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

224. Telegram From the Embassy in India to the Department of State¹

New Delhi, January 8, 1959—6 p.m.

1538. Country Team Message. Purpose of this message is to stress Country Team’s conviction it has now become imperative that US consciously devote sufficient portion of money and effort involved in our aid program to execution of a series of projects which, in addition to their economic merits, will have substantial impact on Indian public. (See Embtel 473 of August 26, 1958.)²

Economic soundness of given development project must continue be basic factor determining eligibility for US aid. Beyond this, however, it necessary that end result this aid be such as make Indian people conscious of magnitude US assistance, both absolutely and in relation Soviet effort, and identify its purpose with Indian interests.

Soviet offensive in India well designed achieve maximum psychological impact. (See Ambassador Bunker’s letter to George Allen, November 26, 1958;³ also joint Embassy/USIS despatch 1373, May 12, 1958.)⁴ As one part our program to counter this offensive, Country Team made recommendations for USIS use PL 480 rupees to further US psychological effort India. (Joint Embassy/USIS/TCM despatch 673, December 15, 1958.)⁵ The basic element of such program, however, is economic aid program which itself offers best single avenue furthering US interests in India.

It obvious our economic aid programs as conducted to date have made favorable impact on important segments Indian society, particularly on small to fair section press, on top GOI officials, especially MEA, Finance, Commerce and Industry Ministries, some influential members Parliament. There no doubt also they have been effective in furthering our objective make possible steady progress in India’s economic development under democratic institutions. But Soviet economic-psychological offensives keeping up in intensity and effectiveness. It essential therefore our programs should have flexibility needed meet this growing challenge and that their impact must reach and affect much wider area public opinion.

Inherent in our present program, however, are two factors which tend inhibit public understanding and recognition, and reduce effectiveness of substantial effort we currently making to “get across” our program to average Indian. First is diffusion large proportion US aid through total Indian economy. Second is that in only few of aid projects does US play paramount or exclusive role essential for US identification with project. (In cases where US financing has been paramount, other criteria for treatment as impact project have been lacking.)

It essential that portion our total resources be reserved for projects which, in addition being economically sound, are easily understandable impact projects. Such projects should contain following elements:

(1) US should be readily, fully and publicly linked with project. This means most, or, if possible, all costs must be underwritten by US and US technicians made available when feasible.

(2) Project should, on completion, deliver product and/or service easily understood by general public and addressed to commonly recognized problem, or to national pride.

(3) Project should preferably have concrete and geographically specific physical entity.

Country Team believes it essential there be series such impact projects located in strategically important areas and designed accomplish political, economic and psychological goals of US. In addition to projects of national significance, some should be designed to contribute also to solution of vexing local or regional political problems important in terms over-all US objective in India. In other words these projects should not only be addressed to solution important economic problems, but should also be of such character, and so distributed geographically, as to have maximum psychological and political impact.

This obviously requires coordination of the various elements of assistance program. Local currencies, dollar resources and technical assistance must be concentrated on the selected projects.

We now ready discuss with GOI allotment PL 480 rupees to various projects. Country Team sending concurrently with this telegram request for allotment rupees 1.1 billion for obligation under loan and grant provisions of 1956 PL 480 sales agreement. (Toica 801)⁶

It our firm conviction part of these rupees must be used to further our political and psychological as well as economic objectives. This possible only if dollar resources tied to rupees and combined prior these discussions to enable us take stronger position with GOI than heretofore possible in urging impact projects be undertaken.

Country Team has selected two impact projects (detailed below) which we would like undertaken at earliest possible moment. Total cost these two projects to US would be $17 million in foreign exchange and about $45 million in PL 480 rupees. (If last stages dam project are ultimately undertaken with US financing, these totals would rise to $44 million in foreign exchange and $64 million in rupees.) We intend forward to Washington on continuing basis additional selected impact projects for financing from future rupee and/or dollar allocations; some of these currently under study. We have in mind regional and political impact projects (e.g., Calcutta land reclamation) in Bengal and other sensitive areas.

Action Requested:

(1) Immediate allotment of rupees as requested in Toica 801.

(2) Authority now to advise GOI (in course of negotiations here) Washington agrees in principle dollars required finance impact projects described below will be made available if GOI requests them.

(3) That future negotiations with GOI by Washington lending agencies be conducted with recognition of necessity for impact projects. This requires coordination within Washington and between Washington and field. This, it seems, would involve prior screening by Country Team of requests for US assistance from GOI so Country Team can forward to Washington recommendations for specific combined uses of dollar, rupee, and technical resources. Washington would thus be enabled more effectively coordinate various lending agencies involved and thus combine dollar resources with PL 480 rupees reserved for such impact projects as Country Team may develop.

In summary: Country Team believes it imperative our assistance gain public association with goals and aspirations Indian people, and that to accomplish this, flow of US resources (dollars, rupees and technicians) must be so directed as to include series of impact projects.

List of projects.

(1) Sharavathy Hydroelectric Project: Situated in power-deficient portion Mysore state, near Kerala border, this possibly best power site in India in re technical feasibility and economy. Ideal in terms guidelines set forth Embassy telegram 473. Project included in second paragraph and GOI going ahead with preliminary construction though GOI apparently unclear where finance required its completion to come from. Popular interest in project intense, and our impression from talks with GOI officials is they would welcome US rupee and dollar finance. First stage (178 mega watts) to cost about $65 million of which 14.4 is foreign exchange; by April 1, 1959, GOI expects have spent 10.3 of this, of which 1.1 is foreign exchange. First stage is expected be completed 1962–3. Total cost completed project (890 mega watts) is expected run about $110 million, of which foreign exchange would be 41. In forthcoming talks, we would discuss allocation PL 480 rupees for unspent portion first stage rupee costs, i.e. about 41, and dollar aid for outstanding first stage foreign exchange costs (about 13.3). Whether it would best serve our purpose to finance project’s final stages can best be determined at future date. Should be noted stage one is technical entity, project complete in itself and meeting all requirements for impact project as described above.

(2) UP Agricultural College: This project is attempt attack some fundamental problems in Indian agriculture through establishment at Terai State Farm in Uttar Pradesh Prototype Agricultural and Engineering College, modeled on US land grant college pattern, and combining research and extension work with teaching. Following several years study by Indian groups (and persuasion by TCM), bill establishing college passed by UP State Legislature in December 1958. Country Team believes it desirable for impact purposes that Americans (furnished under TC) be in position of influence for first five years, and Indians sent to US for study. Dollar costs proposed for programming under TC will total 1.6 million through 1965. Proper equipment of farm and university may raise foreign exchange cost of project to total of 4.1. GOI will ask for 3.8 for rupee capital costs now, with some more required in third plan. Impact this project can be increased considerably by additional rupee allotments to improve construction quality. Whereas Sharavathy project proposes additional dollar resources to support rupees now available, second project proposes programming PL 480 rupees and relatively small additional foreign exchange components to support technicians and dollars already planned for programming under TC. These two initial projects therefore illustrative of approach Country Team considers imperative.⁷

Bunker

1. Source: Department of State, Central Files, 791.5–MSP/1–859. Confidential. Repeated to Bombay, Calcutta, Madras, London, Paris, Bonn, and Karachi.
2. Document 215.
3. Not found. Documentation relating to the letter, however, is in Department of State, Central File 511.91.
4. See footnote 7, Document 215.
5. In despatch 673, the Country Team recommended that P.L. 480 rupees be used for a supplementary information and exchange program in India during a 3-year period in order to counteract a “massive communist bloc propaganda campaign in India.” (Department of State, Central Files, 511.91/12–1558)
6. For text of the Agricultural Commodities Agreement signed at New Delhi on August 29, 1956, see 7 UST (pt. 3) 2803. Toica 801 has not be found.
7. Telegram 1688 to New Delhi, January 15, thanked the Embassy for the “thoughtful and imaginative proposals Embtel 1538.” (Department of State, Central Files, 791.5–MSP/1–859) The Country Team proposed some additional impact projects in telegram 2029 from New Delhi, March 5. (Ibid., 791.5–MSP/8–559)