227. Memorandum of a Conversation, Department of State, May 5, 19591

SUBJECT

  • United States Financial Assistance to India and the Third Five Year Plan

PARTICIPANTS

  • Mr. Douglas Dillon, Under Secretary for Economic Affairs
  • Mr. B. K. Nehru, Commissioner General for Economic Affairs, India
  • Mr. Leland Barrows, ICA
  • Mr. Henry W. Spielman, SOA

Mr. Nehru opened the conversation by requesting that this discussion be off-the-record. He then said that present studies of the Indian economy indicated that the country would reach the “take-off point” in eight to fifteen years from 1961. He, himself, believed that it would probably be ten years, but the Prime Minister has insisted that it be in seven years.

Mr. Nehru then shifted to a discussion of the preparation of the Third Five Year Plan on which progress to date indicates new investment of about $20 billion, of which $5 billion would be foreign exchange requirements beyond India’s anticipated resources. At this [Page 482] stage in the planning Mr. Nehru said that India needed assurances that this deficit would be met, and he was inquiring as to the possibility of a long term commitment from the United States.

Mr. Dillon assured Mr. Nehru that the United States was giving serious consideration to the long term planning requirements of underdeveloped countries and the necessity of departing from the annual approach. He mentioned that there was real possibility DLF might be put on long term basis next year. Senator Fulbright had already made such a proposal for immediate action. Additional information on the Indian program would be useful in justifying to Congress such an approach. If such a proposal were approved by Congress, Mr. Dillon said, the Government of the United States would be in a position to give India assurances of long term assistance.

Mr. Nehru then asked if legislation were approved for the DLF to provide this capitalization, could India expect to receive, during the Third Five Year Plan period, about the same proportion as from past DLF funds. Mr. Dillon said that he thought such a figure could be justified, and that if larger amounts of loan funds were available India might receive a larger proportion of the total. Mr. Nehru stated that if this would enable India to receive $500 to $600 million from the United States this would be adequate, along with assistance that might be obtained from other sources.

Mr. Nehru then asked about the “Herter” type study which Senator Kennedy had mentioned in a recent speech and about the State Department’s views on the Kennedy–Cooper resolution.

Mr. Dillon said that Senator Kennedy was considering a resolution suggesting a Congressional study team visit the countries of Asia and Africa with a view to revising the United States foreign aid approach and, particularly, the possibility of multi-year appropriations. He then referred to the Kennedy-Cooper Resolution on India, pointing out that the State Department would prefer a resolution that did not single out a particular country, and had suggested the possible inclusion of the countries of South Asia, plus Burma, which appear to be a logical unit. Mr. Nehru did not express objections to the inclusion of the other South Asian countries.

Mr. Dillon then asked if India’s Third Five Year Plan would be sufficiently well developed for a mission such as provided in the Kennedy–Cooper Resolution to study late this year. He pointed out that it would be especially useful if a report could be available to Congress by the first of April of next year. Mr. Nehru replied that he thought such a mission could be useful, and that it certainly would have an opportunity by next January to study the draft of the Indian Third Five Year Plan. Mr. Nehru also thought that such a mission [Page 483] composed of private citizens similar to Mr. McCloy2 would make an especially good impression on India.

  1. Source: Department of State, Central Files, 791.5–MSP/5–559. Secret. Drafted by Henry W. Spielman, Officer in Charge of Economic Affairs in SOA. The source text is marked “off-the-record.” Kennedy briefed Dillon for this meeting in a memorandum of May 4. (Ibid., 791.5–MSP/5–459)
  2. John J. McCloy, Chairman of the Board of the Chase Manhattan Bank and former High Commissioner for Germany.