2. Memorandum of Discussion at the 408th Meeting of the National Security Council, Washington, May 28, 19591

[Here follow a paragraph listing the participants at the meeting and agenda item 1, “Significant World Developments Affecting U.S. Security.” For an extract from that discussion, see Document 230.]

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2. U.S. Policy Toward South Asia (NSC 5701; OCB Report on NSC 5701, dated March 18, 1959;2 Memo for NSC from Executive Secretary, same subject, dated May 22, 19593)

Mr. Harr4 initially briefed the Council on the highlights of the OCB Report on South Asia, noting the OCB recommendation for a review of NSC 5701 with respect to Pakistan, India, and Ceylon. Mr. Hair’s comments stressed the very low standards of living in the area, particularly in India, Pakistan, and Afghanistan. While he singled out Soviet successes and capabilities in spreading Communism in the South Asian nations, he also pointed out some of the obstacles which confront the Soviets. He noted the hopeful possibility that a solution might be in the offing for the dispute between India and Pakistan on the Indus Waters. His report concluded with a brief run-down of developments in the several countries composing the area covered by our policy on South Asia.

Mr. Gray, after noting that the Planning Board would commence at once its review of NSC 5701, asked Secretary Dillon if he had any comments to make with respect to the problem of the Indus Waters.

Secretary Dillon began by emphasizing that a settlement of the Indus Waters problem would actually go further to reduce tensions between Pakistan and India than would a settlement of the Kashmir dispute, although the two problems were related. Secretary Dillon pointed out that some 80 per cent of the water that comes from the Indus was used by Pakistan for the irrigation of agricultural lands. This figure amounted to more than one-half of the total water used for irrigation in Pakistan. It would be a calamity to Pakistan if this water which came from India were to be denied to Pakistan. Mr. Dillon then indicated in outline the general nature of the plans being devised to settle this dispute. Essentially, he said that what Mr. Black had accomplished consisted of an agreement by India not to shut off the Indus Waters until the irrigation projects for Pakistan had been completed. Moreover, India had undertaken to make a substantial contribution to the costs of the irrigation dams.

Secretary Dillon said that the overall cost of Mr. Black’s plan for settling the Indus dispute amounted to about one billion dollars. This total, however, included such matters as power facilities as well as irrigation dams and canals. Much benefit would result for India as well as for Pakistan. The foreign exchange costs would inevitably be very large. It was hoped that the U.S. would supply perhaps $275 million of foreign exchange costs. It was hoped to get an additional $100 [Page 8] million from countries of the British Commonwealth. The rest of the costs would be supplied by the International Bank for Reconstruction and Development (IBRD). These costs would extend over a period of ten years. The U.S. contribution would probably have to be made on a grant basis by means of a special item in the Mutual Security Program. U.S. expenditures for any one year would have as a maximum $40 million.

At the conclusion of his comment Secretary Dillon cautioned that what Mr. Black had brought back was simply an agreement in principle. The problem now facing Mr. Black was to transform this agreement in principle into an agreement on specific and concrete details.

When Secretary Dillon had concluded his remarks, Mr. Gray commented that his statement led quite naturally to one of the questions raised by the Discussion Paper on U.S. Policy toward South Asia which Paper had been prepared by the NSC Planning Board with a view to securing useful guidance in the Planning Board’s forthcoming review of NSC 5701.5 The specific question Mr. Gray had in mind was set forth in sub-paragraph 10–e on Page 5 of the Discussion Paper. Mr. Gray read the question as follows:

“e. To what extent is it in the U.S. interest to seek to relate U.S. assistance to the achievement of greater cooperation between India and Pakistan? For example, if the United States is called on to help finance the IBRD plan for settling the Indus waters dispute, should U.S. participation be made conditional on willingness by India and Pakistan to cooperate further, for mutual benefit, in the economic development of the sub-continent, in planning for its defense, and in terminating continuing rivalry between the two countries in building their military forces?”

Mr. Gray then invited Secretary Dillon’s comment on the question from the Discussion Paper which he had read. Secretary Dillon replied that he felt very strongly that the U.S. should not attach conditions to its assistance in achieving the settlement of the Indus Waters dispute. It was much too important to find some genuine solution to the dispute and we might very well fail to get the issue settled if we insisted on attaching conditions designed to compel greater cooperation between India and Pakistan. We do feel, however, that a solution of the Indus Waters dispute will in and of itself produce a new climate in which tensions between India and Pakistan could be lessened. He added that he thought that we should certainly conduct parallel efforts to reduce tensions between India and Pakistan and indeed we have already entered upon this process which involved both reduction of military force levels in the two countries and greater economic cooperation [Page 9] between them. This process, however, he emphasized was not the same as attaching conditions to assisting in a settlement of the Indus Waters dispute.

The President commented that as he saw it this was essentially a selling job by the U.S. rather than a job involving conditions set upon our aid. Mr. George Allen noted the analogy between the effort to divide the waters of the Indus and Mr. Eric Johnston’s efforts to deal with the problem of the Jordan Waters.

Mr. Gray then stated that the next issue on which he would like to have the Council’s guidance was found in Paragraph 9 on Page 4 of the Discussion Paper and was concerned with India’s role in Asia and the basic objectives of the U.S. vis-à-vis India. Was India to serve as a counter-weight to Communist China or was India to be a successful example of an alternative to Communism in Asia? The point, said Mr. Gray, seemed to be whether the U.S. could reasonably expect a democratic India ever to become a successful alternative to a monolithic Communist China. We would, thought Mr. Gray, be on a dangerous wicket if we were to undertake to make the economic growth of India competitive with that of Communist China. Should we simply try as an objective to keep India from going Communist or alternatively should our objective be something more ambitious? Mr. Gray did not think that all the responsible elements in our government were in agreement with respect to these objectives.

The President observed that he thought we must all remember that India had never announced any readiness to align itself with the West as an opponent of Communism, as Japan for instance has. We could not talk of a counterweight if the nation in question refuses to be a counterweight. Personally, the President said he believed the Indians were wise to adopt their attitude of non-alignment, looked at from the point of view of what was advantageous to India in a difficult situation. So, continued the President, while it was obviously important for the U.S. to help India to prove itself, we should not think of India in terms of a counterweight to Communist China. India simply could not afford to play the role of counterweight. The President added that he was not very sympathetic with the widespread Congressional attitude of criticism with respect to aid provided by the U.S. to neutral nations. He also added the thought that if the U.S. were actually to try to make India a counterweight to Communist China, the task would be so great that we would probably bankrupt ourselves in the process. Accordingly, he counselled that it was best not to take any black and white position on the counterweight issue. On the other hand, it was very important to give India a chance to grow as a free and democratic country.

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Secretary Dillon explained that he found the question that Mr. Gray and the Discussion Paper posed boiled down to how much, both in dollars and other efforts, the U.S. should devote to helping India to succeed in its objectives and also to determine what would constitute the measure of India’s success. Secretary Dillon emphasized that he did not think the measure of success for India could be calculated in terms of year by year competition with Communist China. India would simply not be able to do this while still preserving the methods and techniques of a free society. On the other hand, Secretary Dillon suggested that there was perhaps not as much difference as we were inclined to believe in the rate of growth that India must demonstrate in order to preserve her freedom. He said he did not think it was realistic for the U.S. to adopt a policy of giving India only so much aid as we calculated would be sufficient to prevent India from going Communist. Such a calculation was essentially unrealistic. India was a country that was of vital importance to the U.S. If the Indians succeeded in achieving their objectives, India might well prove to be a counter-attraction if not a counterweight to Communist China. Moreover, India was sufficiently advanced so that there was a real possibility that she would achieve self-sufficiency in a given period of time with some help from outside. The leaders of India hoped to achieve this status of self-sufficiency in about ten years time after perhaps a fourth Five Year Plan. Attainment of this objective will be the great test for India. It will determine whether India can support itself with its enormous population while still adhering to the democratic system and values.

Secretary Dillon then emphasized that the Soviet Union has entered fully into this contest over the fate of India. He pointed out Ambassador Bunker’s concern, expressed in a recent telegram, about the Soviet contribution for the forthcoming third Five Year Plan.6 He pointed out that of course Soviet assistance to India could be provided on a multi-year basis which gave the Soviets a very great advantage over us who can provide assistance only on a yearly basis. He added that there was great anxiety lest, as a result of Soviet assistance, India should become unduly dependent on the Soviet Union for support. Accordingly, concluded Secretary Dillon, the U.S. did need to find some means by which we could put our own assistance to India on a long-range basis in order to overcome this built-in Soviet advantage.

The other big problem with regard to India, said Secretary Dillon, was the matter of the role of private investment and private enterprise. He felt that recently real progress had been achieved in recognition by India of the need to develop the private sector of the economy. In turn, [Page 11] our American industrialists and capitalists have become more and more interested in the possibilities of successful investment in India. The State Department was doing its best to advance this point of view. We did feel that India was the most crucial area in the economic contest between the U.S. and the U.S.S.R.

The President repeated his view that while he hoped that India would some day become a great counterweight to Communist China, he did not believe that we should now base our policy on this specific objective. The President then reverted to his frequently expressed concern about the problem of explosive population growth particularly in underdeveloped countries like India. The problem, he added, was a constant worry to him and from time to time almost reduced him to despair. He felt that our people must face up to the problem of population growth.

Secretary Dillon replied that at least in India, as opposed to other areas involved in the population problem, the leaders fully recognized the magnitude of the problem. Moreover, it was a cardinal policy of the Indian Government to try to hold down the birth rate. The only method so far devised to do this was sterilization and abortion. He wished that we could find some kind of very inexpensive chemical contraceptive. There was also a study of the possibility that more widespread education may ultimately provide the key to solving the problem.

The President commented that of course we faced the problem in Latin America as well as in Asia and there we were confronted by obstacles involving religion and dogma. On the other hand, an increase of eight million people each year in India seemed to the President to be almost self-defeating for our efforts.

Admiral Strauss pointed out that while the Gross National Product in India has been increasing in recent years, the per capita income of the country has not increased. With respect to Ambassador Bunker’s telegram from New Delhi, earlier mentioned by Secretary Dillon, Admiral Strauss said that he wished to make a comment. He said that it seemed to him that the total amount of aid needed by India was much greater in amount than could ever be supplied by governments. The only real hope, therefore, lay in the supply of private capital. Accordingly, it should be the policy of the U.S. not to encourage India to build up large-scale Government-owned industries. To do so would not only be contrary to our own traditions, it would mean that many people throughout the world would say that the U.S. had no faith in its free enterprise system.

The President replied that Nehru now recognizes that India must depend much more than he had originally imagined on private industry. This of course, cautioned the President, did not mean that we were likely to see a wholesale and completely free enterprise in India.

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(At this point, about 10:30 a.m., the President announced that he would be obliged in a few minutes to leave the meeting in order to meet with the Foreign Ministers who had flown over from Geneva for the funeral of the late Secretary of State.7 He added that he had a few matters to present to the Council before leaving. The points raised by the President are set forth at the end of this Memorandum.)8

When the President had left the Cabinet Room together with certain other participants at the meeting, Mr. Gray asked those who remained at the Council table whether he might proceed with one or more of the remaining difficult questions which were raised by the Discussion Paper on South Asia. He then turned to sub-paragraphs 10–a and –b on Page 5 of the Paper reading as follows:

“a. Should the United States continue to provide and continue to encourage other Free World countries to provide, economic and technical assistance to South Asia on a project or case basis?

“b. Alternatively, is a higher rate of economic growth in South Asia of such importance as to warrant a new approach to economic assistance which would involve a significantly greater U.S. and Free World effort? If so, should the U.S.:

Assure the governments concerned that it will attempt to provide supplementary financing to carry out the governments’ own development plans, or
Give assurances of the willingness of the U.S. to assist in both the formulation and financing of programs aimed at achieving more rapid rates of economic growth?”

He also called attention to sub-paragraph 10–c on Page 5 reading as follows:

“c. Would the effectiveness of the U.S. programs in South Asia be enhanced if legislative authority were obtained to provide aid on a multi-year basis? Could the United States give such assurances without taking similar action in other less developed nations, e.g., in Latin America?”

With respect to the latter sub-paragraph Mr. Gray pointed out that this was a matter of very great concern to elements in our Government who entertained opposing views. Mr. McCone asked what was the essence of the problem?

Secretary Dillon replied that in its essentials the problem was simple. It was a matter of finding there means of financing aid to these nations without doing violence to our financial traditions and principles. He feared that the Treasury Department was strongly opposed to providing aid on a multi-year basis.

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Secretary McElroy inquired whether the Soviet economic assistance to India took the form of loans or of grant aid? Secretary Dillon replied that most of the assistance provided by the Soviet Union to India was in the form of loans but he warned that the Soviet Government could be flexible if need be, as had been demonstrated by its grant aid to Nepal.

Mr. Gray inquired whether it would be possible for the U.S. to undertake to provide aid to India on a multi-year basis without being obliged to use similar methods in other areas of the world and most particularly in Latin America. Secretary Dillon replied that such a course of action was possible and seemed to imply a preference for the provision of aid on a multi-year basis as opposed to providing aid on a year by year basis.

Mr. Gray then suggested that it was perhaps unwise for the Council to pursue this issue in the absence of the President and said he would try to undertake to have the Planning Board frame the issue in clearer form.

Secretary Dillon warned that we needed a decision in the matter of legislative authority for provision of aid on a multi-year basis in order to respond to Senator Fulbright’s position on the Hill. Mr. Stans, however, insisted that there was more to the problem than a simple decision as to whether the U.S. was going to provide assistance to other nations on a year by year basis or over a longer range of time. The fundamental problem in Mr. Stans’ view was whether we would resort to “backdoor financing.” This, said Mr. Stans, is what Senator Fulbright was advocating. He would authorize extension of aid on a multi-year basis but Congress would appropriate money only on a year by year basis with the result, said Mr. Stans, that we would have to go to the Treasury to get the money needed to carry out our commitments. In short, how do we commit ourselves to a long-range aid program without at the same time getting from Congress long-range appropriations? This was the major problem that had to be resolved.

Mr. Stans also said that there was yet another problem in connection with the extension of long-range aid. Were we to deal with multi-year programs through the medium of existing institutions or were we to create other institutions for this purpose? He felt that a discussion of these problems in the NSC Planning Board or elsewhere should be used to develop these points before they are brought back to the NSC.

Mr. Gray expressed the opinion that the kind of questions posed by Mr. Stans were not appropriate for solution in the Planning Board or in the NSC itself. These questions involved techniques rather than policy. The real problem, as it appeared to Mr. Gray, was what policy differences existed with respect to South Asia.

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Mr. Scribner said he assumed that Mr. Gray would bring these matters up at a later meeting. Mr. Gray replied that he intended to do so but not in the form of further consideration of the Discussion Paper but as part of a revised statement of policy on South Asia which would presumably contain split views.

Mr. Scribner said he had a question to put to Secretary Dillon. Was it Secretary Dillon’s thought that we should now depart from our policy, with respect to foreign aid, of trying to find aid projects which seemed promising, and instead shift to some kind of general assistance project which really amounted to nothing more than pumping a certain amount of money into a country like India regardless of how it was to be spent? Secretary Dillon denied any intention to move in this latter direction and said he fully agreed with the Treasury on the need to come to an agreement with India with respect to the projects for which the U.S. would provide financial assistance.

The National Security Council:9

Noted the reference Report on the subject by the Operations Coordinating Board.
Discussed certain issues affecting U.S. policy toward South Asia, in the light of the Discussion Paper on the subject prepared by the NSC Planning Board and transmitted by the reference memorandum of May 22, 1959.
Noted that the NSC Planning Board would review and prepare a report on U.S. policy toward South Asia (to supersede NSC 5701), taking into account the OCB Report and the discussion at this meeting.

[Here follow the remaining agenda items.]

S. Everett Gleason
  1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret; Eyes Only. Drafted by S. Everett Gleason.
  2. Not printed. (Department of State, S/SNSC Files: Lot 63 D 351, NSC 5701 Series)
  3. See footnote 2, supra.
  4. Karl G. Harr, Jr., Vice Chairman of the OCB.
  5. Supra.
  6. Reference is presumably to telegram 2791 from New Delhi, May 13, in which Ambassador Bunker reported: “Recent indications sharp increase tempo and scope Soviet economic offensive India now confirmed and documented [less than 1 line of source text not declassified].” (Department of State, Central Files, 861.0091/5–1359)
  7. Former Secretary of State Dulles died on May 24; he had resigned for reasons of health on April 22.
  8. Not printed.
  9. Paragraphs a–c that follow constitute NSC Action No. 2094. (Department of State, S/SNSC (Miscellaneous) Files: Lot 66 D 95)