233. Memorandum of a Conversation, Department of State, Washington, June 15, 19591


  • General Discussion on India–Nepal Political and Economic Developments


  • Ambassador Ellsworth Bunker, American Embassy, New Delhi
  • Mr. James W. Riddleberger, Director, ICA
  • Mr. Leonard J. Saccio, Deputy Director, ICA
  • Mr. D. A. FitzGerald, Deputy Director for Operations, ICA
  • Mr. Leland Barrows, Regional Director, Office of Near East and South Asia, ICA
  • Mr. Harold E. Schwartz, Chief, South Asia Division, ICA
  • Mr. Anthony Cuomo, SOA

Ambassador Bunker reviewed the most recent political developments in India commenting on the anti-Communist agitation in Kerala. He expressed doubt that this would result in the overthrow of the Communist State Government, feeling that the action was somewhat premature, though it was difficult to foresee how something of this kind, once started, would end up. The new Congress Party leader in that State seemed to be more of a practical politician. Mrs. Gandhi was also an improvement over her predecessor. In Nepal, the Ambassador said he had found the new Prime Minister, B. P. Koirala, friendly to the United States as well as to India. The King’s2 visit to Moscow was engineered by Foreign Secretary Nara Pratap Thapa. Apparently the King committed himself to accept Soviet aid and had so admitted when directly asked. The Ambassador then outlined the Soviet aid agreement which was to include an East-West road survey. The Ambassador said he had suggested to the Nepalese that the United States be allowed to undertake this survey. In his opinion, the Ambassador said, the Nepalese Government might still keep the Soviets out of this particular project.

Mr. Saccio asked about the timing of the announcement regarding the establishment of a Soviet Embassy and Ambassador Bunker replied that this also had been engineered by Foreign Secretary Thapa. The Prime Minister was unhappy about it and the Deputy Prime Minister, Subarna, learned about it on the train from Calcutta.

Turning back to India Mr. Saccio remarked that the United States level of aid was being set by the Development Loan Fund; the selection of projects was following rather than preceding the setting of an aid figure.

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After agreeing with this, Ambassador Bunker went on to describe the new Soviet economic offensive which would double or triple Soviet aid to India. That aid might aggregate from $700 million to $1 billion. The Ambassador said he had been asked if this Soviet aid was not, after all, assisting us in our own objectives of promoting the economic development of India. The answer, he said, was “yes”, but the Soviets were looking fifteen or twenty years ahead. At that time it might be found that India would not have made sufficient progress and this would increase the country’s vulnerability to its own Communist Party.

The Ambassador went on to say that the Soviet offensive was in the field of aid, trade, and training. The INSTEP program for training Indian steel technicians was brought up at this point. Mr. Bunker was informed that Mr. John Stephens, a Presidential Assistant, had promised to talk to the American Iron and Steel Institute in an effort to increase the quota of the technicians who would be brought to this country.

The Ambassador went on to say that the Soviets were carrying on an effective psychological propaganda campaign through the distribution of cheap books and magazines.

He brought up the question of project type aid pointing out the “mileage” the Soviet Union had gotten out of the Bhilai Steel Plant and the “mileage” the Canadians have obtained from their reactor. The Ambassador admitted that the Indians were sensitive to this type of aid but that this sensitivity was not an insurmountable obstacle. We could undertake such aid without fanfare. It would undoubtedly be helpful to the Congress Party to be able to point to specific projects accomplished by the United States, despite any unwillingness to talk about impact projects as such. The Ambassador mentioned Sheravathi, a hospital in New Delhi, and grain storage facilities as possibilities under this type of aid.

United States aid to the public sector was then brought up by the Ambassador who said the Indians were pragmatic in their approach to investments and that their use of the word “socialism” should not be frightening. The Ambassador said there was no reason why the United States should not build the fourth public sector steel plant. Mr. Barrows commented that certainly our aid must have benefited the private sector even though it may not have been extended directly to it. He said that as he understands it, B. K. Nehru does not want project aid. Mr. Barrows asked how India would feel about grant aid. Mr. Bunker replied that if handled properly they would probably accept. Mr. Barrows said he was not convinced India could absorb $1 billion a year of aid. Ambassador Bunker said he did not think that all aid should necessarily be project aid, only a proportion.

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The Ambassador then mentioned the question of the economic organization in the Embassy. There would undoubtedly be more aid under the Third Five Year Plan, and therefore a greater need for coordination. Two forms were suggested by Mr. Bunker: (1) an Economic Minister with two deputies, one of whom would be the TCM Director and the other the Economic Counselor; or (2) the Economic Minister to be also the TCM Director and under him a Deputy TCM Director and the Economic Counselor. The Ambassador was asked if the Agricultural Attaché would be included in this integrated organization. He replied that he believed so. Mr. Saccio said that ICA would come up with suggestions on this subject.

In conclusion Ambassador Bunker remarked that he hoped something could be done to stimulate American investments in India. We were a bit slower in this field than the British, he said.

It was agreed to postpone any discussions about Nepal until Mr. Russell Drake arrived.3

  1. Source: Department of State, Central Files, 791.00/6–1559. Secret. Drafted by Anthony Cuomo of SOA on June 29.
  2. Mahendra Bir Bikram Shah Dev.
  3. Russell P. Drake, Director of the U.S. Operations Mission in Nepal.