Without prejudging the conclusions of the study, I believe that India has
an importance to us in terms of the Nixon Doctrine as a country which
can contribute to a stable order in Asia. Our aid to India has supported
an independent India which has been able to resist communist subversion
and the threat of Chinese expansion.
Attachment
Memorandum From Secretary of State Rogers to President
Nixon
Washington, February 2, 1971
Subject:
- FY 1971 A.I.D. Program for
India
Recommendation:
That you authorize us to proceed with an FY 1971 program for India of up to $225 million in
development loans, $150 million in Title I PL 480 concessional sales of surplus agricultural
commodities, and $10. 8 million in technical assistance.
Background:
We and the other eleven nations in the India Consortium have extended
aid to India not primarily for security reasons, but rather to help
meet the resource needs of the free world’s largest development
effort. At the same time, we have been well served by the relative
stability of India, compared to other major areas of Asia. There has
been no need for direct outside involvement in India even in face of
the localized and brief conflicts with China and Pakistan. With its
huge population, central location in Asia, long Indian Ocean
shoreline, broad industrial base, military capability for deterring
conventional Chinese pressure, established democratic government and
national unity, and interest in regional stability and in trade
expansion, India is an important element in long-run Asian stability
and self-reliance. Economic development,
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with resulting increases in food supplies and
job opportunities, is essential to India’s achieving such long-run
stability.
Our past aid to India, while much less in per capita terms than aid
for other major recipients, has contributed in decisive ways to the
survival and development of the country. Our financial and technical
assistance has played a major role in India’s “Green Revolution” and
in the growth of its private industrial sector; it has supported the
development of some of India’s leading educational facilities, and
promoted a rich intellectual exchange between U.S. and Indian
educational and scientific communities; and through our
participation in the India Consortium, it has contributed to
significant improvements in both policy and implementation in
agriculture, foreign trade, and family planning.
Development Loan Assistance
The World Bank has recommended that the Consortium provide $1. 1
billion gross, excluding food aid, in loans to India in FY 1971. We share the Bank’s judgment
that this level of lending is desirable to accelerate growth and
employment and facilitate policy improvements in the trade and
industry sectors. But the likely U.S. share of $1. 1 billion exceeds
what other priorities will allow us to program for India. Taking
these priorities into account, we have programmed up to $225 million
for the FY 1971 India program. Other
donors will provide about $675 million, which would put the U.S.
share of the total at about 26%.
In the mid-1960’s, the U.S. share of Consortium loan assistance was
around 40%. In FY 1967, when the
Consortium negotiated the economic policy package still in effect,
the U.S. provided 42% of the Consortium assistance, and other donors
together provided 58%. In the past few years the other donors have
increased their contributions to the Consortium, but U.S.
contributions have declined, so that the U.S. share fell to about
25% ($194 million in AID loans) in
FY 1970.
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The goals of our FY 1971 assistance
are, in general, to support the economic development and political
stability objectives discussed above, and, more specifically, to
provide the imports to support moderately expansionist fiscal and
monetary policies and to encourage the maintenance and possible
extension of existing market-oriented economic policies. Our
assistance will be in the form of a non-project loan, to finance raw
materials, industrial intermediate goods and spare parts,
commodities essential for the preservation of the momentum of recent
agricultural and industrial growth in India.
India is now in a very good position for growth. The agricultural
policy reforms begun in 1966 have been maintained, and even
expanded, and while achievement of the 5% agricultural growth target
is far from guaranteed, growth prospects from, the new agricultural
technology remain encouraging. India’s family planning program has
undergone an important expansion, assisted in part by a $20 million
U.S. grant which has been the spearhead of a Consortium initiative
on family planning. Exports have been given high priority, and a
number of measures have been taken over the past few years to
encourage their expansion. On balance economic policy decisions
since the 1969 split of the Congress Party have veered far less in
the direction called for by leftist Young Turks than some feared.
Although India is often said to be a socialist country, over 85% of
industry and virtually all of agriculture are in the private sector.
As is evidenced by a 20% increase in the past year in equity values
of the Indian stock market, private sector industry has been
reassured and encouraged by the moderate import and industrial
licensing policies the GOI recently
announced and by the resumption in FY
1971 of an expansionary fiscal policy.
We will continue to keep Indian growth and policy performance under
review and, through the Consortium, to urge improvements in major
problem areas.
The World Bank has not yet taken a decision whether to ask the
Consortium to participate in a debt relief exercise, beyond the
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current three-year
arrangement which runs out in FY
1971. In the event that the Bank and the GOI do make such a request, we would expect to
participate, if other donors agreed that their relief would be on
appropriate concessional terms.
Population Assistance
There will be a review in February of progress under last year’s $20
million family planning grant. If progress by then justifies further
support, we would anticipate a grant of $15—$20 million, out of
Title X funds earmarked by Congress for population assistance.
PL 480 Assistance
The other major constraint on India’s fiscal and monetary policy,
apart from foreign exchange, is the availability and price of
food-grains and edible oils. Our Title I foodgrain target for FY 1971 shipments to India is 1,500,000
metric tons, to consist of 770,000 tons to be negotiated in a new
sales agreement this year, plus 730,000 tons carried over from the
FY 1970 agreement you approved
last year. This figure is somewhat below our estimate of the
desirable level required for price stability, but we believe it will
be adequate to satisfy minimum consumption requirements. Edible oils
are programmed at 75,000 tons and cotton at 200,000 bales.
In addition, in order to provide for continuity of wheat shipments,
we propose to include in this year’s agreement a carry-over of wheat
for shipment during FY 1972 in an
amount comparable to the 730,000 tons from the FY 1970 agreement carried over for
shipment this year. The Indian Government has publicly stated that
on the basis of its improved agricultural situation, it will cease
concessional imports of foodgrains after December 1971. Our
projections indicate that India’s ability to do without concessional
shipments is still a couple of years off, and we anticipate PL 480 wheat shipments to India over
this period, but the Indian Government’s political commitment does
raise some uncertainty about FY 1972
and FY 1973 programs. We tentatively
propose to sign an additional agreement early in FY 1972
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to provide about an additional 700,000 tons,
bringing the total for FY 1972
shipments to approximately 1. 5 million tons, the same level as for
this year. The total values of this year’s agreement and of this
year’s shipments are both estimated at about $150 million. This
compares to last year’s level of $191.5 million in agreements and
$197 million in shipments.
Technical Assistance
For FY 1971 we propose a technical
assistance program of about $10.8 million, with continuing
concentration on increasing agricultural productivity, improving
India’s agricultural universities, and assisting the improvement and
expansion of India’s considerable efforts in family planning and
nutrition. During FY 1971 a personnel
cut is being implemented reducing the number of AID direct-hire positions in India.
The Departments of Treasury and Agriculture concur in the
recommendation contained in this memorandum.
