FOREIGN RELATIONS: Two-Way Aid

In an agreement of unprecedented scope and unique terms, the U.S. last week arranged to sell to India $592 million worth of surplus farm products for $305,900,000. It is the biggest sale of surpluses ever made by the U.S. and the greatest contribution any nation has made to the economy of India since that land gained independence nine years ago.

As outlined by Agriculture Secretary Ezra Taft Benson, the agreement calls for India to pay about $200 million for 130 million bu. of U.S. wheat (more than 15% of the U.S. surplus), $70 million for 500,000 bales of cotton, $26.4 million for 440 million Ibs. of rice (more than 20% of the total U.S. Government rice stocks), $6,000,000 for 6,000,000 Ibs. of tobacco and $3,500,000 for dairy products.

In payment, the U.S. agreed to accept not dollars but Indian rupees. Further, the U.S. agreed to spend all of the rupees it will receive in ways calculated to benefit the Indian economy. The breakdown: 65% to go to India as a new U.S. loan, the details of which are still under negotiation; 15% to be a direct U.S. grant to help India’s economic development; 20% to go toward U.S. Government costs in India, e.g., the construction of a handsome new U.S. embassy in New Delhi (see ART). The U.S. attached an enlightened self-interest condition to the deal:

India must use $55 million of the U.S. loan to promote the country’s harassed private enterprise.

All this, thought former U.S. Ambassador to India John Sherman Cooper (now Republican candidate for U.S. Senator from Kentucky), would give the Indians a hedge against crop failure and inflation, save their foreign exchange and their funds for industrial development, and generally help to bolster the Indian economy. The agreement assures other free-world countries that they will not be deprived of Indian markets, provides India with enough purchasing power to maintain her normal imports of agricultural commodities from Canada, Denmark and New Zealand. As for the Indians, New Delhi was as cool and silent as Indian officials in the U.S. were vocally grateful. Proclaiming that the agreement would enable India to go ahead with its second five-year plan, Indian Minister to the U.S. Harishwar Dayal also pointed up the fact that this form of aid is a two-way street. Said he: “It helps you by taking care of some of your surpluses.”

Beyond that, the agreement is an effective U.S. countermove against the Soviet Union’s efforts to encourage nationalization of industry and agriculture in India (TIME, Aug. 20). Summed up a State Department official: “We get rid of our surpluses, we create a future demand, we help a critical country build.” With the Indian agreement signed and sealed, Ezra Benson turned to the next items on his surplus-slicing agenda: similar but smaller deals with Pakistan and Brazil, designed to help them—and the U.S.