toward the end of 1965. The Bank and IDA have played an important role by providing $254 million for the development of power resources and to assist the development of regional transmission networks. Damodar Valley : The Damodar River drains a valley extend· ing north-westward some 300 miles from its junction with the Hooghly River near Calcutta. The Valley, with a population of between five and six million, has some of the richest mineral deposits in India. Over recent decades it has become a focal point for Indian industry and one of the largest manufacturing centers in Asia. A wide range of modern industries, including iron and steel, chemicals, cement, fertilizers and machinery manufacture, as well as the mining of coal, iron ore, mica, copper and other deposits, have developed in the Valley. In the late 1940's the Indian Government drew up a unified scheme to develop and distribute electric power, control flood- ing and improve irrigation in the Valley. Execution of the scheme was entrusted to the Damodar Valley Corporation ( DVC) , created in 1948 on the pattern of the Tennessee Valley Authority (TVA) in the United States. The Bank has extended three loans and IDA one development credit to help DVC in- crease its electrical generating capacity, a key factor in the industrialization of the Valley. In all, these loans and the credit have provided about $70 million toward DVC's power program. The first Bank loan , made in 1950, provided $16. 7 million for a project whose main feature was the construction of a large new thermoelectric power station at Bokaro. A second loan, in 1953, provided $10.5 million for multipurpose projects to provide flood control, irrigation structures and electric power. The third, in 1958, provided $22 million to finance the installation of further generating capacity at Bokaro (raising it to 225,000 kilowatts), and the construction of a new power station at Durgapur, together with additional transmission and distribution facilities . In 1962, an IDA credit provided $18.5 million to increase the capacity of the Durgapur station from 165,000 kilowatts to 305,000 kilowatts, and to expand DVC's transmission facilities. 11  Apart from the loans made directly to the Damodar Valley Corporation, Bank and IDA lending for railways and roads, for expanded steel and coal production , and for the improvement of the Port of Calcutta have greatly contributed to the indus- trialization of the Valley. The Bank has also made three loans, and IDA has extended one credit, for power in the Bombay-Poona region on the west coast. Electricity consumption in this region, well known for its textile industry and other manufacturing, is about ten times the national average on a per capita basis, and rationing has been made necessary by the heavy demand. Financing pro- vided by the Bank Group is helping to remove this serious obstacle to the growth of industry. Two loans, in 1954 and 1957, made available sums of $13 .9 million and $9.7 million . The borrowers were three private firms forming part of the Tata group of companies. The first loan helped to finance con- struction of a 125,000-kilowatt thermoelectric station on Trombay Island near Bombay; the second paid the foreign exchange costs of adding a third generating unit to give the plant a total capacity of 187,500 kilowatts. A third Bank power loan , of $18.7 million , made in 1959, covered most of the foreign exchange requirements of the first stage of the Koyna hydroelectric power project, 130 miles southeast of Bombay. The Koyna scheme is intended to pro- vide most of the additional electric power needed in the Bombay-Poona area during the 1960's, and is therefore of great importance to the development of the whole region. Its first stage, completed in 1962, incJuded the construction of a large dam, together with a 240,000-kilowatt underground power station and transmission lines. The second stage of the project, financed with the help of an IDA credit of $17.5 million signed in August 1962, is designed to increase Koyna's total capacity to 580,000 kilowatts. When completed, Koyna will be one of the largest hydroelectric undertakings in India, and will nearly double the electrical capacity available to the Bombay-Poona area. 12  The Bank and IDA have provided $34 million for an im- portant thermal power project about 5 miles from Kothagudem, near the center of the Singareni coal fields, in the State of Andhra Pradesh . A credit of $20 million made in May 1963 contributed towards the financing of the first part of this power station, which consisted of the construction of two 60,000- kilowatt units. A Bank loan of $14 million was made in June 1965 to help finance installation of two additional units of the same size. When completed, these will bring the station to its present planned capacity of 240,000 kilowatts. However, because of the station's location in the coal field, and its prox- imity to adequate circulating water supplies, the capacity could be expanded to provide 1,000,000 kilowatts or more. The project will relieve shortages that have severely handicapped the development of industry and agriculture in the State. In June 1966 IDA extended another credit equivalent to $23 million to assist in developing hydroelectric power on the River Beas and extending irrigation in the Punjab and Rajasthan. 13 This credit was part of the financial arrangements agreed at the time of the Indus Basin settlement between India and Pakistan in 1960. Transmission Network: Besides financing individual power projects, the Bank and IDA have assisted in the development of regional transmission networks. During the past few years there has been rapid development in India of transmission facilities to interconnect power sources within the States. Growth of industry under successive Five-Year Plans and the large investments required to provide for the accompanying rise in demand in electricity underlined the need to form regional grids to make the most economical use of electricity. During the Third Plan, the Government took steps to further integrate its power system by interconnecting the State grids to form regional networks . The Plan calls for the construction of about 30,000 miles of transmission lines. Some 22,000 miles have already been built or are under construction. The program involves an expendi- ture equivalent to $390 million, of which $120 million will be in foreign exchange. In June 1965, the Bank made a loan of $70 million to help finance the construction of 8,000 miles of transmission lines and the construction or extension of 300 substations. The balance of the foreign exchange cost is being met by various foreign loans and credits, including $25 million from the Bank and IDA as part of their financing of other power projects. INDUSTRIAL DEVELOPMENT Iron, Steel and Coal: India has all the raw materials required for iron and steel making. Major deposits of high grade iron ore occur in Bihar, Orissa, Madhya Pradesh and Mysore. Coking coal is found in ample quantities but with a high ash content in Bihar and West Bengal. Manganese, limestone and dolomite occur in various parts of the country. The late J. N . Tata, a well-known 15 industrialist, established as early as 1907 the first Indian steel works in Bihar. The expansion of the steel industry has been the centerpiece of the industrial programs included in the Second and Third Five-Year Plans. The Bank has lent $206 million, the largest amount that it has lent to any industry any- where, to assist the two private steel producers-the Indian Iron and Steel Company ( IISCO) and the Tata Iron and Steel Company (TISCO)-in expanding their output from 1.3 mil- lion tons in 1955 to 3.3 million tons of ingot steel, or to almost one-half of the total Indian steel production. Four loans have been made to IISCO. The first , of $29.2 million, was made in 1952 and enabled the company to expand its integrated steel mill in Burnpur in the Damodar Valley. This was also the Bank's first loan in the manufacturing field to be made directly to a private company with the guarantee of the Indian Government. A second loan of $19.9 million , made in 1956, helped to increase rolling mill capacity at Burnpur. Together, the two loans assisted the company in raising its capacity for producing ingot steel from 450,000 tons to over one million tons a year. In 1961 , a loan of $19. 5 million was made available to IISCO to provide the foreign exchange needed to increase the company's own coal production from 260 ,000 tons to 2.2 million tons annually, thus relieving prob- lems in securing reliable supplies of high-quality coking coal. IISCO's expansion in the 1950's resulted in surplus capacity in the Burnpur finishing mills , a type of imbalance often en- countered in the expansion of steel plants. A project being financed by a Bank loan of $30 million in June 1966 will make it possible for IISCO to utilize this excess capacity by increas- ing the output of the primary production facilities. Production of crude steel will be raised by 300,000 tons. During the fifties , TISCO carried out four major programs to modernize the company's facilities at J amshedpur in the Damodar Valley and to expand its annual ingot steel capacity from 1.1 million tons to 2 million tons. These programs were completed in 1961. Part of the foreign exchange cost of the 16 expansion programs was met by two Bank loans totaling $107.5 million made in 1956 and 1957. As a result of major expansion since the mid-1950's, the Indian steel industry has quadrupled its steel making capacity to a present level of almost 7 million ingot tons. The two private companies participated in this expansion, but the bulk of the increase came from three new Government-owned plants. Further expansion is under way and the capacity of India's five integrated steel works is expected to reach nearly 9 million ingot tons, or about 6.3 million tons of saleable steel, by late 1967. The Indian steel industry, both public and private, is looking to a further round of expansion during the next decade. In addition to being an important raw material for India's steel industry, coal is a major fuel both for the electric power industry and for the railways, as well as for other manu- facturers and domestic consumers. Despite an increase of over 40 per cent in the annual production of coal during the Second Five-Year Plan period, the industrial goals of the Third Plan required considerably higher coal production . In August 1961 , the Bank made a loan of $35 million (later reduced to about 17 $29 million) to provide the foreign exchange needed by I coal mining companies for equipment to expand their p tion of high-quality coal. A large number of private co: participated in the program. Industrial Imports: Within the last decade there has been considerable dE ment in India of manufacturing firms capable of proc sizeable quantities of capital equipment such as industri electrical machinery, construction equipment and comrr vehicles. Increased capacity in these industries has been high priority because of the rapid development of road port, the need for more electric power throughout the cc and the growing requirements for construction equipme many kinds of development projects. Because of the sbl of foreign exchange, however, manufacturers have not able to purchase all the imports they require to make ft of presently installed plant capacity. IDA has extended credits totaling $340 million to enable selected capital industries to import components and materials on a scale and thereby make fuller use of existing capacity. Th credit, of $90 million, was extended in June 1964 to companies manufacturing commercial vehicles, auton components, machine tools and cutting tools, electrical ( ment, and heavy construction equipment. Mainly as a res the credit, the total amount of foreign exchange allocat the Government for commercial imports in 1964-65 w creased for the first time in four years. There has already a substantial increase in production in all the sectors as by the credit. In August 1965, IDA extended a second of $100 million to finance imports received by firms fc production of commercial vehicles, industrial machinery, trical and construction equipment. A year later, IDA ext( anotheF credit of $150 million as part of a program suppc the Indian Government's measures to ease import control accelerate economic growth. The range of goods to be imp under the credit will be broad. As in the case of the pre 18 credits, the goods will include basic materials such as s copper and brass, as well as semi-finished products sud heavy steel casting and forgings, and a wide range of c ponents. But in addition to imports of this kind, the proc« of the third credit will be available for the purchase of 0 materials, such as sulphur and rock phosphate, required manufacturers of fertilizers and pesticides. The inclusio imports required by chemical fertilizer and pesticide firrr especially significant, since it reflects the new emphasis of Indian Government on scientific agriculture and inten farming techniques. The Industrial Credit and Investment Corporation of Ind Six Bank loans, made in 1955, 1959, 1960, 1962, 1963 1965 and totaling $140 million in all, have provided for exchange resources for the Industrial Credit and lnvestr Corporation of India (ICICI), a privately-owned developr financing corporation. ICICI was established in 1955 witl: World Bank's advice and assistance in order to promote growth of private industry in India. By helping the expan of private industry, ICICI's loans have contributed tm achievement of the objectives for industrial employment production embodied in the Second and Third Five-Year P: ICICI makes long- and medium-term loans and equity in ments. It has served to channel foreign exchange as we rupees into industry, and by its own underwriting activitiei helped to develop the Indian capital market. In its firs1 years of operations, ICICI provided nearly two hundred panies in India with well over $215 million in loan or s capital. Nearly half of these companies were newly establh and they were heavily concentrated in industries that werE new to India. Funds from the Bank's loans have been alloc to companies in many industries, including manufacture electrical goods, textiles, fertilizer, paper, glass and bui materials. In addition to its financial operations, ICICl contributed in other ways to the growth of private indust India. The high standards it requires in the preparatic 19 projects have already had a beneficial effect on Indian fi and industry. ICICI has been successful in mobilizing botl and foreign private participation in its financing operci It is estimated that ICICI's operations have resulted i mobilization of a total capital investment equivalent to $1,260 million, or nearly six times the amount of it~ approved investments. When all the projects now financed are in operation, ICICI estimates that they wi about Rs. 4 billion ( $840 million) a year to gross dor product and create over 100,000 additional jobs. ICICI is owned by private investors in India, Fi Germany, Japan, the United Kingdom and the United S Including the $140 million lent by the Bank at that ICICI's total resources amounted to the equivalent of million as of June 1965. IFC Investments: IFC has undertaken investment commitments totaling million in six industrial projects in the private sector. details are as follows : IFC Commit Type of Business in US Dol Assam Sillimanite, Ltd., (Refractory Bricks) ........... . ......... . 1,365,00 K.S.B. Pumps Ltd., (Pumps, Compressors and Valves) 210,00 Precision Bearings India Ltd. , (Bearings) ........... : . . . . . . . . . . . . . . . . . 897,05 Fort Gloster Industries Ltd., (Transmission Cables) . . . . . . . . . . . . . . . . . . . 1,210,80 Mahindra Ugine Steel Company Ltd., (Steel Products) . . . . . . . . . . . . . . . . . . . . . . . . . 3 ,450,00 Lakshmi Machine Works Ltd., (Textile Machinery) . . . . . . . . . . . . . . . . . . . . . 1,380,00 Total . . . . . . . . . . . . . . . . $8,512,85. 20 TELECOMMUNICATIONS India has only about 1.6 telephones per 1,000 of her pc compared with an average of 5 per 1,000 for Asia as av 50 for the entire world, and 300 to 400 for most highly c oped countries. The backlog of applications for new subsc services amounts to some 50 per cent of those installed. graph services in India are also faced with rapidly incre demands; four-fifths of all telegraph offices in the countJ still equipped with hand operated Morse code sounders' must be replaced by teleprinters to handle adequate!~ growth in demand. To reduce these deficiencies 400,00C telephone sets (increasing the total number to 810, 000) been installed during the Third Five-Year Plan. About : miles of coaxial cable have been added to the 300 mile~ existed when the program began and about 1,400 mil microwave radio links have been installed. Nearly 1, 700 of open telephone lines along railways that are being elect have been replaced by shielded underground cables. printers are being installed to step up the speed of transmi on trunk lines to the international rate of 66 words per mi The expansion program involves an investment of million. Two IDA credits totaling $75 million extended in and 1964 are providing two thirds of the foreign exch needed for the program. COORDINATION OF AID In 1958, the success of the Second Five-Year Plan threatened by an acute shortage of foreign exchange. ) was using up its foreign exchange reserves at a danger« rapid rate in order to maintain imports needed under the l Under the auspices of the Bank, representatives of five na (Canada, Germany, Japan, the United Kingdom and United States) met in Washington, D.C., in August 19~ discuss the situation. After these talks, the Bank and the ernments began bilateral negotiations with the Indian Go' ment in order to arrange for assistance to cover the fo1 22 exchange needs of the third year of the Second Plan. The B itself undertook to expand its lending for a series of projc in India. Similar arrangements for aid in the final two year the Second Plan and for the Third Five-Year Plan were m as a result of subsequent meetings of the Group which < tinued to be enlarged by the addition of other countries in ested in India's development. Later meetings have been l to review progress and to make further commitments. In all, members of the group have pledged a total of $5,. million of aid for the Third Five-Year Plan 1961/62-1965 as follows: ($ mil. equiv.) 5-Year Total AUSTRIA 18 BELGIUM .................. . 24 CANADA ................... . 173112 FRANCE ................... . 120 GERMANY ................. . 6441/2 ITALY ..................... . 170 JAPAN . . . . . . . . . . . . . . . . . . . . . . 290 NETHERLANDS .............. . 44 UNITED KINGDOM ........... . 518 UNITED STATES . . . . . . . . . . . . . . 2,285 WORLD BANK AND IDA . . . . . . . . 1,185 TOTAL .................. . 5,472 Staff from the World Bank Group and consultants emplc by it have continuously followed developments in the Irn economy, studied in depth its various sectors and offered vice and assistance to the authorities. Three internationally known bankers-Mr. Hermann J., Sir Oliver Franks and Mr. Allan Sproul-visited India Pakistan in early 1960 at the suggestion of the then Presi< of the Bank, Mr. Eugene R. Black, to gain first-hand imr sions of the current situation and prospects there. The t; bankers recorded their general impressions in a joint lew Mr. Black, in which they urged support for the developn programs of both countries, but warned of the many difficu 23 which must be resolved cooperatively between India Pakistan and the industrialized countries to which they looking for support. A special Bank mission headed by Mr. Bernard Bell pleted in 1965 an intensive study of the country's ecor position, in preparation for the Bank's appraisal of I1 Fourth Five-Year Plan (April 1, 1966 to March 31 , 197 TECHNICAL ASSISTANCE The Bank paid the foreign exchange costs amounti $862,000 of a study aimed at improving the transport o in India. The consultants submitted their report to the Ge ment and the Bank in 1964. The Bank also paid part of the costs of a study c feasibility of constructing a new crossing for road traffic the River Hooghly. A new crossing is urgently needed tor congestion on the famous Howrah Bridge, at present the link between Calcutta and the highly industrialized area west. The study by consultants was completed in 1965 estimated cost to the Bank of $87,500. In 1965, the Bank joined the Government of India in fi ing a survey of all modes of transport in the eastern reg the country in order to enable the Government to formu transport investment program for the Fourth and Fifth Year Plans (1966-1976). The Bank is paying the f• exchange costs estimated at $285,000. By August 1966, some 30 Indians had participated : various courses conducted by the Economic Development tute, the Bank's staff college for senior officials from deve countries whose work involves decisions on economic and the formulation of development programs or proje• 1964, the Institute joined the Indian Institute of ManagE Calcutta, in organizing a project evaluation course in . .for participants from four Asian countries. The Bank maintains a Resident Representative in New 25  BANK LOANS, IDA CREDITS AND IFC INVESTMENTS AS OF AUGUST 31, 1966 BY SECTOR Amount expressed in equivalent of U.S. Dollars IFC BANK LOANS IDA CREDITS INVESTMENTS TOTAL Amount Amount Amount Amount No. (thousands) No. (thousands) No. (thousands) No. (thousands) TRANSPORTATION t-.:> Cj) Railways .......•..• 9 $ 377,810 3 $197,500 - $- 12 $ 575,310 Ports .. . ... . ....... 3 61,000 1 18,000 - - 4 79,000 Roads ........... .. - - 1 59,500 - - 1 59,500 Aircraft . . . . . . . . • . . • 1 5,600 - - - - 1 5,600 ELECTRIC POWER . • • . . . 8 175,470 4 79,000 - - 12 254,470 INDUSTRY ... .... ... .. 13 374,890 3 340,000 6 8,500 22 723,390 AGRICULTURE ........• 1 7,203 6 56,500 - - 7 63,703 TELECOMMUNICATIONS - - 2 75,000 - - 2 75,000 - --- - --- d'nn~ e'n.n. ~ ....,,_ --- ~~ ....... --- ---  PHOTOGRAPHS Page 3. Relaying track on the Western Railway's system. Page 6. Shipping in the Port of Calcutta. Page 10. Tractors ploughing reclaimed land in Central India. Page 13. The Koyna darn-one of the largest hydroelectric proj- ects in India. Page 14. One of the many high tension pylons in the Damodar Valley-part of a regional grid. Page 17. The Burnpur Works of the Indian Iron and Steel Com- pany. Page 21. Early Construction work at the alloy steel plant of the Mahindra U gine Steel Company Limited (MUSCO). Page 24. Planting new trees besides the Maithon dam in the Damodar Valley.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H Street, N.W., Washington, D. C. 20433 U.S .A. Telephone number: EXecutive 3-6360 Cable address: INTBAFRAD Office for Europe: 4 , Avenue d 'Iena, Paris 16e, France Telephone number: KLEber 25-10 Cable address: INTBAFRAD