Office of the Historian

259. Memorandum of a Conversation, Department of State, Washington, May 23, 19601

Washington, May 23, 1960

SUBJECT

  • Aid for India

PARTICIPANTS

  • The Under Secretary
  • Mr. L. K. Jha, Secretary-Designate of the Department of Economic Affairs of the Ministry of Finance (India)
  • Mr. B. K. Nehru, Indian Commissioner
  • General Mr. Donald D. Kennedy, Deputy Assistant Secretary, NEA

Mr. Nehru took the occasion of Mr. Jha’s courtesy call to discuss three points relative to India’s economic needs: (1) India’s additional foreign exchange requirements of the last year for the second Five-Year Plan; (2) the situation with respect to getting the third Five-Year Plan started; and (3) interest in a multi-year PL 480 cotton program.

Last Year of Second Five-Year Plan

Mr. Nehru handed the Under Secretary a paper (attached)2 showing a gap of $284 million in foreign exchange availabilities for the last year of the second Five-Year Plan ending March 31, 1961 (the British have estimated this gap to be $253 million, the difference being explained by Mr. Nehru’s failure to offset against the gap the second German loan of $30 million as yet unexpended). The critical element in closing the gap is the Indian proposal that the United Kingdom should provide $100 million. Mr. Nehru asked the Under Secretary to make clear to the British that we were doing all we could through the DLF loan procedure which was not amenable to the current problem of meeting the short run situation in India. The Under Secretary agreed to speak to the British along this line.3

Third Five-Year Plan

Mr. Nehru said that it was necessary to get orders out this year in connection with the start of the third Five-Year Plan scheduled to begin April 1, 1961. Their analysis produced a figure of $670 million, and he would like to have an indication from the United States and the IBRD as to what portion of this amount it would be willing to think of as their share without of course any commitment at this time. He [Page 541] was going to Europe in early June and wanted to discuss aid with other countries. If he were given some indication of our views before he left, this would give him a basis for working on the Germans and the French in particular. In anticipation of more detailed discussions with the DLF he had already reviewed tentatively with Mr. Brand a list of projects under the Third Plan.

The Under Secretary responded that it was really impossible to give any positive indication at this moment. For one thing, we would not know how much additional money would be available to DLF until after Congress had passed the appropriations legislation which would likely be in the latter part of June. Certainly our interest in India’s development had not slackened and possibly India’s past experience with us in this area might provide an indication.

Mr. Nehru asked about approaching the Export-Import Bank for a line of credit which could be used in the private sector. The previous line of credit had been exhausted and India needed additional assistance of this character. The Under Secretary indicated that this should be discussed with Mr. Waugh, President of the Bank.

PL 480—Cotton

Mr. Nehru said that India would like a long-term deal in cotton—1.5 million bales over five years. There would be no difficulty as to a normal marketing requirement. The Under Secretary replied that so far as he knew there should not be any difficulty in principle. After a short exchange of views it was agreed that the existing request for 300,000 bales should be taken care of first—the long-term arrangement would then be the subject of examination.

  1. Source: Department of State, Central Files, 891.00–Five Year/5–2360. Confidential. Drafted by Kennedy.↩
  2. Not printed.↩
  3. Later that day, Kennedy met with Lord Cromer, Economic Minister of the British Embassy, to discuss this subject. A memorandum of that conversation, drafted by Anthony Cuomo, is in Department of State, Central Files, 891.10/5–2360.↩