Foreign Relations of the United States, 1958–1960, South and Southeast Asia, Volume XV

261. Telegram From the Embassy in India to the Department of State¹

New Delhi, June 22, 1960—6 p.m.

4203. For Dillon/Waugh from Bunker.

1. Understand GOI Washington requested amount $150 million EXIM line of credit.² I believe extension such credit by US will have important and far reaching beneficial economic [effects?] at this time and in my view favorable reply would be appropriate on grounds both of Indian needs and contribution it will make to both Indian and US interests. I wish particularly to bring [to] your attention urgent requirement at least some of this request be met in immediate future, having in mind other forms of our assistance do not meet considerable present foreign exchange needs for generalized equipment imports for private sector in India, especially medium-sized firms.

2. Existing EXIM Bank credit has made significant contribution in awakening Indian industry to desirability having American equipment. For many reasons, including traditional orientation to Europe and earlier dollar exchange restrictions, American suppliers previously made no deep inroads into Indian market. This, I believe, now changing with greater awareness on part of Indians what US has to offer competitively and complete elimination discrimination against dollar imports. In many lines first preference here now is for US equipment. GOI, however, generally issues import licenses for capital goods only when availability of foreign exchange is assured under long-term credits. I think would be unfortunate setback to growing penetration Indian market by US suppliers if many desires for US equipment not possible to fulfill because nonavailability US financing. Thus, I believe further EXIM line of credit would not only give tangible support to current US export drive, but would also strengthen position US suppliers in Indian market over long-run by introducing or continuing supply American equipment at this time of significant industrial growth in India.

3. I understand GOI estimates annual requirements for dollar imports in textile machinery alone about $12 to $15 million and machine tools at about $5 million. Believe without EXIM credit bulk of these purchases will surely not be made in US. Similarly, as indicated frequent inquiries to Embassy offices about dollars to purchase US equipment, Indian firms in number other industries anxious import US equipment.

4. In my view most important to maintain momentum present rapid growth of private industrial sector in India, and EXIM line of credit particularly suitable to contribute this important objective. During past year private sector orders amounting to $87 million for US equipment approved under first EXIM credit, in addition to $63 million for government purchases. I do not have in mind precluding under new EXIM credit allocation for public sector projects, involving such items as dredges, earth moving and large generating equipment, et cetera, which have proved their worth in India. However, it is vital area of private sector investment by medium-sized firms, not susceptible other forms US assistance, where I think need is great and EXIM line of credit can play important role.

5. In light of above considerations I urge consideration making available immediately new EXIM line of credit preferably in amount about $75 million, and as minimum $50 million pending more thorough consideration additional amount such credit.

6. Embassy preparing and will pouch soon statement of Indian obligations payable in foreign currency to lenders through the world³ as requested in Waugh to Sherwood letter.⁴

Bunker

1. Source: Department of State, Central Files, 891.10/6–2260. Official Use Only.
2. In a meeting with Assistant Secretary Kennedy on June 21, Govindan Nair, Minister for Economic Affairs of the Indian Embassy, noted that the Indian Government had recently approached Waugh, seeking approval of a second loan of $150 million, of which the Indian Government would like early use of $107 million for a series of private sector industry requirements. According to Nair, Waugh was not enthusiastic about extending a line of credit for a series of miscellaneous items, appearing to prefer direct loans to the industries involved. (Memorandum of conversation by J. Wesley Adams; ibid., 611.9141/6–2160)
3. This information was transmitted in despatch 3 from New Delhi, July 1. (Ibid., 891.10/7–160)
4. Not found.