429. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1
- Instructions for Our Delegation to the India Consortium
George Woods’ consortium meets 4 April (a) to nail down matching food aid from other donors, and (b) to round up enough additional general economic aid to keep India’s import liberalization program going until the consortium’s October pledging session.
Agriculture will top the agenda, but Woods will also use the meeting to keep up our end of the broad economic bargain he and Mehta made last spring with your backing. Woods concludes that the Indians have stuck to the terms of that deal, and meeting his targets is essential to keeping it alive.
That general economic program plays an important role in the success of agricultural reform. It’s essential to India’s buying or producing its agricultural requirements, but it’s also important to the politics of reforming the agricultural system. Mrs. Gandhi’s new government faces hard bargaining with recalcitrant states to get them to go along with reasonable food-sharing programs. Her leverage comes from having outside resources to allocate to best developmental and political [Page 830] advantage and from her ability to produce the results consortium aid promises.
Woods’ main goal at this meeting—apart from rounding up matching food contributions—is to make a breakthrough in softening the terms of other donors’ aid. This beginning attack on India’s debt burden is crucial to forcing others to share the aid burden more fairly. If we don’t soon solve that problem, India will be repaying some donors more than it gets in new aid, and our aid will just go to pay India’s European creditors.
The attached memos from Schultze and Gaud2 spell out a two-step strategy which includes a $33–48 million non-project Ex-Im loan on newly flexible terms and the offer of an early $50 million AID non-project loan (from FY 1967 funds) against our FY 1968 program. Gaud would come back to you before determining the size of that overall pledge and our share next fall.
What they are asking you for now is authority to make these two limited offers. Since we’ve already made our big food offer, we’re proposing just enough more in strategic forms to improve our leverage on both the Bank and other donors. Gene will lead our delegation and is fully aware of your overall objectives. We think this will give him enough to negotiate with.
I recommend you use Schultze’s memo (attached) as your decision document, since it details our conditions.3
- Source: Johnson Library, National Security File, NSC Histories, Indian Famine, August 1966–February 1967, Vol. IV. Confidential. A handwritten notation reads, “Rec’d 10:36 a.” A handwritten “L” indicates the memorandum was seen by the President. Sent to the President at the LBJ Ranch in Texas as telegram CAP 67230, March 30. (Ibid., Country File, India, Vol. IX, Cables, 3–7/67)↩
- Reference is to a March 26 memorandum from Gaud to the President and a March 28 memorandum from Schultze to the President, both entitled “The India Aid Consortium Meeting.” (Ibid., India’s Food Problem, Vol. IV)↩
- Schultze’s memorandum indicates that President Johnson approved the two proposed loans on April 2.↩