385. Memorandum From Secretary of Agriculture Freeman to President Johnson1
SUBJECT
- Review of the Indian Situation
I. Current Crop Prospects
The more recent reports from New Delhi, estimating the coming foodgrain harvest at 80–85 million tons, indicate a much smaller foodgrain harvest than was anticipated by Indian government officials a few months ago. It now seems quite likely that India’s food situation will continue to be precarious throughout the coming year and that grain import needs will continue to be high. This is due in part to a very poor monsoon and in part to shortcomings in this year’s agricultural development effort.
II. An Evaluation of this Year’s Agricultural Effort
The nature of the monsoon continues to be the overwhelming factor determining the level of food production on the Indian subcontinent. The second most important factor is the use of fertilizer. In this area, the Indians have performed well on some counts but poorly on others. They have willingly allocated scarce foreign exchange for the import of fertilizer in order to meet the agreed upon targets for fertilizer availability. However, last year because of delays in financing much of the fertilizer was not ordered on time.
Efforts to increase foreign private investment in the production of chemical fertilizer in India have been quite successful compared with any previous efforts but not adequate when related to the scale of [Page 750] India’s needs. A similar shortfall exists for investment in pesticides and the multiplication and distribution of improved seed varieties.
Minister Subramaniam seems to be doing his utmost to achieve the objectives for Indian agriculture which he and I mutually agreed upon several months ago. But private foreign investment in fertilizer is moving slowly. The reason is, at least in part, that both sides (the Indian Government and the foreign investors) are trying to get the best deal possible for themselves and are willing to delay in order to get it. The follow-through necessary to complete complicated negotiations is lacking on the Indian side. We believe that the solution to this problem of ensuring the necessary action for foreign private investment can only be accomplished by the Prime Minister herself. Somehow she must be made to realize this. Reaching agreement with Minister Subramaniam, however competent and influential he may be, is not enough. The Prime Minister, however, is deeply pre-occupied with the campaign for the General Election to be held in February. The key figures in politics are jockeying for position in anticipation of the formation of a new cabinet in February.
We are also concerned about the reluctance of the Indian Government to ease controls and regulations in the agricultural sector. Two years ago I went to India and helped them to set up a Foodgrains Corporation, comparable to our Commodity Credit Corporation, which would have the responsibility for supporting farm prices at a level which would make the use of modern inputs profitable. It now appears that the Government of India is using the Foodgrains Corporation to procure foodgrains at below market prices, thus discouraging food production rather than stimulating it with proper pricing as was originally intended. However, procurement prices have recently been raised in four states. We are planning to send to India, within the next week or two, a member of the team who originally helped establish this corporation to evaluate its performance.
III. Proposed Action on PL 480 Interim Agreement
These matters and some others that we are checking out need to be taken into consideration before allocating any substantial quantities of food assistance. We will be prepared to review with the Indians a progress check list in detail when negotiations take place in December for the balance of fiscal 1967. In the meantime I would urge that we go slowly and make only the minimum necessary allocation to avoid breaking the pipe line.
We can expect no substantial policy changes before the Indian elections in late February and our negotiations in December should be kept quiet so as to avoid providing ammunition to those who attack the present government for being too subservient to U.S. wishes. But [Page 751] in the December negotiations we can and will explore a number of self-help measures which could improve India’s agricultural performance and impress upon Indian leaders how gravely we view performance shortfalls.
We recommend therefore that we go ahead at this time with 1.2 million tons of wheat and 800,000 tons of grain sorghum on an interim basis, meanwhile preparing for detailed top level negotiations in December. By early December we should have more detailed information on the nature of shortcomings of this year’s agricultural effort as well as the first report on our own wheat acreage.
State and AID concur in this analysis and recommendation.
- Source: Johnson Library, National Security File, Country File, India, India’s Food Problem, Vol. II. Confidential. Rostow forwarded Freeman’s memorandum to the President on November 9 under cover of a memorandum in which he noted that Rusk endorsed Freeman’s recommendation. Rostow added his own endorsement of the recommendation. (Ibid.)↩