845.24/341: Telegram

Mr. William Phillips, Personal Representative of President Roosevelt in India, to the Secretary of State

26. Raisman,96 finance member of Viceroy’s Council informs me he expects Government of India will instruct Bajpai97 in next few days to approach Department formally with view to concluding direct lend-lease agreement between United States and India. The formal approval of Government of India has not yet been given but Raisman expects this to be done in 2 or 3 days. Matter is being expedited here in order to take advantage of presence in United States of Sirrama Swami, India’s representative on Pacific War Council and recently commerce member of Viceroy’s Council. The Government is anxious that he participate in forthcoming negotiations.

Two principal reservations which India will make are those mentioned in Mission’s 954, December 17, 11 a.m.,98 namely:

Special recognition of India’s need to retain a considerable measure of post war tariff autonomy because of this country’s industrial immaturity. In discussing this phase of the matter I emphasized to Raisman my belief that United States would insist on a reasonably cooperative attitude on India’s part as regards post war reduction of trade barriers. From his remarks, however, I gather that the Government feels obliged by strong public opinion to drive as hard a bargain as possible on this point, although he himself expressed his personal belief in minimum trade restrictions.

India will accept direct responsibility for reciprocal aid only to the value of lend-lease aid she receives. However, if by any chance value of reciprocal aid should exceed benefits received, Britain would be responsible for surplus amount. Britain has not yet made any formal undertaking to India on this point but Raisman clearly indicated that no difficulty is expected as regards British attitude on this score.

Raisman confirmed statement in Mission’s telegram No. 1, January 2, noon [midnight] that Britain’s interest arises primarily from desire that India accept direct responsibility for reciprocal aid. Questioned as to whether projected agreement would or would not be retroactive, he said definitely that it would. Thus India will take over the entire lend-lease obligation which Britain has thus far assumed on India’s behalf, and would also accept responsibility for the reciprocal aid heretofore given on behalf of Britain to American forces in India.

A definite complication on latter point may arise from the fact that, according to an incidental remark made by Raisman, no accounting [Page 250] in terms of value has thus far been kept here of amount of reciprocal aid extended. Only an unpriced record has been maintained of projects completed for American troops and goods and services rendered. This fact is confirmed by remarks recently made by General R. A. Wheeler of American Service of Supply. It should be particularly noted, however, that Wheeler who has been handling American side of reverse lend-lease has kept his own informal record of benefits received and when actual costs or prices could not be obtained he has estimated them.

In addition to reciprocal aid for American forces here it is expected Raisman said that services for American shipping in India ports would be rendered. The Mission happens to know that London has recently cabled Government here on this point stating that expenses of American vessels, with certain minor exceptions, should be regarded as eligible for reciprocal aid. Procedure now followed in England in this regard will be used as basis for drawing up new procedure for India but certain modifications will be made due to special circumstances here.

Repeated to London.

  1. Sir Jeremy Raisman.
  2. Sir Girja Shankar Bajpai, Indian Agent General in the United States.
  3. Foreign Relations, 1942, Vol. i, p. 748.