891.03/1–3051
Memorandum by the Assistant Secretary of State for
Near Eastern, South Asian, and African Affairs (McGhee) to the Secretary of State
top secret
[Washington,] January 30,
1951.
Subject: Indian Bequest for Food Grains
Discussion
Since the Indian Ambassador presented her Government’s request for
assistance in obtaining 2 million tons of food grains on December
16, the Department has been studying the Indian food grain position
and ways and means of meeting the request. We have consulted
informally with Treasury, Commerce, Agriculture, ECA, and the Bureau of the Budget.
We find that the extraordinary sequence of floods and droughts which
beset India has destroyed crops which would normally have produced
in the order of 5 million tons of food grains. We find also that
India would face very serious difficulties in financing the purchase
of the total 6 million tons of food grains which it must import
during 1951 to prevent mass starvation. Our statistics on these
aspects of the situation require further refinement, but the
foregoing general conclusions are valid.
Our own supply position is such that we can make available during
1951 2 million tons of food grains in addition to the quantities
which the Indians intend to acquire in this country under their
purchase program. Commerce has stated informally that ocean
transport will be available. United States and Indian inland
transport and terminal facilities are deemed capable of bearing the
added burden.
The cost of 2 million tons of food grains is estimated at $180
million. Present indications are that few or no funds are available
from previously appropriated ECA
funds. It will almost certainly be necessary to ask Congress for new
money for the Indian food grain program.
The newly appropriated funds should provide at least $90 million to
be used for the procurement of 1 million tons of foodgrains in
fiscal 1951, the balance of the request to be subject to review and
appropriation of funds which must be available in the first half of
fiscal 1952. This approach will permit a final evaluation of: (1)
India’s addition food grain import requirement on the basis of
crop-yields and domestic procurement in the first half of 1951, (2)
India’s ability to finance further importation of food grains, on
the basis of trade
[Page 2096]
developments in the first half of 1951, (3) our supply position in
the light of other requirements which may develop, and (4) the
availability of shipping and United States inland transport.
In order that procurement, loading and shipment may begin
immediately, the authorizing legislation should also authorize the
RFC to make available $50
million, pending the appropriation of funds for the first 1 million
tons.
The aid agreement which will be negotiated with the Government of
India for this program, should specify that the aid will generate
counterpart funds which will be used for local expenditures involved
in Indian programs: (1) to maximize Indian food production, (2) to
provide for educational exchanges of the type now carried on under
the Fulbright Act, (3) to establish technical and welfare institutes
and (4) to develop health, sanitation and other similar projects for
the benefit of the people of India.
In view of the grave impact of the program on the United States
economy in general and on grain reserves and the price of grain
during this period of crisis in particular, the Government of India
must make every effort, in addition to that made possible by United
States aid, to alleviate the present problem. In this respect, the
agreement should specify that India maximize her effort: (1) to
produce more food grains and (2) to increase procurement of food
grains from other sources such as Pakistan and the Commonwealth. As
an additional point the agreement might also specify that India
maximize the production of strategic materials which are urgently
needed by the United States.
For the purpose of administering the program, the President should
appoint a Personal Representative for Indian Food Aid. Prior to the
appropriation of funds for the last half of the program, the
President’s Personal Representative should report to Congress on
fulfillment of the terms of the agreement and should recommend
Congressional action in the light of further information on: (1)
India’s requirements, crop-yields and procurement, and (2) India’s
ability to finance additional imports, as judged from trends in her
balance of payments position in the remainder of fiscal 1951. The
President’s Personal Representative should also supervise the
deposit of counterpart funds, see that the food grains are
distributed so as to achieve the maximum benefit for the people of
India and see that the program receives full publicity in India.
The Government of India should bear the cost of transportation to
India. The United States, however, should assist in making ships
available through bareboat chartering or other means.
The Indian request collides with a highly unsatisfactory Indian
position on the Far East crisis. We must focus attention on the
humanitarian aspect of the Indian request and on the longer-range
[Page 2097]
aspects of our
relations with India. If we do not assist India in its present
crisis, elements inimical to the United States and the Western world
generally will be strengthened. Our friends will despair of
convincing the Indian masses of United States good will toward them
and interest in them. If, as is probable, millions die of
starvation, we shall find it difficult to live with our own
consciences, and our dwindling credit in much of Asia will be
further reduced.
If we do assist India, our friends will gain greater influence with
the masses and with Nehru and his Government. We could mitigate much
of the anti-Western bitterness which enables Nehru to maintain his
present posture in foreign affairs. No overnight change can be
expected, but the basis for a developing United States–Indian rapprochement will have been provided.
We have reached the stage in our examination of the Indian request at
which an Executive decision is required. We can continue to compile
and study statistics, and review possible legislation and sources of
finance indefinitely. What is now needed to give direction to our
efforts is a determination that it is in the United States national
interest to meet the Indian request, in whole or in part and by such
methods of financing as we can devise in consultation with the
Congress.
This is the more true as considerable independent interest in this
problem has appeared on the Hill. Senator Smith of New Jersey and
Representative Javits1 are
attempting with some success to line up bipartisan support for food
for India. They and some of their colleagues are becoming
increasingly convinced of the necessity of early legislative
action.
The Executive cannot longer delay its decision. Food grains from a
grant program must begin to move to India by April at the latest if
a breakdown of the rationing system and possible starvation is to be
averted.
Recommendation
That you sign the attached memorandum to the President2 seeking his
decision to give Administration support to Congressional action
providing for a grant food grain program for India.
Concurrences
E and H have concurred.
[Page 2098]
Attachments
Memo to the President
Paper on Economic Considerations
Paper on Political Considerations3
[Annex I]
India’s Bequest for Foodgrains: Economic
Considerations
On December 16, 1950, the Government of India officially
requested United States aid for the procurement of 2 million
tons of foodgrains. In determining the course of action to be
taken in response to this request, the Department must consider
the factors underlying the request and the ability of the United
States to render aid. These factors center about India’s need,
her capacity to finance an additional 2 million tons, the United
States supply situation, the availability of ocean transport,
and the availability of inland transport both in the United
States and in India.
a—india’s foodgrain requirements
The Government of India’s estimate of its foodgrain ration
requirements for calendar year 1951 is 9 million tons. In
addition to this 9 million tons .9 million tons will be required
to replenish the pipeline. The Government of India’s estimate of
local procurement ranges from 3 to 4 million tons. (For the
purposes of this calculation we shall use the figure 3.5 million
tons.) The local procurement of 3.5 million tons of foodgrains
leaves 6.4 million tons to be procured from abroad.
The Government of India is undertaking to finance 3.9 million
tons of imported foodgrains. The Government of India has
procured or tentatively arranged for procurement of 3.0 million
tons of foodgrains from abroad. An additional .8 to .9 million
tons is expected through additional International Wheat
Agreement allocation and transfers under the International Wheat
Agreement. The 2.5 million tons remaining to be procured abroad
would not be covered fully by the proposed grant of 2 million
tons.
The principal criticism to be anticipated is that of the
vagueness and uncertainty of the Indian statistics relating to
their requirements for imports of foodgrains. It is to be
recognized, however, that even with a most efficient statistical
organization it would be extremely difficult to narrow the range
of the figures submitted by the Government of India because of
the huge quantities of food and people involved in the
calculation. Vagaries of the weather and other unpredictable
[Page 2099]
factors connected
with natural causes, which would affect domestic production and
procurement, require wide ranges of estimate.
An informative comparison can be drawn from the Government of
India’s figures for rationing requirements for 1951 and the
figures developed from India’s foodgrain production and
requirement.
(1) The latest estimates on the 1951 foodgrain production in
India show a decrease of 5.47 million tons from the production
of foodgrains in 1950.
Rice production for 1951 in India is estimated to be 2.72
million tons less than production in 1950 which was not a
good year. This estimate is based upon crop cutting tests.
Crop cutting for the 1951 millet crop will not be available
until March. The latest estimates, however, are that the
millet crop for 1951 will be 2.75 million tons less than in
1950.
The present outlook for the 1951 wheat crop is the same as
that for 1950.
(2) In 1950 India imported 2.2 million tons of foodgrains and
took .9 million tons from her pipelines.
By adding the 5.47 million tons representing the shortfall in
foodgrain production, the 2.2 million tons imported for
consumption in 1950, and the .9 million tons consumed from the
pipeline, we arrive at a figure of 8.57 million tons of food
grains which would be required from abroad to maintain the 1950
standard of consumption. This figure does not allow for an
increase in population of at leaes 5 million people. It also
does not allow for .9 million tons which would be required to
keep the pipeline in most efficient operation.
It appears, therefore, that the Government of Inida’s estimates
of imports required—6.4 million tons—is a very modest estimate
indeed when compared with the minimal 8.57 million tons which
would be required to maintain the 1950 standard.
Even the lowest figure of 6.4 million tons required for
importation leaves a requirement of .5 million tons from abroad
after we have deducted the tonnages for the Indian purchase
program and the proposed grant-in-aid.
At the Department’s request, The Office of Foreign Agricultural
Relations prepared an estimate of India’s 1951 foodgrain import
requirements. In the light of later information from the field,
this estimate of 5.6 million tons of foodgrains required from
abroad represents the lower limit of the estimate. The upper
limit is estimated at 6.2 million tons.
[Page 2100]
This range is derived in the following manner:
| Ration requirements in 1950
were |
7.6 |
million |
tons |
| Additional ration
requirements in 1950 |
8 to 1.0 |
“ |
“ |
| To replenish foodgrain
pipeline |
.9 |
“ |
“ |
| To repay foodgrain borrowed
1950 |
.2 |
“ |
“ |
| Total Government procurement
requirements for 1951 |
9.5 to 9.7 |
million |
tons |
| Less Government procurement
from domestic procurement |
3.5 to 3.9 |
million |
tons |
| 1951 import
requirement |
5.6 to 6.2 |
“ |
“ |
| Government of India financed
imports |
3.8 |
“ |
“ |
| Balance to be imported |
1.8 to 2.4 |
“ |
“ |
b—the government of india’s ability to
finance the necessary import of additional foodgrains
(1) To evaluate India’s ability to pay for the importation of
foodgrains required in 1951, the official Indian
balance-of-payments projection for fiscal 1951 has been
converted into a tentative balance-of-payments estimate for the
current calendar year. On this basis there would be an estimated
deficit of $166 million in calendar 1951. This figure takes into
account a foodgrain import of only 3.9 million tons. It does not
allow for the additional 2 million tons of emergency food
imports required. If India’s total of imported foodgrains for
calendar 1951 is taken, at a rough estimate, to be no more than
6 million tons, of which 3.9 million tons are assumed to be
within India’s capacity to acquire and finance, the general
magnitude of the expected financial imbalance can be projected
as follows: The cost of 2 million tons of foodgrains is
estimated at $180 million f.o.b., or $214 million delivered. If
India were to finance the importation of these additional 2
million tons, her total estimated deficit would be increased to
approximately $380 million (i.e. 166+214). This would, of
course, require utilization of India’s sterling balances and
substantial drawings on the sterling-area dollar pool. The net
amount of such dollar drawings would, of course, depend on what
happens to the remainder of India’s dollar balance of payments
during this period.
(2) India’s large sterling balances can be examined from the
point of view of their possible availability in the present
emergency. From the peak of about £1.3 billion in 1946 for
pre-partition India–Pakistan (pre-devaluation equivalent about
$5.2 billion) India has drawn down her share to approximately
£640 million (post-devaluation equivalent about $1.8 billion).
The bulk of these balances is in a blocked account. Under an
agreement of August 1949 India was entitled to a release of £50
million in the year ending June 30, 1950, and an additional £50
million in the year ending June 30, 1951, none of which has yet
been drawn. In addition she will be entitled, under the
so-called
[Page 2101]
Colombo
plan, to releases of £35 million per annum for the six years
beginning July 1, 1951. It should be noted that arrangements
between India and the U.K. with respect to the former’s sterling
balances are very flexible, and India has been able to draw on
her sterling account to the extent necessary to meet current
deficits even when the drawings exceeded the limits set by
previous understandings.
As India is a sterling-area country and maintains her reserves in
sterling, any net surpluses or deficits in her balance of
payments will be reflected in changes in her sterling balances.
Thus, a deficit of $166 million in 1951 would imply (in the
absence of capital movements) a reduction in India’s sterling
balances of approximately £60 million. If India draws down her
balances at the rate of £35 million per annum for the next six
years in accordance with her present development plans, those
balances will be further reduced by £210 million by 1956 or
1957. Thus, barring further emergencies, the total diminution in
India’s balances would be of the order of £270 million, leaving
India some six years hence, with a reserve of approximately £30
million.
(3) The foregoing calculation was based on the assumption that
extraordinary external aid would be provided for the two million
tons of additional wheat required. If India should not be able
to obtain this aid and must finance the increased imports
herself, her reserves would be pulled down still further by the
equivalent of $214 million, or approximately £76 million. The
result would be to bring her sterling balances down to the
neighborhood of £300 million or slightly under $900 million by
1956–7. It is doubtful whether such reserves can be considered
adequate for a country of India’s size, growing population, and
volume of international transactions. In the absence of external
aid, India might curtail or abandon her economic development
program in order to prevent her reserves from falling below the
safety level. If India should follow such a policy it would, of
course, pose the longer-range problem of India’s essential
requirements for development and improvement of living
standards, a problem in which the U.S. is vitally interested for
political reasons.
(4) Informal talks with the Department of Agriculture indicated
that Australia has no foodgrains available for export, other
than those coming under the IWA. While Canada has some low-grade
(#5, not normally used for human consumption), Canada’s inland
transport situation is such that movement could not begin until
much later in the year.
Canada and Australia have indicated that they will make rather
modest contributions to the Commonwealth development program for
South and Southeast Asia; it has been estimated that these gifts
might aggregate about $25 million for the first year of the
program.
[Page 2102]
All in all,
therefore, it is not likely that any but rather nominal sums
compared to the requirement can be forthcoming from these
sources.
(5) India’s reserves other than sterling are not large. The
statistics on short-term deposits in New York indicate working
balances maintained at about $50–70 million chiefly for the use
of the Indian Purchasing Mission. In addition, India has a
modest independent gold reserve which since before World War II
has been maintained at a constant level ($247 million since
partition). This reserve is approximately equal to the legal
minimum requirements against the note issue of the Reserve Bank
of India. For both legal and psychological reasons this
traditional gold reserve is not available for meeting
current-account deficits in India’s balance of payments.
(6) There would be little justification for financing the import
of the additional 2 million tons of foodgrains by a long- or
intermediate-term loan. Neither the Export-Import Bank nor the
International Bank for Reconstruction and Development would be
prepared to advance the necessary funds for procurement of
consumers goods, i.e. for an undertaking which has no income
producing possibilities. The International Monetary Fund has
already advanced India $100 million, nearly four times the
Indian gold contribution to the Fund.
c—the availability of supplies and the
ability to deliver
(1) The Department of Agriculture has stated that an additional 2
million tons of wheat are available in the United States. It
should be noted, however, that the entire 2 million tons of
foodgrains should be taken in wheat only as a last resort. In
view of possible increases in the price of wheat and possible
increases in the demand for wheat from other quarters, the
composition of the 2 million tons of foodgrains might well
extend into barley, corn, and other substitutes.
(2) United States inland transport for 2 million additional tons
of foodgrains will be a problem, but not an insurmountable one.
Present estimates on the availability of inland transport show
that the greatest load will come in late spring and during the
summer.
(3) The Maritime Commission has stated informally that ocean
transport will not be a major problem.
(4) Studies of India’s ability to unload and distribute an
additional 2 million tons of foodgrains show that India has this
ability.
Note:
Comprehensive analyses of the detailed statistics involved in
factors A, B, and C are in process.
[Page 2103]
[Annex II]
secret
[Washington,] January 24,
1951.
Indian Request for Food Grains: Political Considerations
india’s importance to us security
South Asia, of which India comprises the most important part, is
the only substantial area in the Asian land mass which has not
been subverted, or is not imminently threatened with Communist
domination. If South Asia falls under Communist control, a
strategic area containing nearly half a billion people will be
denied to us, and its resources, including strategic materials,
can be utilized against us. Potential bases for containment of
Soviet power, or attacks on the Soviet heartland and Communist
China would be denied to the non-Communist powers and Soviet
control of the Asian land mass would be virtually complete.
The present threat of famine in India promises to create
conditions ideally suited to the subversive activities of the
Communist Party of India which is exploiting situations
calculated to increase popular dissatisfaction with the present
non-Communist Government. A quick response to the Indian
Government’s request for food grains is the most effective
means, immediately available to our Government, of counteracting
Communist subversion in India.
humanitarian considerations
Rightly or wrongly large numbers of Indians have expressed
disappointment or bitterness over the failure of the US to
respond to the informal request for food grains made by Mr.
Nehru in 1949. Today, in the face of shortages far more serious
than those which existed in 1949, Indians find it increasingly
difficult to understand why the US, which prides itself on
humanitarian principles, cannot make food grains available to
avert famine. Informed Indian officials are aware of our many
commitments in other parts of the world, and may understand the
bureaucratic complexities and political complications bearing on
a project of this sort, but most Indians feel that if the US
really wants to prevent famine it will find some way of doing
it, while Communist propaganda will be quick to seize on our
failure to help as evidence of greed and cold-bloodedness in our
dealings with under-developed areas and under-privileged
peoples. Public support in the US for assistance to India can
probably be stimulated more effectively on humanitarian grounds
than on the basis of strategic considerations. Mr. Hoover4 and Mr.
Stassen5 have
both declared
[Page 2104]
themselves in favor of economic assistance to other countries,
and it is understood that in a private conversation Mr.
Taft6 recently stated that while he had
not investigated the matter, he was inclined to favor a gift of
food grains to India if this were necessary to prevent
starvation.
indian government attitudes
Considerable annoyance and concern has been created among
officials in Washington by statements made by Mr. Nehru. It is
quite apparent that Mr. Nehru, recognizing the power of
Communist China, is grasping at every possible straw in his
effort to avoid offending the Chinese Communist authorities, and
many of his pronouncements regarding the Communist aims are
disturbing. We cannot, however, afford to allow Mr. Nehru’s
declarations to blind us to the vital importance of not losing
India and South Asia to Communism by default.
In the last analysis Mr. Nehru’s current policy toward Communist
China, is essentially the same as that of the British
Government, which, while not openly encouraging him, does not
appear to have made any effort to change his views. Whether we
like the British attitude or not, self-interest dictates that we
continue to make sacrifices to keep Great Britain independent.
By the same token it is in our interest to prevent India from
falling under Communist domination.
Mr. Nehru’s pronouncements to the contrary notwithstanding, the
Indian Government is well aware of the danger of Chinese
Communist aggression—exemplified in Tibet and Korea, and
threatened in Burma. Current reports indicate that border
defenses are being strengthened, and Mr. Nehru has stated in
Parliament that India will not tolerate an invasion of Nepal.
There is no reason to believe that the present Indian Government
would not fight Communist invaders to the best of its ability,
but if large elements of the population are starving the will to
resist will be proportionately weakened.
So far as internal Communism is concerned, Indian
authorities—both Central and State—continue to apply stringent
measures to control Communist activity.
Whatever we may think of Mr. Nehru’s somewhat emotional
declarations we know that if the present government falls India
will either be thrown into a state of chaos or come under
control of a government far less sympathetic to our ideals and
objectives than the present government. It is all too likely
that a new government would be controlled either by Communists
who would swing India into the Soviet orbit or by elements of
the extreme right utilizing totalitarian methods which would be
much closer to Soviet communism than to the principles supported
by the western democracies. The emergence
[Page 2105]
of either type of government
would probably have a disastrous effect on Indo-US relations. By comparison
Nehru’s current effusions would probably seem quite
innocuous.
indo-us relations
Relations between the US and India are essentially good.
Differences of opinion regarding issues such as Kashmir,
Formosa, Indochina, and admission of the Chinese Communists to
the UN need not be regarded as
incapable of solution. However misguided Mr. Nehru may be on the
subject of the Chinese Communists and the UN (along with the British and a number of other
governments) we will only be hurting ourselves if we allow our
rancor to cloud our vision in viewing the over-all importance of
keeping the present Indian Government in power.
If we permit famine to develop in India, we may contribute to the
collapse of a government which in the long run is much more apt
to cooperate with us than any possible successor government. The
cost of the food grains under discussion is not inconsequential;
and the effect of a gift of food grains cannot be mathematically
predicted; but failure to take this calculated risk may result
in inestimable losses in terms of manpower, resources, and
strategic advantage.
If Congress is asked to authorize a gift of food grains the
question of Kashmir and other Indo-Pakistan disputes will be raised. We may wish
to state frankly that we do not agree with Mr. Nehru’s position
in the Kashmir case and are continuing efforts through the
UN to bring about an
equitable settlement, but are convinced that the urgency of the
food problem is such that we cannot afford to make a gift of
food grains contingent upon a final settlement of current Indo-Pakistan disputes. If it is
suggested that funds currently being used to support Indian
armed forces might better be used for the purchase of food it
may be pointed out that in view of Communist aggression we
believe the Indian armed forces should be maintained at their
present strength, or greater, even if differences with Pakistan
are settled. It may be also pointed out that famine in India
would probably serve to increase tension between India and
Pakistan and make it more difficult than ever for the Indian
Government to agree to an equitable settlement.
the alternatives
If we respond to the Indian request we may reasonably expect the
following benefits:
- 1.
- The position of the present non-Communist government
will be strengthened; the possibility of subversion of
India and South Asia by Communist powers will be
reduced; and the possibility of gaining
[Page 2106]
Indian cooperation and
denying South Asia and its resources to the Communist
bloc will be enhanced.
- 2.
- The Indian people and the world at large will be
impressed by our humanitarian impulses; charges that we
are willing to relieve suffering only when we stand to
gain politically will be counteracted; and the American
taxpayer will have the satisfaction of participating in
a generous project to prevent starvation in a country
plagued by natural disasters.
- 3.
- Relations with India, which, despite differences of
opinion, are essentially good, will be improved;
cooperation between our governments necessitated by a
gift of food grains will offer new opportunities for
increased mutual understanding; and our basic good will
toward the Indian people will take tangible form.
If we refuse the request for food grains we may reasonably expect
the following developments:
- 1.
- The present government will be weakened and India may
be threatened with anarchy, a dictatorship of the
extreme left, or a dictatorship of the extreme right.
The possibility of Communist subversion of the country,
and utilization of Indian manpower and other resources
against us will be increased.
- 2.
- The Indian people and peoples of other Asian countries
will question the validity of our humanitarian impulses;
and charges that we are interested in relieving human
suffering only for political reasons will be
substantiated in the eyes of the world.
- 3.
- Our relations with India will deteriorate; we will
throw away an opportunity to develop mutual
understanding between our governments; and the Indian
people will be willing to believe that our expressions
of solicitude are hypocritical.
