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

216. Memorandum of a Conversation Between the Indian Commissioner General for Economic Affairs (Nehru) and the Under Secretary of State for Economic Affairs (Dillon), Department of State, Washington, August 26, 1958¹

Washington, August 26, 1958

SUBJECT

• Call by B. K. Nehru on Mr. Dillon

Mr. Nehru explained that he was calling to pay his respects in his new capacity as Commissioner General for Economic Affairs. He will be based in Washington, but would be traveling to other countries as occasion required. He stated that the first day’s meeting of creditor nations appeared to have revealed a very satisfactory and cooperative attitude on the part of all concerned and a disposition to assist India in meeting its current financial problems.²

Mr. Nehru inquired what was the present status of DLF funds. Mr. Dillon replied that the DLF appropriation of $400 million was, of course, less than hoped for, and that consideration was being given to making a new request to Congress in January, 1959 for an additional $25 million. Mr. Nehru inquired what the present thinking was on DLF aid to India to which Mr. Dillon replied that the figure of $100 million previously discussed was still valid, although some downward revision might be necessary in view of the reduced appropriation for DLF.

Mr. Nehru said that he again wanted to mention the problem of utilization of such DLF funds as might be made available to India, particularly the question of using DLF funds for discharging past commitments. Mr. Dillon recognized that this presented a problem, both mechanically and because it would tend to establish precedents to which other countries might be able to point. However, there appeared to be no legal bar to using DLF funds in this manner although there was a legislative provision against using DLF funds to retire debts. However, the question of when a commitment constituted a debt is subject to interpretation. We must not lose sight of the fact that the purpose of extending DLF assistance to India is to help in the present crisis and it would not make sense to require that India enter into new commitments in order to utilize the projected DLF assistance. Mr. Dillon added that he would discuss this matter further with the DLF.

Mr. Nehru then inquired whether any funds such as those appropriated for Special Assistance might be available for India.³ Mr. Dillon explained the purpose of Special Assistance funds, stating that these funds were already fully programmed and that many new and unforeseen requirements, such as those developing from the Middle East situation, would make heavy demands on all funds available to the Executive Branch for foreign assistance.

Mr. Dillon stated that one of the problems causing some concern to the U.S. was what would follow the completion of India’s Second Five Year Plan. He hoped that future plans would be more realistic so that India would not again be faced with financial crises such as those experienced under the Second Five Year Plan. Mr. Nehru said that India had learned a bitter lesson from its present difficulties, and that he was certain future planning would be more realistic and would concentrate on projects such as agriculture and roads which were of a labor intensive nature rather than capital intensive nature. He said it would be of great assistance to India, in future planning, if it could have some idea in advance of foreign aid funds which would be available from the United States. Mr. Dillon explained that it was, of course, not possible to predict in specific terms what future foreign aid appropriations would be. In general, however, the leaders of both political parties are in favor of continuing foreign aid and the trend in public opinion is in favor of expenditures for economic development rather than for military programs.

Mr. Nehru said that India’s food crop this year was substantially less than anticipated and hoped that PL 480 assistance would be forthcoming promptly. Mr. Dillon assured him that this matter was receiving urgent attention and that we hoped to have the program in shape for presentation to Mr. Desai during his visit here in September.

Mr. Dillon mentioned that the Government of India had recently made available certain figures on its defense expenditures for the balance of the Five Year Plan. Mr. Nehru stated that he knew there had been speculation in some quarters that India’s defense expenditures were higher than they actually were; that the Government of India had no objection to making these figures available to the U.S.; and that the Government of India intended to enter into no new defense commitments involving foreign exchange beyond those already contracted.⁴

1. Source: Department of State, Central Files, 033.9111/8–2658. Official Use Only. Drafted by Leon B. Poullada.
2. See Document 214.
3. Reference is to the President’s Fund for Asian Development, first established under the Mutual Security Act of 1955.
4. On August 28, B. K. Nehru also paid courtesy calls on Acting Secretary Herter, Assistant Secretary Rountree, and Deputy Assistant Secretary Kennedy. Memoranda of those conversations, drafted by Poullada, are in Department of State, Central Files 033.9111/8–2858.