Foreign Relations of the United States, 1958–1960, South and Southeast Asia, Volume XV

199. Telegram From the Department of State to the Embassy in India²

Washington, January 10, 1958—9 p.m.

1750. Ambassador authorized communicate following message on US assistance for India to Prime Minister. The FYI sections are for Embassy’s background information and use as guidance in discussion with GOI. Embassy requested report promptly Indian reaction.

1. Recognizing India’s need for additional resources to assist its economic development, the US Government is prepared to discuss with Indian representatives the implementation of a loan program contributing to current India requirement. The loan program proposed by the US, utilizing presently available funds, consists of Eximbank loans and Development Loan Fund credits.

2. In order to proceed with working out the details of this program, it is hoped that the Indian Government will send to Washington qualified experts empowered to engage in staff-level discussions on the technical aspects of these programs. The discussions will concentrate primarily on implementation of proposed Eximbank and DLF lending.

3. Eximbank: Eximbank is prepared to consider a line of credit of $150 million to finance capital equipment and services for priority projects in both public and private sectors which would offer possibilities of early impact on the economy. In accord with its basic policy, the use of the Bank’s resources would be limited to financing goods of US origin.

4. DLF: The Development Loan Fund is prepared to consider the extension of credits, from funds available in the current fiscal year, to the extent of about $75 million in connection with other high priority projects of the Indian program for which financing from Eximbank or from other sources is not available. Additional credits will be considered when and if new funds are appropriated by the Congress for the Development Loan Fund. Development Loan Fund credits would not necessarily be limited to the financing of goods of US origin.

5. In view of the increased Indian needs for capital goods of all types, it is believed that such a loan program can make a significant contribution towards meeting India’s capital goods import requirements over the next 15 to 18 months. It is desirable that Indian experts coming to Washington be prepared to discuss the Indian import program in detail, providing such information as the total size of the import program by years, its commodity composition by capital goods category (e.g., electrical equipment, transport equipment, machinery, etc.), commitments already entered into by country, possible items for Eximbank financing from US sources, and Indian contracting procedures. Since it is recognized that presently available funds are limited, it is considered important that Indian representatives be prepared to indicate those projects of program considered of first importance. Following these discussions the Eximbank and Development Loan Fund would be prepared to send a mission to India to work out further details of the credits. FYI. We believe it is desirable that proposed credits be used for the type of projects which would make an impact upon Indian public opinion. End FYI.

6. Also exploring possibility converting 1951 Wheat Loan³ to provide for repayment in local currency. FYI. This would require NAC approval and consultation with Congressional leaders also deemed appropriate. End FYI.

7. In addition foregoing financial assistance, intensive work being done here on means meeting immediate grain shortage. Embtels 1739⁴ and previous being carefully considered but (for reason given below) primary means at present contemplated are (a) amendment of present PL 480 Agreement⁵ to substitute wheat for substantial portion remaining cotton and (b) barter transactions of substantial size involving various minerals. Appears total quantities wheat which could be so provided would be sufficient, added to latest 400,000 tons from Canada, to meet needs to June 30 or somewhat later. Title I program⁶ out of FY59 funds will be considered when extended PL 480 authorization for next fiscal year is passed by Congress. Arrangements for cotton-wheat shift being worked out here as matter urgency, including preparation text exchange of notes to take place New Delhi. Expect to discuss barter possibilities with Indian representatives next week. FYI. For domestic policy reasons it is considered important to conclude barter deal if possible. Since GOI has not raised question replacement cotton under (a), we prefer not discuss that question now. To meet grain emergency, resort might also be had to other means, including use Title II, if absolutely necessary, but not until above primary means have been exhausted. End FYI.

8. In view of the fact that the details for this proposed program cannot be finalized before discussions are held with Indian representatives, it is the desire of the US Government that publicity deal only with the broad composition of the loan program. There is no objection, however, if the Indian Government desires, to the release of information to the effect that “the United States Government, desirous of assisting the Indian Government to meet its current economic problem, has invited Indian representatives to Washington to discuss the details of a loan program from currently available funds totaling about $225 million from Eximbank and DLF sources. The Indian Government has accepted this invitation. In addition, the US Government is considering on an urgent basis additional measures to assist India in meeting its immediate grain shortage.” FYI. We prefer that the decision on the desirability of a publicity release be made by the Indians. Advise GOI reaction and content and timing if release planned to permit simultaneous release here. End FYI.⁷

Dulles

2. Source: Department of State, Central Files, 891.10/1–1058. Confidential; Priority. Drafted by William V. Turnage, Deputy Director of the Office of International Financial and Development Affairs; cleared with SOA, the Export-Import Bank, and the Treasury Department; and approved by Dillon. Paragraph 7 was cleared with the Department of Agriculture.
3. reference is to the India Emergency Food Aid Act of 1951, approved by the President on June 15, 1951. (65 Stat. 71)
4. Dated January 6. (Department of State, Central Files, 891.49/1–658)
5. Agricultural Trade Development and Assistance Act of 1954, approved by the President on July 10, 1954. (68 Stat. 454) The then most recent P.L. 480 agreement with India was signed at New Delhi on August 29, 1956. (7 UST 2803)
6. Reference is to Title I of P.L. 480.
7. In telegram 1816 from New Delhi, January 14, Ambassador Bunker informed the Department that Prime Minister Nehru was “pleased and gratified” by the information on U.S. aid. (Department of State, Central Files, 891.10/1–1458) A press release announcing the aid program was issued on January 16 in both New Delhi and Washington. (Telegram 1774 to New Delhi, January 14; ibid., 891.10/1–1458)