The Ambassador in India (Henderson) to the Secretary of State
1769. 1. Although GOI has been encountering some difficulties in obtaining for our use “conclusive” or final official figures re food losses and shortages, we are convinced from such figures as it has now been able furnish and from our own investigations and studies that need India for at least two million additional tons food grain from US is serious and that there is grave danger that failure on part US materially to assist in overcoming India’s food shortage will have grave political and economic consequences in South Asia.
2. In our considered opinion GOI during calendar year 1951 should have these two million tons food grain from abroad in addition to the 3.7 million tons it has already bought or is in position buy if it is to meet food shortage crisis and maintain public confidence in its ability supply sufficient food meet rationing demands in deficit areas.
3. According to letter received from Munshi,1 Food Agriculture Minister, dated January 18 results crop cutting tests in Assam, Bihar, Bombay, Madhya Pradesh, Uttar Pradesh, and West Bengal indicate that as result natural calamities rice crop for 51 will be 12,150,000 tons as against 14,990,000 tons in 50. In rest India 51 production will be 7,903,000 tons as against 7,784,000 tons in 50. Therefore crop cutting tests indicate shortfall 2.72 million tons rice as compared with 50 which was itself not good year.
Crop cutting tests re millets will not be available until March. Munshi states latest estimates show millet crop 51 will be less by 2.75 million than 50.
5. Results wheat crop cutting tests will be available only in May. Munshi states present outlook is 51 crop will be about same as 50.
6. Therefore Minister Food Agriculture estimates 51 food grain production will be 5.47 million tons less than 50.[Page 2088]
7. In 50 imports of only 2.2 million tons made it necessary deplete distribution pipeline and already meager reserves by 900,000 tons. Amounts in pipeline and reserves now dangerously low and this 900,000 tons should be restored during 51. As of January 1, 1951 only 700,000 tons in pipeline and reserves, whereas there should be at least 1.6 million tons. This particularly important view shipping uncertainties and increase volume rationing.
8. Even if requested 2 million tons made available, all people India unable to eat in 51 as they ate in 50. This would require imports 9.47 million tons in 51. This figure reached by adding following: decline production 5.47 million tons; amount actually imported 2.2 million; amount taken out of pipeline in 50—900,000; and amount needed replenish pipeline 51—900,000 (this does not take population increase into consideration). But even if India could import 9.47 million tons it would be impossible to distribute all of it in such manner as to enable all Indians eat as they ate in 50. Many farmers for instance who have suffered crop losses will eat less in 51. Furthermore, problems internal transport would prevent distribution all points where losses occurred. Question is what extent India can safely absorb production decreases by eating less. This question might be tentatively answered by examination GOI figures as what it hopes do through rationing to relieve situation and what it hopes achieve in procurements despite crop losses.
9. In order meet rationing needs GOI estimates it must have 9 million tons in 51 (as compared with 7.6 in 50) and another 900,000 tons to meet pipeline needs. Toward obtaining this 9.9 million tons it hopes procure locally from 3 to 4 million tons (as compared with 4.4 million tons in 50). This means that India must import from 5.9 to 6.9 million tons in 51 to meet estimated requirements rationing system. GOI has foreign exchange funds available only to purchase 3.7 million tons. It must be able obtain therefore on exceptional terms (probably grants or equivalent) from 2.2 to 3.2 million tons additional food grain.
10. Difficult for us precisely assess GOI estimates. Since they deal with such huge quantities of food grain production (more than 45 million tons) and with such tremendous population there are of course wide margins of error. We believe their revised figures are sincerely prepared and not puffed up for purposes of obtaining our aid. Nevertheless there is possibility some figures will need further revision. For instance, amount estimated for rationing may be larger by several hundred thousand tons than amount will actually be rationed. On other hand bad weather or faulty organization may reduce estimated procurements. In any event we agree that additional two million tons from US urgently needed.[Page 2089]
11. We also believe if Department contemplates recommending Congressional grant to India two million tons food grain during 51, important for political and economic reasons that action be taken at earliest possible date. Early assurances that US will give this aid will serve to quiet fears which in some areas is almost of panic proportions and to promote internal political and economic stability. Such assurances will also discourage potential horders and slow down tendencies towards price increases, blackmarketing, etc. Furthermore procrastination of character which might give impression we are approaching problem in calculating or haggling spirit will tend dim generosity our decision and prevent grant from having impact on Indian public as beneficial to US as prompt and ungrudging action would be.
12. Realize that attitude currently assumed by Nehru2 re Far East situation not conducive to receptive atmosphere in US and particularly in Congress for recommendations large gift food grain to India. Nevertheless our failure respond to Indian request generously and promptly will add grist to mill those elements unfriendly to US and will weaken those leaders and groups who continue insist close political and economic relations between US and India would be in interests both countries and strengthen chances survival free world.
13. In our opinion consideration of food grain grant should be kept quite separate from consideration any kind of economic aid program for India and be given first priority. If one of these must be abandoned it would be preferable retain food grant. We hope that both forms of aid can be rendered. Food grain grant will be helpful in increasing receptivity in India for general economic aid program. On other hand dropping of food project or endeavor merge it in curtailed form into general economic aid program might well dampen enthusiasm of Indian public for latter. No general economic aid program of similar magnitude likely have appeal to Indian public that would equal food grant. On other hand we consider it important that terms any grant food grain shall include stipulations re effective use counterpart funds. If for instance we decide also recommend to Congress economic aid program to South Asia, including India, provisions might be inserted in grant obligating GOI use counterpart funds from grain grant to cover rupee expenses of projects included in program. Question remains whether Congress would be willing approve dollar aid program of sufficient magnitude to permit effective utilization of large volume counterpart funds derived from two million tons grain grant.[Page 2090]
14. We also believe that if in making recommendations to Congress, Department stresses this grant not of recurring nature but made because of unusual natural calamities which afflicted India in 50, and if we stress to Indian public and officials nonrecurrent aspect such grant, we need not be unduly embarrassed by demand for repetition 1952.