Foreign Relations of the United States, 1955–1957, South Asia, Volume VIII

153. Memorandum of a Conversation, Department of State, Washington, November 18, 1955¹

Washington, November 18, 1955

SUBJECT

• FY 1957 Economic Assistance to India

PARTICIPANTS

• Mr. Murphy, G
• Mr. Robertson, FE
• Mr. Prochnow, E
• Mr. Hill, U/MSA
• Mr. Kalijarvi, E
• Mr. Bennett, G
• Mr. Smith, SOA

Mr. Murphy stated that he had called the meeting to discuss informally the proposal for FY 1957 economic assistance to India at the suggestion of Mr. Hoover, who believed that this question would be one of the most difficult in connection with the over-all FY 1957 program. Mr. Murphy, in this connection, read a letter from Mr. Nelson Rockefeller to President Eisenhower, with an accompanying memorandum from Mr. Rockefeller to Mr. Adams,² which stressed the importance to the U.S. of the present situation in India and recommended reconsideration of the proposed reduction in FY 1956 funds for India.³

Mr. Smith stated that it was the agreed position of the operating levels of State and ICA to recommend $70 million in development assistance for India in FY 1957. India has adopted an ambitious Second Five Year Plan, which will result in a large financial gap and increased need for foreign assistance. Success of the Plan is of major importance politically to the Government. At the moment, the financial problems inherent in the Plan are resulting in conflict between moderate leaders in India who wish to pursue a conservative financial and political policy and radical elements who demand increased State control of the economy to assure success. A reduction in U.S. aid at this time would play into the hands of these radical elements and could set Indian economic policy on a more dangerously Socialistic path for the future. Further, a substantial Soviet economic penetration of India is now developing.⁴ Loss of U.S. economic support could well throw Indian leaders into dependence on Soviet aid for their Plan. The recommended level of $70 million was consistent with the FY 1956 proposal and represented a judgment as to a minimum level for an effective U.S. program.

Mr. Kalijarvi and Mr. Prochnow said that E agreed with the recommended FY 1957 program. Mr. Kalijarvi thought that the U.S. should not make its decision on the basis of the often-times unfriendly or difficult statements of Mr. Nehru but on a cold assessment of U.S. interests. In the circumstances, he felt continuation of U.S. aid to India was definitely in U.S. interests.

Mr. Robertson stated that although he could not speak of Indian problems in detail, he did not believe we could buy support. In view of Mr. Nehru’s consistent support of the Communist position and his opposition to U.S. policy, Mr. Robertson felt that U.S. aid would only build up an unfriendly government. He suggested that we might get more results in India if we withhold aid and forced them to consider their position without it.

Mr. Hill referred to the current visit of Soviet leaders to India and suggested that decision be deferred until an assessment of the results of this visit could be made.

Mr. Murphy stated that this had been an informal and exploratory discussion of the problem. A further meeting would be held next week at which a recommendation on aid to India for Mr. Hoover could be decided.⁵ In the meantime, he suggested further thought be given to the issues raised.

1. Source: Department of State, Central Files, 891.00/11–1855. Secret. Drafted by Smith.
2. Nelson A. Rockefeller, Special Assistant to the President and Chairman of the President’s Advisory Committee on Government Organization, wrote the President on November 7 urging him to address a personal message to Nehru before the arrival of the Soviet leaders in India later that month. He recommended that the President state that the United States had been proud to contribute to the advances India had achieved in agricultural development and was interested in helping to promote industrial growth over the next 5 years. (Ibid., 033.6191/11–755) Adams referred Rockefeller’s letter to Hoover on November 14. (Ibid., 033.6191/11–1455) Hoover responded on the same day concurring in the conclusion of Department officers that the suggested Presidential message to Nehru would encourage him to believe that substantial amounts of aid would be forthcoming. If he then were to be disappointed, the effect on U.S.-Indian relations would be worse than if the matter had never been broached. Furthermore, any letter to Nehru avoiding pledges of U.S. cooperation was held likely to be dismissed as an obvious effort to counter the Soviet visit. (Ibid.)
3. According to a memorandum from Allen to Under Secretary Hoover, October 19, the Department and ICA had decided to reduce FY 1956 development assistance to India from $50 million to $40 million, in order to provide funds for a special contingency reserve. (Ibid., 791.5–MSP/10–1955)
4. Aside from the commitment to build a steel plant, Soviet aid had been offered in the fields of oil exploration and diamond mining. (Telegram 912 from New Delhi, November 7; ibid., 791.5–MSP/11–755)
5. The meeting, which took place on November 28, included a somewhat different group of participants. Murphy expressed the opinion of all present “that FY 1956 aid to India be reinstated at $50 million, and that Congress be requested to appropriate $70 million in FY 1957.” (Memorandum of conversation by Smith, November 28; ibid., 791.5–MSP/11–2855) In telegrams 1047 and 1233 from New Delhi, November 26 and December 20, respectively, Cooper strongly urged the reinstatement of the $50 million sum. (Ibid., 791.5–MSP/11–2655 and 12–2055)