Foreign Relations of the United States, 1964–1968, Volume XXV, South Asia

325. Telegram From the Department of State to the Embassy in India¹

Washington, April 25, 1966, 9:06 p.m.

2041. 1. Indian Planning Minister Asoka Mehta met Secretary April 25. Following report based on uncleared memcon. It is FYI, Noforn and subject to amendment upon review.

2. Mehta said talks with IBRD have been going well so far. He would like to reach specific agreement regarding current Indian fiscal year and broad understanding regarding Indian needs for Fourth Five-Year Plan as a whole. Current economic situation very bad but program to liberalize imports could have very good effect and India needs to do it. GOI also anxious to finalize Fourth Plan. Secretary observed we were also in turbulent period in that annual Congressional review of aid program taking place.

3. Mehta described India’s current economic difficulties. He noted that although production this year abnormally low, Indian economy has achieved diversification and degree of sophistication giving potential for very rapid growth. He observed India’s current tribulations having salutary effects:

(a) Psychology of Indian farmer completely changed. He now wants fertilizer, electricity, improved seeds, etc. This has become political issue. Healthy development but can recoil on GOI if nothing done.

(b) Broad-based demand for family planning. Program going very well, proportionately even better in some states like Punjab than in Taiwan.

(c) Since foreign exchange pinch currently felt throughout country, general awareness has developed of need for intensified and sustained export drive. State Chief Ministers now display clear understanding this requirement and what it means to them directly.

(d) State Chief Ministers have recently unanimously decided raise taxes in this pre-election year rather than cut back development. As they are close to people, this is good sign of new commitment of ordinary Indians to concept of development and a most important psychological change.

4. Mehta recounted recent GOI measures to attract foreign private investment in fertilizers and observed that if his talks with Bank and Fund succeeded, GOI could “push this all the way.” He also noted US companies being invited join Indians to set up distribution companies for improved seed.

5. Secretary referred to importance of peace in subcontinent and asked about prospects for Indo-Pakistani cooperation in development field. Mehta, noting that Prime Minister Gandhi expressed support for this concept to President, stated that GOI welcomed Indo-Pak economic development cooperation in principle and said he had so informed Woods of IBRD. In response Secretary’s question, Mehta said he had not seen Pak MinFin Shoaib on present visit but would be happy to meet him.

6. Secretary asked whether GOI considering further ministerial talks pursuant Tashkent agreement. Mehta said first ministerial discussions not fruitful. Subsequent Chicom visit to Pakistan and Pakistan display Chinese arms not taken very well in India; Mehta implied it best to allow cooling off period prior starting new round of ministerial talks. Secretary noted importance of continuing to work on these problems. Mehta said it might be easier move first on economic side. Referring again to Indo-Pak political problems, Secretary drew analogy of US-Soviet problem over Berlin, noted he had spent two years discussing Berlin with Russians, and stressed that important thing was to keep communications going.

7. Secretary said basic question in US now regarding aid to subcontinent was peace.² Two questions important: chances for future hostilities and levels of defense expenditures by each government. Mehta said Indian public had completely accepted Tashkent and India’s mood was opposite of belligerency. He noted that if one examined closely circumstances of last year’s two hostilities, it clear Paks started each. Taking longer view, he noted that before Chicom attack only two per cent of India’s national income devoted to defense. Need for new equipment for mountain fighting, road construction, etc. thereafter forced this percentage up but it has since remained fairly steady. As long as need to defend against China remains, India will not be able to reduce level of its defense expenditures very much. Mehta said, however, that if there should be some reduction in Pak defense outlay, India would be willing to match it. Such Indian reduction could not however be “mixed up” with need for defense against Chinese.

8. In response to Secretary’s question on Binational Foundation,³ Mehta said if we could agree on permanent Indian Chairman and majority of Indian members, Indian public would find it easier to accept idea as genuinely Indian institution.

9. On internal stability, Mehta discounted severity of problems in Punjab and Naga-Mizo Hills. Punjab problems sorted out. Discussions with Nagas going well, and in any case troubles there should be seen in perspective (India successfully assimilating 25 million other tribals).

10. In conclusion, Mehta held forth prospect of very rapid progress in India, given sufficient external aid to permit the necessary structural changes.

11. At the Secretary’s suggestion, Mehta agreed another meeting would be desirable shortly before his return to India, i.e., May 4.

Rusk

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL 7 INDIA. Confidential. Drafted by Coon, cleared by Handley, and approved by Laise . Repeated to Karachi, London, and USUN.
2. Rostow also stressed the importance of a rapprochement between India and Pakistan in a conversation with Mehta on April 27. (Memorandum for the record, April 28; Johnson Library, National Security File, Country File, India, Mehta Visit, 4/19–28/66)
3. Reference is to the binational educational and cultural foundation Bowles proposed in March 1964. As envisioned by Bowles, the foundation was to be funded by rupee bank deposits held by the United States in India as a result of funds generated from the repayment of development loans and P.L. 480 proceeds. (Letter from Bowles to Moyers, March 12, 1964; Johnson Library, National Security File, Country File, India, Exchanges with Bowles)