Memorandum of Conversation, by the Assistant Secretary of State (Acheson)

Sir Girja12 called at his request. He asked me what progress had been made in considering the suggestions of the Government of India in regard to the lend-lease arrangement. He told me that he had communicated with his Government, expressing his view as a result of a prior conference with us, that we would find it difficult, if not impossible, to include in any agreement a limitation of lend-lease aid from India to the United States to an amount not to exceed aid from the United States to India. He was hopeful that the Government of India would drop this suggestion, although it might well have such an idea in mind in determining whether or not it could grant particular requests for lend-lease aid. He had not, he said, reported in any length upon the possibility of eliminating Article VII from the agreement, although he understood that, from our point of view, this did not appear feasible. I told him that he should report that such an elimination would not be feasible from our point of view. He then asked whether it would be feasible to include anything in the agreement reserving India’s position in enacting, if it should choose, protective legislation for new industries in India. We again went over the ground covered in the earlier conference, in which I pointed out that nothing in Article VII in any way impaired the sovereign power of any government to enact any legislation it thought best; that it was in agreement as to certain principles to be followed in an attempt to work out post-war arrangements; and that if we began to limit or to make exceptions to those principles, we would destroy the whole purpose of the Article. I therefore thought that he could report to his Government that the reservations of the type he had in mind would not be favorably regarded by us.

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He then said that one of the worries of the Government of India about Article VII was that the impression might get abroad in India that the Government, having won its fiscal independence from the British, was now compromising it by the agreement with the United States. I pointed out that this was not the case, to which he readily agreed. He then asked whether it would be possible in an exchange of notes to find some formula for stating that the agreement did not in any way limit the fiscal sovereignty of India. I told him that I should be glad to discuss this matter with other interested offices of the Department. It was obviously correct that the fiscal sovereignty of India was not in any way affected by Article VII. It was possible, however, that stating the proposition as obviously as this might give rise to some misconceptions. We would examine the matter closely and endeavor to find some formula which could be used by the Government of India to assure its people that it had not surrendered or compromised any of its powers.

Dean Acheson
  1. Sir Girja Shankar Bajpai, Indian Agent General in the United States.