X. Personnel and Administration The current program is being carried on by the United States technical cooperation mission in India, which is closely associated with and under the overall supervision of the United States Embassy. The mission is staffed as follows: The Embassy's economic staff consists of 14 United States personnel and 8 local personnel, and their work areas roughly parallel those of the FOA and mission personnel, although almost entirely in the field of reporting. There has been no integration of the TCM and the Embassy section. Both staffs maintain liaison with the same Indian officials and other country officers and organizations concerned with aid work. Much has been said about FOA intentions to integrate its missions with the embassies, but in the case of India, there has been no physical integration and a coordination of the two has been accomplished because of the strength of the last two United States Ambassadors. The cost of operating the technical cooperation mission for 1954 was $528,250, and for 1955 (estimated), $488,757. The cost of operating the economic section of the Embassy for 1955 will be $120,678. Although there has been reduction in the cost of operating the TCM, it appears logical that substantial savings could be made by a physical integration of the two units. For the purpose of showing, from a fiscal viewpoint, the progress of United States aid in India, the following comparison is made: Looking at these figures, it is seen that as of the end of fiscal year 1954, there was programed a total of $132,224,000. Of this total, $131,200,000, or all but $1 million, had been obligated, but only $56,900,000, or about 45 percent, had been expended. A slightly different view is shown by the following figures on procurement: These figures show about $20 million of unauthorized procurement obligations, but a better-balanced operational picture. XI. Loans and Grants A great deal of discussion has taken place, and is still going on, as to the possibility of substituting loan aid for grant aid in India, and what the probable results of such action would be. In his testimony in 1954 before the Senate Foreign Relations Committee, Mr. George Allen, then Ambassador to India, stated that he personally saw advantages in the loan program from a psychological and political angle. It would bolster the Indians' self-respect and lessen mutual recrimination. Discussions with other State Department personnel and FOA personnel indicate the same trend of thought and the additional thought that the Government of India would not be adverse to a loan program. The type of loan, hard or soft, seems to be the point difficult of solution. India has borrowed a total $116.7 million from the IBRD, according to Mr. John Ferris of the FOA India Desk. XII. New India Investment Corporation Further development in the loan picture is the Industrial Credit and Investment Corporation of India, Ltd. The World Bank has approved the loan of $10 million to this corporation which is being formed by private investors for the purpose of assisting the growth of private industry in India. It is expected that the corporation will be established in January 1955, at which time the bank will enter into a formal loan agreement. Private investors from India, the United Kingdom, and the United States will subscribe the initial share capital of the corporation which will be $10.5 million. A group of prominent Indian industrialists and financiers will arrange for the sale of $7,350,000 of share capital in India, partly through private placement and partly through public offering. The British investors will subscribe $2.1 million of capital. American investors will subscribe $1,050,000 of share capital. In addition, the Government of India will make an interest free advance of $15,750,000 to the corporation. The new corporation will make long- and medium-term loans to industrial enterprises, purchase shares of industrial enterprises, underwrite new issues of securities, guarantee loans from other investment sources, and help industry to obtain managerial, technical, and administrative advice and assistance. It is planned that the corporation will sell its loans and share holdings to other investors to expand the capital market and recover its own capital for further investment. Lack of risk capital has always been a drawback to industrial development in India. Since 1948, it has been difficult for even the largest and best established concerns to raise new capital in the Indian markets, and almost impossible to raise equity capital. The first Indian five-year plan relied upon private enterprise to bring about industrial expansion. However, the results have been below the level hoped for. It is hoped that the new corporation will be able to tap funds in India not presently being made available to industry, and later to increase the flow of foreign investment into India. The Corporation, in addition to aiding India by direct financing, will also assist Indian industry in meeting its needs for technical knowledge and managerial experience. The establishment of this corporation has been a matter of discussion and planning since 1953, and in early 1954, the World Bank sent a mission to India to analyze the situation, while at the same time, exploring the possibility of obtaining prior British and American participation in such a corporation's equity capital. The authorized capital of the corporation will be $52.5 million, represented by 500,000 ordinary shares and 2,000,000 unclassified shares, all with a par value of 100 rupees each. Initially the corporation will issue only the ordinary shares $10.5 million). Investors in the United Kingdom will subscribe to 100,000 shares, and investors in the United States, 250,000 shares. The balance of 350,000 shares will be sold in India, and it is expected that 150,000 will be sold by private placement, and 200,000 through public subscription. The Government of India will make a 30-year advance of $15,750,000 to the corporation, free of interest, with repayment in 15 equal annual installments beginning in the 16th year. This advance will be provided out of funds derived from the proceeds of the sale of steel supplied by the Foreign Operations Administration, and will be made to the corporation when the share capital has been subscribed. The proceeds of the $10 million World Bank loan will be used for the purchase of imported material, equipment, and services needed to carry out private industrial projects financed by the corporation. This loan will be for a term of 15 years at an interest rate of 45% percent per annum with amortization beginning January 1, 1960. The Government of India will guarantee this loan. This will be the seventh loan by the World Bank for development projects in India and will bring the loan total to $126.7 million. Previous loans were for the development of electric power, agriculture, railways, and iron and steel production. XIII. United States Food Grain Loan to India, 1951 This loan was authorized under Public Law 48 entitled "India Emergency Food Aid Act of 1951" for the purpose of providing emergency food relief assistance at a time when the people of India were in desperate need of such assistance because of a series of natural disasters. These included earthquakes, floods, droughts, and insect plagues, all of which combined to cause a very acute food shortage. The law provided for shipment of grain, the amount of which totaled 2.18 million long tons at a dollar value of $190 million. The cost of the grain was set up as loan through the Export-Import Bank in terms of a line of credit to allow the Government of India to purchase the grain. Interest was set at 212 percent per year on the unpaid balance payable semiannually beginning December 31, 1952. The principal is to be paid in semiannual installments starting on June 30, 1957, over a 30-year period. The funds were furnished by the Economic Cooperation Administration. Interest up to a total of $5 million was deposited in a special account with the United States Treasury for the following uses: (1) Studies, instruction, technical training, and other education activities of Indians in the United States; (2) Students, professors, other academic and technical persons (United States citizens) to participate in similar activities in India; (3) Selection, purchase, and shipment of American scientific, professional, and educational literature; (4) Selection, purchase, and shipment of American laboratory and technical equipment for higher education and research in India; (5) For similar materials and equipment (3 and 4) from India for use in the United States. Repayment by GOI was to be by transferring to the United States materials originating in India and required by the United States because of deficiencies in its own material sources. India has utilized all but $325,732.86 of the $190 million line of credit. The unexpended balance has been canceled. To date India has met each interest payment on time, and in fact two payments were made ahead of schedule. It is anticipated that the GOI will make all payments of principal on time. This experience indicates the ability of India to fulfill its credit obligations and perhaps to absorb any future United States aid under loan agreements. XIV. Commodity Aid Commodity aid to India is programed under the Mutual Security Act of 1954 (Public Law 665) (Title II) and the Agricultural Trade Development and Assistance Act of 1954 (Public Law 480). For the fiscal year 1955, Public Law 665 authorizes the sale of surplus agricultural commodities in the amount of $30 million. A breakdown of these commodities shows: Bread grains---- Dairy products.... Public Lawo 665 $10.0 |