891.16/10–652: Telegram
The Ambassador in India (Bowles) to the Department of State
1458. In long discussion with PriMin Wednesday, considerable time devoted question land reform in India. On several occasions Nehru has invited my views on GOI polit and econ problems. In answer his questions I have suggested that if reforms do not take place in villages and if Cong Party stays where it is at present seems likely sizable [Page 1667] vacuum will gradually open to left of Cong Party. Socialists even fol their merger with KMT unlikely develop hardheaded polit approach and sophistication required fill this vacuum and as result Commies will have opportunity widely expand their influence.
On other hand, if Nehru moves to institute land reforms and rural debt reforms he can fill this vacuum and keep Commies from further headway. Such development wld admittedly result in split-off landlord grp and others from Congress Party and creation of sizable Conservative right-wing bloc; but if Commies to be stopped no other alternatives. This wld leave Nehru slightly left of center.
I also suggested on previous occasion that while undertaking village and rural reforms he shld consider encouraging private investment to speed development Ind industry. Specifically, I suggested he study experience Puerto Rico in offering tax incentives to both fon and local risk capital. Suggested moratorium on corporation tax for new investment for five to ten years and similar moratorium on real estate taxes for newly expanded industry.
Also suggested while increasing incentives thru lower taxes to creative expanding industry taxes might be increased on stagnant capital in order discourage idle funds. Nehru has agreed at least in theory this analysis altho remaining extremely fuzzy his discussion developing industry. At Wednesday mtg I told Nehru anxious have him discuss land reform problem with Ladejinsky soon as Ladejinsky’s studies completed. Was concerned when Nehru responded by saying wld be delighted see Ladejinsky but thought Ladejinsky wld find that India was making major progress on land reform and that problem was on its way to solution.
He then gave me specific outline of alleged land reforms state by state which in fact are either non-existent or in conversation stage and likely to remain there.
His lack factual info is startling and offers indication extent to which he is cut off from facts and influenced by members his Cab whose views on land problems have become increasingly conservative. Young competent staff people who know score do not dare challenge Nehru’s convictions on such subjects which all too often based on lack honest info. This is basis for real concern on domestic questions. Nehru may become increasingly cut off from people and their problems and more inclined substitute speechmaking for admin and legislative actions.
Ladejinsky, who just returned from trip thru Madras state which Nehru says “had practically solved its land problem”, confirmed my understanding. Ladejinsky states even under new so-called “reforms” in Tanjore area 60 percent crop still going to landlords; cultivators forced to pay expenses for seeds, etc. out of their 40 percent and clear indications that they turning increasingly to so-called Red Flag Assoc which, of course another name for Commies. Ladejinsky stated that [Page 1668] in some sections bitter attitude of villagers, blind stubbornness of landlords and creeping influence of Commies reminiscent of what he saw in China in 1948.
Fortunately Nehru seems to like discuss rural problems with me and I will continue tactfully whenever possible to do what I can. However, I believe best hope for Ind econ progress lies less with Nehru’s leadership than with the conviction and determination which seem to be growing in many state govts notably Uttar Pradesh. The excitement and widespread All-India Press coverage of opening of first 55 community projects October 2 was deeply impressive. I was present at opening 100-village project at Alipore which attended by 16,000 enthusiastic villagers.