791.5 MSP/7–552: Telegram

The Ambassador in India ( Bowles ) to the Department of State

secret

57. Bruce from Bowles. Prev desps and Embtels this Emb plus my talks Wash emphasized urgent need Ind econ for bal payments support. Studies completed by our econ sec during my absence indicate sitn even more dangerous than prev stated.

Ind lost approx 150 mill overseas assets during second half calendar year 51. Has lost addit $200 mill first five months 52. Most these losses attributable to net deficits with dol area even after US grain loan. Prospects are that even with most stringent import controls India will lose another $75–100 mill bal this calendar year.

This means India’s external asset in form sterling bals virtually exhausted. Bal remaining this calendar year will be insufficient permit drawings even at rates permitted under Indo UK Colombo Plan agrmt unless India dips into currency reserve.

We have consistently advised Dept of India’s crucial need for rupee assistance if they to succeed in their efforts to demonstrate to world and particularly to Asia that democracy can provide dynamic econ as well as polit answer to Commie. Altho everyone with whom I talked or corresponded professed full agrmt with our analysis and recommendations the action which required not forthcoming.

This sitn plus addit drastic cuts in already meager fon aid act reportedly made in appropriation act underscores importance action which I proposed to Pres, i.e., special msg to Cong stressing importance India’s efforts build sound economic democratic nation with expanding living standards and urging Cong make available $125 million in credits—$25 mill to make up a part slashes fon aid recommended by admin—$100 mill with which Ind can purchase cotton, industrial raw materials or grain and which can then be turned into rupees to assist in essential econ development this strategically placed nation.

Even though Cong fails act such message wld be enormously reassuring Ind people and their govt.

Also hope Averell Harriman and his associates will do everything possible build up our very meager allotment in dols. Am sure you wld [Page 1655] be reassured by earnest efforts Indian Govt making and enthus response villagers to community dev programs on which we already embarked.

Will be absolutely tragic if our present momentum here lost. Does not seem possible we cannot find money to meet modest requirements this key area out of $80 bill natl budget. I know we can count your help. I need not restate to you urgency polit reasons for insuring we do not fail India. Appreciate if you will pass copy msg Harriman.

Know you understand my persistence this stems entirely from my conviction sitn urgent and obligation to report it as I see it and from fact that so few in admin or Cong seen this first hand. Whatever happens you can count on me to do our best. We will work all the harder to do job that must be done.

Bowles