INDIAN-SOVIET ECONOMIC RELATIONS: NO GREAT BONANZA FOR INDIA (S-5742)

Created: 12/5/1973

OCR scan of the original document, errors are possible

RELEASE AS8

MEMORANDUM FOR: '

ax:

Attachedeneral assessment cf the Soviet aid ^li^ju in India that nav be useful rear briefing other LDCs intsrestsd iaperiance3ajor recipient of Soviet aid.

Office of Economic Fesearch

Attachment: As stated

53 (DATE)

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Indian-Soviet Economic Relations: No Great Bonanza for India

India has received commitments of6 billion from the USSR (all committed, but less than two-thirds of these commitments have actually been delivered.

Part of the undelivered aid (possibly more than one-half) has never been allocated to specific uses, mostly because Moscow has insisted that the credits be used for creating additional heavy industrial plants in India. Delhi has insisted that these outstanding credits be diverted to cover purchases of industrial raw materials (newsprint, kerosene,hat are in critically short supply in India. Although at the end of Brezhnev's recent visit it was announced that the Soviets would expand their exports of these goods to India, there was no mention that they would

be provided as aid.

Aid deliveries have petered out in recent years, down toear0 million annually in the.

Meanwhile, India's obligation to pay principal and interest on its cumulating debt grows. It is estimated that service on its economic aid debt to the USSR will be in the rangeillionillion

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The Indians now bear the cost of carrying excess capacity resulting from poor initial planning. Most major Soviet built plants in India operate at only partial capacity and incur sizable annual losses. Most of them are high cost producers whose productivity is low. Examples include the Heavy Machine Building Plant at Ranchi (for which the Indiansillionhe cumulative loss on this plant had exceeded the amount of the Soviet aid. Tho Coal Mining Machinery Plant at Durgapur also had incurred losses equivalent to theillion of Soviet aid Even the Bhilai Steel Mill, one of the more successful Soviet built plants, still operatesoss and waselow capacity as recentlyears ago.

The recently concluded agreements between India and the USSR, that were accompanied by much fanfare, provided little that was new and nothing that will significantly expand the rate of India's economic development.

CIA/OEH Dec 73

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