Ex-Ante Evaluation
Private Sector Investment Finance Division,Private Sector Patnership and Finance Department, JICA
1.Name of the Project（１）Country: Republic of India ("India")（２）Project site/area name:India（３）Project Name: Agricultural Sector Support Project（４）L/A signing date: March 23rd , 2023
2. Background and Necessity of the project（１）Current status and issues of private sector development in India
The importance of the agricultural sector in the Indian economy issignificant, accounting for approximately 17% of the country's GDP (WorldBank, 2021). Agricultural products are inputs to India's food processing,tourism, and service industries, and have a significant impact on a wide rangeof industries in India. In addition, the agricultural sector accounts forapproximately 50% of India's total employment,making it the largest sector in
the country. The role of the agricultural sector in improving the country's
standard of living and overall economic growth is extremely important.
In the agricultural sector, it has been observed that there is a need toincrease the production of agricultural products and improve food security. Infact, the average monthly income of farmer is as low as Rs.10,218(approximately 16,931 yen), which is nearly 50% of the average monthly
income of a regular urban worker of Rs 18,190 (approximately 30,140 yen)
as of 2019. (Bureau of Indian Statistics). Since the income gap between
urban workers and farmers, who are considered to be mostly rural, also leads
to regional disparities, it is essential to improve farmers' incomes from theperspective of correcting the disparity. The Indian government has launcheda policy called "DOUBLING FARMERS INCOME" to double the income offarmers, and has emphasized the need to improve agricultural productivity,
which will contribute to higher farmer incomes. The government aims toimprove the quality and diversification of agricultural products, create pricecompetitive products by improving technological capabilities through theintroduction of equipment and materials, expand marketing, and ultimately
increase productivity leading to higher farm incomes.
Agricultural productivity in the country is low compared to the world
average, and there are issues such as access to finance to improve

productivity. Of these, improved access to finance will contribute significantly
to improving agricultural productivity through the purchase of agriculturalequipment and materials,quality seeds, and necessary fertilizers, but thenumber of farmers who have sufficient funds to make such purchases islimited. It is difficult to ensure the economic rationale for lending to small
farmers1 due to the high risk involved and the high service cost burden of onfarm activities, and only about 41% of small farmers have access to loans
from commercial banks (2019,Reserve Bank of India ("RBI")).
In this context, the Government of India has addressed the issue by
supporting financial inclusion for farmers through the National Bank for
Agricultural and Rural Development (NABARD)2 Farmer’s Finance Scheme,
as well as through the provision of short-term credit services to small farmers
by commercial banks (e.g. Kisan Credit Card ). 3In addition, to strengthen
financial inclusion, the country has encouraged commercial banks to set up
Digital Banking Units4 to enable rural residents to open bank accounts, applyfor loans, transfer money, make payments, and more. The government is also
working to improve access to finance by enabling rural residents to open bankaccounts, apply for loans, transfer funds, and make payments online.
However, as noted above, access to finance for small farmers is currently
limited.
In addition, the Reserve Bank of India has issued Priority Sector Lending
to various banks and has identified lending to the agricultural sector as oneof the priority sectors to promote lending to this sector5. In contrast, it has
been pointed out that while public financial institutions have achieved theirPSL targets, private commercial banks have not acheived （ ReviewAgricultural Credit,2019,RBI）. Private financial institutions play an importantrole in promoting financial inclusion in this sector, as approximately 80% of
Defined as farmers with less than 2 hectares of arable land.
A government-affiliated financial institution that provides refinancing to state governments and publicfinancial institutions.
3The scheme was introduced in 1998 to make it easier for farmers to issue credit cards and withdraw cash.
Scheduled Commercial Banks, Regional Rural Banks, and Small Finance Banks and Cooperative haveadopted the scheme.
Farmers can withdraw cash for seeds, fertilizers, pesticides, and other production needs. Eligible farmers
are (1) individual farmers and joint farmers who lease land, (2) tenant farmers, and (3) Self Help Groups
and Joint Liability Groups that include tenant farmers. (Reserve Bank of India "Master Circular-Kisan
Credit Card (KCC) Scheme")
4
IndusInd Bank Limited has established DBUs in Punjab and Tamil Nadu.
5The priority sectors are (1) agriculture, (2) MSME, (3) export credit, (4) education, (5) housing, (6) socialinfrastructure, (7) renewable energy, and (8) others. The agriculture sector is charged with allocating 18%
of its loans (RBI).
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loans to the agricultural sector come from commercial banks, and support
from private financial institutions needs to be strengthened.
By improving access to finance in the agricultural sector, which plays animportant role in the country's socio-economic development, the project isexpected to increase agricultural productivity, raise farmers' incomes, reduce
inequalities and promote inclusive and sustainable growth in the country. The
country's agricultural sector has a growing demand for medium- to long-term
credit, but agricultural finance collateralized by farmland is risky for loans tosmallholder farmers. In addition, the high cost of providing services in rural
areas makes it difficult to ensure economic rationality, and loans to farmers
are limited and short-term. In this regard, IndusInd Bank Limited has a large
number of branches in rural areas and does not focus heavily on urban areas.
(2) Japan and JICA's Policy and Operations in the Private Sector
Japan's "Country Assistance Policy for the Republic of India" (April 2018) sets
"Support for Sustainable and Inclusive Growth" as one of the development
issues based on the country's needs. Furthermore, the "Economic Development
and Livelihood Improvement in Rural Areas" is identified as a priority area in theRolling Plan of Country Assisatnce Policy for the Republic of India" (April 2018),
which will promote the stabilization of agricultural production in rural areas
through the development of rural environment and rural infrastructure, and theimprovement of rural incomes through increased agricultural productivity andincome diversification The policy also states that the government will "improverural incomes by increasing agricultural productivity and income diversification.
In addition, in terms of "improving rural incomes,"also includes developing t lowcost appropriate farming technology for poor farmers, improving anddisseminationing farm management and technology to diversify agriculture andother livelihoods, and supporting microfinance for the poor to improve farmers'incomes. In the "JICA Country Analysis Paper on India" (March 2018), identifies"inclusive growth in rural areas" as one of the development challenges, andanalyzes that farmers' income should be increased by improving agricultural
productivity, and this project is in line with these policies and analysis.
JICA has also supported the agricultural sector through the "Himachal
Pradesh Crop Diversification Promotion Project (Phase 2)" (2021) and the"Uttarakhand Integrated Horticulture Development Support Project" (2022),
both yen loans. In the states of Himachal Pradesh and Uttarakhand, the projectwill develop agricultural production infrastructure such as small irrigation andfarm roads, farmer organization and agricultural technology support, and supply
chain development including marketing support and post-harvest processing.
This project is in line with India's development issues and policies, as well asJapan’s assistance policy and JICA’s country analysis on India.
3. Project Description(1).

Project Description① Project Description
This project will provide long-term loans to IndusInd Bank Limited, aleading private sector financial institution in India, to improve access tofinance in the country's agricultural sector6, thereby contributing to inclusive
and sustainable economic growth in the country by increasing agricultural
productivity and farmers’ income.
② Project Components
To improve access to finance in the country's agricultural sector7 through along-term loan to IndusInd Bank Limited, thereby contributing to inclusive andsustainable economic growth by increasing agricultural productivity andfarmers’ incomes in the country.

③ Project Beneficiaries(Target Group)
Agricultural workers in India.
(2) Estimated project cost: About 19.8 billion yen (including 13 billion yen fromJICA)(3) Schedule (Cooperation Period):
March 2023 - March 2030
(4) Project Implementation Structure(1) Borrower: Indusind Bank Limited(2) Execution Agency: IndusInd Bank Limited(5) Collaboration and Sharing of Roles with Other Donors(1)Japan's Activities: N/A(2)Other Donor’s Activity:Co-finance with Citibank, N.A.
Specific end-users include (1) farmers who own land, (2) farmers who lease land, (3) laborers engaged inagriculture, and (4) farmers' producer organizations (FPOs) and other micro, small, and medium-sizedbusiness corporations and their workers. (3) "Agricultural Household" as defined by the Government of India.
(Department of Agriculture & Cooperation Ministry of Agriculture Government of India, "NATIONAL POLICYFOR FARMERS 2007")
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Specific end-users include (1) farmers who own land, (2) farmers who lease land, (3) laborers engaged inagriculture, and (4) farmers' producer organizations (FPOs) and other micro, small, and medium-sizedbusiness corporations and their workers. (3) "Agricultural Household" as defined by the Government of India.
(Department of Agriculture & Cooperation Ministry of Agriculture Government of India, "NATIONAL POLICYFOR FARMERS 2007")6

(6) Environmental and social considerations①②

Category Classification: C
Reasons for Categorization: It is Judged under the JICA Environmental
and Social Considerations Guidelines(promulgated in January 2022) thatthe undesirable effects of the Project on the environment are minimized..

(7) Cross-cutting issues: N/A(8) Gender Classification:
Gender-related Projects] GI(S) Gender Activity Integration Projects
Reason for Categorization: Although the review identified the need for gendermainstreaming needs, it did not result in the establishment of indicators for
specific initiatives that contribute to gender equality and women'sempowerment.
(9) Other special notes: N/A
4.Targeted Outcomes（１） Quantitative Effects

index-nameTarget(2029)[ 7years after L/Asigning]

Baseline(2022)

Outstanding loans to theagricultural sector

374,972
Million INR

674,835
Million INR

Number of borrowers tobe financed by JICA

0 person

47,000 peopleloan（２） Qualitative effects
Increased income for farmers.
5. Assumptions and external conditions
N/A
6. Lessons Learned from Past Projects
The results of the ex-post evaluation of the "Agricultural Sector
Strengthening Project (II)" in Paraguay pointed out the importance of setting
up a financing system that meets the objectives of the project. It was pointed
out that the project failed to meet the screening requirements of the financialinstitutions,which resulted resulting in the loans not reaching the originallyintended target, and lessons were learned about the importance of setting
the lending conditions of the financial institutions at a reasonable level. Forthis project, we confirmed IndusInd Bank Limited's loan requirement wasreasonable and that loan was likely to be implemented in agriculturalsector.In addition, although JICA will be solely responsible for the last five
years of the seven-year repayment period of the JICA loan, part of thesupervision of this project will be conducted in cooperation with the India
Office, including the Overseas Investment and Loan Task Team establishedin June 2021, in order to collect information and communicate more closelywith the borrower more closely. The team will also work with the India office
to gather information and communicate with the borrower more closely.
7. Evaluation Results
This project is in line with India's development challenges and policies, aswell as assistance policy of Japan and analysis of JICA, Goal 17(revitalization of partnerships), and therefore, the support is highly significant.
8.Plan for Future Evaluation(1) Indicators to Be Used: As shown in Section4(2) Future evaluation schedule(estimate)
Ex-post-evaluation is planned approximately 7 years after L/A signing.
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