168. Operations Coordinating Board Report1


I. Introduction

A. References

U.S. Policy Towards South Asia (NSC 5701), Approved by the President January 10, 1957.2
India Over the Next Five Years (NIE 51–56), May 8, 1956.3
Basic National Security Policy (NSC 5707/8), Approved by the President June 3, 1957.4

B. Objectives

1. U.S. operations should be developed in accordance with U.S. objectives which are: the continuance of non-Communist governments willing and able to resist Communist blandishments or pressures from within and without; an increased association and identification with other South Asian governments, and peoples, and with the free world community; a lessening of the tensions with other South Asian states in order to augment their resistance to Communist tactics and to strengthen their bonds with the free world; strong, stable and, if possible, popularly-based governments; increasingly sound and developed economies, and a posture of military strength contributing to area stability and as appropriate to the defense of the free world.

C. Special Operating Guidance


2. India. It should be borne in mind in dealing with India that it is not merely the largest of the less developed countries, but is very important in itself to United States policy. It is one of the leading powers of the world and stands preeminent among the free Asian-African countries. With a population approaching 400 millions, it encompasses one out of every seven persons in the world.

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Communist China’s tacit yet certain rivalry with India is one of the basic facts of Asian politics. Its implication to United States policy and operations lies in the inevitable comparison that will be made between the two countries’ progress—the one depending upon totalitarian controls and devices, and the other relying on democratic processes and methods. The outcome of the race could have a very considerable effect on the other and much smaller Asian countries. India is deeply and officially committed to an “independent” foreign policy amounting to neutralism between the Communist bloc and the West. Equally, if not more important, the United States is committed to support its ally Pakistan against Communist aggression, and India has interpreted this commitment as a potential danger to India’s security. The intensity of India’s resentment of this alliance is a reflection of age-old communal tensions between Hindus and Muslims, greatly exacerbated by the partition of the subcontinent and the ensuing, bitter Kashmir dispute. There appears to be no easy “out” to the dilemma, but with patience there may be a chance eventually to persuade India that its oft expressed fears of the misuse of United States military aid to Pakistan in aggressive action against India are unfounded and indeed harmful to India’s aspirations for a reputation of objectivity.

In spite of the conflict between certain U.S. and Indian policy objectives, there are many lines of parallel action: to stand against further Communist expansion; to limit Chinese Communist influence in South and Southeast Asia; to limit Soviet influence in the Near East and Africa; and to foster regional cooperation among the non-Communist countries of both continents. India of course hopes to extend and strengthen its ties with its smaller neighbors generally. While an Indian “sphere of influence” would not necessarily be consistent with United States aims, no serious problem is posed to present American policy so long as India remains non-Communist and democratically oriented. On the contrary, Indian influence contributes to the stability of parts of Free Asia. This applies particularly to the land-locked Kingdom of Nepal, where practically all free world activity is physically dependent upon a cooperative attitude on the part of the Government of India.

3. Nepal. Nepal, by virtue of its geographic position relative to India and Communist China, merits attention. Since 1951, India has had a dominating influence over Nepalese politics. However, long established Nepalese ties with Tibet and Nepalese dislike of occasionally heavy-handed Indian “protection” have inspired Nepal to seek closer relations with the Chinese Communists. During the past year and a half relations between Communist China and Nepal have become closer.

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United States policy and operations toward the buffer state of Nepal should take into consideration the objectives we have with regard to India and Communist China. Since India looks upon all foreign influence in Nepal with some suspicion, the United States must pursue its objectives tactfully and carefully, not appearing to usurp India’s special position. Similarly, the United States should regulate its activity in Nepal so as not to encourage the Chinese Communists to expand their operations there.

Special Situations

4. US-India Economic Relations. In the absence of strong U.S. Indian political or military ties, economic relations between the two countries assume a special importance. The United States has relatively little “leverage” on India apart from India’s need for greater foreign economic assistance. The present level of U.S. assistance, though substantial, is small in comparison with India’s total economic development expenditure and can exert little if any influence on its policy outlook. The same applies to the present level of Communist bloc economic assistance to India. It is not clear whether any increase in magnitude would have any effect on India’s policy outlook.

Success of the Government of India in attaining its present economic goals, as reflected principally in its Second Five-Year Plan (1956–61) would do much to assure that India will remain non-Communist in the foreseeable future. Failure to achieve the Plan on schedule would tend to weaken the moderate elements in India, and increase the chances that extremist elements would eventually come to power. Such a development could result in a setback to the attainment of United States objectives in the area.

Present prospects are that, in the absence of greater foreign exchange resources, the goals of India’s Second Five-year Plan will have to be lowered. Our stake in India’s future economic and political development requires that Indian economic problems be kept under continuing review from the standpoint of the United States interests involved.

In this connection a special study has been prepared by an interdepartmental working group. This study has been submitted to the President. The Department, in consultation with the Departments of the Treasury and Agriculture, ICA and the Export-Import Bank is currently developing a series of recommendations which follow from the factual material in the study.5

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India has agreed with the United States to buy for rupees $360 million worth of surplus commodities, chiefly foodgrains with 20 per cent of the sales proceeds to be reserved for U.S. uses. The balance is to be lent to India for developmental purposes, and $55 million of this balance is to be made available through private banking channels to private enterprise for expansion purposes. Although the agreement provides for shipments over a three-year period, in the first 10 months of the program (by July 1, 1957) almost half of the agreed total of these surplus commodities will have been delivered. This is proving especially beneficial to India in that the sales of foodgrains to the public help to counter inflation by absorbing the extra income generated by India’s development projects.

In matters affecting commercial relations, the promotion of American investment in India should be given priority, followed by trade promotion. Financial difficulties and inflationary pressures have created serious problems for India in the execution of its Second Five-year Plan. Part of the answer could lie in foreign investment whether in the form of direct capital participation or technical licensing agreements.

Greater provision should be made for assisting American business interests to enter the Indian market. Strong economic and commercial ties between India and the Unites States will not only contribute to India’s economic well-being and thereby keep it among the free world countries but would also directly benefit U.S. business interests.

5. Communist Government in Kerala. The Communist Party won its most significant electoral victory in India in March 1957, when, in India’s second general elections, it gained control of the Legislative Assembly of the State of Kerala. Communist Party members were elected to 60 of the 127 seats in the Assembly. Having been joined by 5 “independent” fellow-travellers elected with Communist support, the Communist Party holds a slim majority upon which it hopes to consolidate its newly-won position.

This victory of the Communists within a democratic, Constitutional framework gives them an important foothold from which to expand in India, and enhances their respectability and prestige as a successful, parliamentary political party which may have a far-reaching effect on their future capabilities. Their victory also introduces a new element in the psychological battle for Asia which is clearly advantageous to international Communism.

. . . . . . .

United States Government operations in Kerala are on a modest scale and consist of (1) a USIS Library at Trivandrum and (2) two [Page 357] ICA employees engaged in agricultural education and research work. If the Communist authorities demand the removal from Kerala of USIS and ICA personnel and insist that all U.S. activities in these fields cease, the United States should be prepared to face these issues and, unless the Government of India is ready to oppose the Communists, to withdraw ICA and USIS operations from Kerala.6

6. U.S.–India–Pakistan Relations. Both India and Pakistan consider that their most vital foreign relations problems lie with each other. The two countries have radically divergent viewpoints on the issue of collective security, Pakistan’s being officially much closer to that of the United States. In this context the main United States problems are to prevent the outbreak of hostilities and to maintain friendly relations with both countries while not weakening in any way our essential support for the collective security principle.

The principal Indo-Pakistan dispute relates to Kashmir State and revolves around differing concepts of the status of that area. India claims that Kashmir has been a part of India since October 1947. Pakistan disputes this contention and has the implied support of the UN Security Council on this point. The overriding interest of the United States in the dispute is to facilitate a mutually-acceptable settlement. The manner in which it is achieved is of considerable yet secondary interest. In the absence of a direct agreement between the two parties, the United States must, and does, fully support the UN action to achieve a settlement.

The other Indo-Pakistan disputes, though less serious, are deserving of our sympathetic and impartial interest. We favor the continuance of bilateral discussions, under the aegis of the World Bank, for an equitable settlement of the claims of both parties to the use of canal waters available in the Indus River Basin.

7. Military Aid Problems. The United States is committed to grant Pakistan an amount of military assistance of major proportions. A considerable amount of this aid has already been delivered, and some will continue to be delivered for years to come. In the context of strained Indo-Pakistan relations and of our desire to maintain friendly relations with India as well as Pakistan, it is particularly important that the United States extend military cooperation to [Page 358] India. India refused the President’s suggestion of February, 1954, that it might receive grant military aid from the United States. Nevertheless India had signed a military sale agreement with the United States in 1951,7 and since then has purchased about $38,000,000 worth of United States military goods and services. Most of India’s requests under this agreement have presented no problem from either the viewpoint of our national disclosure policy (for safeguarding information regarding certain types of military equipment) or of preventing an undue imbalance of power on the subcontinent. Such requests should normally be met. Those few cases where Indian requests raise disclosure problems should continue to be handled, as in the past, with due consideration to the special circumstances and justifications of the request, bearing in mind both our national security interests and our desire that India be given no cause to turn to the Communist bloc for military supplies. To date India has not purchased such supplies from the bloc, and this is one encouraging factor in U.S.-Indian relations.

8. U.S.-Nepalese Relations. American economic aid to Nepal should be on a moderate scale, sufficient to contribute to Nepalese economic development, political stability and a western orientation. Our aid program should be planned and implemented in cooperation with the Nepalese and Indians, where feasible, and its scope and manner of implementation should not antagonize India nor spur Communist China to greater activity in Nepal.8 Operations should be carried on with the minimum of personnel consistent with efficiency.

The United States does not maintain a resident diplomatic mission in Nepal. Our Ambassador to Nepal (and India), who presented his credentials to the King on March 8, 1957, is resident in New Delhi, India, as are the Communist Chinese and USSR Ambassadors who are also accredited both to India and Nepal. The United States has refrained from establishing a resident diplomatic mission in Nepal because such action would doubtless lead the Communist Chinese, and perhaps also the Soviet Union, to open a similar mission. The United States benefits from the present situation, since it has a USOM in Nepal while the Communist Chinese and Russians have no such official representatives there. The Communist Chinese are developing increasingly close relations with Nepal, however, and [Page 359] will probably open a mission there when a favorable opportunity arises. It is not unlikely that the Soviet Union might do likewise. The United States should therefore be ready to counter such a move by establishing an equivalent American mission as quickly as possible.

The Nepal Government plans to hold its first general elections in October 1957. Prior to the elections, a constitution for Nepal is expected to be promulgated. Both these measures indicate the basic western orientation of the King9 and the present Nepalese Government. The United States should encourage the democratic trend in Nepal, but also bear in mind that Nepalese limitations might handicap any government established under the forthcoming constitution.

[Here follow résumés of principal United States economic commitments to India and action assignments to United States Government agencies.]

  1. Source: Department of State, OCB Files: Lot 62 D 430, India. Secret. The cover sheet was dated July 5, 1957. Attached to an undated memorandum by Charles E. Johnson, which noted that the OCB at its June 27 meeting had revised and concurred in the operations plan “for implementation by the responsible agencies of the actions and programs contained therein.”
  2. Document 5.
  3. Not printed.
  4. Not printed here.
  5. The Department of Agriculture and the Export-Import Bank had not been represented on the original working group.
  6. The state of Kerala resulted from the November 1, 1956, merger of the Malabar district of Madras State and the former state of Travancor–Cochin. Following the Communist electoral victory, the Department of State requested the Embassy to assess, among other things, the importance of Kerala to U.S. policy. (Telegram 2659 to New Delhi, April 8; Department of State, Central Files, 791.00/4–857) The response on April 12 indicated that Kerala’s importance was primarily in political, psychological, and strategic fields rather than in the areas of trade and investment. (Telegram 314 from Madras; ibid., 791.00/4–1257) Rountree submitted a study of the “Implications For U.S. Foreign Policy Of Communist Electoral Victory in Kerala” to Dulles on April 29. (Ibid., 791.00/4–2957)
  7. For text of the “Agreement relating to transfer by the Government of the United States to the Government of India of certain military supplies and equipment,” see TIAS 2241; 2 UST 872.
  8. Jones wrote to Consul General Gordon H. Mattison at Calcutta on July 16 to advise that should Ambassador Bunker visit Katmandu he might discreetly mention to government officials the dangers that could result from Nepalese acceptance of Soviet aid while, at the same time, refraining from any implication of possible additional U.S. assistance. (Department of State, NEA/SOA Files: Lot 62 D 43, Nepal 1957)
  9. King Mahendra Bir Bikram Shah Dev.