Document of

The World Bank FILE COPYFOR OFFICIAL USE ONLY

Report No. P-28 13-IN

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO INDIA

FOR THE

KARNATAKA SERICULTURE PROJECT

May 14, 1980

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENT(as of May 12, 1980)

US$1.00 5 Rs 7.931277Rs 1.00 Rs 0.12608Rs 1 million = US$126,080

(Since September 24, 1975, the Rupee has been fixed againsta "basket" of currencies. As these currencies are nowfloating, the U.S. Dollar/Rupee exchange rate is subjectto change. Conversions in the Staff Appraisal Report weremade at US$1.00 to Rs 8.40, which represents the projectedexchange rate over the disbursement period.)

FISCAL YEAR

April 1 - March 31

ABBREVIATIONS

ARDC - Agricultural Refinance and Development CorporationCSB - Central Silk BoardCSRTI - Central Silk Research and Training InstituteDOS - Department of SericultureGOI - Government of IndiaGOK - Government of KarnatakaIDBI - Industrial Development Bank of IndiaKSIC - Karnataka Silk Industries CorporationKSSDI - Karnataka State Silk Development InstituteSA - Sericulture AssistantSD - Sericulture DemonstratorTSC - Technical Service Center

FOR OFFICIAL USE ONLYINDIA

KARNATAKA SERICULTURE PROJECT

CREDIT AND PROJECT SUMMARY

Borrower: India, acting by its President.

Beneficiaries: The State of Karnataka, the Agricultural Refinance and

Devevelopment Corporation (ARDC), the Industrial Develop-ment Bank of India (IDBI), Karnataka Silk IndustriesCorporation (KSIC), the Central Sericultural Research andTraining Institute (CSRTI), the Karnataka State Sericul-tural Development Institute (KSSDI), and three universitiesin the State of Karnataka.

Amount: US$54 million equivalent.

Terms: Standard.

Relending Terms: GOI to the State of Karnataka, the research institute andthe universities: financing in accordance with Borrower'sstandard arrangements for development assistance.

GOI to ARDC to refinance loans to silk farmers and reelers:

(a) GOI to ARDC, interest rate at 6% per annum inrespect of ARDC refinancing for up to 9 yearsand 6.5% for refinancing for up to 15 years.GOI to bear foreign exchange risk.

(b) ARDC to Participating Banks, interest rate at6.5% per annum for lending to small farmers 1/and 7.5% for lending to other borrowers. Install-ment repayments to coincide approximately withexpected collections of loans financed.

(c) Participating Banks to Borrowers, interest rateat 9.5% per annum to small farmers and 10.5% toother borrowers. Repayment periods to be based onborrowers' repayment capacity.

1/ Small farmers are defined as those cultivating land providing a pre-development net return to family income not exceeding Rs 2,000 annually

(based on 1972 prices).

I This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

- ii -

GOI to IDBI for lending to KSIC:

(a) GOI to IDBI, interest rate at 7% per annum for periodbetween 5 and 9 years and 7.5% per annum for periodbetween 10 and 15 years. GOI to bear exchange risk.

(b) IDBI to KSIC, interest rate at 9.5% for the first

Rs 20 million and 11% for the balance of loanamounts. Repayment period would be up to 10 years.

ProjectDescription: The project is designed to promote the integrated develop-

ment of sericulture in India. Its main objectives wouldbe: to increase raw silk production in Karnataka by 1,600tons per year, including a significant increase in highquality silk; to introduce modern processing facilitiesand methods to upgrade raw and spun silk to export quality;and to introduce the latest technologies from leadingsilk producing countries and to expand local research forthe longer term improvement of the silk industry.

Estimated Cost: (US$ Millions)Local Foreign Total

Credit for Silk Production 6.1 - 6.1Ccedit for Reeling 1.9 - 1.9

Dept. of SericultureGrainages & Hatcheries 19.5 0.1 19.6Technical Service Centers 10.3 - 10.3Training Schools 0.9 - 0.9Markets 3.0 - 3.0Filature 0.3 0.4 0.7Incremental Administrative Costs 3.1 - 3.1

KSICFilature 0.8 4.2 5.0Spun Silk Mill 2.1 7.8 9.9Headquarters and Workshop 0.7 - 0.7Net Incremental Working Capital 0.5 - 0.5Research 6.6 1.4 8.0Technical Assistance & Studies 0.4 2.2 2.6

TOTAL BASE COST 56.2 16.1 72.3

Physical Contingencies 3.0 1.4 4.4Price Contingencies 15.2 3.2 18.4

TOTAL PROJECT COST 1/ 74.4 20.7 95.1

1/ Includes US$6.6 million in taxes and duties.

Financing Plan: (US$ Millions)Local Foreign Total

IDA Credit 33.3 20.7 54.0

GOI/GOK 30.7 - 30.7

ARDC 3.5 - 3.5

IDBI 5.0 - 5.0Banks 0.9 - 0.9Farmers/Reelers 1.0 - 1.0

74.4 20.7 95.1

TOTAL

Estimated (US$ Million)Disbursement: FY81 FY82 FY83 FY84 FY85 FY86

Annual 3.0 8.0 16.0 14.0 12.0 1.0

Cumulative 3.0 11.0 27.0 41.0 53.0 54.0

Rate of Return: 22%

Appraisal Report: No. 2901a-IN dated May 14, 1980.

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO

INDIA FOR THE KARNATAKA SERICULTURE PROJECT

1. I submit the following report and recommendation on a proposed dev-elopment credit to India in an amount equivalent to US$54 million on standardIDA terms to help finance a project designed to develop sericulture in theState of Karnataka. The Government of India (GOI) would relend US$4.4 millionto the Agriculture Refinance and Development Corporation (ARDC) at 6% per yearfor lending to farmers for up to 9 years and at 6.5% per year for lending ofup to 15 years to refinance loans to farmers for silk farming and reeling;and US$9.5 million to the Industrial Development Bank of India (IDBI) at 7%interest per year for lending for up to 9 years and 7.5% for up to 15 yearsto lend to the Karnataka Silk Industries Corporation (KSIC) for modernizationand expansion of silk processing factories. GOI would bear the exchange risk.Of the balance, GOI would use US$5.5 million to implement technical assistance,overseas training and research programs, and would pass the remaining US$34.6million to the Government of Karnataka (GOK) in accordance with its standardarrangements for development assistance to the States of India.

PART I - THE ECONOMY 1/

2. An economic report, "Economic Situation and Prospects of India"(2431-IN dated April 9, 1979), was distributed to the Executive Directorson April 13, 1979. Country data sheets are attached as Aknnex I.

Background

3. India is a large, low-income country with 652 million people (inmid-1979) whose average income is US$180 per annum. The agricultural sectordominates the economy, employing over two-thirds of the labor force and con-tributing over 40% of value added. Although smallholder agriculture providesa fullsome subsistence to many, the land base is inadequate to provide allfamilies in rural areas with an adequate livelihood under current conditions,and many who are landless or nearly landless have only an insecure grasp onthe means of existence. Industrialization in India has not been rapid enoughto bring about the economic transformation that has led to higher productivity

* and rapid urbanization in some other countries. The urban population was 18%of the total in 1960, 20% in 1970 and is 21% now. The share of manufacturinghas grown slowly and since the late 1960s has remained roughly constant at16% of GDP.

4. Economic growth has been slow in the past, with GDP growing at atrend rate of 3.6% per annum from 1950 to 1975. Agricultural output grew at2.4% per annum over the same period. Slow growth in agriculture acted as a

1/ Parts I and II of the report are substantially the same as Parts I andII of the President's Report for the Kerala Agricultural ExtensionProject (Report No. P-2797-IN), dated May 1, 1980.

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drag on overall growth, not only because of its sheer weight in the total, but

also because of the need to use scarce foreign exchange to import food. Growth

in industrial output has been higher at 5.2% per annum between 1950 and 1975,

but not as high as in many other developing countries nor as high as can be

expected.

5. This slow growth has persisted despite a quite creditable domestic

saving and investment performance. Domestic saving has grown from 9% of GDP

in 1951 to the current high level of 24%. Gross domestic investment has risen

from 10% to 24% of GDP over the same period. Foreign savings have never

financed a large portion of domestic investment and have financed no more than

5% of investment since 1970. Foreign savings have been important in financing

imports, and a shortage of foreign exchange has acted as a constraint on the

economy for most of the period. External assistance has been low both as a

percentage of GDP and in per capita terms. Net external assistance is less

than 2% of GDP now, has never risen above 3% and fell to less than 1% in the

early 1970s. Exports have grown relatively slowly--5.4% per annum in USdollar terms and 2.8% per annum in volume terms between 1950/51 and 1975/76.

So far during the 1970s, exports have grown much more rapidly, by 18% per

annum in US dollar terms and 8% in volume terms over the period 1970/71 to

1976/77. During the same period imports grew by 17% per annum in US dollar

terms but only by 2% per annum in volume terms, reflecting a 28% fall in

India's terms of trade over the period.

6. Irdia has the capacity to grow and develop at a more rapid pace than

has been achieved so far. Although the industrial sector is small compared to

the size of the total economy, it nevertheless has a highly diversified struc-

ture and is capable of manufacturing a wide variety of consumer and capital

goods. Basic infrastructure--irrigation, railways, telecommunications, roads

and ports--is extensive compared to many countries, although considerable

gaps remain. India is rich in human resources and institutional infrastruc-

ture, although there is much scope for improvement. India is reasonably

well-supplied with natural resources, not only land and water but minerals,

including oil, gas and coal. With good economic policies and sufficientaccess to foreign savings, India should be able to manage these considerableresources to accelerate the longer-term growth trend.

Recent Trends

7. India has managed faster growth during the recent past. Growth of

GDP in 1978/79 is estimated to be between 3% and 4%; this is a strong perform-

ance coming on top of the previous year's 7.2% growth in GDP and considering

agricultural output grew less than 2%. Even this agricultural growth is

highly creditable given the previous years' record harvests in most crops.

Industrial output grew by 8-10% in 1978/79. Over the four years, 1975/76 to

1978/79, growth in real GDP, agricultural output and industrial output has

averaged 5.3%, 4.4% and 6.9% per annum, respectively. Although these rates

represent growth over the depressed base of the early 1970s, they are signi-ficantly higher than the longer-term past trend and comparable to the target

growth rates for the medium-term future. Buoyant domestic demand, stagnating

output and world inflation have led to significant increases in prices duringthe first half of the 1979/80 fiscal year. The wholesale price index for

September 1979 was 18.4% above that of the previous September. Together, the

rise in the prices of food products, crude petroleum and mineral oils accounted

for over two-thirds of the increase in the index. However, prices of almost

all commodities moved up significantly over this period as reflected in the

9.6% increase in the prices of the residual commodities. Government attempts

to regulate the supply and price of commodities like sugar and edible oils,

ceilings on credit, adjustment of some interest rates and the seasonal downturn

of the fruit and vegetable prices after summer helped the wholesale priceindex to level off after September. However, if allowance is made for the

seasonal factors, prices are still rising at approximately an 18% annual rate.

The Indian economy will no doubt continue to face inflationary pressure duringthe 1980/81 fiscal year. Its intensity will to a large extent depend on the

developments in world inflation, especially the rise in oil prices and India's

success in alleviating the supply bottlenecks that emerged during 1979.

Although the current inflationary pressures need not seriously impair medium-

term growth prospects, given available aggregate resources and production

capacity, significant improvements are likely to be required in the organ-ization of key sectors if an economic slowdown is to be avoided.

8. The 1978/79 foodgrain crop exceeded the 1977/78 record crop of

126 million tons, and many non-food crops did well. The 1978 monsoon rains

were timely and adequate, although severe flooding in some areas destroyedboth lives and property and ruined some crops. The basic inputs into agricul-

tural production continued their rapid growth of the recent past. Additions

to area under irrigation have doubled from 1.3 million hectares a year during

the five-year period ending 1973/74 to 2.6 million hectares a year during

1977/78 and 1978/79. Fertilizer consumption in 1978/79 reached 5 million

nutrient tons, an increase of 18% over 1977/78. This growth has been impres-

sive, particularly since it followed two successive years of very high growth--

18% in 1976/77 and 26% in 1977/78--so that fertilizer consumption in 1978/79

was 75% higher than in 1975/76. However, prospects for agricultural produc-

tion in 1979/80 are not good. India experienced a severe drought in 1979.

The monsoon was delayed and subsequent rainfall was deficient throughout the

country. Consequent damage to the kharif crop has been substantial. Tenta-tive estimates indicate a shortfall of 10-12 million tons in kharif crop from

last year's level of 78.7 million tons. Delayed sowing, lack of soil moisture,

low levels of water in tanks and wells as well as power cutbacks and recent

shortages in diesel fuel for irrigation pumps are adversely affecting the

rabi crop. Depending on the performance of the rabi crop, total shortfall

in grain crop is expected to be 10-12 million tons below the 1978/79 level.

9. The growth of industrial output in 1978/79 came from a sharp risein the output of food industries, particularly sugar, a modest increase intextiles, important increases in the hitherto depressed engineering sector

and the revival of demand for consumer durables. Production would have been

still higher but for recurring shortages of steel, coal, railway wagons and

electric power and capacity constraints in fertilizer, cement, vegetable oils

and petroleum products. Labor unrest also constrained output in some indus-

tries, particularly in textiles, steel and mining; man-days lost in 1978 ex-

ceeded the high level of 1977 and only in 1974 were the number of days lost

higher. Power production increased by 12% but continuing shortages in many

States necessitated power cuts and curbs on new demand. During the first

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half of 1979/80 supply bottlenecks in basic industrial inputs began to retardoverall industrial production. In addition to coal and steel, cement, sugar,cotton textile and cotton yarn output fell below last year's levels. Strongdemand has continued to sustain other important industries such as fertilizersand chemicals, but it appears increasingly unlikely that these can counter-balance the constrained sectors.

10. The trade deficit grew and both the current account surplus and thebalance of payments surplus of recent years shrank in 1978/79. The import billis expected to reach US$8.4 billion, which brings the average rate of increasein US dollar terms to 19% per annum since 1976/77. Non-foodgrain imports roseeven more dramatically by 28% per annum over the past two years. The growthof imports and the liberalization of import control policies represents adesirable adjustment to enhanced foreign resources. Although exports grewmuch faster during the 1970s through 1976/77 than earlier, export growth in1977/78 and 1978/79 has slowed somewhat. After rising by 12% in 1975/76and 23% in 1976/77 in US dollar terms (virtually all growth in export volume),export earnings rose by only 9% in 1977/78 (with little or no volume growth)and an estimated 8% in 1978/79 (with 5-8% volume growth). Although partof the decline is attributable to unfavorable conditions in foreign markets,export profitability has been allowed to deteriorate somewhat. With net invi-sible receipts in 1978/79 estimated the same as in 1977/78--US$2 billion--thewidened trade deficit resulted in a significantly reduced current accountsurplus, from US$1 billion in 1977/78 to US$400 million in 1978/79. Despitesome increase in net aid disbursements from their low level in 1977/78, theincrease in reserves declined from about US$2 billion in 1977/78 to about

US$1.5 billion in 1978/79 to reach US$7.4 billion. Exports during the firstthree months of this fiscal year are 32% higher than the same quarter of lastyear. Imports in the first quarter of 1979/80 are around 7% higher than thesame period of the previous year. However, the impact of recent increasesin petroleum prices are only partially reflected in this figure. India'stotal POL import bill for 1979/80 is likely to reach $3.2 billion, $800 millionhigher than earlier estimates. As a result, there should be a sharp decelera-tion in the rate of growth of reserves sufficient to significantly reduce thenumber of months of imports covered by reserves during 1980.

Development Prospects

11. The faster growth of the recent past has been made possible by themuch-increased inward flow of foreign exchange from increased exports, workers'remittances and external assistance; greatly improved agricultural performance;the impressive saving effort; the liberalization of import controls; and ex-panded public expenditure on development programs. Although sustaining thehigh growth rates of the recent past in the medium-term is by no means assured,especially if there is a repeated drought in 1980, India has a level of re-sources with which to manage the economy that had not existed before. Thecomfortable foreign exchange position, and the large foodgrain stocks havegreatly eased the pressures to deal with short-term crises and freed India'seconomic managers to continue planning a more ambitious course for the economy.The policy improvements needed to achieve the better performance now possiblehave begun in some important areas but in others have yet to be initiated.

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12. The Draft Plan, which was released in March 1978 and is expected

to be finalized and approved by the National Development Council later thisyear, sets out India's development strategy for the five years 1978/79 to1982/83. The principal objectives of the Draft Plan are to achieve within

a period of ten years: (i) the removal of unemployment and significantunderemployment, (ii) an appreciable rise in the standard of living of the

poorest sections of the population, and (iii) provision by the Government of

some of the basic needs of the people in these low-income groups. While the

Plan recognizes the importance of achieving more rapid expansion of the economythan in the past to meet the employment and welfare objectives, the targeted

rate of growth at 4.7% per annum is lower than projected in most earlier Plans.According to the planners, this reflects in part the increased emphasis given

to the distribution rather than the level of income generation, and in part

the need for greater realism in the macro-economic assumptions underlying the

Plan. While the trade-off between growth and distribution is not immediatelyobvious from the Plan model, the adoption of a more realistic growth target

is in itself well justified -- even at 4.7% per annum, the targeted growthrate is higher than actually achieved during any of the previous Plan periods,and is substantially above the longer-term trend growth rate.

13. In agriculture, despite the 1979 drought, economic policies, dev-

elopment programs and secular trends all seem favorable for resuming a period

of sustained high growth after 1979/80. Fertilizer prices have been reducedprogressively from their very high level in early 1975 and despite some fall

in market foodgrain prices, the fertilizer: foodgrain price ratio has fallento a clearly profitable range. Good harvests and higher farm incomes provide

the money to finance higher fertilizer purchases, creating something of avirtuous circle. Pricing policies for many crops--rice, wheat, sugarcane,pulses and others--have concentrated recently on supporting prices to maintain

incentives to farmers rather than trying to administratively control prices

to contain inflation. The ambitious irrigation and rural electrificationinvestment program in the new Five-Year Plan, if fully funded, will help pro-vide the water control needed to increase yields directly and to induce further

productivity-increasing investments. The effective reorganization of theagricultural extension service will raise yields as it takes hold graduallyacross India. Finally, there are several heartening trends in foodgrain pro-duction: one is the steady growth of area planted to high-yielding varietiesof rice; another is the growing adoption of summer rice cultivation in thetraditional wheat-producing areas (Punjab and Haryana). These two trendsalong with the other favorable developments have caused rice production torise impressively in the last two years. Another good omen for foodgrainproduction is the rapid growth of winter wheat cropping in traditional rice

areas (West Bengal, Assam and Orissa).

14. In industry, despite some uncertainty in industrial policy andthe lack of strong policy stimulus to improve efficiency in the industrialstructure, recently strengthened demand forces, increase in planned invest-ment along with adroit input supply management should allow the industrial

sector to continue to grow at the improved rate of the recent past, at least

for the near- and medium-term future. Over the longer term, growth of indus-

trial production at or above the rate experienced in the recent past--e.g.,

7% per annum during the last four years--will require some changes in policy

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to induce a more efficient industrial structure. Recent industrial policieshave sent mixed signals to private manufacturers and investors. Some, such asreserving certain lines of production for small-scale enterprises or prohibit-ing the location of new firms in municipal areas, have been restrictive.Others have been stimulative, such as the raising of the exemption limit ofindustrial licensing for capital investment or favorable adjustments in thepricing and production controls in several major industries, including cement,steel, and textiles. In addition the liberalization of import controls is ofconsiderable benefit to increasing industrial production. However, there aresome worrisome supply shortages that are currently threatening continued rapidindustrial growth. Many can be handled through imports, if needed, as longas India maintains a healthy foreign exchange position. However, two supplyconstraints likely to persist in the future -- namely, rail transport andpower -- cannot be eased through imports. The new Plan contains a major powerinvestment program to increase capacity rapidly. The railway investment pro-gram is more modest. Another crucial input into both of these sectors, andinto most other major sectors, is coal, whose supply needs careful management.

15. The main reason for expecting sustained growth in industrial pro-duction is improvement in demand prospects for each of the four major sourcesof industrial demand. The first is market demand for manufactured consumptiongoods, which is expected to pick up in response to the increase in disposableincome due in particular to improvement in agricultural output. Although itseffect has been delayed somewhat, this broad-based demand is finally makingitself felt and is eypected to continue into the future unless the growthin agricultural output is constrained by repeated droughts. Another sourceof demand is public expenditure on development projects, which has grown ina major way in the last few years and is scheduled to continue to grow underthe new Five-Year Plan. A third source of growth is export demand for indus-trial goods. There has been a sustained growth in the export of manufacturessuch as engineering goods, garments, gems, finished leather and some chemicalproducts. This export growth should continue in the future with proper policysupport. A final source of growing demand is private investment by both thehousehold and corporate sectors. There are as yet only a few signs of thisgrowth, such as increased disbursement by term lending institutions and in-creased use of inputs; investments should become stronger as growth in theother sources of demand continues and as capacity limitations begin to con-strain production in more industries. The net result of increasing demandshould be continued high growth in industrial production in the near andmedium term within existing policies.

16. Import policy is an area where there has been significant improve-ment in the recent past; but some improvement in export policy is requiredto raise incentives to export. India has liberalized import control policysignificantly in the past two years and imports have responded. Future growthin imports, and in the benefits of price stability, enhanced production andincreased efficiency which imports bring, will depend to a great extent onhow the now liberalized policy is administered. A delicate touch is requiredto yield the benefits without bringing about undesirable damage to vulnerableindustries. India has the foreign resources to allow imports to grow at therapid rates of the past two years for a few more years and continue to relaxthe very severe restraints imposed on the economy during the early 1970s by

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suppression of imports. But, given the import liberalization undertaken so

far and the expected growth of imports, by the end of the Plan period (1982/

83), foreign exchange reserves will have fallen to six months of imports, or

less, and some adjustment in the balance of payments will be required. Part

of the adjustment will very likely be a reduction in the growth rate of

imports; the import bill need not grow 15% in volume terms indefinitely to

sustain the target growth in GDP. Part of the adjustment must come from the

achievement of a growth rate of exports,in the vicinity of 7-8% or higher in

volume terms. Faster export growth is needed not only to provide the foreign

exchange to sustain the rapid growth in imports but also to allow foreign

demand and competition to improve the efficiency of Indian industry. Finally,

part of the adjustment should come from an increased net transfer of external

assistance.

17. India's population policy continues to aim at reducing the birth

rate to 30 births per thousand people by 1983 through completely voluntary

acceptance of fertility control methods supplied by a family welfare system

integrated with the supply of basic health, maternal and child health and

nutrition services. Since 1977, the family planning achievements in terms

of number of acceptors have been below that needed to achieve the 1983 goal

or even to keep the birth rate from rising above its current level. The low

performance is primarily the result of the reaction to the harsh birth control

policies introduced during 1976. Since then family planning performance has

been gradually returning to the rising trend which was discernible before it

was disrupted by the intensive drive of 1976/77. Given continued support for

the program of family welfare, Bank estimates indicate that India's rate ofpopulation increase should remain below 2% per annum and fall to 1.5% by about

the year 2000. Despite the declining trend in the rate of population increase,a net reproduction rate (NRR) equal to one (replacement level) would only be

achieved around the year 2020. At this time, the total population is estimated

to reach 1.2 billion persons, an increase of about 84% over the mid-1979 level

of 652 million.

18. In addition to stimulating overall economic growth and constrainingpopulation growth, reduction of poverty in India requires special attentionto ways of raising the income and productivity of low-income groups. More than

one-third of the world's poor live in India and more than 80% of the Indian

poor belong to the rural households of landless laborers and small farmers.

The prospects for alleviating their poverty by providing these families with

more land are not good because of the virtual absence of uncultivated arable

land, the slow progress in implementing land reform and the limited amount of

land that would be available if land reform were carried out. Estimates of

the amount of land that would be available if land reform were carried out varygreatly. One estimate is that there would be about 9 million hectares avail-

able for distribution. This compares to roughly 45 million families in the twopoorest groups in rural India: landless families and families owning less than

one hectare of land, whose average holding is 0.31 hectares. An approach to

the amelioration of poverty more promising than land reform is the creation

of more employment opportunities for the landless and small farmers in rural

areas. Although the basic thrust must come from the market by a more rapidly

increasing agricultural output, there will be a role for employment-intensiverural works programs. The new Plan provides for increased rural employment

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both through direct employment schemes and through ambitious programs of

investment in rural infrastructure in addition to the more general rural

development programs.

PART II - BANK GROUP OPERATIONS IN INDIA

19. Since 1949, the Bank Group has made 57 loans and 118 developmentcredits to India totalling US$2,529 million and US$7,255 million (both net

of cancellation), respectively. Of these amounts, US$1,055 million had

been repaid, and US$3,226 million was still undisbursed as of March 31, 1980.Bank Group disbursements to India in the current fiscal year through March 31,1980, totalled US$517 million, representing an increase of about 44% over thesame period last year. Annex II contains a summary statement of disbursementsas of March 31, 1980, and notes on the execution of ongoing projects.

20. Since 1959, IFC has made 18 commitments in India totalling US$72.5million, of which US$17.4 million has been repaid, US$7.6 million sold andUS$6.9 million cancelled. Of the balance of US$40.6 million, US$31.5 mil-lion represents loans and US$9.1 million equity. A summary statement of

IFC operations as of March 31, 1980, is also included in Annex II (page 5).

21. In recent years, the emphasis of Bank Group lending has been onagriculture. The Bank Group has been particularly active in supporting minorirrigation and other on-farm investments through agricultural credit operations

and in providing direct support to major and medium irrigation. Marketing,seed development, agricultural extension, and dairying are other agriculturalactivities supported by the Bank Group. Also, the Bank Group has been activein financing the expansion of output in the fertilizer sector and, through itssizeable assistance to development finance institutions, in a wide range ofgeographically scattered medium- and small-scale industrial enterprises. IDAfinancing of industrial raw materials and components for selected priority

sectors has been instrumental in facilitating better capacity utilization inindustry. The Bank Group has also been active in supporting infrastructuredevelopment for power, telecommunications, and railways. Family planning,water supply development, and urban investments have also received Bank

Group support in recent years.

22. The direction of assistance under the Bank/IDA program has beenconsistent with India's needs and the Government's priorities. The emphasisof the program on agriculture, power, water supply and other infrastructuresectors remains highly relevant. Projects designed to foster agriculturalproduction through the provision of essential inputs, particularly water andcredit for on-farm investments, will continue to receive emphasis. Improvedwater management and intensification and streamlining of extension systemsform an important institution-building aspect of the Bank Group's program forthe next several years. Special emphasis will be given to projects benefit-ting small farmers. The Bank Group's continuing role in the fertilizer sectoralso assists India in the more efficient provision of another key input inthe agricultural growth process. Projects supporting water supply, sewerage,and urban development also form an integral part of the Bank's lendingstrategy to India for the next several years. Lending in support of infra-structure and industrial investments will focus on those subsectors which have

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recently emerged as key constraints on India's overall growth, primarily powerand transportation.

23. The need for a substantial net transfer of external resources insupport of the development of India's economy has been a recurrent theme ofBank economic reports and of the discussions within the India Consortium.Thanks in part to the response of the aid community, India successfullyadjusted to the changed world price situation of the mid 1970s. However,the need for increased foreign assistance to adjust to an even greater deter-ioration in balance of payments prospects during the 1980s by augmentingdomestic resources and stimulating investment, remains. As in the past, BankGroup assistance for projects in India should include, as appropriate, thefinancing of local expenditures. India imports relatively few capital goodsbecause of the capacity and competitiveness of the domestic capital goodsindustry. Consequently, the foreign exchange component tends to be small inmost projects. This is particularly the case in such high-priority sectorsas agriculture, irrigation, and water supply.

24. India's poverty and needs are such that as much as possible ofIndia's external capital requirements should be provided on concessionaryterms. Accordingly, the bulk of the Bank Group assistance to India has been,and should continue to be, provided from IDA. However, the amount of IDAfunds that can reasonably be allocated to India remains small in relationto India's needs for external support, and India should be regarded as credit-worthy for some supplemental Bank lending. The ratio of India's debt serviceto the level of exports was 12% in 1978/79 and is projpcted to remain below20% through 1995/96. As of March 31, 1980, outstanding loans to India heldby the Bank totaled US$1,516 million, of which US$556 million remained to bedisbursed, leaving a net amount outstanding of US$960 million.

25. Of the external assistance received by India, the proportion con-tributed by the Bank Group has grown significantly. In 1969/70, the BankGroup accounted for 34% of total commitments, 13% of gross disbursements,and 12% of net disbursements as compared with an estimated 62%, 27% and 38%,respectively, in 1978/79. On March 31, 1979, India's outstanding and dis-bursed external public debt was US$15.3 billion, of which the Bank Group'sshare was US$4.6 billion or 30% (IDA's US$4.0 billion and IBRD's US$0.6 bil-lion). Because Bank Group assistance to India is predominantly in the formof IDA credits, debt service to the Bank Group will rise slowly. In 1978/79,about 17.5% of India's total debt service payments were to the Bank Group.

PART III - SERICULTURE IN INDIA

General

26. Sericulture holds an important place in the Indian economy. Nearlyfour million people are engaged in plant cultivation (mainly mulberry), silk-worm egg production and rearing or in the predominantly small-scale reelingand weaving of silk. In 1977, about 131,000 ha of land were under mulberrycultivation. India ranks fifth among silk producing countries after Japan,the People's Republic of China, Korea and Russia. In 1978, India produced3,700 tons of raw silk, used to manufacture fabrics with an estimated value

- 10 -

of US$200-250 million. Since silk is rooted in Indian social tradition, the

domestic market is strong and uses most of the production. Exports, mostlyfabrics, have expanded, particularly over the last five years, and were valuedat about US$45 million in 1978.

27. Four silk varieties are produced in India - mulberry, tasar, eriand muga - which are derived from silkworm varieties feeding on leaves ofdifferent plants. Of these, mulberry silk, representing the bulk of inter-

nationally traded silk, constitutes about 85% of the total silk produced inIndia. About 75% of the Indian mulberry silk is produced in Karnataka.

28. Sericulture is highly labor-intensive. Development of sericulture,therefore, accords well with the Government of India's priorities for alleviat-ing unemployment and rural poverty. The time is propitious for expandingsericulture in India, since production is dropping in leading producer coun-tries, notably Japan and Korea, due to high seasonal labor requirements and

costs. India also has a greater amount of suitable land available for seri-culture than does Japan, and has an additional advantage of year-round produc-tion (up to seven silkworm rearings) compared to seasonal production (twoor three rearings annually) in temperate countries. Consequently, GOI hasincluded several sericulture development programs in its Draft Sixth Plan(1978-83) aimed at doubling production and exports.

Mulberry Cultivation

29. Mulberry is a hardy and drought-resistant tree, tolerating most soilconditions other than poor drainage, and, because of a range of varieties, itgrows well at altitudes from sea level to 1,500 meters. Established by cutt-

ings, the first crop of leaves is harvested five to six months after planting.Harvesting under rainfed conditions in India is seasonal and tails off duringthe dry season between November and June, whereas under irrigation five

harvests at roughly 10-week intervals are customary. The crop responds wellto inputs and good cultivation practices, as evidenced by an average yield

of 3,000 kg/ha of leaves under rainfed conditions compared to commonly obtainedyields of 30,000 kg/ha with a full package of improved practices under irriga-tion. Pests and diseases cause few problems.

30. Mulberry farming, combined with silkworm rearing, is more profitablethan any other crop in silk-producing areas, particularly those under irriga-tion. Furthermore, continuous harvesting throughout the year is an attractionas it produces steady cash income to the farmers. However, it requires a veryhigh labor input and careful management. As a result, most silk farmers haveless than one hectare of mulberries. The production of mulberry can beimproved by the use of improved high-yielding varieties.

Silkworm and Silkworm Rearing

31. The nucleus of the sericulture industry is the "grainage" whereeggs of selected silkworm varieties are produced under controlled hygienic

conditions for sale to sericulturalists who hatch them and rear their result-ing silkworms to produce cocoons. In a grainage, selected seed cocoons arekept in a controlled environment to synchronize the emergence of moths from

- 11 -

cocoons of different races for egg layings. The eggs are then examined for

disease, and only disease-free eggs are issued to the sericulturists for rear-ing. For the first 26-28 days after their hatching the farmers feed the silk-

worms with mulberry leaves; during this time the worms grow to about 10,000

times their birth weight. At the end of this phase of their life-cycle, theworms stop feeding and are transferred to cocooning frames. There each worm

ejects a silk filament which it spins around itself to form a cocoon. Each

comprises a single unbroken filament, the quality of which--determined bylength, thickness and weight--depends on the genetic quality of the worms,

rearing method and quality of the leaves fed to them.

32. Tropical silkworms, including traditional Indian varieties, are

multivoltine and produce several generations of worms in a year. Temperate

silkworms, from Japan and Europe, are uni- or bivoltine having only one or

two generations per year. Their eggs remain dormant for some months to allow

over wintering, but there are artificial means of terminating dormancy, so

that they too can be grown throughout the year. Multivoltine varieties ofworms spin an average of 400 meters of continuous filament, but in the case

of bivoltine hybrids average lengths of 1,500 meters are common. In India,particularly in Karnataka, increased efforts have been made over the lastdecade to improve silkworm varieties, and the success in introducing andacclimatizing bivoltine varieties represents a significant advance in Indian

technology.

Cocoon Marketing and Processing

33. About five days after cocoon formation, farmers sell cocoons to

reelers. Formerly, reelers purchased cocoons from farmers either directly or

through agents. But in recent years most sales take place at State-regulatedcocoon markets. In Karnataka, 85% of the cocoons pass through such markets.

34. Before reeling takes place, the pupa inside the cocoons must bekilled; otherwise, on the tenth day, the worm transforms into a moth and

emerges from its cocoon, cutting the continuous filament. Traditionally,the pupa is stifled by steaming the cocoon, but in more modern processing hot

air is used. By joining eight to ten filaments together, silk yarn of standardthickness is produced in the process called reeling. Small producers use thetraditional 'charkha' or improved equipment termed cottage basins for thispurpose. Large factory-type units known as filatures are used on an indus-trial scale. The yarn is treated on 'twisters' for increasing its tension,

and sold to weavers. Waste material from the cocoons, once the filament isremoved, is used for making spun silk yarn.

35. The amount of silk obtained from cocoons and its quality are lowin India compared to other major producers. For instance, in Japan 5 to 6 kgof cocoons yield one kg of silk, while in India 12-16 kg of cocoons arerequired. The quality of charkha silk is lowest but finds a ready market withhandloom weavers. Even the silk from filatures is below international market

standards. Reasons for low quality include the poor varieties of silkwormsand obsolete reeling equipment. Raw silk is sold to silk merchants who inturn sell it to silk weavers. About 150,000 handlooms or small-scale powerloomenterprises are engaged in production of silk fabrics, mainly saris. Silk waste

- 12 -

is purchased by merchants partly for resale to the three publicly owned mills

in India and partly for export.

Government Programs

36. Silk production is a State responsibility handled by State indus-

tries ministries. The Central Government is involved through the Central

Silk Board which is responsible to the GOI Ministry of Industries. The Board

advises GOI on policy and development programs, and is responsible for silk

imports, export quality control, and for assisting States with production

programs. In addition, the Board is responsible for silk research and some

training; it operates four central research stations, seven regional stations

and about twenty extension centers in fourteen different States. GOI's

financial provision for these activities increased from US$550,000 in the

First Five-Year Plan (1951-56) to US$30 million in the Fifth Plan (1974-78);

US$190 million is targetted in the Draft Sixth Plan (1978-83).

Mulberry and Silk Research and Technology

37. Modern integrated sericulture research began in India in 1961 after

the Central Sericultural Research and Training Institute (CSRTI) at Mysore

was established under the Central Silk Board. The Institute has a team of

40 scientists and 45 technicians working on mulberry and silkworm improvement,

a modest reeling and fiber technology program, and a post-graduate training

program for field officers. The research and extension centers under the

Institute perform the triple functions of applied field research, advising

extension staff and farmers and feeding back farmers' problems into the

research pipeline.

38. Research results have been impressive. In mulberry improvement, a

high-yielding and more nutritious variety has been evolved, together with a

package of cultivation practices which has found ready acceptance by farmers.

In silkworm improvement, local varieties have been improved and bivoltine

varieties and hybrids have been successfully adapted. To improve rearing of

bivoltine varieties, communal hatcheries have been introduced for operation

under Government supervision. Despite these impressive successes, there is

a considerable gap between silk yields per hectare in India (40-50 kg/ha of

irrigated mulberry) and Japan (over 120 kg/ha of rainfed mulberry). To ensure

longer-term growth of the industry, research activities need considerable

strengthening and Indian researchers would benefit from more contacts with

their foreign counterparts.

Sericulture in Karnataka

39. The State of Karnataka, situated in Southwest India, has a popula-

tion of about 30 million and a cultivated area of about 10 million hectares

(of which 1.35 million ha are irrigated). Foodgrains, including rice, sorghum

and millets, occupy half the cultivated area, and production has been adequate,

for some years, to meet the State's food requirments. With the State's climatic

range of humid tropical coasts to more temperate upland areas, Karnataka has

a large range of cash crops including cotton, groundnuts, sugarcane and horti-

culture crops. The State produces over 60% of India's silk. The topography

- 13 -

and climate are ideal for sericulture which was introduced in the State some200 years ago. Sericulture is now practiced by 200,000 farmers and providesemployment for about two million people in the State.

40. The mulberry area is estimated at about 110,000 ha, of which about30,000 ha are irrigated and 4,000 ha are under the improved M5 variety. It islargely confined to Bangalore and four adjacent districts. However, over thelast five years mulberry plantation has extended to other parts of the State,and 1,000 ha have been planted in such new areas. The total mulberry areaincreased from 43,000 ha in 1951/52, to 106,000 ha in 1977/78. Similarly, silkproduction has increased from 727 tons in 1951/52 to 2,300 tons in 1977/78.Yields range from 190 kg of cocoons from each hectare of mulberry plantation inrainfed areas in Mysore District to close to the Japanese yield of about 600 kgfrom one hectare of mulberry in some irrigated areas. Improved technology insericulture has only become available in the last three or four years. Cocoonyields of 800-1,000 kg per hectare of mulberry in some intensively staffedvillage scheme areas have proved the value of the new technology. Its large-scale adoption requires intensification of research and advisory services,increased production of improved seed and introduction of improved reelingtechnology.

41. The Department of Sericulture of the Government of Karnataka (GOK),with a professional and technical staff of 2,000, plays a key role in allaspects of raw silk production in the State, and provides production, advisoryand cocoon marketing services. In addition, the Department fulfills regulatoryfunctions, particularly in the fields of silkworm egg production and cocoonmarketing. It also used to operate an industrial wing, comprising seven fila-tures (silk reeling factories), a twisting plant, a spun silk factory and asilk weaving factory, which has recently been transformed into a GOK Corpora-tion to operate commercially.

42. The Department operates 74 silk farms (average size 10 ha) and 80grainages that provide farmers with disease-free silkworm eggs. In silkfarms, breeder silkworm stock are multiplied and provided to closely super-vised farmers for further multiplication. In departmental grainages cocoonsfrom such farmers are collected for egg production in controlled aseptic con-ditions. The Department sells eggs to farmers at prices which cover grainageoperating costs. In 1979, about half of the 160 million layings used inKarnataka came from departmental grainages and the rest from 833 licensedprivate grainages. The private grainages also obtain cocoons from GOK super-vised farms but quality control is below the standards of the departmentalgrainages and thus the product is of variable quality. Due to increasingdemand, departmental production is expanding rapidly, but departmental grain-ages lack modern facilities and the Department needs additional staff toallow appropriate supervision of their operations.

43. Technical services so far have been sufficient to raise yields onlyslightly although they have been effective in preventing any catastrophicdisease outbreak. Recently, however, the Department has established a systemof serving the industry that has been successful and appears to be the way ofachieving greater inpact in the future. The system is based on a technicalservice center staffed by a sericulture assistant who supervises eight seri-culture demonstrators. About 12-13 communal hatcheries are attached to each

- 14 -

center. Each demonstrator is expected to visit each of the 100 farmers in his

area of responsibility, once every four days while rearing is in progress and

supervise one or two hatcheries. About 60 technical service centers and 640

hatcheries have been established but require additional equipment and staff.

44. GOK introduced regulated cocoon marketing under 1959 legislation,

and the Department operates 22 cocoon markets at which cocoons are sold by

auction under Departmental supervision. Farmers prefer this type of marketing

to direct trading. Designed for 10,000 tons, the markets already handle about

30,000 tons of cocoons. Therefore, there is an urgent need to expand the

markets. Reeling is predominantly a cottage industry. About 10,000 charkhas

and 7,500 cottage basins account for 90% of all reeling, with the balance

processed mostly in government filatures. Until 1957, charkhas were predom-

inant, but in that year GOK introduced a 50% capital subsidy for establishing

cottage basins to improve quality. As a result, cottage basins now exceed the

output of charkhas.

45. Credit for sericulture activities is provided by cooperative and

commercial banking, which is well developed in Karnataka. The three-tier

short/medium-term cooperative system has about 200 District Central Bank

offices and 5,000 Primary Agricultural Society offices in project districts,

the two-tier medium/long-term Land Development Bank has 140 offices and

commercial banks have about 1,600 branches of which 1,000 are semiurban or

rural. There are also several Regional Rural Banks which cater specifically

to the poorer section of the rural community. A major credit scheme formu-

lated in 1974 for se-iculture development in Karnataka has been disappointing

to date. It comprised formation of combined sericulture and general service

cooperatives to provide long and short term credit and technical and marketing

services. There has been little demand for credit through these cooperatives.

For instance as of June 30, 1979 only Rs 1.2 million of a Rs 30 million target

had been disbursed by ARDC in 31 long term credit schemes for cooperatives.

At the same time both cooperative and commercial banks had, over three years,

disbursed well over Rs 50 million for sericulture to individual borrowers.

Consequently, lending would now be to individuals rather than cooperatives

in new silk areas.

Bank Group Activities in Karnataka

46. The Bank Group has been involved in Karnataka through a number of

projects, mainly in the agricultural sector. The Mysore Agricultural Credit

Project (Cr. 278-IN of January 1971) provided US$40 million to finance agri-

cultural loans to farmers, and was fully disbursed by June 1977. The

Karnataka Wholesale Agricultural Markets Project (Cr. 378-IN of May 1973) has

provided US$8 million to establish agricultural markets in strategic locations.

After initial delays, almost all of the 39 markets envisaged are either com-

pleted or underway. A US$30 million credit for the Karnataka Dairy Development

Project (Cr. 482-IN of June 1974) is being implemented to support dairy

development along the lines of the successful Amul dairy cooperative system.

Another multi-state agricultural project, the US$35 million Drought Prone Areas

Project (Cr. 526-IN of January 1975) includes one district of Karnataka and is

progressing well. In May 1978, a US$126 million credit was provided for the

Karnataka Irrigation Project (Cr. 788-IN) to irrigate about 105,000 ha of

- 15 -

land and promote agricultural development in the area. In addition, the Second

National Seed Project (Cr. 816-IN of July 1978) and the Composite Agriculture

Extension Project (Cr. 862-IN of February 1979) finance seed development and

agricultural research and extension activities, respectively, in Karnataka

among other States. Non-agricultural activities of the Bank Group include

family planning and nutrition activities under a US$21.2 million Population

Project (Cr. 312-IN of June 1972) which is nearing completion.

PART IV - THE PROJECT

47. The project was prepared by the Sericulture Department of the Gov-

ernment of Karnataka (GOK) in collaboration with GOI's Ministry of Agricul-

ture Project Preparation and Monitoring Cell and with assistance by the Bank's

New Delhi Office. The project was appraised in September/October 1979, and

negotiations were held in Washington, D. C. in April 1980. The Indian nego-

tiators included Mr. S. Sharma, Development Commission, Ministry of Industry,

GOI, Mr. B. S. Lamba, Deputy Secretary, Ministry of Finance, GOI, and Mr. V.

Balasubramanian, Director of Sericulture, GOK. The Staff Appraisal Report

(No. 2901a-IN) is being circulated separately. A Supplementary Project Data

Sheet is attached as Annex III.

Project Description

48. The proposed project would represent a major effort for the inte-

grated development of sericulture in India. Its main objective would be:

- to increase raw silk production in Karnataka by about 1,600

tons per year, including an increase in high quality bivol-

tine silk from 100 to 1,000 tons;

- to expand reeling capacity and introduce modern processing

facilities and methods that would upgrade raw and spun silk

to export grade quality; and

- to introduce the latest technologies from leading silk produc-

ing countries and to expand local research for longer-termimprovement of the silk industry.

49. Silk Production. Silk production would be supported by strengthening

and improving of the Department of Sericulture advisory services, providing

hatcheries under the Departmental supervision for most of the silk production

requirements and expanding cocoon markets to cater for the projected increased

production. The advisory services, apart from helping farmers improve silkworm-

rearing practices, would encourage replacement of 20,000 ha of local mulberry

varieties in traditional areas with improved M5 varieties, planting of 14,000

ha of M5 in new areas to increase the mulberry area there from 1,000 to 15,000

ha, and improving mulberry cultivation in all areas including the 60,000 ha of

existing rainfed mulberries. A modest credit program for 3,500 ha of mulberry

(25% of the planting target) would support the planting program in new areas

(para 60). The project would provide funds for lending to farmers to establish

- 16 -

new plantations, purchase silkworm rearing equipment, construct improved

rearing houses, and cover recurrent costs for two rearing cycles. The rearing

houses would be constructed in accordance with Department of Sericulture

specifications acceptable to ARDC and IDA, and such specifications would be

drawn up by December 31, 1980 (Section 2.08 of the Project Agreement).

50. Technical services would be provided for silk producers, based on

the successful technical service center (TSC) model (see paragraph 43). The

project would provide funds for strengthening the existing 60 TSCs and 640

hatcheries and for establishing 90 additional TSCs and 1,060 hatcheries.

Most of the sericulture area would be covered, within which about 90% of all

silkworm eggs could be hatched and initially reared in communal hatcheries.

The project would finance incremental staff totalling 150 Sericulture Assis-

tants (SA) and 1,600 Demonstrators, which would result in placing one Demon-

strator per 60-100 growers and one Sericulture Assistant to supervise eight

Demonstrators. The project would also finance hatchery equipment, TSC and

hatchery incremental operating costs and vehicles. To ensure staff mobility

for farm visits, 750 light motorcycles would be procured for purchase by staff

through loans. Extension advice for mulberry production would be provided by

the Department of Agriculture. The Department of Agriculture is employing the

Training and Visit System and is receiving IDA support under the Composite

Agriculture Extension Project (Cr. 826-IN).

51. In support of the technical services, the project would improve and

expand an existing training center and establish two new ones, each with a

capacity of 1,200 trainees a year, including staff and farmers. In addition

the p5 oject would finance 20 model hatcheries including construction of a

110 m hatchery building, and provison of equipment and incremental operating

costs. As private grainages have not been able to meet the exacting standards

needed for high quality egg production GOK would expand production from

departmentally owned grainages. Under the project, most of the present 80

departmental grainages would be closed or converted into egg sale centers and

would be replaced by 10 large modern grainages to be financed under the

project. To provide adequate facilities for ongoing cocoon production and for

its expansion, the project would extend markets in 11 of 22 existing sites and

construct markets on 12 new sites. A total of 30 market units would be

established in those 23 sites.

52. Silk Processing. The project would create processing facilities in

new sericulture areas and, at the same time, it would also improve the exist-

ing facilities by introducing modern technology to increase silk recovery from

the cocoon and to upgrade quality. In the new areas, the Department would

establish one small semi-automatic filature and would also encourage invest-

ments in privately owned cottage basins (see paragraph 34). The Department

filature would also act as a demonstration, training and cocoon testing

center. Since most cocoons in the State would continue to be reeled by

cottage basins, the project would provide credit (channeled through ARDC and

banks) for 500 units of about one ton per year silk reeling capacity in new

areas. GOK provides a subsidy equal to 40% of machinery cost, which would be

continued.

- 17 -

53. GOK has established a Karnataka Silk Industries Corporation (KSIC)to operate the existing departmental filatures, spun silk mill and weavingfactory (see paragraph 59). KSIC would modernize one of the existing sevenlarge filatures and expand its production capacity. The existing GOK spunsilk mill, established in 1936, requires extensive reconditioning. A reno-vation program, based on a technical study carried out by Japanese spunsilk specialists, would be implemented by KSIC, and its capacity increasedfrom the present 45 tons of spun silk production to 60 tons per year. Inaddition, a new 90-ton-per-year spun silk production unit would be con-structed at the factory, and would be provided with the latest equipment toallow it to produce export-quality spun silk. The project would also financeexpansion and equipping of the existing GOK workshop, which would be takenover by KSIC and would carry out the spun silk mill renovation program.

54. Research and Technical Assistance. The project would provide fundsfor laboratory buildings, staff housing, equipment, and incremental staff andoperating costs required by: (i) the Central Sericultural Research andTraining Institute (CSRTI), to strengthen its central station, establish tworegional stations and five substations and to improve five existing substations;(ii) University of Agricultural Sciences, Bangalore, for strengthening itsongoing program focussed on silkworm disease control, for starting new programsfor mulberry and silkworm pest and disease incidence surveys, and for strength-ening its sericulture teaching faculty; (iii) University of Bangalore forsilkworm genetics research and a broader program on mulberries; and (iv)Mysore University for specific research on silkworm genetics. In addition,GOK, with its heavy stake in the silk industry, would ei3tablish the KarnatakaState Sericultural Development Institute (KSSDI) to car:-y out research intoall aspects of mulberries, silkworms and silk processing. A SericultureResearch Committee would coordinate the research program (para 62).

55. Longer-term development of the silk industry in India would requirethe introduction of the latest technologies from leading silk producing coun-tries like Japan and Korea. The project would therefore finance 70 man-monthsof consultants' time and a 380 man-month program for training abroad. About19 man-months would be needed for visits of 5 or 6 top-level scientists toCSRTI to support mulberry and silkworm breeding work and for exchange of ideason other research topics. About 12 man-months would be used for two visits bya two-man team to help the Department of Sericulture with grainage developmentand another expert would be needed for two visits of six months each to helpwith the communal hatcheries program, with special focus on disease control.About 27 man-months would be used by KSIC for training staff to operate newfilature and spun silk factory equipment.

56. Japan, the leader in silk technology, would be a most suitablesource of expertise and training opportunities. To attract the necessarytop-class scientists and technicians, it is expected that US$15,000 perman-month, inclusive of air fares, living expenses and local travel, would berequired. However, there is no certainty that all the desirable expertisecan be recruited, particularly on a time-bound schedule. It is assumed alsothat most, if not all, project financed overseas training would be in Japan.The cost per training month has been estimated at US$3,400. GOI would,

- 18 -

by December 31, 1980, draw up a plan and timetable for the technical assistanceand overseas training program on terms and conditions mutually acceptable toGOI and the Association (Sections 3.02 and 3.03 of the Development CreditAgreement).

57. The project would provide funds for an evaluation study by a localresearch institute. The study would evaluate the impact of the project andits individual components on silk production, employment and rural income.GOK would initiate an evaluation study, by March 31, 1981, with terms ofreference satisfactory to the Association (Section 2.13 of the Project Agree-ment).

Project Implementation

58. The Department of Sericulture would implement all components con-nected with cocoon production, including development of silk farms, grainages,technical service centers, communal and model hatcheries, training centersand cocoon markets. The Department would cooperate closely with credit agen-cies (paragraphs 60 and 61) which would carry out the lending program forsilk farmers and reelers, and with the Department of Agriculture which wouldprovide extension for mulberry cultivation. The Department of Sericultureis part of the State Ministry of Industries and is headed by the Director ofSericulture, responsible to the Secretary of Industries. The Department isdynamic and well organized and its staff responds well to its strong leader-ship. The Department is undergoing reorganization in preparation for almostdoubling its technic;l staff over the project period. To ensure adequatetraining for new staif, GOK would draw up a training plan by December 31,1981 and submit for IDA's comments (Section 2.07 of the Project Agreement).The field services would be organized on a District basis with a DeputyDirector in charge. Each District would have divisions (5 in Mysore, 3 inBangalore and 2 in all other Districts) headed by an Assistant Director,whose primary task would be organization and supervision of technical servicecenters and communal hatcheries. At the Head Office, apart from the SeniorTechnical Advisor, there would be five Joint Directors for the differentspecialities as well as for silk farms and technical services. To carryout the construction program under the project, the Department would estab-lish an engineering cell. The engineering cell would be established bySeptember 30, 1980 (Section 2.07 of the Project Agreement).

59. The Government of Karnataka has recently established the KarnatakaSilk Industries Corporation (KSIC) with an authorized capital of Rs 150 mil-lion. It would take over and operate the GOK-run processing facilities andwould implement the modernization program financed under the project. TheCorporation would be controlled by a Board nominated by GOK. The managementteam would be headed by a managing director. Heads of KSIC's Technical,Finance, Personnel and Accounts Divisions would be appointed by September 30,1980 (Section 2.10(b) of the Project Agreement). An engineering unit withstaff deputed from the State Public Works Department would supervise projectconstruction for KSIC. The engineering unit would be established by December 31,1980, (Section 2.10(c) of the Project Agreement). To allow adequate debt serv-icing capacity the Corporation would maintain a debt:equity ratio as determined

- 19 -

by IDBI (Section 2.01(d) of the Project Agreement). The ratio is expected to

remain less than 2:1 during the project period.

60. Credit for silk farmers and reelers would be provided by the parti-

cipating banks and refinanced by the Agricultural Refinance and Development

Corporation (ARDC) under a financing arrangement between GOI and ARDC. ARDC

has ample experience of Bank Group project execution through participation in

about 40 projects. To ensure adequate and suitable banking arrangements, ARDC

would draw up a banking plan which would include a definition of ARDC's role

in project implementation and proposals for: banking coverage of the project

area; preparation, supervision and monitoring of project schemes; rehabilita-

tion or development of banks or branches as needed; recruitment and training

of staff; and proposals for necessary improvements in lending procedures.

Execution of financial arrangements between GOI and ARDC, satisfactory to

IDA, would be condition of disbursement against loans for farmers and reelers

under the credit (Paragraph 3(b) of Schedule 1 to the Development Credit

Agreement and Section 2.02 of ARDC Agreement).

61. Financing for the industrial component (para. 53) would be channeled

through the Industrial Development Bank of India (IDBI), a public sector corp-

oration established to finance small- and medium-scale industrial enterprises.

IDBI has experience dealing with the Bank Group, as a beneficiary of three

projects (Cr. 356-IN of February 1973, Ln. 1260-IN of June 1976 and Ln. 1511-IN

of March 1978) and as a financing channel for the Jammu & Kashmir Horticulture

Project (Cr 806-IN of July 1978 and the Fertilizer Industry Project (Cr. 598-IN

of December 1975). IDBI would appraise the factories' modernization proposals,

prepared by a local consulting firm with international experience and their

findings would be sent for IDA's review. IDA's approval of the terms and

conditions of the financial arrangements between GOI and IDBI would be a

condition of disbursement for the relevant part of the credit (paragraph 3(c)

of Schedule 1 to the Development Credit Agreement and Section 2.02 of IDBI

Agreement).

62. The research component would be carried out by the Central Sericul-

tural Research and Training Institute (CSRTI), three universities and by the

Karnataka State Silk Development Institute (KSSDI). The latter would be estab-

lished, with key staff, before December 31, 1980 (Section 2.09 of the Project

Agreement). Responsibility for the development and research programs would

rest with the head of each participating institute--Director CSRTI, the Vice

Chancellor of each university and the Director of KSSDI. In order to coor-

dinate research programs, a Sericulture Research Committee has been set up

including the head of CSRTI, the Director of Sericulture and representatives

of participating universities as members; the Committee would also include the

Chief of KSSDI, when it is established. The Committee would review proposals

from participating institutions, formulate annual research program and send

each year's plan for IDA's comments by every March 31 (Section 3.04 of the

Development Credit Agreement).

63. The Central Ministry of Industries would be the agency responsible

for the project at the Center. The Development Commissioner (Handlooms), under

the Secretary of Industries, would handle matters connected with the project.

- 20 -

The Ministry, through the Central Silk Board, would be responsible for theCSRTI research component and would also arrange technical assistance and theoverseas training programs.

64. Overall project coordination, management and monitoring would be pro-vided by a Project Coordination Committee. The Committee has been establishedand includes representatives of all agencies involved including a representa-tive of GOI. The GOK Director of Sericulture would provide for its secretariat.To support silk production activities, there would be a district level coor-dination committee in each district. The Committee would review and approvethe annual programs for the execution of the project and would furnish eachyear's program, by March 31, for IDA's comment (Section 2.12 of the ProjectAgreement).

Project Cost and Financing

65. The total project cost is estimated at US$95.1 million, includingUS$6.6 million for taxes and duties. Foreign exchange costs are estimatedat US$20.7 million or 22% of the total cost. Included in the costs are:US$8.0 for credit for on-farm activities and for silk reeling; US$37.6 millionfor sericulture development activities under the GOK Department of Sericulture;US$16.1 million for processing activities under the Karnataka Silk IndustriesCorporation (KSIC); US$10.6 million for research, technical assistance andstudies; and US$22.8 million for physical and price contingencies.

66. The proposed credit of US$54 million equivalent would finance, netof duties and taxes, about 65% of costs of components to be implemented by theGovernment Departments and about 50% of costs of relending through ARDC andIDBI. The balance would be met by GOI and GOK (32%), ARDC (4%), IDBI (5%),lending banks (1%) and farmers/reelers (1%). The project would provideretroactive financing of up to US$1 million to cover early implementationcosts incurred after October 1, 1979.

67. GOI would on-lend (i) US$4.4 million to ARDC to refinance silkfarming development loans and cottage basin development loans to reelers, and(ii) US$9.5 million to IDBI to lend to KSIC for modernization and expansion ofsilk processing factories. The terms of these loans are described in para-graph 1. GOI would use US$5.5 million for implementing the technical assist-ance and overseas training component and the research program under CSRTIand would channel the balance to GOK for the components to be carried out bythe State, the Universities and the Karnataka State Silk Development Institute.

68. GOI's onlending rates to ARDC and IDBI and the interest rates tobe applied through the ultimate borrower are consistent with the prevailingoverall rate structure in India. Intersectoral differences are small.Inflation in India between 1974/75 and 1978/79 averaged only 1.5% per annum.With the sharp increase in oil prices during 1979 coinciding with a severedrought, prices spurted by almost 15% between April and December 1979 and areanticipated to increase another 10% during 1980/81. Given past GOI determin-ation and success in containing inflation, and the likelihood of a resumptionof the strong agricultural growth that was disrupted by the 1979 drought andan improved supply of industrial inputs, the rate of price increase over the

- 21 -

project period is expected to average somewhat below 7% per annum. The

proposed on-lending rates to farmers would be positive in real terms through-

out the project period and would compare favorably with real rates in other

developing countries.

Procurement and Disbursement

69. Civil works for KSIC, the departmental program and the research

program costing about US$8.2 million, would be carried out on about 90 sites

over five years. Contracts for such work would not attract foreign bidders

and would be awarded after local competitive bidding, using GOI or GOK pro-

cedures, which are satisfactory to IDA.

70. About 250 motor vehicles (US$1.9 million) would be required by

project agencies, mainly DOS and purchased over a five year period. Adequate

maintenance and availability of spare parts would be of paramount importance,

and this would necessitate purchase of locally made vehicles of types already

in use by project agencies. Procurement would be according to GOI and GOK

procedures. Motorcycles (US$0.3 million) would be purchased by individual

departmental staff, from loan funds provided by GOK.

71. Reeling and spinning machinery and major items of ancillary equip-

ment such as boilers (US$14.0 million) for KSIC and cold store equipment,

refrigerators, and generators for departmental grainages (US$1.9 million)

would be procured by international competitive bidding, following Bank Group

guidelines for procurement. A 15% preference on bids based on the CIF price

of each item or the actual custom tariff, whichever is lower, would be granted

to domestic manufacturers.

72. Other equipment would consist of furniture, silkworm rearing equip-

ment, farm and laboratory equipment (US$9.1 million) to be purchased over

five years for use over a wide area. These items are not suitable for inter-

national bidding and would be purchased by local competitive bidding proce-

dures. Small, off-the-shelf, items costing less than US$10,000 and which

are required urgently for project execution, would be purchased by prudent

shopping, through normal commercial channels. Farmers and silk reelers

receiving loans for mulberry planting, silkworm rearing equipment and cottage

basins (US$8.0 million) would purchase materials and equipment individually

from dealers of their choice and would also arrange construction of rearing

houses and reeling sheds locally. Technical assistance and overseas study

tours (uS$... million) and the project evaluation study (US$0.2 million) would

be arranged on terms and conditions satisfactory to IDA. The balance of the

project cost (US$30.7 million) would cover Departmental operating costs and

staff salaries and those of various research agencies, KSIC incremental work-

ing capital, and land purchase for the research component which would not

involve procurement. The above figures include physical contingencies (US$4.4

million), but exclude price contingencies, which amount to US$18.4 million.

73. IDA would disburse: (a) 55% of ARDC refinance for loans to farmers

and reelers; (b) 70% of loans to KSIC; (c) 75% of civil works, vehicles and

equipment and farm development and incremental staff costs for the Sericulture

Department and participating research agencies; and (d) 100% of the costs of

technical assistance, training abroad and evaluation studies. Disbursements

- 22 -

for all ARDC refinancing and for other expenditures would be made against

certificates of expenditures, except for expenditures exceeding Rs 150,000

for vehicles, equipment, staff salaries and incremental operating costs and

exceeding Rs 300,000 for civil works for which full documentation would be

required. Supporting documents for which payments were made against certi-

ficates would be retained by the implementing agency for review by IDA review

missions and these expenditures would be audited at least once every six

months.

Marketing

74. Social traditions, the comfort of the natural fiber and Western

European haute couture provide a reliable and expanding market for silk.

While demand for silk is growing at a little over 2% per year, production, at

present about 50,000 tons per annum, is dropping, notably in Japan and Korea,

two of the leading producers, due to high labor requirements and costs. These

supply and demand trends are expected to continue, and demand is projected to

outpace production within five to ten years. There is an enormous and as-yet-

unsatisfied demand for silk in the local Indian market, but falling production

by leading producers abroad opens up excellent export opportunities for Indian

sericulture. The project with its emphasis on quality improvement through

introduction of high-quality bivoltine silkworm varieties and modernization of

processing technology would provide essential preconditions for developing

silk exports from India. With such promising export opportunities opening up

and with the domestic market still expanding, there would be no problems of

marketing the anticipated additional 2,200 tons of silk production from the

project.

Cost Recovery

75. About one third of the project cost would relate to credit for

on-farm development, reeling and the KSIC modernization program and would

be fully recoverable. Another 35% of project cost would finance project

technical assistance, overseas training, research and extension programs for

which cost recovery is not considered appropriate. The balance of project

cost would finance grainages, cocoon markets, the departmental filature and

communal hatcheries. All these except the hatcheries (about 12% of project

cost) would be self supporting from fees or sale of products and would gener-

ate financial returns from 8% to 18% which are satisfactory for GOK facili-

ties rendering services to silk farmers. Communal hatcheries provide a serv-

ice that reduces farmers' costs and raises cocoon yields and represent an

innovation well-proven on a pilot field scale, but not yet accepted by most

silk farmers. GOK ascribes importance to fostering widespread adoption of

hatcheries by farmers, and has provided full funding for hatcheries to cover

establishment and operating costs over the project period. However, GOK

plans that ultimately farmers themselves should operate the hatcheries and

is considering ways in which those plans can be effected. GOK, in the third

project year would exchange views with IDA on possible ways of recovering

hatchery costs, once the benefits of hatcheries are understood by most silk

farmers.

- 23 -

Project Benefits and Risks

76. The project would help to provide a sound technical basis forimprovements in production, productivity and qual;t-y at virtually every majorstage of mulberry sericulture in Karnataka. Its principal benefit would be anincrease in annual raw silk of 1,600 tons and silk waste of about 480 tonsvalued at about US$75 million. In addition to incremental production, ageneral improvement in the quality of raw silk silk would be brought about.To sustain these improvements, the project would seek to enhance research andexchanges with experts in sericulturally advanced countries to broaden andintensify the Indian research establishment to support long-term developmentof the industry. Very importantly, a significant number of employment oppor-tunities--an estimated 180,000 work-years annually--would be created, primarilyamong the rural population, and project activities would contribute to increas-ing incomes of producers and processors as well. Benefits from the projectwould be widely distributed and affect positively the entire spectrum of theestimated two million persons engaged in sericulture and related activitiesin Karnataka. The economic rate of return from the project is expected tobe 22%.

77. The main project risks would be (a) limited response from silkfarmers to adopt improved practices and (b) disease damage to improved silk-worm varieties, which are more disease susceptible than traditional varieties.However, the project has been specifically designed to minimize those risks,by providing exceptionally strong advisory services and modern egg productionfacilities (para 51). Technical assistance and overseas training programs arealso largely focussed on improving services to growers and on silkworm diseaseprevention and control.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

78. The draft Development Credit Agreement between India and theAssociation, the draft Project Agreement between the Association and theState of Karnataka, the draft ARDC Agreement between the Association andARDC, the draft IDBI Agreement between the Association and IDBI and theRecommendation of the Committee provided for Article V, Section l(d) ofthe Articles of Agreement are being distributed to the Executive Directorsseparately.

79. Special conditions of the project are listed in Section III ofAnnex III.

80. The additional conditions of disbursement, specified in paragraph 3of Schedule 1 to the Development Credit Agreement would be the following:

(a) execution of Financial Arrangements between GOI and ARDCwould be a condition of disbursement against ARDC refi-nancing; and

- 24 -

(b) execution of Financial Arrangements between GOI andIDBI would be a condition of disbursement against IDBIlending.

81. I am satisfied that the proposed credit would comply with theArticles of Agreement of the Association.

PART VI - RECOMMENDATION

82. I recommend that the Executive Directors approve the proposedcredit.

Robert S. McNamaraPresident

May 14, 1980

ANNEX I

IOU - socA DIC OUTA SM Page I of 5

MIA Alrum= cr um yW LAID ARA (TUOUSAND SO. Kl) 3 _UCE S TrUA

TOTAL 3287.6 Sl S 11| llCEEACUCULTUIAL 1818.3 '*am C mCC C EGa

1960 A 1970 A ISTINAFE tb *lz IC oW: C 02009

cP m CAPITA (US5) 60.0 90.0 180.0 191.1 209.6 467.5

URIc! COUSIPIOUQ| PU CU1ST(KILOCRAN Of 0? L EQUIVALET) 142.0 181.0 216.0 69.1 83.9 262.1

POTOIATION AND VITAL STATITCSPOPULATIIO, Km-Ts" (3LIOIS) 4.9 547.6 631.7L

n3l1 POPULAION (PRCIT OT OTL) 17.9 19.7 20.7. 13.2 16.2 24.6

POPULATION PIOCJCIPOPULATOU DN TEA& 2000 (U.LIONS) 973.0STATIONAtY POPULATION (MILLIONS) 1643.0TR STATIONRY POPULATION IS A 2150

POPULATIo DUSITYPE SQ. M. 132.0 167.0 192.0 86.6 49.4 45.3PER SQ. 11. 4GUCULTL LAD 247.0 308.0 347.0 330.2 252.0 149.0

POPULATION AGE STRUCTURE (PLCUT)0-14 YIS. 40.8 42.5 42.0 44.3 43.1 45.2

15-64 Ys. 55.7 54.6 55.0 52.4 53.2 51.965 Ys. AND AuOV 3.5 2.9 3.0 3.1 3.0 2.6

POPATION GW RATE (PzUCnT)TMTAL 1.9 2.3 2.1 2.4 2.4 2.7ORA 2.SLA 3.3 3.1 4.1 4.6 4.3

CRUDE lI S gTE (PU T2OUUI0) 43.0 40.0 35.0 44.4 42.4 39.4CRUDE DEATH LATE (PZU T1tUSD) 21.0 17.0 14.0 16.4 15.9 11.7GROSS EPRODUCTION RATE 3.2 2.9 2.4 3.2 2.9 2.7JANKIL PLANNING

A5CEPTO3S. AUAL (TE'OUSADS) 64.0 3782.0 4518.0USERS (PYICZNT OP MAUD WOE) .. 12.0 16.9 7.9 12.2 13.2

OOD AND mnRTIoNnOaX OF FOOD PRODUCTION

PU CAPITA (169-71-100) 100.0 102.0 101.0 99.4 96.2 99.6

PU1 CAPITA SUPPLY OfCALOlIES (PUCNT OF

lEUIRENNTS) 95.0 92.0 89.0 93.0 93.3 94.7PROTEINS (GRAMS PER DAT) 51.0 53.0 48.0 56.1 52.1 54.3

OF WIICE ANIMAL AD PULSE 19.0 16.0 12.6 10.4 13.6 17.4

CHILD (AGES 1-4) MOTALTY RATE 28.0 22.0 18.0 19.2 18.5 11.4

HEALTELIFE EXPECTANCY AT SDn TE ) 43.0 48.0 51.0 49.1 49.3 54.7TINANT MORTALITY RATE (PUTHOUSAND) .. 134.0 .. .. 105.4 68.1

ACCESS TO SAFE WATRI (PCZNT OFPOPULATION)

TOTAL .. 17.0 33.0 31.5 26.3 34.4URBAN .. 60.0 83.0 63.9 58.5 57.9RURAL .. 6.0 20.0 20.1 15.8 21.2

ACCESS To EZ1 DISPOSAL (PEZCENTOF POPULATION)

TOTAL .. 16.0 20.0 15.7 16.0 40.8URBAN .. 85.0 87.0 66.8 65.1 71.3RURAL .. 1.0 2.0 2.5 3.5 27.7

POPULATION PER PHYSICIAN 5800.01k 4890.0 3135.0 7107.9 11396.4 6799.4POPULATION PER NURSING PERSON 9630.0L 5220.0 6320.0 12064.0 5552.4 1522.1POPULATION PER HOSPITAL BED

TOTAL 2590.0L_, 2020.0 1231.0 2738.4 1417.1 726.5iHBAN .. .. .. .. 197.3 272.7RURAL .. .. .. .. 2445.9 L404.4

ADMISSIONS PER HOSPITAL RED .. .. .. .. 24.8 27.5

HOUSINGAVERAGE SIZE OF HOUSEHOLD

.OTAL 5.2 .. 5.2 .. 5.3 5.4URBAN 5.2 .. 4.9 .. 4.9 5.1RURAL 5.2 .. 5.3 .. 5.4 5.5

AVERAGE NMBER OF PERSONS PER ROOMIOTAL 2.6 2.5 ..

UR3AN .. .. ..RURAL ..

ACCESS TO -LECTRICITY (PERCENTOF DWELL:NGS)

7OTAL .. .. .. .. 22.5 25.13x3BAX .. .. . .. L7. 8 45. 1RLRAL .. .. .. .. .. 9.9

ANNEX IPage 2 of 5

INDIA - SOCIAL INDICATORS DATA SHEET

INDIA C lELL= GROUPS (ADJUSTED AYEAGES- lMOST RECENT ESTINATE) -

SUIE SAME ETY UCaERMOST RHOUT OCRAtUIC INCOmE ICOHE

1960 lb 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /e

EDUCATIONADJUSTED ZNIOLLMZNT RATIOS

PRIMARY: TOTAL 61.0 72.0 79.0 59.5 63.3 82.7MALE 80.0 87.0 94.0 74.9 79.1 87.3LEMAU 40.0 55.0 63.0 43.7 48.4 75.8

SECONDARY, TOTAL 20.0 29.0 28.0 19.5 16.7 21.4MALE 30.0 39.0 36.0 27.8 22.1 33.0FOUIL 10.0 17.0 18.0 10.0 10.2 15.5

VOCATIONAL ENROL. t2 OF SICOMDUAY) 8.0 6.0/j *- 1.3 5.6 9.8

PUPIL-TEACHER IATIOHEIMARY 29.0 40.0 42.0 42.2 41.0 34.1SECONDARY 16.0 17.0 .. .. 21.7 23.4

ADMLT LITERACY RATE (PRCET) 28.0 33.0 36.0 25.5 31.2 54.0

CONSUMPTIONPASSENGER CARS PER THOUSAND

POPULATION 0.7 1.0 1.2 2.3 2.8 9.3RADIO RECEIVnS PER TROUSAND

POPULATION 5.0 21.0 24.0 15.5 27.2 76.9TV RECEIVERS PER ThOUSAND

POPULATION .. 0.1 0.5 .. 2.4 13.5NEWSPAPER ("DAILY GENCRALINTEREST") CIRCULATION PERTHOUSAND POPUILATION 11.0 16.0 16.0 6.2 5.3 18.3ClNEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 .. 1.1 2.5

LABOR FORCETOTAL LABOR FORCE (ThOUSANDS) 188670.0 226870.0 261000.0/k

FEMALE (PERCENT) 31.3 32.6 32.2 21.4 24.8 29.2AGRICULTURE (PERCENT) 73.0 73.0 73.0 66.3 69.4 62.7INDUSTRY (PERCENT) 11.0 11.0 11.0 9.6 10.0 11.9

PARTICIPATION RATE (PERCENT)TOTAL 43.0 40.2 39.2 35.8 36.9 37.11MALE 57.1 52.3 51.3 52.3 52.4 48.8FEMALE 27.9 27.1 26.2 15.7 18.0 20.4

ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.1 1.3 1.2 1.4

INCOME DISTRIBUTIONPERCENT oP PRIVATE INCOMERECEIVED BY

HIGHEST 5 PERCENT O HOUSEHOLDS 26.7 26.3/1 .. .. .. 15.2iIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.97t .. .. .. 48.2LOWEST 20 PERCENT OIP HOUSEHOLDS 4.1 6.771 *- *- *- 6.3LOWEST 40 PERCENT o0 HOUSEWOLDS 13.6 17.27T .. .. .. 16.3

POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (US$ PER CAPITA)

L'R8AN .. .. 83.0 86.5 99.2 241.3RURAL .. .. 73.0 74.2 78.9 136.6

ESTIMATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN .. .. .. .. 91.9 179.7RURAL .. .. 50.0 50.4 54.8 103.7

ESTI!ATED POPULATION SELOW ABSOLUTEPOVERTY 'NCOME LEVEL (PERCENT)

FRBdAN .. .. 47.0 o.3 44.1 24.8RURAL .. .. 52.0 52.4 53.9 37.5

.Not available

.Not applicable.NOTES

/a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extremevalues of the Indicator and the most populated country in each group. Coverage of countries azong theindicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimate, between 1974 and 1977.

'c South Asia; Id Low Income (S280 or less per capita 1976); /e Lower MUddle Income (5281-550 per capita,1976); !f 1978 mid-year population is estimated at 640.. million; j 1951-60; 'h 1962;

_ 1958; 'j 1967; !k 1978 mid-year labor force is escimated at 261 million; /1 1964-t5.

Most Recenc Estirate of GNP per capita is for 1978.

August, 1979

ANNEX tDU'AEPTP OF IJL INDC.ATORS Page 3 of 5

Note: Altboigh the data ae draw from ore general&ly judged the most thoritatire ad reliable, it should alan be anted that they may not be interna-

tionalLy comarblebecaus of the lack of standadized definitions and noasopte used by different coutries in collecting the data. The data are, nonetheless,

usefkl to desribe orders of magitude,I indicate trends and =braterine certain major difference betneen coutrie.

The adjusted group avrugen for each indicator re poplathon-wighted geomtrie mea, -neldieg the eiArn oluen of the badioator and the moot ppoplted

.- utry in each grop. W.s to lack of data, grop avrgssa of all. adioators fee Capita.1 urplue Oil nprete- and of idicatora of Aocesa to Water and EoortaDIapoal, Hooing, incm Distribution and Povety for other .o-tey grops r pejssltio-eeigbted geomtric ae- without excluion of thc entrec value andthe matppltdcuty ic hecvrg fcutiasgteinlaosdpnso vielt - I ta and in sot unifoern cation must be e-eeiard

In retlato=vrages ofton iadientor to anthr. Ths-vrgsaeual saeoiais fepected" values aba oomaiag the o-les ofon

indisator at a time-amas the coun.try and referenc neonp..

LA"D AREA (thousadfaq.km.( Mon obrt ips) (eon fpdsai -total_ urban, and rurl Total - Total .sraearen coprising hand are and inland eater.. Number of ~peope toal urban an or ere _y urta disposal as

Agri-ult-1a - mnt recent estimate of agricultural area used teewrs.idy peroe..tagen of their -epective ppslatiosn. E.-reta disposalI my inclde

orPermaently foe crps, pastures, maket and kitebon gardens or to the _ofletios and disposal, nith or nithout treatmet, of humso ec-rtaleeflow, and eate-wator by oate'.-hon system or the use of pit privies and -iailar

SEP flP CAPiA (upS) - O? per capit esodates a current maket ..i.s Popnatindper Poician - FPpultios dicided by nao of practicig phy-ibancalculated by sam conerion method an World Rank Atlas (1976-78 basin; quIlfife froml a dmedal school at anbe-ity leve.

1960, 1970, and 1978 data. Pnpsltioa per ursing Person - Population divided by este o-f peactsing male

M .YlEtC:dGLiPW5PP PEP CAPITA - An-..I consuption of -rial eSerY and femle graduateuss p-atioal ssn,ad neultetat nuse.(ca n inte,. Petrole, natural gas and bydro-, anoea end g.- Poosltios per Hsneital hBed - total urbanadrrl- Population (tota., orbs,

tbee-l eleotrioity) in kilograms of coal equiraot percapita 1960 and-rural divided by their renrtvenmero opota beds available in1970, and 1976 data. pli and private genral and pcialkied hotpita and rohnbilitationoe-tor

Hospital are establinh-nte permanetly staffed by at 1eaut -e ,sys!ivin.POPULATIONI PNP VITAL STATISTICS n bIshmets providing prisospaly utsdinl caear ts -inlded coral

Total Popslatin. Mid-YearNm1li...( As of July 1; 1960, 1970, and hospitals, h-ser, include health and medical casters not permanotly stafico

197? dabs. by a physician (but by a medical ass istant, surse, midwife, etc.) hkiob offer

Urba Population (percent of totn( -Ptio of urban to toted population; n-patient ncsdatios and provide a limited range of medical faclitIesdifrntdfniin ofubnnesm :ff-et comarbility of data Admissions per Hioapital hed - Total -unbr of amsin to or dinchergos f eon

aogoot-es; 1960, 1970, and 1975 datahoptl divddby the ,ester of bed-.

Porsilt ico ProjectionPonclatios is Year 000 - Cur.ret poplatios projeotions ac bha.od on OEUSINGi977 tota pPu-Isosby age and nec n t ermortality and fertility AeaeSloe of Houshold (Person per household - total urban, sad ru-I -

rete.t Frojctio paramtersfr raity rates o-prine of three A ba-sbold consists fan of ofiniv -hl.eb share living quarter andleel assum..Ing life e-p-tany t histb isore-ing with .- utry'. their main meals. A boarder or lodger my or my sot he i-oludod is tho

Per capita -cona level, and feesle life sop.eotany ntsilising at howuehold for statistical purposes.77.5 yenro The par-mtor for fertility rate also hav three level Average sober of Persoson, o total, urban, and rura - Aerage somber

555-5mg deolo- In fetlity accrding to ic"m leve and pant of person p:er mona isn. uran ,ndrua occupied cov-tioso doelliogo,famil olsosiag pXrfrsa= ce task v-uty In tbn assigned one of thes repcivl. Weflingn occlude son-perenet etrutures and -- ocp-d ptro

ciscostinations of aeotality sod fertility trends for projeotiseAcs oietiiy(ecn fdefig)-ttl.ra,sdcrd-Co

-purpse. retional deellings nit el_tr~ity in living qnrtera a perc-tago ol

Station.sry populstioo - IG stetiosavy pupultios there ia no growth total, urban, and rura dwellings epcieysince the birth rate Is equal to thc desth rate, and also the ago

stutur esssooat.Tiisahiee onI fter fortuity rates EDUCATIONdo-lo 1 cik rpacmet eelofuit Ioe-t repeordaction rate, * eke Adjusted is-rllm-t Setsoeah genertive of sc- replace itself eu...tly. The stationa-y pupa- P-rosy schoo.Ittl,sle and female - Ge.o. total, saesd fenale -11oh-

lticet'i-ensoetinaed 00 the b-oiu of the projected characteristics mast ofalae t the "esar leve no pernctges of'repective p-ranyof the popltiosis the peer 2000, and tke rate of dnchise of fertility school-age popuations; s-esaly includes children aged 611 peur hot

rot to r"P'nea level sd.-ted for different 1vogtbs of prinay education; lor,ooteic-stbroa toticor .. pnio -I reachd - The year be- stationary population ...... aI education -nr1leet my asced 100 percen.tosc anpupils

sloe hau been reahed. are below or shov the offic-l school age.

Popnlatios D,-sty le-oday school - total. male and female - Computed so s.., -- duosorFor os. in. - Mid-yea populot-o per square ksl ter (100 heotaren) of eduction requires at least four year of ppr-od prlasr -cotr_tlo

t'tal re proides gonera -1 o-tional, or teasher trsining isiotis i pupls~Pee so. Ion.gri-1ltu-l land - Computed an aho- foe agricultural land onualy of I2 to 17 yearn of ago; -responden-ooiooar mosl

only. -colded.P.-I i. Ag.St-t- p -t)- Childre (0-lb your), sorking-age Vs-ti-a enrolleest (pceece.t of secondary) - Vocational -ntitoti-c iso1odo

year re,U. tired 65 years and o-v) so p-rotagen of aid-year tehoical, industrial, or other prngram- uhih operate iodopeodeetlyornpopolatoow i6o, 1970, nd 1977 data, dpeprtmets of secondary isotiotioss.

tolihon Groth Ot (peots - total - Annua eroth mOos. of total mid- Pupil-e -uEr rtio - primary so ... seodary - Total studsto coisod inyea populti... for 1950-hO, 1900-70, sd1970-77. primay and seodI eeodvddb obr fteacers on Ilcvrc

Ponulntiho Growth Hate (-eoet) - urban - Annul growh -at-s of urban o`odig hovelspopulations for h90bO 1707,nd 1970-79. Adult literacy rein (peevet) - Literte ado1to (tile tq crud sod write) s

Crude Birth Pain ep- thounud) - Annua live biethn Poe thousnd of nod- p_r-otage of total edult popuhatioc aged 15 Year and over.

year populitos; 1 0,~ 190,ad 197 data.Crud heath Pte pe tosn) _A- na deatho Per thou-acd of old-yea COEIJWI"TP

population; 1900, 1970, sad 197its Psee Can (cer thausand posuhation - Ponoeger car -oprisenbro

Gros Pepr-d-tios Pate-doerW ag -wner of daogkte- u nill bea setn esta ih esn; ldsahlne,haunad elitaris bee noreal rPe-du-tir- p-od of oh -pe-cih--e presen.t ag-ceil.oPevific f-etilityr.etes; usually ir--sar averges ending is 190, hdoPwiro(one tho-ond --olation) - All types of re.oi..e. toe, di.

h970, and 0975. broadcasts to g-sne1 public e huadofpoaio;eolodesoohicoFaily i'lsno1io9b- Acceptorsl =oa (thousands) - AnnuaI nuaber of reevesiscutries and In year aso regiora _s ofIuio -eto O.i

acetoso birtb-_ntrol deioe _ er ausPices of national f saly offe-t; data for recet years my sot is -op-rble -inc s.:-t co-tries

plsosYisg prgmo. abolished lcnigFeallo Plaoiag - Uors poe-et of ried mnic) - P-eestgc of narried TV Peceive- (per thousad noechtion,) - TV recivers foe b-od-st to geso-snnsof child-bearn ag (5-_ year) hAn us hlrth-o...trI d-ciceI public per th-usnd popultion; enlds onliteseed TV -eeier- soot-s

to nil maried ... e. insane age grouP. an sya ho.e regi-tesic of 7V stswo in effect.Nesae iroultios (per thousand peat"'s - ihoso the ovrge- eoltc

POOl) ANI) NUTRITION of "dily general ist -t-est aeonpaper' dfinedI sope i-Ioa publivatinoTndeo ofFood roFduotio- per Cepita (1969-71-100) - loden of Pee capita devoted Primail to recording genral. news Cs is cosnidored to hr 'doily"

-nsa productIon of all food commoditie. Pro.ductine enludes seed and if it appeast ileas fou. ie ed

feed adi o ndneyerbasi. Cosdit -- cvr priosry goods Gnesa An..ual Attendnc Per Capits ow Oea-n-ased on the oubo o~f.ti Icoo(..sgar-nne isetoad of sugar) hbih ar odible and ... otnic ntrients oddrn.h er shdo disost rv-scsesadstt

(eg.cffee nod ten se -colded). dggrognte peoduntico of .s-h ouety uits.1di h i. t rv-.i -1is basd on satiosel Icrg rdooee pric weights.t

Fee onPita supply of ouore (p_e_et:of roleet)-Cmue ie lt iCeno rgy equivaet of set food ophe aibe in country pee -apita Totalbo Foc Itosnds) Icnmc yntion perons, i-olodiag ar-d

Per day. Availble -ppliet comrise d-netic prodotio, ipoota less foce and onomplywd but e-oluding hcones-ices, studests cto hefioit mr-

e-port, and ohnoges is stosk. Pet supplie eclod.eanimal feed, sends, is vaioscontries sen sot comparble-

quatities -od 10 food processng, nd base is diotribution. Pequire- P.-I.4Pjpp .ept( - F-sal labor force1 aspercetage of tota1l Ibor forte.vets oor etiented by FAG basdonphysiciogiosl scouft fr.normal Ari-Iurjeeroe.. 3 t( - Labor forc infriedg, foc-try, bhsting sod

et ithy sd isu1hi .. cosdofongvoisesa teprtre -oy ights, fishing as percentage of total labor force.age sd ... dostrobut_o ofpopolin acd nlloiog tO peroet for ndsry (sersent) - Labor forc is mining, so-t-t-io, -ofacturiag acd

snote at boosebohi bosh, elec~~~tricity, wutor and gasa percetage of total 1mice for-e

Fee onIt suppl of proto 'r-n see dyp) - P-tteje ots fpr PriinisPt peet -ttotal, sale no eah rstic'Iptinocapita set supply of food pee day. Net supply of food is deshnd an acIity rats, arecoPutds total,mle, sodfeloub frcase-above Reqoireots for all1 countries established by USDA provide foe a _eetas of. totalslean fomal populssi-o of nlae pciey

aici-o edosc f 60 gea_ of total proteiw per day and 20 sgas o 196, 1970, and i975 dnta. Thes are I1,1.' part-iplsiocrntos-fleotisg

soina1 and pulse peo-in, of chiob 10 gene should be animal protein.f ag-e-tutr ftepplto,sd l..g tiso treed. A fenestiote-These stand nd, se 1o-r than those of 75 gram of total protein and ar .enntionl nron25 gene of aiea p-oteis as - averge for the ouId, proposed by FAQ Passnain Dependency Ratio - Patio of pspultios oder 15 sod 65 and ovr to

in the lhind World Food Surey. the labor forc in age group of 15-6b years.

Per cast prtin supl fe.a solsa andple P rotoin supply of fooddrived froaiNlCnOuleMngaspw dy ET D bTON

Ckild (ages 1-u) Mortalty Hate (per thousand) Anuldnbsprtonad PeeIae ofPivate Psa (bhot In cah and hind) - eceired by richestis age grop Iu er, to cbiidree is this ag group; foe sot devel- 5pers.-t, richest PDernon t, poorest PC peren.t, sad posrest 40 perosot

oPi. cutre dayta derived fro Life tabls ofh households..

IDiAITH POVERTY TAPOIGZ GROUPS

life Pupectany at Birth (years - Average somber of year of life EstImated Absol ute oet IsoeLevel (UV,$ Pee capIta) - urha andrua-

ressainin at ir1k 100, 1970, nod 1977. data Absolute pse-ty Iscm ee Is that I=-om leve below hbloh a nism

Osfant Mortality Hose leer thousnd) - dA-usI deaths of infants under one nutritionally adequate diet plus e..s.stis1 son-food requirenot s o.t

year of age per thousand lIve births, affrdable.Accs toSf ae ecs fpouais oa ra,ad ral- Estimated Relative Po,eety Icom e bevel (UPS! per caIta).-Iuba ndrra1

saf oster suPpply(iwoudetreated surface waters or untreated but personl incom of the coutry. Urban leve Is derived fron the rura 1e-o_nnotanisatedostr suh as ts from protnctod horobois, springs, nith ajsmnfohier coat of living in urban area.

and usaitsry veils) as perctentges of their repective populations. n EtmtdP lation hiss. Absolute Pov-te scanlve H(eet" rbnad

an ucha area a public founitais or standpost located sot mere than -rurl - Percet of population (urbaanrul)osre'bltepc"10 mters fr.a a house my be considered as being within reaonableanoes of that house, in rura areas reasonable access -sld imply

that she h..s.oife or asters of the househsld do sot have t spend a DEssAicd sad Scia1 Data Division

dlsprop-tsio..ate part of the day is fotshing ta family. a wter nseds Do-oic Analysis and Projasti... DpeprtmentAugut 1979

AMNEX Iso~~cmwmmaZTs Page 4 of 5

in CAPTr 11 1977 U 150

C60S IU103AUL nowes IN 1977/7$ L US O n. *ntnt rt eae

0ln/61-194/65 lSL/W 29/O 1S70/72z1. 76n77

Go at merket Price 101.47 100.0 3.9 3.S 3.2,ross Domestic Investment 21.65 21.3

ross Natieual Swins 22.77 22.4Current Account BaLane jV 1.04 1.0Sesourc balanae g/ - 0.31 - 0.3

OUTP1T. U3O I IID hPMSClTT 11 1972

v1lue Per. S' tollerEJil.. ~ f Nationl Averea

Ariculture 24.5 4.6 13%0.0 72.1 1" 4Industry ll.d 22.3 20.2 11.2 552 1SS

sr,icas .3 31.1 vZ 16-7 AMTotallavsrage 52.6 100.0 1*0.4 100.0 292 ii

GOVIC S F1IM8 .'/

tmbrel Coe~ t Centrl 1 Cre_et

19c 51n 1977/73 1974/75-l177 ft 97/75 2197A/72-19f1/t8

Current aceipta 164.42 16.9 18.2 93.62 11.0 10.5Current netaditurs 157.29 16.6 SU .9blCurrent Surplu/Djeficit 7.13 0.8 1.6 0.35 n.e. 0.6Capital IQendituree f/ 62.58 7.2 7.0 43.31 5.0 5.0Ixernal Assistance (est) J/ 9.82 1.1 1.6 9.62 1.1 1.6

MGM, CUfS AND PUIs 19p0/71 1973/74 1974/75 197576 1976/77 1977/75 Saetcer 1977 mteg,r 1978(B Billion eotistAding at ed of period)

Noey sad Quasi mony 121.4 19N.4 220.3 254.7 306.9 365.1 334.8 395.6lak Credit to Gevrmect (nt) 52.6 87.3 95.3 101.1 110.2 129.7 119.3 139.5sank Credit to Cmercial Sctor 64.6 107.0 126.7 153.9 U5.1 210.0 195.3 223.5

(Percantae Or inAex umbere) Ji.r 197z Jamr- 1i9n

NOD" and Quit Mony as S of am 30.1 33.5 31.5 34.5 38.8 41.9Wholesale Price Index

(1970/71 * 100) 100.0 139.7 174.9 173.0 176.6 165.8 184.5 164.6

Ammal percentage c_Cge In:

Wholeals Price Index 7.7 20.2 25.2 - 1.1 2.1 5.2 3.2 0.1Bank Credit to Gonruset (nat) 10.5 12.3 9.2 6.1 9.0 17.7 13.4 16.9lank Credit to Comrcial Sector 19.4 22.6 18.4 21.5 20.3 13.5 16.6 14.4

*/ TM per capita me estimte is at m*at prices, calculated by the coveresio techniu used ti the World Atlas.All other ceversioas to dollars in this table ar* at the avers exchang0 rate prevailin debring 2 period coverd.

b/ Quick Ustimtes.c/ Ceuated iroa tred line of 1 at factor cost series, including one observation betfre first year and ane

observation atter last yer of listed period.d/ World Bank estimates; not necessrily consistent with official National Account Statistics.i/ Tranfers betwen Centre and States have been netted oet.f/ All loas sad advances to third parties hve been netted out.if Uutral grants and loans less principal repanynts as recorded in the Central budget.

P&Se 5 of 5

BALAECR OF ( IAT)WS 1975/76 J9 Z 1977/7Z 1978/79 It/ iJChUNDIU UxpoT £AVhG 1975/76 19- 77/78)

Rxports of Goods 4,672 5,753 6,276 6,800 Inginsering Goods 610 11Imports of Goods -6,449 -5,928 -7,237 -8,400 Tea 417 7Trade Balance -1,777 - 175 - 961 -1,600 Cm 377 7NuS (net) 310 360 650 700 Clothing 331 6

Leather and LeatherResource Balance -1,467 in - 311 - 900 Products 278 5

i/ Jute lanufectures 267 5Interest Payment (net) - 216 - 180 - 50 - Iron Ore 265 5Other Factor PaYMent (est) - - - - Cotton Textiles 248 4let Transfers tI 470 730 1,400 1,300 Super 244 4

Other. 2,530 45Balance on Curreat Account -1.213 fLU 1,039 400

Official Aid bSSI. 5,567 100

Disbursoeentt 2,341 1,953 1,628 1,805 UTUUAL DE8T. H4RCU 31. 1978 hAmortixation - 531 - 560 - 645 - 725 US$ billion

Transactions with IYW 242 - 337 - 330 - 158 Outstanding t4d Disbursed 14.8All Other Items - 45 - 216 384 205 Undibur-ad 4.3

Outstanding, includingIncrosse in Reserves (-) - 794 -1,575 -2,076 -1,527 Undisborsed 19.1Gross Reserve. (end year) 2,172 3,747 5,823 7,350 h/l/Not esaerves (end year) k/ 1,365 3,276 5,668 7,350 DOT SEVICZ RATIO FOR 1977/78 15.0 percent

Fuel and Related Materials 1JRD/IDA LUNDIWI. RDCUIR 31. 1978

Imports 1,417 1,581 1,817 1,980 US$ uillionof ibich: Petroleum 1,417 1,581 1,817 1,980 ABaD 1

Exports 43 37 33 M.S. Outstand.us. *ud Disbursed 613 3,864of which: Petroleu 22 21 s18 na. Undisbursed 615 1,992

*f *hich Patro22n21Outatanding, including P/Undisbursed 1,228 5,856

RATE QV IICHAGE

Jume 1966 to mid-Dceomber 1971 : US$1.00 - Rs 7.5Rs 1.00 - Us$0.133333

Kid-December 1971 to and-June 1972 US$1.OO - Rs 7.27927Es 1.00 - us$0.137376

After and-June 1972 : Floating RateSpot Rate *nd-Decber 1978 : US$1.00 - Rs 8.168

us$1.00 - Es 0.122

h/ Estimated.i/ Figures given cover all invet_ant incoae (net). Major payments are interest on foreign loons

and charges paid to IW, and major receipt is interast earned on foreign assets.J/ Figures given include workers' rmittances but eclude official greant asstaence, which is- included within official aid disbursements.k/ Excludes net use of IM credit.1/ Aaortization and interest paymnats on foreign loans as a percentoge of merchandise exports.!/ Excludes exchange adjust_nt, but includes us$ 22 million due to third parties.

ANNEX IIPage 1 of 17

THE STATUS OF BANK GROUP OPERATIONS IN INDIA

A. STATEMENT OF BANK LOANS AND IDA CREDITS(As of March 31, 1980)

US$ millionLoan or (Net of Cancellations)

Credit No. Year Borrower Purpose Bank IDA Undisbursed

41 Loans/ 1,163.2

60 Credits fully disbursed 3,624.6

312-IN 1972 India Population -- 21.2 .33

342-IN 1972 India Education -- 12.0 5.31

356-IN 1973 India IDBI I -- 25.0 8.44

378-IN 1973 India Karnataka AgriculturalMarkets -- 8.0 3.19

390-IN 1973 India Bombay Water Supply I -- 55.0 6.09

456-IN 1974 India HP Apple Processing& Marketing -- 13.0 7.63

481-IN 1974 India Trombay IV Fertilizer -- 50.0 .201011-IN 1974 India Chambal (Rajasthan) CAD 52.0 -- 21.99

482-IN 1974 India Karnataka Dairy -- 30.0 20.55

502-IN 1974 InUia Rajasthan Canal CAD -- 83.0 34.24

520-IN 1974 Inlia Sindri Fertilizer -- 91.0 .24

521-IN 1974 India Rajasthan Dairy -- 27.7 15.60

522-IN 1974 India Madhya Pradesh Dairy -- 16.4 6.28

526-IN 1975 India Drought Prone Areas -- 35.0 9.95

1079-IN 1975 IFFCO IFFCO Fertilizer 109.0 -- 10.03

1097-IN 1975 ICICI Industry DFC XI 95.6 -- 3.88

532-IN 1975 India Godavari BarrageIrrigation -- 45.0 10.27

541-IN 1975 India West Bengal Agric.Development -- 34.0 12.98

562-IN 1975 India Chambal (MadhyaPradesh) CAD -- 24.0 6.40

572-IN 1975 India RuralElectrification I -- 57.0 12.46

585-IN 1975 India Uttar Pradesh WaterSupply -- 40.0 22.02

598-IN 1975 India Fertilizer Industry -- 105.0 54.05604-IN 1976 India Power Transmission IV -- 150.0 78.89

ANNEX IIPage 2 of 17

US$ millionLoan or (Net of Cancellations)Credit No. Year Borrower Purpose Bank IDA Undisbursed

609-IN 1976 India Madhya PradeshForestry T.A. -- 4.0 2.22

610-IN 1976 India Integrated CottonDevelopment -- 18.0 13.60

1251-IN 1976 India Andhra PradeshIrrigation 145.0 -- 105.52

1260-IN 1976 India IDBI II 40.0 -- 23.721273-IN 1976 India National Seeds I 25.0 -- 24.001313-IN 1976 India Telecommunications VI 80.0 -- 23.421335-IN 1976 India Bombay Urban Transport 25.0 -- 10.12680-IN 1977 India Kerala Agric.

Development -- 30.0 27.82682-IN 1977 India Orissa Agric.

Development -- 20.0 94.18685-IN 1977 India Singrauli Thermal

Power -- 150.0 15.15687-IN 1977 India Madras Urban

Development -- 24.0 15.74690-IN 1977 India WB Agric. Exten-

sion & Research -- 12.0 12.00695-IN 1977 India Gujarat Fisheries -- 4.0 .981394-IN 1977 India Gujarat Fisheries 14.0 -- 14.00712-IN 1977 India Madhya Pradesh

Agric. Dev. -- 10.0 9.09720-IN 1977 India Periyar Vaigai

Irrigation -- 23.0 17.16728-IN 1977 India Assam Agricultural

Development -- 8.0 7.041473-IN 1977 India Bombay High Offshore

Development 150.0 -- 54.84736-IN 1977 India Maharashtra

Irrigation -- 70.0 50.03737-IN 1977 India Rajasthan Agricul-

tural Extension -- 13.0 10.54740-IN 1977 India Orissa Irrigation -- 58.0 48.311475-IN 1977 ICICI Industry DFC XII 80.0 -- 35.81747-IN 1978 India Second Foodgrain

Storage -- 107.0 93.84756-IN 1978 India Calcutta Urban

Development II -- 87.0 50.80761-IN 1978 India Bihar Agric.

Extension &Research -- 8.0 7.48

ANNEX IIPage 3 of 17

US$ millionLoan or (Net of Cancellations)Credit No. Year Borrower Purpose Bank IDA Undisbursed

1511-IN 1978 India IDBI Joint/PublicSector 25.0 -- 24.72

1549-IN 1978 TEC Third TrombayThermal Power 105.0 -- 93.75

788-IN 1978 India Karnataka Irrigation -- 117.6 99.74

793-IN 1978 India Korba Thermal Power -- 200.0 178.77

806-IN 1978 India Jammu-KashmirHorticulture -- 14.0 13.91

808-IN 1978 India Gujarat Irrigation -- 85.0 78.99815-IN 1978 India Andhra Pradesh

Fisheries -- 17.5 17.15

816-IN 1978 India National Seeds II -- 16.0 15.87

1592-IN 1978 India Telecommunications VII 120.0 -- 59.80824-IN 1978 India National Dairy -- 150.0 141.98842-IN 1979 India Bombay Water

Supply II -- 196.0 193.44843-IN 1979 India Haryana Irrigation -- 111.0 79.84844-IN 1979 India Railway Modernization

& Maintenance -- 190.0 172.69

848-IN 1979 India Punjab Water Supply& Sewerage -- 38.0 34.07

855-IN 1979 India National AgriculturalResearch -- 27.0 26.84

862-IN 1979 India Composite AgriculturalExtension -- 25.0 23.50

871-IN 1979 India NCDC -- 30.0 23.001648-IN 1979 India Ramagundam Thermal

Power 50.0 -- 50.00

874-IN 1979 India Ramagundam ThermalPower -- 200.0 182.38

889-IN 1979 India Punjab Irrigation -- 129.0 120.30899-IN 1979 India Maharashtra Water

Supply -- 48.0 47.73911-IN 1979 India Rural Electrification

Corp. II -- 175.0 175.00

925-IN 1979 India Uttar Pradesh SocialForestry -- 23.0 21.68

ANNEX IIPage 4 of 17

US$ millionLoan or (Net of Cancellations)Credit No. Year Borrower Purpose Bank IDA Undisbursed

947-IN 1979 India ARDC III -- 250.0 230.861743-IN* 1979 India Thal Fertilizer 250.0 -- 250.00963-IN* 1979 India Inland Fisheries 20.0 20.00

Total 2,528.8 7,255.0of which has been repaid 995.3 59.8

Total now outstanding 1,533.5 7,195.2Amount Sold 133.8

of which has been repaid 116.2 17.6Total now held by Bank and IDA 1/ 1,515.9 7,195.2Total undisbursed (excluding*) 555.6 2,669.9

* Not yet effective

1/ Prior to exchange adjustment.

ANNEX IIPage 5 of 17

B. STATEMENT OF IFC INVESTMENTS(As of March 31, 1980)

Fiscal Amount (US$ million)Year Company Loan Equity Total

1959 Republic Forge Company Ltd. 1.5 - 1.5

1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9

1960 Assam Sillimanite Ltd. 1.4 - 1.4

1961 K.S.B. Pumps Ltd. 0.2 - 0.2

1963-66 Precision Bearings India Ltd. 0.6 0.4 1.0

1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2

1964-75-79 Mahindra Ugine Steel Co. Ltd. 11.8 1.3 13.1

1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3

1967 Jayshree Chemicals Ltd. 1.0 0.1 1.1

1967 Indian Explosives Ltd. 8.6 2.9 11.5

1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9

1976 Escorts Limited 6.6 - 6.6

1978 Housing Development FinanceCorporation 4.0 1.2 5.2

1980 Deepak Fertilizer andPetrochemicals Corporation Ltd. 7.5 1.1 8.6

TOTAL 61.0 11.5 72.5

Less: Sold 5.9 1.7 7.6

Repaid 17.4 - 17.4

Cancelled 6.2 0.7 6.9

Now Held 31.5 9.1 40.6

Undisbursed 10.5 1.7 12.2

ANNEX IIPage 6 of 17

C. PROJECTS IN EXECUTION 1/

Generally, the implementation of projects has been proceeding reason-ably well. Details on the execution of individual projects are below. Thelevel of disbursements was US$538 million in FY79, compared to US$497 millionin the previous year. Disbursements in the current fiscal year throughMarch 31, 1980 totalled US$517 million, representing an increase of about44% over the same period last year. The undisbursed pipeline of US$3,226million as of March 31, 1980, reflects the lead time which would be expectedgiven the mix of fast- and slow-disbursing projects in the India program.

Ln. No. 1097 Eleventh Industrial Credit and Investment Corporation ofIndia Project; US$100.0 million loan of April 2, 1975;Effective Date: July 1, 1975; Closing Date: December 31,1980

Ln. No. 1475 Twelfth Industrial Credit and Investment Corporation ofIndia Project; US$80.0 million loan of July 22, 1977Effective Date: October 4, 1977; Closing Date: March 31, 1983

These loans are supporting industrial development in India througha well-established development finance company and are designed to financethe foreign exchange cost of industrial projects. ICICI continues to be awell-managed and efficient development bank financing medium- and large-scaleindustries, which often employ high technology and are export-oriented. Loan1097 is fully committed and disbursements are slightly ahead of schedule.Disbursements under Loan 1475 are also ahead of schedule.

Loan No. 1260 Second Industrial Development Bank of India Project;US$40.0 million loan of June 10, 1976; Effective Date:August 10, 1976; Closing Date: June 30, 1981

Loan No. 1511 IDBI Joint/Public Sector Project; US$25.0 million loan ofMarch 1, 1978; Effective Date: May 31, 1978; Closing Date:March 31, 1983

Loan 1260 is designed to assist the Industrial Development Bank ofIndia in promoting small- and medium-scale industries and in strengthening theState Financial Corporations involved. Loan 1511 is designed to encourage thepooling of private and public capital in medium-scale joint ventures. Theproject also assists IDBI in carrying out industrial sector investment studiesand in strengthening the financial institutions dealing with the state joint/public sector.

1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution, and in particular to reportany problems which are being encountered and the action being takento remedy them. They should be read in this sense and with the under-standing that they do not purport to present a balanced evaluation ofstrengths and weaknesses in project execution.

ANNEX IIPage 7 of 17

Cr. No. 947 Third Agricultural Refinance and Development Corporation

(ARDC) Project; US$250.0 million credit of August 20, 1979;

Effective Date: January 2, 1980; Closing Date: June 30,

1982

Refinancing of lending to farmers has been started under this project

after the completion of the Second ARDC Project towards the end of 1979.

Cr. No. 747 Second Foodgrain Storage Project; US$107.0 million credit of

January 6, 1978; Effective Date: May 17, 1978; Closing Date:

June 30, 1982

As of September 1979, satisfactory progress was being made in

the construction of bag storage warehouses, despite problems of land acqui-

sition at some sites. However, construction of flat bulk warehouses and

port silos is not expected to be completed until 1985, as a result of delays

in the employment of consultants and the longer time required for the prepa-

ration of technical specifications and tenders and the construction itself.

Cr. No. 456 Himachal Pradesh Apple Processing and Marketing Project;

US$13.0 million credit of January 22, 1974; Effective Date:

September 26, 1974; Closing Date: December 31, 1980

The project encountered prolonged initial delays due to managerial

and technical problems. These problems have been largely resolved, but con-

struction progress remains slow due to material shortages and severe winter

conditions. Initial packing house operations were undertaken in the last

two seasons with favorable response from farmers. The project is scheduled

for completion by December 1980.

Cr. No. 806 Jammu-Kashmir Horticulture Project; US$US$14.0 million credit

of July 17, 1978; Effective Date: January 16, 1979;

Closing Date: June 30, 1984

The principal executing agency, J&K Horticulture Produce Marketing

and Processing Corporation, is under strong management and rapid progress has

been made in start-up operations with only minor slippage. The project's

research activities, however, are behind the original schedule due to poor

organization.

Ln. No. 1313 Telecommunications VI Project; US$80.0 million loan

of July 22, 1976; Effective Date: September 14, 1976

Closing Date: March 31, 1982

Ln. No. 1592 Telecommunications VII Project; US$US$120.0 million loan

of June 19, 1978; Effective Date: October 30, 1978;

Closing Date: March 31, 1982

Both projects are progressing satisfactorily, although as of

November 1979, when they were last reviewed, imports of electronic switching

equipment and local production of electro-mechanical switching equipment

ANNEX IIPage 8 of 17

were behind schedule, resulting in a reduced growth rate for the installa-tion of direct exchange lines. Institutional improvements envisaged underthe projects have been achieved, and the financial situation of the Postsand Telegraphs Department remains sound.

Ln. No. 1079 IFFCO Fertilizer Project; US$US$109.0 million loan ofJanuary 24, 1975; Effective Date: April 28, 1975;Closing Date: December 31, 1980

Cr. No. 598 Fertilizer Industry Project; US$105.0 million creditof December 31, 1975; Effective Date: March 1, 1976;Closing Date: June 30, 1980

Ln. No. 1743 Thai Fertilizer Project; US$250.0 million loan of August 20,1979; Effective Date: July 31, 1980 (ex-pected);Closing Date: November 30, 1984

The IFFCO project was delayed by about a year as a result of achange in feedstock from fuel oil to naphta and delays in completion ofengineering contracts. However, project construction is now proceedingsatisfactorily and commissioning is expected within the next six months.Credit 598 is designed to increase the utilization of existing fertilizerproduction capacity. The project has encountered delays in sub-projectpreparation and investment approvals by the Government. Further, some of thesub-projects identified earlier may not materialize because of reconsiderationby the Central and State governments. IDA has agreed to a list of sub-projectsto replace the ones that are likely to be dropped. Because of the above, theproject is likely to be delayed by about 18 months.

Cr. No. 378 Karnataka Wholesale Agricultural Markets Project; US$8.0 mil-lion credit of May 9, 1973; Effective Date: September 7, 1973;Closing Date: June 30, 1981

Delays in project implementation were encountered as a result offrequent changes in management in the early stages, and these have necessi-tated an extension of the closing date by 18 months to June 30, 1981, to allowfor completion of works and withdrawal of the credit. Progress is improving,however. As of May, 1979, construction on 36 of the 39 markets envisaged underthe project was underway or completed, and trade had shifted to about half ofthese. An additional five markets may be included in the project at therequest of the State government.

Cr. No. 312 Population Project; US$21.2 million credit of June 14, 1972;Effective Date: May 9, 1973; Closing Date: June 30, 1980

This credit is designed to finance an experimental and researchoriented population project in Karnataka and Uttar Pradesh. The project'sinfrastructure, which would provide the optimum facilities (buildings, equip-ment, staff and transport) according to GOI standards in selected districtsin each state, is virtually complete. The two Population Centers, establishedto design and monitor research aimed at improving the family planning program,

ANNEX IIPage 9 of 17

are now functioning. The Population Centers are expected to complete theirevaluation of family planning strategies and the introduction of managementinformation and evaluation systems by the present closing date.

Cr. No. 342 Agricultural Universities Project; US$12.0 million credit ofNovember 10, 1972; Effective Date: June 8, 1973; ClosingDate: December 31, 1981

The project involves the development of the agricultural univer-sities in Assam and Bihar. The primary aim of the AUs project is to improvethe quality and practical training of undergraduates and so the spectrum oftheir employment opportunities; and to strengthen university structure toenable it to give an impetus to agricultural and rural development. Consider-able progress has been made in achieving the latter objective; but achievingeducational objectives is more slowly attainable, constrained by traditionalattitudes and structures where consistent effective leadership falters.Changes to a more functional orientation are now planned. The ProjectDirector and others responsible are aware of the constraints and are support-ing efforts to remove them.

Cr. No. 390 Bombay Water Supply and Sewerage Project; US$55.0 millioncredit of January 22, 1974; Effective Date: March 13, 1974;Closing Date: June 30, 1981

Cr. No. 842 Seconi Bombay Water Supply and Sewerage Project; US$196.0million credit of November 13, 1978; Effective Date:June 12, 1979; Closing Date: March 31, 1985

Cr. No. 848 Punjab Water Supply and Sewerage Project; US$38.0 millioncredit of October 27, 1978; Effective Date: January 25, 1979,Closing Date: March 31, 1983

Cr. No. 899 Maharashtra Water Supply and Sewerage Project; US$48.0 mil-lion credit of June 21, 1979; Effective Date: November 9,1979; Closing Date: June 30, 1984

Having overcome earlier difficulties, including cost overruns causedby inflation (requiring project redefinition in February 1975), redesign ofmajor project components and the addition of a supplementary study on sewagedisposal, Credit 390 is now progressing satisfactorily. The water treatmentworks were successfully completed on schedule at the end of 1979. Completionof construction of the project sewerage works is scheduled for mid-1980.Financial performance of the project entity is satisfactory. Implementation ofCredit 842, a second stage of the ongoing Credit 390, is proceeding to schedule.Preliminary work in connection with implementation of Credit 848 is progressingsatisfactorily.

ANNEX IIPage 10 of 17

Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40.0million credit of September 25, 1975; Effective Date:February 6, 1976; Closing Date: Jure 30, 1980

The Project has had a slow start due to delays in the preparationof technical reports for regional and local water authorities and in theengagement of consultants. While improvements have been made in the physicalexecution, other aspects of project implementation continue to lag so thatdisbursements under the Credit have fallen short of estimates at the timeof appraisal. In order to improve the situation, arrangements have beenmade to closely supervise and coordinate implementation.

Cr. No. 756 Second Calcutta Urban Development Project; US$87.0 millioncredit of January 6, 1978; Effective Date: April 7, 1978;Closing Date: March 31, 1983

The project is proceeding quite well in most sectors, in spite ofthe severe floods of September 1978 and serious Statewide electric powershortages. Procurement is generally on schedule for equipment and consultants'services, though somewhat behind for larger civil works contracts. Staffshortages in some of the implementing agencies continue, although more exten-sive use of consultants has to a great degree alleviated this problem.

Cr. No. 687 Madras Urban Development Project; US$24.0 million creditof April 1, 1977; Effective Date: June 30, 1977; ClosingDate: September 30, 1981

Physical progress is generally satisfactory and costs are withinappraisal estimates on most components. However, land acquisition problemsand consequent delays in construction on one of the three sites and serviceareas will result in about 15 months delay in the completion of the finalsections of these areas. Inadequate attention and staff has been given tothe financial analysis and marketing strategies required to ensure that anti-cipated cost recovery in the sites and services and slum upgrading componentsand thus replicability is actually achieved. However, there is still ampletime to deal effectively with these problems; technical assistance is beingsought to strengthen financial management and analysis.

Cr. No. 482 Karnataka Dairy Development Project; US$30.0 million creditof June 19, 1974; Effective Date: December 23, 1974; ClosingDate: September 30, 1982

Cr. No. 521 Rajasthan Dairy Development Project; US$27.7 million creditof December 18, 1974; Effective Date: August 8, 1975;Closing Date: December 31, 1982

Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 millioncredit of December 18, 1974; Effective Date: July 23, 1975;Closing Date: June 30, 1982

ANNEX IIPage 11 of 17

Cr. No. 824 National Dairy Project; US$150.0 million credit ofJune 19, 1978; Effective Date: December 20, 1978;Closing Date: December 31, 1985

These four credits, totalling US$224.1 million, support dairy devel-

opment projects organized along the lines of the successful AMUL dairy coopera-tive scheme in Gujarat State. More than 2,100 dairy cooperative societies(DCS) have been established under the three state projects (Karnataka 923,Rajasthan-926, Madhya Pradesh-272). Farmer response had been excellent and

project authorities are under considerable producer pressure to speed up theestablishment of DCS. Profitability in almost all of the DCS is good and con-struction of dairy and feed plants is now proceeding at a satisfactory pace.

Limited milk processing capacity has been the major constraint to DCS formationin all three projects. Under the National Dairy Project, three subprojectswith an estimated total cost of approximately Rs 1,000 million have beenappraised by the Indian Dairy Corporation and a further eight subprojects arein various stages of preparation and appraisal. Advance procurement of dairyequipment is well underway though disbursements have been slow, mainly as aresult in the start of project operations.

Cr. No. 532 Godavari Barrage Project; US$45.0 million credit ofMarch 7, 1975; Effective Date: June 9, 1975;Closing Date: June 30, 1980

Both the civil works and equipment tenders have been awarded afterinternational competitive bidding. Work is proceeding satisfactorily.

Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52.0million loan of June 19, 1974; Effective Date: December 12,1974; Closing Date: June 30, 1981

Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83.0million credit of July 31, 1974; Effective Date:December 12, 1974; Closing Date: June 30, 1981

Cr. No. 562 Chambal (Madhya Pradesh) Command Area Development Project;US$24.0 million credit of June 20, 1975; Effective Date:September 18, 1975; Closing Date: June 30, 1981

Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development(TW) Composite Project; US$145.0 million loan (Third Window)

of June 10, 1976; Effective Date: September 7, 1976;Closing Date: December 31, 1982

Cr. No. 720 Periyar Vaigai Irrigation Project; US$23.0 millioncredit of June 30, 1977; Effective Date: September 30,1977; Closing Date: March 31, 1983

Cr. No. 736 Maharashtra Irrigation Project; US$70.0 million credit ofOctober 11, 1977; Effective Date: January 13, 1978; ClosingDate: March 31, 1983

ANNEX IIPage 12 of 17

Cr. No. 740 Orissa Irrigation Project; US$58.0 million of October 11,1977; Effective Date: January 16, 1978; Closing Date:October 31, 1983

Cr. No. 788 Karnataka Irrigation Project; US$126.0 million credit ofMay 12, 1978; Effective Date: August 10, 1978; ClosingDate: March 31, 1984

Cr. No. 808 Gujarat Irrigation Project; US$85.0 million credit ofJuly 17, 1978; Effective Date: October 31, 1978;Closing Date: June 30, 1984

Cr. No. 843 Haryana Irrigation Project; US$111.0 million credit ofAugust 16, 1978; Effective Date: December 14, 1978;Closing Date: August 31, 1983

Cr. No. 889 Punjab Irrigation Project; US$120.0 million credit ofMarch 30, 1979; Effective Date: June 20, 1979; Closing

Date: June 30, 1985

These projects, based on existing large irrigation systems, aredesigned to improve the efficiency of water utilization and, where possible,to use water savings for bringing additional areas under irrigation. Canal

lining and other irrigation infrastructure, drainage, and land shaping areprominent components of these projects. In addition, provisions have been

made to increase agricultural production and marketing ty reforming andupgrading agricultural extension services and by providing processing and

storage facilities and village access roads. Progress of these projectsis generally satisfactory with the exception of the Nagarjunasagar compo-nent of Loan 1251 where water losses have proven higher than anticipated.Specific efforts are underway to redesign this project so that it can

achieve its original objectives.

Cr. No. 541 West Bengal Agricultural Development Project; US$34.0 million

credit of April 28, 1975; Effective Date: August 28, 1975;Closing Date: March 31, 1981

The progress of shallow tubewells is well ahead of the appraisalschedule, but progress in all other areas is slow. The project will notfully disburse by the closing date, and GOI's request for an extension is

expected.

Cr. No. 682 Orissa Agricultural Development Project; US$20.0 millioncredit of April 1, 1977; Effective Date: June 28, 1977;Closing Date: December 31, 1983

Cr. No. 690 West Bengal Agricultural Extension and Research Project;US$12.0 million credit of June 1, 1977; Effective Date:

August 30, 1977; Closing Date: September 30, 1982

ANNEX IIPage 13 of 17

Cr. No. 712 Madhya Pradesh Agricultural Extension and Research Project;US$10.0 million credit of June 1, 1977; Effective Date:September 2, 1977; Closing Date: September 30, 1983

Cr. No. 728 Assam Agricultural Development Project; US$8.0 million creditof June 30, 1977; Effective Date: September 30, 1977;Closing Date: March 31, 1983

Cr. No. 737 Rajasthan Agricultural Extension and Research Project;US$13.0 million credit of November 14, 1977; EffectiveDate: February 6, 1978; Closing Date: June 30, 1983

Cr. No. 761 Bihar Agricultural Extension and Research Project; US$8.0million credit of January 6, 1978; Effective Date: May 2,1978; Closing Date: October 31, 1983

Cr. No. 862 Composite Agricultural Extension Project, US$25.0 millioncredit of February 16, 1979; Effective Date (expected):December 14, 1979; Closing Date: December 31, 1984

These seven credits finance the reorganization and strengtheningof agricultural extension services and the development of adaptive researchcapabilities in nine States in India. In areas where the reformed extensionsystem is in full operation, field results have been very good, both in termsof adoption of new ag:icultural techniques and of increased crop yields. InRajasthan, Assam, and Orissa, in particular, significant gains have been madeunder the projects. In West Bengal, where a change in government brought areview of the organizational principles underlying the new extension systemand an accompanying hiatus in project implementation, a recent Cabinet deci-sion has reaffirmed the State Government's commitment to the project andrevised implementation plans are under preparation. In Bihar and MadhyaPradesh, staff shortages, particularly in supervisory and managerial posts,have hampered project implementation, although progress in areas whereregular extension visits are being made attests to the efficacy of thesystem itself. Finally, in Gujarat, Haryana and Karnataka, all coveredunder the Composite Agricultural Extension Project (which is not yet effec-tive), project implementation is still in the very early stages, althoughimportant early administrative and financial steps have been taken whichshould pave the way for effective operation of the reorganized extensionsystem.

Cr. No. 855 National Agriculture Research Project; US$27.0 millioncredit of December 7, 1978; Effective Date: January 22,1979; Closing Date: September 30, 1983

While the initial sanctioning of research subprojects under thisproject was somewhat slower than expected, due to staff shortages in theProject Unit, the pace has picked up considerably in recent months. Commit-ment of funds to research subprojects in FY80 is expected to meet or evenexceed appraisal estimates, although corresponding disbursements may lagsomewhat behind the original estimates. Additions to the staff of theProject Unit are being recommended to expedite further progress under theproject.

ANNEX IIPage 14 of 17

Cr. No. 526 Drought Prone Areas Project; US$35.0 million credit ofJanuary 24, 1975; Effective Date: June 9, 1975; ClosingDate: June 30, 1980

Overall progress of this project continues to be satisfactory.Implementation of most components is proceeding well. Dairying and drylandfarming components show particular promise for the drought-prone areas.

Cr. No. 680 Kerala Agricultural Development Project; US$30.0 millioncredit of April 1, 1977; Effective Date: June 29, 1977;Closing Date: March 31, 1985

Project implementation started slowly due to initial staffing andfunding delays. The project has now gained momentum and the planting opera-tions, which were one season behind original schedule, have been rephasedto make up for lost time.

Cr. No. 871 National Cooperative Development Corporation (NCDC) Project;US$30.0 million credit of February 2, 1979; Effective Date:May 3, 1979; Closing Date: December 31, 1984

As of October, 1979, when the project was last reviewed, construc-tion of godowns had begun in the three participating States of Haryana, Orissa,and Uttar Pradesh. Consultants were being recruited to assist NCDC and StateCooperative Banks in strengthening their institutions. Initial projectpreparations have been completed on schedule; disbursements are thereforeexpected to follow the appraisal targets.

Cr. No. 844 Railway Modernization and Maintenance Project; US$190.0million credit of November 13, 1978; Effective Date:January 10, 1979; Closing Date: December 31, 1984

Credit 844 was designed to help the Indian Railways reduce manu-facturing and maintenance costs of locomotives and rolling stock and toimprove their performance and availability. The project is still at anearly stage of implementation but is progressing satisfactorily.

Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project;US$4.0 million credit of February 26, 1976; EffectiveDate: May 17, 1976; Closing Date: December 31, 1981

A feasibility study financed under this Credit and completed inNovember 1979 has recommended the establishment of two mills, one for sawn-wood and one for pulp, as the basis of the development of a forest-basedindustry in Bastar district.

Cr. No. 925 Uttar Pradesh Social Forestry Project; US$23.0 millioncredit of June 21, 1979; Effective Date: January 3,1980; Closing Date: December 31, 1984

This project was designed to expand the social forestry programin Uttar Pradesh, to provide a source of energy to the villages, and supply

ANNEX IIPage 15 of 17

raw materials to cottage industries. The project provides for large-scale

tree plantation on 48,600 ha of public and village lands, primarily along

roads, rails and canals, and on village common lands and degraded forest

reserves.

Cr. No. 610 Integrated Cotton Development Project; US$18.0 million

credit of February 26, 1976; Effective Date: November 30,

1976; Closing Date: December 31, 1981

The project's progress remained very disappointing in all areas

until the 1978 season, resulting in negligible disbursements. Due to renewed

interests from GOI and the States, the project has now started to progress

well. Short-term credits are increasing significantly, new processing units

are being established in Haryana and Maharashtra, and plant protection

activities have started progressing well.

Ln. No. 1273 National Seed Project; US$25.0 million loan of June 10, 1976;

Effective Date: October 8, 1976; Closing Date: June 30, 1981

Cr. No. 816 Second National Seed Project; US$16.0 million credit of

July 17, 1978; Effective Date: December 20, 1978;

Closing Date: December 31, 1984

These projects were designed to increase the availability of high

quality agricultural seed, and cover nine States (four by Ln. 1273-IN and

five by CR. 816-IN). The first project started slowly due to organizational

difficulties and is almost two years behind schedule. Progress in the

second project States is more satisfactory. The role of various organizations

(National and State) in the production and processing of seed is being reviewed.

Ln. No. 1335 Bombay Urban Transport Project; US$25.0 million loan of

December 20, 1976; Effective Date: March 10, 1977;

Closing Date: June 30, 1980

The bus procurement program supported by the project has proceeded

on schedule, with all 700 bus chassis and bodies having been ordered and 589

already in service. Total fleet strength has increased from 1,530 buses at

the inception of the project to 1,900 buses in September 1979, in accordance

with appraisal estimates. Depot capacity expansion is lagging somewhat behind

fleet expansion, but should match fleet size by early 1980. However, delays

in construction of new workshop facilities have been more substantial and will

not be fully recoverable. Traffic management civil works are also somewhat

behind schedule, although efforts are being made to speed up the works program.

Ln. No. 1394 Gujarat Fisheries Project; US$14.0 million loan and US$4.0

(TW) and million credit of April 22, 1977; Effective Date:

Cr. No. 695 July 19, 1977; Closing Date: June 30, 1983

ANNEX IIPage 16 of 17

Cr. No. 815 Andhra Pradesh Fisheries Project; US$17.5 million creditofJune 19, 1978; Effective Date: October 31, 1978;Closing Date: September 30, 1984

In Gujarat, harbor construction at Mangrol and Veraval are underway, and although some delays have been encountered, the project is progress-ing satisfactorily and no major problems are evident. In Andhra Pradesh,preliminary work on implementation is progressing satisfactorily, and harborworks at Visakhapatnam and Kakinada are scheduled to commence shortly.

Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit ofApril 1, 1977; Effective Date: June 28, 1977;Closing Date: December 31, 1983

Cr. No. 793 Korba Thermal Power Project; US$200.0 million credit ofMay 12, 1978; Effective Date: August 14, 1978; ClosingDate: March 31, 1985

Ln. No. 1549 Third Trombay Thermal Power Project; US$105.0 million loanof June 19, 1978; Effective Date: February 8, 1979;Closing Date: March 31, 1984

Ln. No. 1648 Ramagundam Thermal Power Project; US$50.0 million loan andand Cr. US$200 million credit of February 2, 1979; Effective Date:No. 874 May 22, 1979; Closing Date: December 31, 1985

Cr. No. 604 Power Transmission IV Project; US$150 million credit ofJanuary 22, 1976; Effective Date: October 22, 1976;Closing Date: June 30, 1981

Credit 685 assists in financing the first stage of the 2,000 MWSingrauli development which is the first of four power stations in theGovernment's program for the development of large central thermal powerstations feeding power into an interconnected grid. The second suchstation, at Korba, is being financed under Credit 793. The National ThermalPower Corporation (NTPC) has been carrying out construction and operationof these power stations. Organization and staffing of NTPC is proceedingsatisfactorily. Loan 1549 is supporting the construction of a 500 MWextension of the Tata Electric Companies' station, in order to help meetthe forecast load growth in the Bombay area. Loan 1648 and Credit 874 sup-port the construction of the first three 200 MW generating units in AndhraPradesh together with related facilities and associated transmission. Allthese large-scale thermal power projects are progressing satisfactorily.Under Credit 604, contracts aggregating about US$114 million have been ap-proved to date. Although this project suffered delays in preparation oftechnical specifications and evaluation of bids for highly sophisticatedequipment, the project is now progressing satisfactorily.

Cr. No. 572 Rural Electrification Project; US$57.0 million credit ofJuly 23, 1975; Effective Date: October 23, 1975; ClosingDate: December 31, 1980

ANNEX IIPage 17 of 17

Cr. No. 911 Rural Electrification Corporation II Project; US$175.0million credit of June 21, 1979; Effective Date: October 17,1979; Closing Date: March 31, 1984

Credit 572 consists of a tranche of rural electrification schemesfinanced by the Rural Electrification Corporation. There are now thirteenState Electricity Boards (SEBs) eligible for onlending, compared with six atthe time of appraisal. The project got off to a slow start, due principallyto the need to adapt the specifications and tendering procedures to interna-tional competitive bidding, but the position has improved and the full amountof the Credit has been committed. Credit 911 provides continued support tothe Rural Electrification Corporation's lending program, and is helping tofinance about 1,700 rural electrification schemes in fourteen SEBs, includingthe newly participating Uttar Pradesh SEB. The project is at an early stageof implementation, and procurement is progressing satisfactorily.

Ln. No. 1473 Bombay High Offshore Development Project; US$150.0 millionloan of June 30, 1977; Effective Date: October 20, 1977;Closing Date: December 31, 1980

The project is progressing satisfactorily. Gas and oil pipelinesfrom Bombay High to shore were commissioned in June 1978. Most contracts forPhase III of Bombay High development have been laid, construction should becompleted by mid-1980 and the loan should be fully disbursed by its originalclosing date.

ANNEX IIIPage 1

INDIA

KARNATAKA SERICULTURE PROJECT

Section I: Timetable of Key Events

(a) Time taken by the country to prepare the project

About one year

(b) The agency which has prepared the project

The State of Karnataka, under overall coordination

of GOI.

(c) Date of first presentation to the Bank and date

of the first mission to consider the project

October 1977; February 1979

(d) Date of departure of appraisal mission

September 4, 1979

(e) Date of completion of negotiations

April 28, 1980

(f) Planned date of effectiveness

September 1980

Section II: Special Bank Implementation Action

None

Section III: Special Conditions

(a) GOK to submit to IDA, by December 31, 1980 specifica-

tions for construction of rearing houses (para 49);

(b) GOI to prepare and submit to IDA, by December 31, 1980,

a timetable to carry out the technical assistance

and overseas training program (para 56);

ANNEX IIIPage 2

(c) GOK to initiate an evaluation study, by March 31,1981, with terms of reference satisfactory to IDA(para 57);

(d) GOK to draw up plan to train sericulture staff(para 58);

(e) GOK to establish an engineering cell in its Depart-ment of Sericulture, by December 31, 1980 (para 58);

(f) KSIC's debt-equity ratio to remain as determined byIDBI (para 59);

(g) GOK to establish the Karnataka State Silk DevelopmentInstitute by December 31, 1980 (para 62);

(h) The Sericulture Research Committee to prepare, andfurnish to IDA, its annual programs (para 62); and

(i) The Project Coordination Committee to furnish aroundprograms by every March 31 (para 64).

IBRD 14378RMAY 19 0

IN D IA DE. RE EU

KARNATAKA SERICULTURE PROJECT A IG.A

T New areas under muleerry PAKISTAN> f UN

Traditional areas ceder erlberry . j N..Jh 'P,B ^UA ,

.TBIDAR ) \ 1 I I FtrJ Roads MAAHAREASHTRA 4 > e " 2 .j7-- R-ersBUM

X State capitol et

0 Distr[ct headquorters

MAHARASHTRA - J- -DiStrct baundories

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~~~:.' FY7F771 I cocoar market ta be maeetnieed~~~~~~~~~~~~~.ihu 0 E.st,gCooo no,ett.bernde,ie

. . R ( ' r PRO CTPDUC TION mk Existing cocoon rorkets

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A. 'BELLARY ~ ~~~~~~~Sulk ters 74 - 2 Trar,ing Ca,trt SCpL ik-I ob dr

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r NO RTH to + Xy i Sd h flc 3rm NN su mber .. deo f n 'ed pr aje c t com ponents dK

spur s t oi d

KANARA * I .15i-Number of e-istng project components ORTH Cariiro Ser rirol Reseorch rd Trining Irstitute (C.S.R T I)

*Th-r -r OOadl orrANARArtkeTX ( Ecistifminq research stotion

'- mrcecood ar e b.... .rCHITRADURGAp e-ar Prapserd regional research staoions

x Cititradu 22 ' '®er rn b n r n .r \ c .. t Exs subc uia-taionrcum-extercor centers'\ c eSHIMOG tcd. .- s l. , Propased .ub-starior-cum-e arersin ceeters

Iy- of:fae ct

O---t,,.,,.,,.,t,.,\ .: . . \ .] \ Etina Un siTe r;eu-rElitfi,gitrrsito ,,-h-i.:j

A'DCMN S/:A \t _Jeiv 8\ . , rsitE o Sk 9 ) wfJl sA 1!1 idir cronEn Seress-

C (! f - \ .0 I ;Y;A Ba5nq \-/ { S r0dtdnbsateB lare cams4 0 Dharwar campus

TUMKUR KOLAR f, (D~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~ Un versity 'of Barg.Eor

C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0g JArv c,QersXilyt,ril! ait >| rco h e

2 I .K:-trko Stf tte SericultAraON A ~ ~ ~ U TeASed eB ~~Deveopment Isatitte (proposd)

KANAIRA ~~~~~~~~~~~~~~~~~~~~~~~~~~ONAA~lssee

MYSORE - I b, I~~~ \-

TAMIL NADU R TAML NAD