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

200. Telegram From the Department of State to the Embassy in the United Kingdom¹

Washington, January 11, 1958—6:37 p.m.

4882. CA 5772² provides background US consideration assistance to India. AmEmbassy Delhi has now been authorized communicate to Indian Government steps US prepared take and suggest GOI send team Washington work out technical details. Extent these facts will be made public to be determined in consultation GOI. Meantime recognize large scale aid India might raise difficult questions certain Baghdad Pact and SEATO capitals. You therefore authorized your discretion communicate soonest respective governments on oral and confidential basis following summary of proposals and rationale:

Ex-Im Bank prepared consider line of credit $150 million finance capital equipment and services priority projects. Development Loan Fund will consider extension of credits approximately $75 million from current fiscal year funds. In addition USG also considering means alleviate grain shortage through additional use PL 480.

You authorized use such portions following rationale as deemed appropriate:

(1) India now in serious economic difficulties with external resource gap of approximately $1,000,000,000 for even reduced objectives Second Five-Year Plan. This complicated by short term foreign exchange problem with reserves drawn down to dangerous level. India, a nation of nearly 400,000,000 people, is of major political and psychological importance in Asia.

(2) In spite many differences between US and Indian foreign policies it obviously in interest free world that India remain independent and free of Communism which would flourish if economic situation deteriorates. This possibility can be lessened if India enabled make economic progress toward satisfying elemental needs of its people.

(3) US has consistently come forward to strengthen free world countries in time of crisis. Witness Turkey, Greece, Iran, Korea, and many other free world countries whose freedom, independence and progress strongly supported by US.

(4) India receiving only economic aid while our allies are receiving both economic and military assistance in proportionately larger quantities. Contemplated assistance is in the form of loans of which by far the greater part (Ex-Im Bank) repayable in dollars. Assistance also being given without context of carefully formulated development program and relatively stable economic and financial situation.

(5) To extent India remains stable and independent, security and well-being of South Asia and of Baghdad Pact and SEATO will be strengthened.

It is therefore in interest of our friends and allies that India’s strength as an independent member of free world community be maintained. This in no way lessens strength US relationship to close and proven allies.

(6) Suggest refer history US assistance particular country in discussion respective governments.

For London advise Fon Off. Assume UKG endorses rationale.³

Dulles

1. Source: Department of State, Central Files, 791.5–MSP/1–1158. Confidential; Priority. Drafted by L. Wade Lathram and approved by Rountree. Also sent priority to Ankara, Tehran, Baghdad, Karachi, Bangkok, Manila, and Tokyo and repeated to Ottawa.
2. Circular airgram 5772, January 7, sent to all major U.S. diplomatic posts, enclosed a policy information statement on U.S. economic aid to India. (Ibid., 511.00/1–758)
3. In telegram 4108 from London, January 14, the Embassy reported that it informed officials of the Foreign Office of the substance of telegram 4882. Those officials said that the Department of State was correct in assuming that the United Kingdom endorsed the rationale for U.S. aid to India. “HMG has shared US concern re India’s worsening economic situation,” the cable reads in part, “and while feeling itself unable help out has been fervently hoping that US would be able to come to rescue. Thus believe HMG sincerely welcomes US decision step up aid to India, even though it might be with tinge of frustration that UK itself unable contribute more to ease economic crisis of Commonwealth sister nation.” (Ibid., 791.5–MSP/1–1458)