Announcement of One Hundred Fifty Million Dollar Industrial Import Credit to India on August 19, 1966

\ "\'.'° I\ I. 0 l',1, .c, t, • ,; • INTERNATIONAL DEVELOPMENT ASSOCIATION (~) 1818 H STREET, N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 66/14 Subject: $150 million industrial import August 19, 1966 credit to India The International Development Association (IDA), an affiliate of the World Bank, has approved a $150 million credit to India as part of a program supporting the Indian Government's recent steps to ea.se import c~ntrols and accelerate economic growth. The credit wil:. provide foreign exchange to meet a portion of the imports of components, materials, spare parts and other goods required to expand output from existing manufacturing capacity. Firms will benefit in in- • dustries producing commercial vehicles and automotive components, machine tools and cutting tools, electrical equipment including cable and wire, agricultural tractors, ball and roller bearinBs, industrial and mining machinery, fertilizers and pesticides, and basic non-ferrous metals. The IDA credit will be used for imports under licenses giving the firms concerned wide freedom to purchase in the way which best suits their needs. This will be the third IDA credit extended to India to assist selected industries in importing·goods essential for maintaining and expanding production. Similar credits were extended in June 1964 and August 1965. These earlier credits achieved their primary objective of expanding production in industries manufac- turing transport equipment and industrial machinery. It is clear that substantial further increases in production can be achieved from existing industrial facili- ties if additional imports of materials, components, spare parts and miscellaneous • equipment are available. This latest industrial import credit is larger than  ; . . • • - 2 - the two previous credits, and its proceeds will be available to several hundred firms in a wide range of fast growing manufacturing industries. In recent months the Indian Government has announced measures designed generally to ma.ke more efficient use of India's vast productive potential. These measures include a substantial reorientation of agricultural policy, a stepped- up campaign to restrain population growth and, in June this year, devaluation of the rupee along with first steps toward removal of administration controls over essential imports. In support of these new directions of policy, members of the Indian consortium, which operates under the chairmanship of the World Bank, have indicated. a readiness to help finance India's import requirements during this current fiscal year. The IDA credit approved today is part of the consor- tium's total contribution to India's needs this year. The total expected con- sortium support, together with other foreign exchange resources available to the Indian Government, should be sufficient to enable manufacturers to carry out • their production plans without the constraint imposed formerly by the shortage of imported production materials. Estimates on which this consortium support is based allow for a 30 per cent rise above 19hL/65 levels in the actual use of production imports, plus some allowance for the rebuilding of inventories. In its announced first step toward easing import controls, the Indian Govern- ment defined a list of 59 priority industries, accounting for about 80 per cent of industrial production. It is the Government's intention that these priority industries sho~ld get sufficient foreign exchange from now on to allow production at full capacity. • The range of goods to be imported under the IDA credit will be very broad • As in previous credits, the goods will include basic materials such as steel, ' • - 3 - copper and brass, as well as semi-finished pr.oducts such as heavy stee+ casting and forgings, and a wide range of components. But in addition to imports of this kind, the proceeds of the latest credit will be available for the purchase of other materials, such as sulphur and rock phosphate, required· by manufacturers of fertilizer and pesticides. The inclusion of imports required by chemical fe?tilizer and pesticide firms is specially significant, since it reflects the new emphasis of the Indian Government on scientific agriculture and intensive farming techniques. This IDA credit to India will be for a term of 50 years. Repayment· of principal will begin January 15, 1977, after a ten year period of grace. There- after 1 per cent of the principal will be repayable annually for 10 years and • three per cent will be repayable annually for the remaining 30 years. The credit will be free of interest but a service charge of three-quarters of one per cent per annum on the amount withdrawn and outstanding will be made to meet IDA's administrative costs. Including today's credit, IDA will have extended 20 credits to India totaling $826 million. In addition to the earlier credits for industrial imports, the other credits have bee~ made for the development of roads, railways, telecommuni- cations, irrigation, electric power and improvement of the Port of Bombay• •