NATIONAL INTELLIGENCE SURVEY 35; INDIA; THE ECONOMY

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I i, P:''
CONTENTS
This chapter supersedes the economic cover-
age in the General Survey dated February 1970.
A. Economic appraisal 1
B. Sectors of the econorny
4
1. Agriculture, fisheries, and forestry
4
a. Topography, climate, and land use
4
b. Agricultural policy and the Green
Revolution
7
c. Food crops and livestock
10
d. Commercial crops
14
e. Fisheries
15
f. Forestry
16
2. Fuels and power
16
3. Metals and minerals
19
a. Iron ore
19
b. Manganese
22
c. Mica
22
CONr-mmfrur.
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d. Bauxite and aluminum 22
e. Copper 22
f. Gypsum and limestone 22
4. Manufacturing and construction 23
a. Textiles and jute products 24
b. Food processing 25
c. Steel 26
d. Industrial machinery 26
e. Chemicals 27
f. Construction 27
5. Domestic trade 27
C. Economic policy and development 30
L Policy 30
a. Government budgets 31
b. Domestic sources of revenue 32
c. Money and banking 33
2. Development policies and programs 35
3. Manpower 37
D. International economic relatiens 40
1. Foreign trade and payments 40
2. Foreign assistance 44
FIGURES
a
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Fig. 1
Population and gross national prod-
24
Fig. 15
uct (chart)
1
Fig. 2
Manufacturing, minerals, and
25
Fig. 16
power map)
2
Fig. 3
Distribution of national income, by
27
Fig. 17
sector (chart)
4
Fig. 4
Major crop areas map)
5
Fig. 5
Land use (chart)
6
Fig. 6
Use of cultivated land (chart)
7
Fig. 7
High yielding varieties of wheat
40
Fig. 22
(photos)
8
Fig. 8
Foodgrain imports (table)
11
Fig. 9
Foodgrain production (table)
12
Fig. 10
Other crop production table)
14
Fig. 11
Refinery capacity and output table)
17
Fig. 12
Electric power map and table)
20
Fig. 13
Structure of 'industrial prodnetion
(table)
23
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Fig. 14
Index of industrial production chart)
24
Fig. 15
Production of principal industrial
commodities (table)
25
Fig. 16
Chemicals and chemical products
(table)
27
Fig. 17
Central government budget (chart)
31
Fig. 18
Development expenditures chart)
37
Fig. 19
Working population (chart)
38
Fig. 20
Industrial employment (table)
39
Fig. 21.
Relative wages in industry table)
40
Fig. 22
Balance of payments table)
42
Fig. 23
Commodity composition of exports
(table)
43
Fig. 24
Commodity composition of imports
(table)
44
Fig. 25
Direction of trade (chart)
45
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The Economy
A. Economic appraisal (U /OU)
India is the second most populous country in the
world -578 million people by mid -1973 �and by
almost any socioeconomic standard, one of the
poorest. It is predominantly an agricultural country,
with about 80% of the population living in the
countryside, mainly as subsistence farmers. Over the
past two decades, population increases have consumed
a major part of the modest economic gains (Figure 1).
With an estimated gross national product (GNP) of
0
US$56 billion (420 billion rupees in FY1972/73),' the
average per capita income still was less than $100
annually. A development strategy of rapid industriali-
zation, begun in the early 1950's, however, has greatly
expanded the country's industrial base (Figure 2).
India now produces nearly all of its supply of
manufactured goods, with the exception of certain
highly specialized and sophisticated equipment and
components. Items produced by the industrial sector
include precision instruments, electronic equipment,
jet fighters and transports, tanks, frigates, motor
vehicles, locomotives, railcars, tractors, steel, cement,
cotton textiles, and jute manufactures.
Periodic droughts and a rapidly increasing
population continue to frustrate India's efforts to
achieve self- sufficiency in foodgrains. Demographers
familiar with the Indian scene estimate current
population growth at about 2.5% annually and
believe it will accelerate as mortality rates continue to
decline and high birth rates persist. Growth of
foodgrain production during the decade ending with
crop year 1970/71 averaged less than 3% annually.
Between 1967/68 and 1970/71 growth averaged more
than 4 but these were successive years of good
weather. Poorer weather since 1970/71 has led to
reduced foodgrain output. After 6 years of declining
foodgrain imports, India almost achieved its long
sought goal of self sufficiency in foodgrains, but
declining production is again leading to increased
imports.
One of India's principal economic problems
continues to be the severe shortage of resources and
capital. Investment for development has been further
limited by heavy spending for other purpose such as
defense; by the unwillingness of the central
government to tax the agricultural sector sufficiently;
'The Indian fiscal year runs 1 April -31 March.
2 Unless otherwise indicated, the Indian crop year runs I Judy 30
June.
1
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reCURE 1. Indexes of population and gross national
prc duct (U /OU)

I.J1.0141 1111F.-I I 11jill �fill
111will 11161111m111111-1
MANUFACTURING MINERALS
0 Textiles At Bauxite
(Jjute, Cooffon,wwool, mman-made)
Cu Copper
Chemicals, fertilizers, or plastics
F Iron
Petroleum refining
ml Mica
Engineering
Iron and steel Mn Manganese
Plo, Zn Lead, zinc
Railroad equipment and repair
a% Motor vehicles or tractors 71 Ilmenite
A Processing
Aircraft plant
jk Shipbuilding I Gaafield
A
41P cement Oilfield
Cu
CrD Coalfield
Cu
Cu Cu
Fe P Zn Cu
Cu
ELECTRIC POWER*
CU
Jammu
Hydra, ATh
Mn
Nuclear
Cu
Mn
*Generating capacity arceeds 200 mw.
BhAk,all
BD Pb, Zn
.cu E
El symbol p ,e resents one or more
p o wer p lants i n the area.
Chand
Q Q a Pb, Zn
Now Del Cu
F
Cu Cu M' �11arilily
Mi
Digbol
Can tok
Fe inpur ThImph
Cu Lucknow 1111mrup
j,$u,Pb, Zn Goriklipur
Fe-
Pto ZnA]M@r Fe
Cu C 1
Fe
Q lisublill
11% F uni
MnF9 C> Cu
Fe m 1 11pu
J; M
U j[Pb, Zn Kota A Awd Pb Zn
Qjft hll R Pb, Zn Ml
in Q
AhmsdJbsd/@Qj& At P Cu
M
M I *jA F.
J V At 1 40 S Al'
At
A I Alp
Ji no 2. Al ndore' (D
Asansol
'Zj. 11110cht At u
I Fe Mn Nn m
Cu Z I Fe oc" n
lullshwar Mn Pb
I c V
AA Mn K orsju
orb C e M
Zn
Pb, Zn 1,
Cu 9PR
ml as Calcutta
Riurksla
1111 PUr Alsik V.Cu ehilli
Q(9Q Fe
J m1hodpor
Mt
Zn
At Fe
Bombay Thins Fe
At Mn
411111111u.0
Ti If-
A I holspor(E)
TI JS
At M 1 Zn Hyderlibi
MnAl Cu Cu Cu
Pb, Zn Cu
on" Fe Hvbli Cu
Cu 1111111111re Cu
At -,b Pb, Zn T1
Sha,Jw, Plo, Zn Fe I
all or
re
a
Cu r
c
Mi 1waffa, Q
111111yurd' a am
Mi Fe AI 1111y"ll
T1 n
linalia. Mi Tinichirippalli
Always At C)
SAL PD. Zn
50U67 7-73 70
FIGURE 2. Manufacturing, minerals, and power (U/OU)
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and by large expenditures for state -owned heavy
industrial projects, many of which are characterized
by excess capacities, low technical competence, and
poor earning records. New Delhi has indicated its
intention to direct economic policies more toward
achieving social welfare goals, such as alleviating
unemployment and individual poverty, but these
goals can be achieved only through a rapid
acceleration of national economic growth.
The structure of India's industrial sector has been
strongly influenced by government policies directed
toward achieving a more equitable distribution of
income and an expansion of employment. Small -scale
industry has been encouraged, although it often
operates very inefficiently and is technologically
backward. Small -scale industry is protected by a host
of laws that include restrictions on the volume of
production by large -scale industry, preferential
licensing procedures, differential taxation, and direct
subsidies. In the textile industry, for example, the
government has protected the small -scale plants by
holding down production in the modern, large -scale
plants. Consequently, the smaller producing units
have provided about four- fifths of the increase in
textile output since 1950.
The output of India's capital goods industries has
been constrained by bottlenecks in production, limited
domestic markets, and the inefficiency of government
owned plants. New Delhi expanded the public sector
at the expense of the private sector by reserving for the
former most basic heavy industries such as coal,
petroleum, iron, and steel. As a result, the public
sector's share of industrial output increased from less
than Wo in 1950 to about 20% in 1972. Public sector
enterprises are tightly controlled by the central
government; politics, not economics, is often the
decisive factor with respect to employment, wage
demands, and new industry locations. The public
sector is free from the usual competitive pressures,
resulting in less initiative, flexibility, arid willingness
to take risks and make quick decisions. There is also
little incentive to reduce costs and improve efficiency.
New Delhi now appears to be more committed than
ever to a further enlargement of the public sector at
the expense of the private sector. Because of this, the
future growth of large -scale private industry, which is
already limited by an extensive system of government
controls, is likely to be stow.
Before independence was gained in 1947, India was
it net exporter, but it subsequently became a net
importer is s result of changing world trade patterns.
Fxidicularly the decline in the old British imperial
trading system. In addition, jute products, traditien-
ally a major export item, suffered from the disruptions
caused by the partition of the Indian subcontinent in
1947. Furthermore, since independence New Delhi's
policies generally have hampered the growth of
exports because the government gave priority to
capital- intensive heavy industry at the expense of
export oriented light industry. India has a large
potential for increasing mineral exports, but many
large ore deposits, such as copper, remain virtually
unexploited. The only major mineral products now
being exported are iron and manganese ores, but these
ores accounted for only 7% of India's total exports in
FY1971/72. Thus, export growth must come primarily
from the agricultural and matrufacturing sectors. On
the average, Indian exports have increased only 2.4%
annually over the past 20 years, or about one -half the
combined average rate achieved by all less developed
countries.
Indian exports consist largely of a narrow range of
goods, many of which face sluggish world demand
and increased competition from synthetic substitutes.
In addition, India has lost ground in international
competition with other less developed countries. From
1950 through 1972, India's share of world markets for
its three main export products actually declined: from
87% to about 55% for jute manufactures, from 44% to
33% for tea, and from 20% to 8% for cotton textiles.
Moreover, 90% of the increase in exports went to the
U.S.S.R. and Eastern Europe, where price competition
was not a decisive factor. Belated efforts were made in
the late 1960's to boost exports by giving exporters
preferential Leatment for essential imports, lowering
export duties, and raising export subsidies. Export
growth accelerated somewhat during 1968 -72.
India's international economic relations have been
characterized by chronic trade deficits and a heavy
dependence on foreign aid to help finance imports
needed for economic development and basic food
requirements. Although foreign firms have enjoyed a
relatively favorable rare of profit arid the right to
repatriate capital within prescribed limits, they face a
host of regulations, red tape, and even outright
government hostility. Foreign firms are under constant
governmental pressure to give more and more egaity
to Indian partners. Moreover, New Delhi severely
restricts the industrial sectors in which new private
foreign investment is allowed.
Indian dependence on foreign aid increased sharply
after 1960, and during the decade of the 1960's total
foreign economic aid amounted to about $11 billion,
more than twice the total received during the 1950'x.
About one -half of the aid during the 1960's came from
the United State Food shipments, principally from
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the United States, accounted for as much as one -third
of the total volume of foreign aid received during
drought years. Net aid receipts have been declining
since 1964 because of sharply rising debt payments
and little change in gross aid receipts, which now run
about $1 billion annually. The U.S.S.R. and Eastern
Europe have provided only slightly more than 10% of
India's total foreign economic aid, and their
contribution to the country's overall econotic
development has been restricted to specific heavy
industrial sectors, such as steel production and electric
Power, with almost nothing earmarked for agriculture
or for basic industrial raw materials.
The modest pace of economic progress recorded in
India during the past 25 years reflects the constraints
imposed not only by limited resources but also by the
country's development policies. Future progress �at
least through the 1970's �will be limited by these
constraints, which include: conflicts between the goal
of economic growth and the other goals of the
government; the continuing predominance of the
agricultural sector, in which production will probably
grow very slowly; limited investment funds for
industrial development; and limited markets and
falling prices for traditional exports that, as a
corollary, lead to a shortage of foreign exchange with
which to finance essential imports.
Despite substantial gains in industrial production
and technology, living conditions for the bulk of the
population remain desperately poor. The typical
Indian is a small subsistence farmer or tenant who ekes
out a living in an isolated village under bare
subsistence conditions. Because of the rapid growth of
population and the slow growth of job opportunities in
rural areas, millions of Indians have migrated to the
cities, where they have swelled the ranks of the urban
poor. Most Indians are susceptible to a host of
debilitating diseases because of malnutrition and lack
of medical care and proper sanitation facilities. A
serious drought or other natural disaster often kills
thousands of under nourished or sick Indians. Bitter
religious, caste, and linguistic differences hamper
economic progress and periodically flare up into riots
that cause extensive damage to life and property.
100-.
B. Sectors of the economy
India's progress toward industrialization and
urbanization is reflected in the altered distribution of
national income since FY1950/51 (Figure 3). At that
time, the industrial sector (manufacturing, mining,
electric power, and construction) accounted for 16% of
national income. By FY1971/72, however, the
4
FIGURE 3. Distribution of national income; by
sector (U /OU)
industrial sector's share had risen to 23 Meanwhile,
the share of agriculture (including fisheries and
forestry) declined from 51% to 45 Trade, services,
and utilities expanded at about the same rate as
overall national income. (U /OU)
1. agriculture, fisheries, and forestry (U /OU)
a. Topography, climate, and land use
The Indian subcontinent contains three broad
topographic and climatic areas that strongly influence
land utilization patterns (Figure 4). The great
mountain wall of the Himalayas consists of a series of
parallel ranges with large plateaus and valleys
extending about 1,554 miles from Jammu and
Kashmir in the northwest to Arunachal Pradesh in the
northeast .3 Agriculture in this area is limited by high
elevations, steep slopes, and cool weather. Rice and
fruit orchards are cultivated in some of the fertile
narrow river valleys, and tea is grown on the lower
slopes in West Bengal and Assam. The Indo- Gangetic
Plain extends from 155 to 186 miles south of the
'For diacritics on place names see the list of names on the apron
of the Summary Map in the Country Profile chapter and the map
itself.
r 1
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Other services
151
166
Commerce, transport,
1 7 7
and communications
16.0
Manufacturing,
construction,
16 0
and mining
1 '22.9
�91
Agriculture, fisheries,
2
and forestry
44.5
Fy 1950/51
Fy 1971/72
FIGURE 3. Distribution of national income; by
sector (U /OU)
industrial sector's share had risen to 23 Meanwhile,
the share of agriculture (including fisheries and
forestry) declined from 51% to 45 Trade, services,
and utilities expanded at about the same rate as
overall national income. (U /OU)
1. agriculture, fisheries, and forestry (U /OU)
a. Topography, climate, and land use
The Indian subcontinent contains three broad
topographic and climatic areas that strongly influence
land utilization patterns (Figure 4). The great
mountain wall of the Himalayas consists of a series of
parallel ranges with large plateaus and valleys
extending about 1,554 miles from Jammu and
Kashmir in the northwest to Arunachal Pradesh in the
northeast .3 Agriculture in this area is limited by high
elevations, steep slopes, and cool weather. Rice and
fruit orchards are cultivated in some of the fertile
narrow river valleys, and tea is grown on the lower
slopes in West Bengal and Assam. The Indo- Gangetic
Plain extends from 155 to 186 miles south of the
'For diacritics on place names see the list of names on the apron
of the Summary Map in the Country Profile chapter and the map
itself.
r 1
Air.
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R t w...!?T..v"i: �Pf.'S SerN.� T' ..,...rs::"T.i.... �TN'IY. _=S ..y
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5018627-73
FIGURE 4. Major crop areas (U /OU)
Himalayas, and comprises the basins of the Indus,
Ganges, and Brahmaputra rivers. It is one of the
world's largest alluvial plains and most densely
populated areas and contributes a large part of India's
agricultural output. The eastern portion alone,
including the states of West Bengal, Bihar, and Uttar
Pradesh, accounts for more than one third of the
country's rice output and much of its sugarcane, jute,
R 0 Rice P Pulses
W Wheat S Sugarcane
J QJowar(sorghum) J Jute
and tea. The chief crops in the drier western portion or
the plain are wheat, barley, gram (mainly chickpeas),
corn, and cotton. The Deccan plateau, which includes
most of peninsular India below the Indo- Gangetic
Plain, is separated from the plain by mountain ranges
and hills. Two mountain ranges �the Western and
Eastern Ghats extend in a general north -south
direction along the sides of the plateau, leaving a
5
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narrow coastal strip on the west and a broader coastal
plain on the east. The central part of the plateau is a
comparatively dry agricultural area, which produces
many types of millets and grain sorghums, as well as
peanuts, tobacco, and cotton. The east coast sections
receive heavy rainfall and are well suited for rice,
while commercial crops such as spices, coconuts,
coffee, and rubber are grown on the southwest coast.
India's climate is essentially monsoon- tropical. The
Himalayas help to moderate the winter we�ither by
preventing much of the frigid air from the north, from
entering the country. Except at the higher elevations
in the north and northwest, temperatures are favorable
for year -round crop production during three main
seasons. The southwest monsoon generally arrives in
May or June, inaugurating the wet season that lasts, in
most areas, through September or October. The winds
originate in the Indian Ocean and travel northward
up both coasts, on each side of the Deccan, to Bombay
and to Calcutta and the Ganges valley. Rainfall is
usually frequent and heavy; daytime temperatures
generally remain at 90� F. or above, and relative
humidity is high. In October, the cool season begins
when the winds reverse direction and a northeast
monsoon moves down the Ganges valley and heads
southward over the peninsula. This season is quite dry
except over southeastern India, where the coastal area
near Madras has a winter rainy season. Mean
temperatures reach a low in January, when they range
from 50 �F. to 70 �F. in the Ganges Valley and 70 �F. to
89 �F, over most of peninsular India. A hot, dry season
begins in March and lasts until the arrival of the
southwest monsoon. There is little rainfall during this
time, and dust storms can be quite destructive in
places.
The two main crop growing seasons are the summer
season, or kharif, associated with the southwest
monsoon, and the cool season, or rabi, associated with
the northeast monsoon. Most areas receive about 70%
of their total annual rainfall during the summer
season, and about 75% of total agricultural production
takes place at that time. Wheat, barley, flaxseed,
mustardseed, and rapeseed are grown during the rabi,
and most other crops during the kharif. Many tropical
crops are grown year- round. The success of India's
crops depends to a large extent on the unpredictable
variations in time of arrival, duration, distribution,
and intensity of the monsoons Crop yields decline
when late monsoons delay sowing, and below- normal
rainfall frequently results in crop failures. Since 1950,
declines in foodgrain production due to erratic
monsoons have occurred in about one out of every 3
years.
FIGURE 5. Land use, crop year 1970/71 (U /OU)
About 60% of India's total land area is classified as
agricultural land, and of this about 75% is cultivated
(Figure 5). Forests account for about one -half of the
non cultivated area, and the remainder is mountain-
ous, barren, or uninhabited. During 1971, only about
64 million acres, or about 17% of the cultivated area,
was sown more than once within the year, and most of
this multicropped land was nonirrigated.
During the main summer crop season, rainfall on
about 70% of the cultivated area generally is
inadequate and too erratic for intensive cultivation.
Irrigation is vital, but its development is proceeding
slowly. Estimates of irrigated area vary from 65
million to 100 million acres, depending on the
reporting method used. Even in irrigated areas,
however, most water storage facilities are too small to
support year -round cultivation, and by crop year
1971/72 less than half the irrigation potential had
been developed. Small -scale irrigation has received
special emphasis since the droughts of 1965/66 and
1966/67, and by June 1972 India had about 470,000
tube wells nearly four times the number in 1966
and 2.4 million diesel or electric pumpsets, compared
with 980,000 in 1966. Small -scale irrigation works
have spread rapidly, but major irrigation projects have
lagged behind schedule, due mainly to the lack of
coordination among numerous government and
private agencies.
Most farmers in India plant the bulk of their
cultivated land in foodgrains, with rice alone
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Gross Harvested Area
(including multiple cropping)
395 million of acres
FIGURE 6. Use of cultivated land, crop year
1970/71 (U /OU)
Asian rice and still retain its disease and drought
resistance by cross- breeding it with high yielding
Taiwanese seed, which is disease -prone under tropical
conditions. The new varieties hive stiff stems, which
are the key to their increased productivity. Because of
this characteristic, they can be heavily fertilized and
watered, and can produce a heavy seed head without
falling over, or lodging. Traditional varieties, when
heavily fertilized, grow taller and lodge when the
heads grow heavy. The HYV seeds also have a short
growing season, making more multiple cropping
possible.
By 1965, the TN -1 and IR -8 varieties were
developed and were imported into India without
further adaptation to local requirements. These high
yielding varieties of rice encountered problems in
India, however, largely because they are prone to local
diseases and have poor milling and taste characteris-
tics. Meanwhile, Indian research in Tamil Nadu
produced another HYV, ADT -27, which has consumer
acceptance, but is suitable for use in only one growing i
season and in a limited area of India. The 4
development of HYV rice which can be fully
acclimated to local conditions and the accompanying
agricultural technology is expected to take at least
several more years.
High yielding varieties of spring wheat were first
developed in Mexico by using dwarfing genes dis-
covered in Japan to give the plants short, stiff stems
and nonlodging qualities. In 1963, four varieties of the
dwarf seeds were sent to India, where they were tested
in numerous locations. Lerma Rojo and Sonora 64
varieties were eventually selected for their high yields
and relative resistance to wheat rust (Figure 7). These
strains were released for general use, and a program to
distribute the seeds over a wide area began in 1966. In
1967 Indian researchers developed an amber colored,
high- protein seed that was more suited to Indian
tastes, by treating the Sonora 64 variety with gamma
rays. The amber seeds are rapidly replacing the
original Mexican varieties. Both the Mexican and
amber wheats are adaptable for use throughout
India's wheat area because of its relatively
homogeneous topography and climate, which are
similar to the Mexican wheat areas.
High yielding varieties of coarse grains (corn,
millet, and grain sorghw.:), first introduced in 1963,
have spread very slowly. Their yields are not I
substantially above those of local varieties, unless
sufficient and carefully controlled water is available, a
condition that does not exist in much of the area in
which these grains are grown. HYV pulses are not
L Fibers 57.
Sugarcane 2J
Other crops 67.
Food grains FI Non- foodgrains
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accounting for nearly one fourth of the planted area
(Figure 6). Much of the cultivated land is marginal; it
is easily eroded, and has poor fertility and a low
moisture content. Yields in such areas are very low.
b. Agricultural policy and the Green Revolution
Serious efforts to improve the performance of Indian
agriculture did not begin until the mid- 1960's,
prompted by a disastrous drought and rising imports.
New Delhi's new strategy consisted of applying new
technology in areas of adequate water supply,
increasing the general availability of chemical
fertilizers, pesticides, and other modern inputs, and
raining farm prices at incentive levels. The
success of the new technology �the so- called "Green
Revolution depended mainly on new high- yielding
varieties (HYV) of seeds and the whole package of
technical and material inputs required to make them
productive. By 1972, the use of HYV foodgrain seeds
had spread to 42 million acres, or almost 15% of the
total foodgrain area.
High yielding rice seeds were first developed at the
International Rice Research Institute in the
Philippines during the early 1960's. Scientists there
attempted to raise the yields of the traditional tropical
II
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poverty. Emphasis is to be placed on expanding em- r?
g ployment, reducing income and wealth disparities, i
Total expenditures: US$32.5 billion and concentrating economic activity. The plan also
reaffirms India's intention to reduce dependence on
i foreign aid.
0
3. Manpower
Other
II
c.
J
Education
TransportE
and
communice
Power
I rrigatior
Agriculti
Indust
and mir
FIGURE 18. Development expenditures for the Fourth
Five Year Plan (U /OU)
provide the basis for a much greater effort during the
Fifth Five Year Plan, which will cover the period 1
April 1974 to 31 March 1979.
The Fifth Five Year Plan has not yet been released.
Preliminary official reports, however, contain the
broad socioeconomic guidelines to be followed. The
plan proposes to integrate the goal of increased
economic growth, which was the main emphasis in
earlier development plans, with schemes to eliminate
India's abundant reserves of manpower are a
potential asset for development of the country, but
they also pose acute problems, especially in terms of
providing training and creating jobs. In April 1971,
about 80% of the population of 547 million lived in
rural areas or in villages of less than 5,003 persons, and
70% of the total population was illiterate. Most of the
urban population was unskilled and unable to learn
easily the complex production methods required in a
modern economy. Unemployment and under
employment were widespread in both rural and urban
areas, and the population was increasing faster than
job opportunities.
Preliminary reports from the 1971 census provide
only generalized data on major categories of workers.
Even when detailed breakdowns of the labor force
become available, however, comparisons with the
earlier census data will be impossible because of
definitional changes. For the 1.971 census, a person
was categorized as a worker or nonworker only
according to his main activity, without considering
any secondary activity. In the 1961 census, persons
who were basically nonworkers, such as housewives
and students, were included as workers even though
few of them were formally employed, even on a part
time basis. These persons were excluded from the work
force statistics in the 1971 census.
In April 1971 183.6 million persons, or 34% of the
Indian population, were in the labor force. According
to preliminary reports on the census, 81% of these
workers were males and 19% females. Although details
on the ages of the persons in the labor force were not
given in preliminary reports, earlier censuses had
classified ages 15 to 59 as the normal working age
group. The government is making efforts to expand
job opportunities and employment by promoting
labor- intensive rather than capital- intensive economic
activities. In the industrial sector, the government is
favoring small- and medium -scale industry over large
scale industry in terms of investment, licenses, and
allocations of new materials. In rural areas, the
government is promoting labor- intensive development
programs such as road building, small irrigation works,
and the like. The purpose of these programs is to
ensure that ultimately, at least one adult in each rural
family has year- round, full -time employment. During
37
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FY1971/72, for example, the Indian government
allocated $100 million for programs aimed at creating
500,000 rural jobs. This number of jobs, however, is
nominal compared with the number required; also,
the government has been slow to utilize the allocated
funds.
About 70% of the labor force is directly dependent
on agriculture for a livelihood (Figure 19). There has
been virtually no change in this percentage since 1900.
The agricultural labor force consists of two distinct
categories of workers and employment: about 79
million cultivators who either own their own land or
have some land rights as tenants or sharecroppers, and
47 million agricultural workers who are landless and
sell their services. The division between these two
groups is tenuous, however. Indian farm holdings
often consist of several small, disconnected pieces of
land that are difficult to irrigate, uneconomical to
operate, and generally resistant to improvements and
new technology. Moreover, the marginal cultivator
runs the constant risk of losing all his land rights,
because he has to borrow to meet current consumption
requirements and to plant his crops. The government
is trying to prevent further fragmentation of
landholdings beyond a minimum economic level, and
is also promoting legislation to overcome extensive
concentration of ownership by imposing a ceiling on
the size of holdings.
The Green Revolution appears to have increased the
number of landless agricultural workers, although the
38
size of the increase cannot be determined, due to the
lack of comparability between the 1961 and 1971
census data. Even before the Green Revolution, the
increasing numbers of landless laborers in the
countryside were causing considerable concern,
because they were more likely than other farm workers
to be unemployed or underemployed. Today many
farmer- cultivators are on the borderline of becoming
landless agricultural workers, because the land they
possess �in freehold or on lease as tenants or
sharecroppers �is not sufficient for their family
requirements. The larger landowners, on the other
hand, have sufficient resources to irrigate their land
and buy fertilizer and new seeds, and are in a better
position to benefit from new technology. Many
landowners have resumed cultivating their own lands,
as farming is now more profitable than before.
Landowners are also repossessing their tenanted land
due to the threat of land reform legislation, contrary to
the reform's aim to give the tenant greater security of
tenure. The result has been to push more tenant
farmers into the landless agricultural laborer category.
On the whole, the new technology has increased the
productivity of the agricultural labor force. With more
intensive cropping and diversification of cropping
patterns, agricultural laborers have been finding work
more readily, and their wages have increased since
1966. However, due to a 25% increase in consumer
prices since that year, laborers generally have
experienced little improvement in real income.
In April 1971, India had 57.6 million nonagricul-
tural workers �about 31% of the total labor force. In
earlier censuses, this category included household and
non household industry, trade, business, the
professions, and services. Workers in household
industry mainly consist of landless laborers who do
small -scale manufacturing in the home, usually with
all adult members of the family participating.
Although details on the distribution of nonagricultural
workers in the 1971 census are not yet available, it is
probable that household industry accounts for a
declining share of the total and small -scale factory
employment for an increasing share. The government
has actively promoted industrial training programs for
both small- and large -scale industry. Nonetheless,
shortages of qualified workers and serious imbalances
in the numbers of skilled and professional workers
continue to inhibit economic progress. Industrial
workers are poorly paid and subject to poor working
conditions by Western standards. The government has
urged employers to improve these conditions. These
efforts are frustrated, however, by the excess labor
supply, the government's inability to enforce laboT
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FIGURE 19. Working population, by major category,
April 1971 (U /OU)

s
0
production. Industries in which wages increased faster
than the average in 1969 included petroleum and coal
products, transport equipment, electrical machinery,
basic meti4l4, metal products, and textiles (Figure 21).
Industries iii which wage increases were far below the
average for all Industry were those producing wood
and cork products (except furniture), leather and
leather products, and nonmetallic minerals (except
petroleum and coal).
Labor unrest and agitation have continued to
increase since the mid- 1960's. Government estimates
place the number of man -days lost due to industrial
unrest at 17.2 million during 1970. The number of
man -days lost during 1971 probably was more than 20
million. Economic factors contributing to the labor
unrest included the rise in wholesale and retail prices,
the continued growth of unemployment, and
government restrictions on new private investment,
which contributed to many industrial closures,
especially in eastern India. Strikes were most prevalent
in airlines, banking, railroads, ports and docks, and
public services, all highly important to economic
development. A trend seemed to be developing in
1971 toward bipartite agreements (without govern-
ment participation). Such agreements were reached in
an airlines dispute after a 15 -day lockout, in a dispute
between public and private steel companies on the one
FIGURE 20. Industrial employment, by branch* (U /OU)
laws, resistance by management, worker apathy, and
by the government's tendency to assign a higher
priority to economic development than to labor
welfare.
The urban labor force Is engaged mainly in trade
and services. Employment in large -scale industry
continues to grow, although not as fast as it did during
the 1950's. During the 1950's, employment in large
scale industry increased 4.5% annually; from 1960 to
1967 it increased 3.4% annually; and since 1967, the
rate probably has slowed due to the slump in
industrial output. In 1967, nearly 20% of these workers
were employed in public sector industry, mainly in the
manufacture of transport equipment, compared to less
than 10% in 1951 (Figure 20). This trend reflects the
government's policy of promoting public sector
industry. On the whole, large -scale industrial
employment probably has not increased as fast as
small -scale industrial employment.
From 1960 through 1969, money wages increased
by 6.6% annually, while industrial production
increased by 6.2% annually. In contrast, during the
1950's wages increased by only 2.9% annually, while
industrial production increased by more than 6.5%
annually. Since 1969, this trend probably has
continued as labor agitation for higher wages has
increased despite the continuing slump in industrial
THOUSAND PERSONS PERCENT DISTRIBUTION
1951 1960 1967 1951 1960 1967
Public sector 237 540 911 9.3 14.3 19.2
Textiles 3 15 45 0.1 0.4 0.9
Printing and publishing 20 34 44 0.8 0.9 0.9
Machinery (excluding electric) 22 31 63 0.9 0.8 1.3
Electrical machinery 10 16 55 0.4 0.4 1.2
Transport equipment I27 252 313 5.0 6.7 6.6
Electricity and gas 8 26 42 0.3 0.7 0.9
Other 49 167 349 1.9 4.4 7.4
Private sector 2,299 3,224 3,833 90.7 85.7 80.8
Gin and presses 89 160 142 3.5 4:3 3.0
Food, except beverages 335 534 576 13.3 14.2 12.1
Tobacco 122 177 170 4.8 4.7 3.6
Textiles 1,042 1,159 1,213 41.1 30.8 85.6'
Chemicals 74 110 156 $.9 3.9 3.3
Nonmetallic minerals 110 183 231 4.3 4.9 4.9
Basic metals 95 137 182 3.7 3.6 3.8
Machinery (excluding electric) 76 163 281 3.0 4.3 5.9
Transport equipment 58 94 143 $.3 8.5 3.0
Other 293 507 738 11.6 13.5 15.6
Total 2,536 3,764 4,743 100.0 100.0 100.0
NOTE- Components may not add to totals shown because of rounding.
*Large -scale industry only.
39
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FIGURE 21. Relative wages In Industry* (U/OU)
10551 1960 1069
All- industry average index..........
100.0
100.0
100.0
Textiles
100.8
102.2
102.9
Footwear, apparel, and textile goods.
95.5
103.0
89.9
Wood and cork, except furniture....
63.1
62.4
54.7
Furniture and fixtures
90.8
75.0
82.0
Paper and paper products..........
92.5
94.1
08.2
Printing and publishing............
101.7
89.2
90.0
Leather and leather products.......
72.6
68.7
77.2
Rubber and rubber products........
128.0
102.8
87.8
Chemicals
83.8
97.0
94.5
Petroleum and coal products........
109.3
148.5
130.4
Other nonmetallic minerals.........
67.5
73.3
67.3
Basic metals
132.1
109.0
100.9
Metal products (excl. machinery)
88.0
94.8
101.4
Nonelectrical machincry
96.4
89.3
81.1
Electrical machinery
119.5
104.4
104.3
'Cransport equipment
113.0
103.4
111.8
*Data refer to employees in large -scale industry earning less
than Rs400 (about $53) per month, including basic wages,
allowances, annual bonus, and money value of concessions.
hand and the labor unions on the other (without a
work stoppage), and in the banking industry (with
only occasional disruptions).
D. International economic relations
(U /OU)
1. Foreign trade and payments
Although India has been improving some features
of its international financial position since 1966, its
balance of payments has been tinder severe and
continuous pressure since the beginning of the Second
Five Year Plan in April 1956. India has become
increasingly dependent on foreign aid and on
emergency drawings from the International Monetary
Fund (IMF) to meet successive deficits on current
account. During most of the First Plan, there was a
surplus on current account, and foreign exchange
reserves reached the equivalent of US$1,894 million
by the end of the plan in March 1956. During the next
2 years, imports increased rapidly, financed mainly
from India's foreign exchange reserves, which
dwindled to $704 million in late 1958. The decline in
reserves was slowed during the rest of the Second Plan
by rising foreign aid disbursements and tightened
controls on import growth. The basic balance of
payments deficit continued to grow during the Third
Plan. Although the utilization of foreign aid increased,
the increase was not sufficient to cover the deficit, and
India found it necessary to resort to the IMF for
emergency balance of payments aid. While foreign
exchange reserves were maintained during the Third
40
Plan, India's obligation to the IMF more than
doubled -to $287 million. The overall deficit on
current account during the Third Plan was about $5
billion, in 1966 and 1967 India drew an additional
$277 million front the IMF because of pressure on the
balance of payments arising out of the need for
massive foodgrain imports. India's borrowings from
the IMF, however, were completely repaid by March
1971.
The main reasons for the improvement in certain
aspects of India's International financial position since
1966 have been increased exports, a general decline in
nonfood imports, and declining high level of foreign
aid. In addition, receipts of '$335 million in Special
Drawing Rights (SDR)' anti $437 million in debt relief
during 1967 -72 helped case pressure on the reserves.
During that period, India received less foreign
nonfood aid annually than in the early 1960's.
Nevertheless, the country continued utilizing aid at
about previous levels -$900 million to $1 billion
annually -by drawing some $800 million front the
accumulated $3.2 billion aid pipeline.
Since 1967, India has also made some progress in
reducing its large foreign trade deficit. Previously, a
major weakness of Indian development policy had
been its neglect of exports. During the 1950's, annual
exports fluctuated around $1,260 million, without any
clear upward trend. Since FY1967/68, however,
exports have grown from $1,598 million to $2,085
million in FY1971/72. Also during that period,
declining food imports and more stringent import
controls reduced the trade deficit from $1,079 million
to $331 million (Figure 19).
Although the trade deficit has narrowed, two other
factors have aggravated the basic disequilibrium in
the balance of payments. Firstly, the burden of
servicing the large and growing external debt has
increased rapidly -from $122 million in FY1960/61 to
$a30 million in FY1971/72 (despite $96 million in new
debt relief). Secondly, India's earnings from invisibles
have declined substantially, from an average surplus
of $177 million a year in the Second Plan to a deficit of
$110 million a year during the first 2 years of the
Fourth Plan. This reflects primarily the emergence of
substantial investment outflows as well as deficits in
government and miscellaneous accounts. Payments of
interest and dividends on foreign investment in India
have increased rapidly, and India's payments abroad
*The SDR is a new form in international currency created by the
International Monetary Fund in July 1969. Its value was on a par
with the U.S. dollar until December 1971, when the value rose to
31.09; in February 1973. the value was fixed at $1.21.
J
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4
for technical and professional services arid royalties
have become it significant drain on its foreign
exchange.
Since 1957, India has tried a variety of remedial
measures to case the strain on its balance of payments,
including a progressive tightening of import
restrictions, export promotion, curbs on foreign travel
by Indians, steps to check smuggling, and devaluation
of the rupee. During the Second and 'Third Plans,
import policy became increasingly restrictive as
India's imports grew faster than exports. Imports of
machinery and equipment have been financed
primarily from foreign aid, as free exchange resources
had to be used primarily for foodgrain and
maintenance imports. Assistance to exports was
gradually increased, eventually becoming a complex
system of subsidies to exporters, which was
cumbersome in operation, open to many abuses, and
generally ineffective in promoting exports. In June
1966, the Indian rupee was devalued from Rs per
USSI to Rs7.5 per USSI, primarily to stimulate
exports. Concurrently, measures were taken to
liberalize imports of capital goods, raw materials, and
spare parts. Import duties on these items were reduced
and all regulatory duties and import entitlement
schemes were withdrawn. More imports were to be
rationed by price instead of by fixed quotas. For the
first time, export taxes were introduced for a number
of traditional exports such as jute manufactures, tea,
cotton, and hides and skins. As a result, export prices
of these traditional exports remained essentially
unchanged, and substantial increases in revenue
accrued to the government.
When the flow of exports failed to respond to the
devaluation, primarily because the continuing
drought held down exports of agricultural goods,
export policy was again revamped. A few months after
devaluation, selective incentives for some export
products were revived. Cash assistance was given to
engineering goods, chemicals, and a few other
manufactures, and a new scheme of import
entitlements was introduced. Cash assistance was
initially provided at the rate of 10%, 15 and 20% of
f.o.b. value for different items, and 25% and 30% rates
were later added. Other promotional efforts that have
been developed mostly since 1967 include rebate of
customs and central excise duties on final inputs; the
supplying of domestic steel and plastic raw materials
at international prices when domestic prices are
higher; preferential treatment of firms exporting 10%
or more of their output; preferential allotment of raw
materials, such as steel, to exporters; concessionary
export credit facilities; market development activities
by the various export promotion councils; and quality
control and preshipneut inspection. While all these
schemes were beneficial, their effectiveness a'as often
diminished by inadequate anti lengthy bureaucratic
procedures, especially for schemes that involved
payments by government agencies.
During the first 3 years of the Fourth Plan, import
polity remained basically unchanged. Imports still
were strictly controlled through a complex licensing
procedure, and permission to import was given only
after it was shown that the imports were essential for
India's development and fulfilled a need that could
not be filled by auy domestically produced product.
Each year, as import substitution progressed, a few
more items were either banned or put on a restricted
basis. Increased imports of hulk items have been made
the responsibility of the three state trading
organizations. The government has given greater
priority in the issuing of import licenses to exporters
and the small -scale sector. Despite preferential
treatment, the small -scale sector remained at it
disadvantage because it was less able to cope with the
complicated procedures. During FY1971/72, the value
of import licenses issued to the small -scale sector was
increased by 25 and the value of spare parts licenses
was cut by one -third following the suspension of U.S.
aid. India loses much production because of a lack of
spare parts that has idled machinery, especially
construction equipment.
In FY1971/72, exports increased to $2,085 million,
or 7.9 over the average of the first two years of the
Fourth Plan. The war in Bangladesh and the
attendant interruption of exports from that country
resulted in huge increases in India's exports of jute
goods. The international monetary crisis caused little
difficulty, except for the few exports sold on a deferred
payment basis, and the temporary U.S. import
surcharge affected only about 15% of India's exports
to the United States.
Imports in FY1971/72 rose 11.50. More than half
of this increase consisted of imports intended
specifically for Bangladesh refugees in India. These
imports totaled about $160 million, of which foreign
governments contributed about $135 million and
voluntary agencies the balance. Excluding imports for
the refugees, imports were only 4.11 higher than in
the previous year. Although imports for the refugees
probably satisfied most of their immediate needs, the
demand increased for items such as raw cotton, steel,
and petroleum products, spurred by the refugee
support program and the December 1971 war.
Foodgrain imports continued to decline, and the
overall grain situation was such that all imports
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apparently went into stockpiles. The largest increases
in imports were in steel, nonferrous metals, and
petroleum products. Low domestic steel production
and lower world steel prices caused the governi.lent to
grant it special, one -time liberalization of steel imports
in September 1970. As a result, steel imports rose
substantially in both FY1970/71 and FY1971/72. The
steep rise in the value of petroleum imports was cruised
to a large extent by price increases resulting from the
1971 Tehran Agreement, as well as increased
petroleum requirements f the war with Pakistan,
In FY1971/72, despite an increase of $97 million in
the trade deficit, the overall balance of payments
deficit fell, primarily because of the completion in the
previous year of repayments to the IMF (Figure 22).
In addition, about $160 million of the trade deficit in
FY1971/72 resulted from direct imports for the
Bangladesh refugees, although total assistance
received for the refugees was about $230 million. In
January 1972, India was allocated an additional $109
million in SDR's, its previously accumulated SDR's
increased about $13 million in dollar value because of
parity changes in December 1971. Total aid receipts
(including refugee assistance) exceeded the finance
gap, so that reserves increased by about $278 million.
FIGURE 22. Balance of payments (U/OU)
(Millions of U.S. dollars)
About 65� %0 of India's exports consist of agricultural
products or manufactures that utilize domestic
agricultural raw materials (Figure 23). Tea, jute
manufactures, and cotton textiles constituted 33% of
total exports it FY1971/72, compared to 52% in
FY1950/51. Tea exports declined fairly steadily in the
1960's and totaled only $208 trillion in FY1971/72.
India's share of world tea exports declined from 44%
in the early 1950's to 33% in FY1970/71. Exports of
jute manufactures, which stagnated during the 1950's,
increased significantly in the early 1960's, but between
FY1965/66 and FY1970/71 the value of jute exports
declined steadily to $252 million. jute exports jumped
sharply in FY1971/72 because events in East Pakistan
disrupted jute exports from India's major rival in
world markets. In FY1969/70, India exported 42% of
the world's jute manufactures, compared to 82% in
the early 1950's. Cotton textile exports have stagnated
in the last two decades, after an abnormally high
volume of exports in 1950; increased production has
been absorbed by the domestic market. Exports of
products of newly established industries, such as
transport equipment, machinery, chemicals, and iron
and steel, are growing rapidly, although they still
account for less than 15% of total exports. Iron and
�1 April to 31 March.
"Preliminary.
***Adjusted for definitional changes in November 1970.
tIncluding invisibles, capital movements, and errors and omissions.
ttlncludes net SDR allocations.
42
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FISCAL YEAR*
1967/68
1968/69
1969/70
1970/71
1971/72
Trade balance
�1,079
�735
�225
�234
�331
Exports (f.o.b.)
1,598
1,810
1,884
�**1,933
2,085
Imports (c.i.f.)
�2,677
�2,545
�2,109
�2,167
�2,416
Net debt payments
�403
�408
�451
�491
�530
Debt payments due
�444
�500
�550
�600
�626
Debt relief
41
92
99
109
96
f M repayments
�57
�78
�167
�253
0
Other payments, nett
�72
135
�28
�205
�238
Overall deficit
�1,611
�1,086
�871
�1,183
�1,099
Financed by:
Food aid
466
287
245
177
137
Other P.L. 480
57
12
44
25
31
Project aid
385
410
314
321
365
Non project aid
649
458
486
464
494
IMF drawingstt
90
0
123
26
120
IBRD special deposit
45
�30
�15
0
0
Refugee assistance
0
0
0
0
230
Total
1,692
1,137
1,197
1,013
1,377
Changes in reserves
81
51
326
�170
278
�1 April to 31 March.
"Preliminary.
***Adjusted for definitional changes in November 1970.
tIncluding invisibles, capital movements, and errors and omissions.
ttlncludes net SDR allocations.
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0
C
FIGURE 23. Commodity composition of exports* (U/OU)
(Millions of U.S. dollars)
na Data not available.
*Values are from customs data.
*I April to 31 March.
steel exports declined sharply in FY1971/72 from the
previous year's record level because of domestic steel
shortages.
Industrial raw materials and semifinished products
constitute the largest category of India's imports
(Figure 24). Such imports increased to 48% of the total
in FY1971/72, compared to 35% in FY1950/51.
Within this category, fertilizer imports grew most
rapidly during the 1960's, accounting for 4% of total
imports in FY1971/72. Machinery and transport
equipment accounted for one- fourth of total imports
and consisted primarily of capital goods for
development projects and programs. Foodgrain
imports have been declining as bumper domestic crops
helped build up food stocks, but this trend may be
reversed because of the 1972 drought. Raw cotton is
still imported to supplement the domestic crop.
Imports of luxury goods are negligible.
The principal suppliers of imports fer development
are also the principal suppliers of external assistance
because India is usually required to use its
development credits for imports from the donor
country. Consequently, trade with the United States,
the European Common Market, Eastern Europe, and
Japan has grown more rapidly than trade with the
United Kingdom and some Asian countries. Imports
from the United Kingdom declined from 25% of the
total in FY1955/56 to 12% in FY1971 /72, while
imports from the United States increased from 13% to
23% (Figure 25). The United States is India's primary
source of imports; but the U.S. share has been falling
since 1967, when it peaked at 39 mainly because of
declining foodgrain sales under P.L. 480 agreements.
The United Kingdom, India's second largest supplier,
is a primary source of capital goods, iron and steel, and
chemicals. Japan's share of India's imports long
remained around 5 but increased to 9% in
FY1971/72; these imports consist mainly of machinery
and metal products.
Although Indian exports to the United Kingdom
declined from 28% of its total exports in FY1955/56 to
11% in FY1971/72, the United Kingdom continues to
be a major buyer of India's tea, leather, raw tobacco,
and cotton textiles. The U.S. share of India's exports
was 15% of the total in FY1955/56 and 16% in
FY1971/72, and consisted mainly of jute manufac-
tures, cashew nuts, fish, and sugar. Japan's share of
Indian exports rose from 5% in FY1955/56 to II% in
FY1970/71, due primarily to a large increase in iron
ore purchases.
All trade with the U.S.S.R. and Eastern Europe is
essentially barter trade, with settlements made in
43
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MCAL
YEAR"
1950151
1955/56
1960/01
1905/66
1070/71
1971/72
Agricultural products:
Tea
169
229
257
216
198
208
Raw cotton
37
83
24
27
22
25
Cashew kernels
18
27
40
58
72
82
Vegetable oils and oileakes
na
18
48
81
83
63
Tobacco
28
25
31
41
42
00
Hides and skins
10
14
20
20
5
1
Minerals:
Iron ore
Insig
13
36
83
156
140
Manganese
17
22
30
23
19
14
Mica
21
18
21
24
21
21
Manufactures:
Jute textiles
239
248
277
370
252
351
Cotton textiles (excl. yarn)
248
119
121
133
130
133
Leather
54
47
52
59
95
121
Iron and steel
Insig
Insig
20
26
121
54
Machinery and transport equipment...........
Insig
Insig
15
23
100
94
Other cA ports
na
416
357
508
717
718
Total exports
1,261
1,279
1,349
1,692
2,033
2,085
na Data not available.
*Values are from customs data.
*I April to 31 March.
steel exports declined sharply in FY1971/72 from the
previous year's record level because of domestic steel
shortages.
Industrial raw materials and semifinished products
constitute the largest category of India's imports
(Figure 24). Such imports increased to 48% of the total
in FY1971/72, compared to 35% in FY1950/51.
Within this category, fertilizer imports grew most
rapidly during the 1960's, accounting for 4% of total
imports in FY1971/72. Machinery and transport
equipment accounted for one- fourth of total imports
and consisted primarily of capital goods for
development projects and programs. Foodgrain
imports have been declining as bumper domestic crops
helped build up food stocks, but this trend may be
reversed because of the 1972 drought. Raw cotton is
still imported to supplement the domestic crop.
Imports of luxury goods are negligible.
The principal suppliers of imports fer development
are also the principal suppliers of external assistance
because India is usually required to use its
development credits for imports from the donor
country. Consequently, trade with the United States,
the European Common Market, Eastern Europe, and
Japan has grown more rapidly than trade with the
United Kingdom and some Asian countries. Imports
from the United Kingdom declined from 25% of the
total in FY1955/56 to 12% in FY1971 /72, while
imports from the United States increased from 13% to
23% (Figure 25). The United States is India's primary
source of imports; but the U.S. share has been falling
since 1967, when it peaked at 39 mainly because of
declining foodgrain sales under P.L. 480 agreements.
The United Kingdom, India's second largest supplier,
is a primary source of capital goods, iron and steel, and
chemicals. Japan's share of India's imports long
remained around 5 but increased to 9% in
FY1971/72; these imports consist mainly of machinery
and metal products.
Although Indian exports to the United Kingdom
declined from 28% of its total exports in FY1955/56 to
11% in FY1971/72, the United Kingdom continues to
be a major buyer of India's tea, leather, raw tobacco,
and cotton textiles. The U.S. share of India's exports
was 15% of the total in FY1955/56 and 16% in
FY1971/72, and consisted mainly of jute manufac-
tures, cashew nuts, fish, and sugar. Japan's share of
Indian exports rose from 5% in FY1955/56 to II% in
FY1970/71, due primarily to a large increase in iron
ore purchases.
All trade with the U.S.S.R. and Eastern Europe is
essentially barter trade, with settlements made in
43
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I
no Data not available.
*Values are from customs data
*1 April to 31 March.
rupees. India concluded its first rupee payments
agreement with the U.S.S.R. in 1956, and since then
has concluded similar agreements with Bulgaria,
Czechoslovakia, East Germany, Hungary, Poland,
Romania, and Yugoslavia. The trade arrangement
with Yugoslavia was subsequently amended and now
provides for settlement in hard currencies. Trade
agreements with several East European countries
provide for triangular arrangements under which
India imports commodities from third countries with
which the East European countries have a favorable
trade balance. Trade with the U.S.S.R. and Eastern
Europe increased from less than 2% of India's total
imports in FY1955/56 to 11 in FY1971/72, and from
less than I% of total exports to 21 during the same
period. India's exports to the U.S.S.R. reached $278
million in FY1971/72.
2. Foreign assistance
India's economic development has depended to a
significant extent on large amounts of official foreign
economic assistance. Through March 1972, total
commitments of foreign economic aid to India
amounted W about $19.8 billion. Foreign aid
incro frorli ;11);6ut $800 million during the First
FN(; Year Plan rQ 'rr, $6.25 billion in the Third Plan.
commitments of alditional aid betv�en FY1966/67
and FY1968/69 were $4.3 billion, and totaled $3.1
billion during the first 3 years of the Fourth Plan.
Approximately half of these commitments came from
the United States. By June 1972, cumulative U.S.
economic aid to India was about $9.3 billion, of which
about $4.8 billion consisted of surplus agricultural
commodities under Title I of the U.S. P.L. 480
program. Until 1967, payment for these commodities
was in rupees, most of which were returned to India as
loans and grants for financing development projects.
Since 1967, however, a gradual changeover to
payment in U.S. dollars has occurred, and the rupee
payment for P.L. 480 commodities was phased out.
The switch to 100% dollar payment for P.L. 480
commodities was completed in 1971. About 90 or
$17.5 billion of India's total aid commitments, had
been utilized through March 1972.
In 1958, the International Bank for Reconstruction
and Development (IBRD �the World Bank) or-
ganized the Aid India Consortium to provide
coordinated assistance for India's 5 -year plans on an
annual basis. Members of the Consortium include the
United States, West Germany, the United Kingdom,
Japan, Canada, Italy, France, the Netherlands,
Belgium, Austria, Denmark, Sweden, Norway, and the
IBRD and its affiliate, the International Development
Association (IDA). Pledges from Consortium members
(including food aid) during FY1966/67- FY1971/72
J
44
t
FIGURE 24, Commodity composition of imports* (U /OU)
(Millions of U.S. dollars)
I
FISCAL YEAR
aw
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1050/51
1955/56
1960/61
1965/60
1970/71
1971/72
Industrial raw materials and semifinished
products:
Iron and steel
42
140
257
206
196
317
Nonferrous metals
59
54
99
144
160
130
Mineral fuels
116
115
140
144
181
259
Fertilizers, manufactured
26
5
20
82
82
108
Other chemicals
na
82
160
130
174
182
Raw cotton
212
120
172
97
132
151
Raw jute
58
41
16
19
/nsig
/nsig
Industrial products:
Machinery
102
276
547
885
435
493
Transport equipment
86
133
139
148
78
113
Paper and paperboard
22
34
25
28
33
47
Foodgrains
209
37
381
676
284
175
Other imports
no
589
393
390
412
435
Total imports
1,366
1,626
2,355
2,958
2,167
2
no Data not available.
*Values are from customs data
*1 April to 31 March.
rupees. India concluded its first rupee payments
agreement with the U.S.S.R. in 1956, and since then
has concluded similar agreements with Bulgaria,
Czechoslovakia, East Germany, Hungary, Poland,
Romania, and Yugoslavia. The trade arrangement
with Yugoslavia was subsequently amended and now
provides for settlement in hard currencies. Trade
agreements with several East European countries
provide for triangular arrangements under which
India imports commodities from third countries with
which the East European countries have a favorable
trade balance. Trade with the U.S.S.R. and Eastern
Europe increased from less than 2% of India's total
imports in FY1955/56 to 11 in FY1971/72, and from
less than I% of total exports to 21 during the same
period. India's exports to the U.S.S.R. reached $278
million in FY1971/72.
2. Foreign assistance
India's economic development has depended to a
significant extent on large amounts of official foreign
economic assistance. Through March 1972, total
commitments of foreign economic aid to India
amounted W about $19.8 billion. Foreign aid
incro frorli ;11);6ut $800 million during the First
FN(; Year Plan rQ 'rr, $6.25 billion in the Third Plan.
commitments of alditional aid betv�en FY1966/67
and FY1968/69 were $4.3 billion, and totaled $3.1
billion during the first 3 years of the Fourth Plan.
Approximately half of these commitments came from
the United States. By June 1972, cumulative U.S.
economic aid to India was about $9.3 billion, of which
about $4.8 billion consisted of surplus agricultural
commodities under Title I of the U.S. P.L. 480
program. Until 1967, payment for these commodities
was in rupees, most of which were returned to India as
loans and grants for financing development projects.
Since 1967, however, a gradual changeover to
payment in U.S. dollars has occurred, and the rupee
payment for P.L. 480 commodities was phased out.
The switch to 100% dollar payment for P.L. 480
commodities was completed in 1971. About 90 or
$17.5 billion of India's total aid commitments, had
been utilized through March 1972.
In 1958, the International Bank for Reconstruction
and Development (IBRD �the World Bank) or-
ganized the Aid India Consortium to provide
coordinated assistance for India's 5 -year plans on an
annual basis. Members of the Consortium include the
United States, West Germany, the United Kingdom,
Japan, Canada, Italy, France, the Netherlands,
Belgium, Austria, Denmark, Sweden, Norway, and the
IBRD and its affiliate, the International Development
Association (IDA). Pledges from Consortium members
(including food aid) during FY1966/67- FY1971/72
J
44
t
FIGURE 24, Commodity composition of imports* (U /OU)
(Millions of U.S. dollars)
I
FISCAL YEAR
aw
APPROVED FOR RELEASE: 2009/06/16: CIA -RDP01 00707R000200110059 -9

S;.
I
i
k
4,
i
4
United States released the previously suspended
commodity aid, but trade no new aid commitments.
India has received the largest amount of
Communist economic aid of any non Communist
country, slightly more than Egypt. Through March
1973, Communist countries had extended about $2.0
billion in economic aid to India, or 13 1 /o of total
Communist economic aid to all non Communist
countries. Most of this was in the form of credits, with
the U.S.S.R. accounting for almost $1.6 billion and
several Eastern European countries providing the
remaining $400 million. Only small amounts of
economic aid have been extended by Communist
countries since 1966, when some $600 million was
offered. Moreover, only $1.2 billion, or three fifths of
the total aid extended by the Communis: countries,
had been utilized by the end of March 1973. The
largest Soviet aid commitment for a single project was
$270 million for the Bhilai steel plant. Other major
Soviet projects include several heavy machinery
plants, two oil refineries, several powerplants,
petroleum exploration, and coalfield development. In
1966, the U.S.S.R. committed $560 million of new
economic aid in support of India's Fourth Five Year
Plan, initiation of which was delayed until 1969, in
additio-i to $225 million extended in 1965 for
construction of a large steel plant at Bokaro. Work on
the Bokaro project was not begun until April 1968 due
to design problems and equipment delays. The first
stage of this plant is scheduled for completion in 1973.
About 92% of the economic aid received by India
has been in the form of loans rather than grants, for
financing imports of industrial and agricultural raw
materials and equipment. As a result of the large flow
of aid over the past decade, the debt service burden
has increased at an annual rate of 9% since 1967.
Total debt service payments during the first 3 years of
the Fourth Plan were $1,472 million, or nearly 25% of
India's export earnings, even after donors had granted
$304 million in debt relief. Annual servicing on the
debt, net of debt relief, has grown from a level of $444
million in FY1967/68 to $626 million in FY1971/72.
New credits necessary for the continuation of India's
development program will add substantially to this
already heavy debt burden. Taking into account debt
payments, net foreign aid declined from $1.2 billion in
FY1967/68 to only $500 million in FY1970/71. An
improvement in the terms of new aid, a reduction in
interest rates on the outstanding debt, or some form of
debt refinancing apparently is needed to keep debt
service at a manageable level.
45
CONFIDENTIAL.
amounted to about $6.8 billion. Disbursements during
this period were $7.2 billion, distributed as follows
among the members (in millions of U.S. dollars):
United States 3,504 West Germany 517
IBRD and IDA 1,047 Japan 355
United Kingdom 663 Italy 185
Canada 584 Others 381
In FY1969/ 70, the first year of the Fouf[li llhn, the
Consortium members pledged aid of $800 million, of
which $280 million was food aid. In the following
year, pledged aid was increased to about $1.0 billion,
including $200 million in food aid. Of these
commitments, $304 million was in the form of debt
relief. In FY1971/72, pledged aid reached $1.2 billion.
In FY1969/70, utilization of aid exceeded the annual
authorization because the pipeline of previously
committed aid was drawn down. In FY1970/71 and
FY1971/72, however, aid utilizations fell slightly
below new authorizations. In December 1971, the
United States suspended $87.6 million in commodity
aid as a result of the Indo Pakistan war. Aid policy
remained under review during 1972, but in October it
agreed to a debt deferral of $29.1 million tinder a
Consortium debt relief program. In March 1973, the
CONFIDENTIAL
l7ri...i:c
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FIGURE 25. Direction of trade, FYI 971 X72 (U/OU)