India Study

I. Philosophy of the Program

The United States aid program in India is based upon the several factors as set forth in numerous addresses by top-ranking State Department and Foreign Operations Administration personnel, correspondence between the Department of State and FOA and committees of Congress, and testimony presented in connection with the continuance of and appropriations for foreign aid before various committees of Congress.

These all can be summed up in the words of Public Law 535, 81st Congress, which states that the purpose of the program is "to aid the efforts of the people of economically underdeveloped areas to develop their resources and improve their working and living conditions by encouraging the exchange of technical knowledge and skills and the flow of investment capital" *** and *** "to help underdeveloped areas to realize the full potential of democratic life." The objectives in implementing this policy in India can be set forth as:

1. To increase the rate of economic development as a convincing demonstration to the people of India and of the world that underdeveloped countries can develop without dictatorship and at a rapid enough rate of economic progress to sustain and fulfil the hopes of the people.

2. To participate in an organized effort (first 5-year plan) to stop deterioration of the Indian economy.

3. The related objective of humanitarian concern, historically traditional with the United States.

II. The Origin and Evolution of the Program

The original aid program started in 1949 under the Economic Cooperation Act of 1948, with minute amounts, but the major program now existing was based on the Act for International Development (Title IV of Public Law 535, June 5, 1950), under which the Technical Cooperation Administration was established. This act provided only for technical assistance, as distinguished from economic aid and for the encouragement of the flow of investment capital (sec. 403 and sec. 418a). Section 418a of the act is couched in terms permitting an all inclusive application of aid beyond technical assistance.

Operations in India followed the guide lines section 407 of the act spells out, under which a country could qualify for aid, and they include:

1. Use of private agencies and persons to the greatest extent

possible.

2. A determination as to the possibility of achievement of results and the requesting country's action to make use of the assistance made available.

3. A country must pay a fair share of the cost.

4. The country must publicize the program.

5. There should be full coordination and integration with other aid programs in the country.

6. The country should encourage the establishment and expansion of fair labor practices.

It should be noted that 3, 4, and 5, above were positive requirements for qualification.

Aid was begun in 1951, concurrently with the establishment of the Government of India's 5-year plan for Economic Development.

The initial stages of United States aid were aimed at the agricultural sectors and primarily toward increased irrigation and water control projects. These were supplemented by other work in connection with soil conservation, improved planting, and modern methods of agriculture. There was also instituted a malaria control project. All of these were directed toward the increase of food production, which was and still is considered by many of those conversant with India to be its most vital problem.

To illustrate the evolution and emphasis of the program over the years, and to indicate the participation of India, the United States and all other aid agencies, it is necessary to look at the costs and scope of the India 5-year plan, the Government of India financing program for this plan, and the total of economic aid furnished to India through the fiscal year 1955:

It is pointed out that, although agriculture was considered the greatest requirement in the first 3 years of the plan, that actually it ranked fourth in the amount of aid programed in the period 1951 through 1954, and continues in that position for the 1954-55 fiscal year, but shows a great increase projected for 1955-56 fiscal year.

Considering the community development aspects of the agricultural aid, doubts are raised as to the stated emphasis on agriculture (FOA, State conversations). The great emphasis on power, transportation and commodities indicates, perhaps, a predetermined emphasis on industrial economic development. The total plan figures tend to bear this out.

It should be noted that of the total financing, approximately 12.8 percent is from external sources, two-thirds of which is directly from the United States, with perhaps some indirectly through International Bank for Redevelopment (IBRD) and the "other" category. This plainly indicates the part that the United States plays in supporting this program. Close scrutiny of a proposed second 5-year plan should be undertaken prior to any indication, formal or informal, that the United States might accept the responsibility for filling a similar financing gap. Total economic aid made available to India in the fiscal year year 1949 through the fiscal year 1955 is shown below:

Total Economic Aid Made Available to India Fiscal Year 1949 Through Fiscal Year 1955

Obtained by multiplving $10,000 by 33, which is the number of Soviet technicians currently in the country.

410,000 tons of wheat, 5,000 tons of rice, 500,000 cans condensed milk and Rs 255,000 cash. Milk at United States prices, delivered in India. Grain at typical contemporary Indian prices. 'Not available.

This tabulation again indicates the great preponderance of United States aid, direct and indirect, over other external aid. Included in these figures are Soviet aid, actual and proposed, which may be indicative of greater pressure being applied by the Soviet bloc.

The Senate Appropriations Committee report, dated in April 1954, stated that "the Indian technical assistance program has deviated widely from the point four concept *** with a tendency to lose for technical assistance all its psychological advantages and its universal acceptability." Commenting on the above statement, as a part of his testimony before the Senate Foreign Relations Committee, May 12, 1954, Mr. George Allen, United States Ambassador to India, said "That is right. I think that has been done. It was true during the first 2 years of our program in India the appropriation was all lumped under technical assistance. Economic aid and technical assistance were all lumped together and there is no doubt about the fact that there were large amounts that should have been classified as straight