THE PROSPECTS FOR INDIA

Created: 12/10/1964

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WARNING

Thii material contains IntovrnerMon affecting the Notional Defense ol 'he Untied State* within Ihe meaning ot the espionageSC, meor revelation ol whichanner to on unauthorised person il prohibited.

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TABLE OF CONTENTS

problemiscussion

i. I. introduction

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ii. poutical SITUATION

The Craigms Party

o|>po>ll(oti

Pttlilklll (hulool

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III. ECONOMIC -

The Currvnl Situation

Ecimomic Outlook

affairs

affa bs

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India* Military RoiUup Indian Military CapaMWir*

i:, Narirar AAklrt L

map: Indian Ownn hi ml.

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THE PROSPECTS FOR INDIA

THE PROBLEM

To estimate probable developments in India during the next three to four years.

initial success. We cannotMinister Sjuutn'i leadership Hthus

But in pasl posts he proveden-erallv effective leader, and we lielieve that he will graduallyirmer control. In domestic policy, he is unlikely In departfrom Nehru's line, though In practice his socialism may prove more flexible and pragmatic .)

i; B. The Congress Party, now ledoalition of state leaders, will prolinblv provide India with stable and orderly government for the ncxl several years. However, continued jockeying for power Iwtwcen ihe center and the states, as well as strains within the centralItself, are likely at times to generate indecision and inefficiency. Prospects for Congress unity would be clouded were Shastri lo depart from the scene in the near future, but the Congress leadership could prolmblv agree onuccessor. There are no effective nationwide opposition parties, and In7 elections Congress will probably continue in its dominant position at the national level and In all but one or two states. (Paras.)

C. The pace of economic growth has slowed considerably during thethree years. In particular, agriculture has shown no increase Inndustrial growth has Iwen (setter, and industrial prnduc-tiim Is likely tobyoercent during the Third Five-Year

lb mi mil)

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Plonvej the five year period, GNP, instead of rising by the plannedercent, will probably increase by no more thanoercent, or about the same amount it increased during each of the first twoThe still tentative Fourth Five-Yearets forth even more ambitious goals, including much largerin the agricultural sector. India is unlikely to achieve these goals, though food grain production will proliably increase significantly by thel. In any case, increased foreign aid will be needed, as import requireirrcnts and debt servicing charges will rise faster than exports. j()

The Shaslri government's foreign policies will prolrably bewith bntad international questions and more devotedissues involving 'India's self interest. India will continueof nonaligumcnt. which in recent years has come to bethe need for support from both the US and USSR in the conwith Cuinrnunist China. Betweennd China, wea general settlement nor an outbreak of major fighting.of any substantial easing of Indo-Pakistaru tensions isof the Kashmir dispute, and of this there is no eai lymajortween the two countries are notsome specific problems'may be resolved. India will devotethan ii. the past to its other neighltors, seeking toCommunist Chinese influence. In the nonaligned worldwhole, India will probablyenerally moderating, but onless influential, role than it did in earlier years. )

leaders want] armed forces capable of containingand Communist China and to this end have sharplyspending2 billion Fivc-Year DefenseThis, combined with military aid from the US,and the UK. is enabling India to further expand andforces, but the plan is likely to take seven years tothe army still suffers from deficiencies of leadership andits combat effectiveness is Improving and it could probablyits smaller Pakistani foe. While the Chinese tmnkltbe advantage of terrain In any conflict, the Indianhinese invasion before it reached the plains.'

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F. India has the capability for developing nuclear weapons, and the government is under considerable domestic pressure to do so. We believe thatinimum India will continue to build up its nuclear capability, and this will enable it toeapons program promptlyecision to do so. Whether the Indians decide to doill depend on Mich questions as the costuclear weapon* program andelivery system, the pace and scope of the Chinese program, and the importance the Indians attach to assurances from the US and

other nuclear powers.

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INTRODUCTION

I. Theof Prime Minister Nehru and the needhoose lit* successor cumelmr when India's forward momentum had slowed conitdcrahlv.the Britears after indrrendence. India under Nchmecord ofMX* mi pi nhmcnJi. The shock of partition wasa working i'i rnoci iin- system was odahlbhrd,table political order was .nliiesrd. The aspirations and energiesTrowing proportion nf Indians were hx'used on rcmomie development and sociiil modernisation, and the standard of living slmvh hut steadily improved. Nelirn himselfkc*mnn lot thev. Iiiped world, iiml his philosophy of non-alignment win accepted by most newlyit countries. Sinceowever, the Impressive progress of earlier years had been less In evidence. The pace of economic growth hod slowed, and the Third Five-Year Finn was in serious difficulty. India'sby Commuhina in (he border lighting had demonstrated the country's weakness and kxlajor military Ixifld-up which further strained theilially. Nehru's declining health and vigor reduced the effectiveness of his leadership.

in his final wars. Nehru retainedominant position thatcamereat shock to India. In these circumstances, tlieorderly selection of Lai Bahadur Shnstri liy the Congress Party nsPrime Mliilvtcemarknlile political achievement. Building Onleft Ity the British, Nehru hadolitical system Kivedprinciples of tunstitutlon.il and parlinmentnry democracy and the rule Thii system has now passed its first ma for test

Ihe smooth transition, the new leaders face formfdahk' proWcms.

egional loyalties persist and could he Intensifiedstruggles for power between New. Delhi and the stale governments. India's adherence lo archaic traditions and to its still rigid caste system conslilutc major obstacles to progress.

Hindu-Muslim antagonisms in India have not been alleviated, and relations with Pakistan remain strained. Desjirte earlier achievements of the economicprogram, India has failed tnatisfactory growth rule. Inthe recent failure of food production lo keen pace with India'* rampant population, which Is growing by someear. Is creating serious difficult lea.

II POilTICAl SITUATION

The Congress Porty

much of Nehru's tenure as prime minister, he dommatij lothparliamentary delegation and the party organization. ThoughCorrgrrsi Vt'orking Committee theoretically had nearly nhsolute

authority over such mutter* a* haw Congress legislators should vote orstand for office. It1 did not exercise (hi* authority fully. Since Nehru'skey leader* of the Working Committee have been able to assert the powerparty organization. These leaders and the Working Committeeationwide machine, the backbone of which ore theof the rural areas whereercent of the population lives. Theythe most ptirt Hindu* from locally dominant castes and are largelyto local parochial Interests. Hence, though nearly all ofognlw-to develop the country and to [muriivt- tlie lot of the notion'sthey bove not generally favored sweeping programs of sociallend to be conservative on economic

5.

Effective

inc'l Ister during filing in the party

i the optional level In IiHlIa Is now being exercisedoosely orrani/cd group of party leaders, generally known as ihen Its head Is Prime Minister Shaitrl.oderate socialist, was for long one of Nehru's trusted lieutenants. Next most important In the syndicate Is Party President K. Kamaiaj Nadar, the long time Chief Minister and party leader of Madras Stale. Kamarajeculiar combination of social reformer and ruthless polii.-al btm. Shastrt has scrsxd ablyumber of positions in the the key port of Home Minister, and later as de facto Prime Min-hru's lastlls achievements In recent yean in recon-forcra and avertingndia, and his general popularity ,frii.-il to an initial feeling of optimism in India about hisfor becoming an effective Prime Minister. Ifowever. heeart attack soon after assuming ofRee, and liy ihe time he returned to work he was facedond crista which was India's most serious Inecode.

preferring to go tolengtlts to try toonsensu* among his colleagues before taking any action. Accordingly, he lias liem accused of weakness and vacillation. On tltc other hand. Shaitrl has shown he has the ability to take firm positions, asi liearty resolution against making nuclear weapons and when he agreedolitically unpopular treaty with Ceylon.

. nmnt

6 in addition to Srhsstri andther memhe-rs of the syndicate are Minister of Heavy Industry Sanjewj Reddi. leader of Andhra Pradesh:f Railways S. K. Patfl of Boinhay. andhosh, politkal boss of West Bengal. This gmop wasin ceierf ing lis authority over theParty members of Parliament and poshing through the election of Shaslri. Since the efc-ction.ew leadership has strengthened its hold on thend bis removed fromirmhrr nf rival state andeaders. One of tlie group'* greatest sssrl* i* the fuel that itto reflect tlie political and iconomlf outlook of most of the middle of the rood local party leadersIndia, Nevertheless, its control Is far from absolute and It faces difficult political problemsumber of sttites, notably Kashmir, Kerala, Qrissa, and Uttnr Pradesh.

Ibllll (MI) IS)

MTLIUY2lli

espite tlie csirrrntly strong po*ition of theair amount of uppmltion In It remain* in the party. Tin Congressby former Financeoraji Deui, v. ho originally contested the succession withfrom the dominant centrists in bring more Influenced by the tenets of Hindu urthodmy.ore eonservative on ecoiMimk and socialrsal f*rime espiasruttirtl line on Kadtmlr. Theassociated with former Minister* V. K. Krldina Menon andore heavily represented than ts justified Iry its popular following due loympalhrtk- altiludr shown it hy Nehni who often shared It* doetrinairr socialist views. The "left" has greater strength in the Parry's parliamentary delegation than in the Ire-al and state organisations.

Porties

he position of the Con/Jess, wltk'i2 captured ulrnul thrrc-tptartrr*Ihearliamentury wau with onlyercent of the pnpuW vole, ha* hern strengthened by the fast that there rs no effective nallonwkleparty. The linkederfe (SSP) was recently formedgcr uf Iwo smaller sixialist partir* whkh together got nine percent of theand IS parliairKTi'ary seats inhile it has some appeal to urlun intel-IrdiMih and tradefTer* little alternative to theure-imi.umhiT of former socialist leaders and groups have refused to |oin the new party and some have joined the Omgrevs. The Sinittmifn Party on (Ik* right received sewn percent of the vote2 and gotent* but has long been troubled hy conflicts between its urban comervotivc elements and It* reliance on feudal Icudcrslirp In the rural areas. It loo has suffered defections to the Congress. - j

ft The stiongeot challenge* to the Congress BMW from groups appealingIn local or communal grievances. The Janilitant ry nationalist Mir-lir Party, has gained some strength In North India, partly because of its strong leedership and discipline, but also because of its anti-Muslim stance and It* emphasis on Hindi as the national language. Conversely, these a'tiibutes give it lei* appeal in the rest of the country. The Drackloe Munnctia KoLngham (DMK La Tamil Nationalist Party,hreat to the Congress only inhe Akatl Dal, representing Sikh interest* in the Punjab, is declining dueumber of minor parties, many of them leftist-oriented,l/cable group of independent* have helped to scatter the vote, but have little Impact tin the national political scene.

he ComnuinM Party Indiahich2 won aboutercent of (he vote, and gotarliamentary seat* has been weakened by the suspicion ina* been held since the Chinete attack and hy its nihserpienl split into two separate parties. Although the fragmentation nf airthority in the International Commit tint mosmtent cnntrl billed to the split. Its more htndamenlal tatne* were prnonal cnriflkt* and such longstanding iliKtriu.il difFcrcncc* as the ipic*tlon of what attitude the CPI should take lirw-nrd* the "national Imurgenh* Congress Pitrtv ii left-wing Communist* deny tin revolutionary potential of the Ctm-

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tin agitational ami even resolotionary stance In Indian policies, wlio haveistinctly pro-HiiAslnn orientation, arc willing tat ekrnrnts in tlie Congress andhat In the course to power with support from the iiiMfOnnmiintM kit. The Party retains tlie sttppcrt of the importantncluding the influential All India Trade Union Congress, and controls most of the party machinery ot both the central and st"tc levels. Tlie left Ms, however, hast' their 'greatest strength in those states when1Is tlnnignt: West Bengal. Kerala, andradesh

Poli'ical Outlook

: II. India's, prospects for stable and orderly goveromeni during tlie period of this estimate are good. Tlie Congress Party Is firmly In control nationally und, until its resent split in Kerala, conlrnlbd all tlie states as welt. Tin- nesetlaim to I* tlier nf tlieIradilim, sperm In lie generalh* accepted, anal it peobahlv will oe able to retain tlieofhepolitical leaders at the national, state, and local levels. SlmVri will hjvnefit by the feeling of most party leaders tlmt any attempt 'obim wmild have ulifavoraldc rcnmusslons In7 general elections. However, frictions are lllrly lietween the Congress parliamentaryim-rvasrd it* influence during Nehru's lastthe partyMnre-rver. the leader* -if lite syndicate are ambition*ho will not only seek to preserve the position of the grouphole but will compete with one artothn for power. Such maneuvering for position could go so forendireakup of the syndicate Itself. Itowcvri. generally satisfactory divisions of power have hern worked out so far. and we think the lenders' recognition of their imitiial dtya-rtdt-nce will keep them logetlier.

itself, oreimes to generate Indocision liarring liecakup of the syndicate, the stale party to dn-nrce ihcmscfvet from es-ntral direction. Tbeeffort between center and slate which has hem probably persist. Though the new nationalresllge of Its priilecessor. It vhinild lie able lo retainii nutltority over tlie smaller iinils of the federal system

IXa.ld.tiVm.it factor of imc-rtainly is tlie health of Shaslri. lieias had at leastbecoming

he syndicate will oho find it difficultert continued forcefulover the state, parties and grrvimmcnts. Factional InfightingnumlKT of states will continue to erupt In struggles for rawerllU limit tlie eflcctlvmcss of thosements. Party discipline will atdifficult to enforce at both the nationaltate lesrkd ofilemonslrated Inlien tlie clilef rr.lnlsters of thj slatesrejected the prime minister's rcniiest to impose food rationing.jockeying for power bersveen tbe center and the states, as well astlie centralinefBciiiicy.are

am! full

another soon and arduous

heart attack prior to taking office, minister. He has since resumed a

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underlying spirit nf built up overent hcks tbe force

sthcdule. Cfvrii hi* age. hb medknl mwl, and hit heavy responsibilities, hi* kingntire cannot lie takenuccessor to Shastri !ml to he cl-nen in tlie near future, tf mightifficult and discordant rtfocrss. The i'i in- ofonsensus" among the Congress parliamentaryby Kamaraj to put across Shaitri'swell he ol* jested to by those whot the first lime around. These iptarreh could reduce tlte stability andf whatever government emerged.

seems iu

too rurlv to make any confident in view of hi* record of genera" of the actions he has already graduallytature and authority in

acking Nehru's prestige and personal autrtority. Shastri has slmwn auhe, ha* been retuiircd Iry politicalseek the agrce-in--ni and concensus of those involved before making gosemroent decisions. He utira to he atterrrpting slowly to increase hb authority and control, but ilstillprediction tliat be will lie successful-ffective leadership in previous posts and some en as prime minister, we believe that he will of control as he builds up hi* own

heilli

the government.

lt

make no sharp break witha ho commiltid to socialism, Shastri has shown

to be i

nd pragmatic While he may improve his Iminbtrativr effectiveness at the very top, hy permitting hblalltude in decistun making (particularly in the economicmprovement throstghout the massive bureaucratic apparalus must be slow. The newmplementation of its policies may jbe inrinclchl hy American standard* and it may be subjected to Increasing public jt silk-ism it will probably continiir lo be acceptable to the (freatf ihe Indian people as It has in the past.

ariety of other domestic probleins will demand the government'sion.kety to Bare up sporadically. Food prices have risen sharply during the past year and havearked decline in Ihe living standard* in some areas. The resulting discontent has led to food riots, which are likely to recur when shortage* are acute. However, thethe military ifcertainly will be able to keep such disturliance* within tnserahlcew Delhi will also face chal'cnge* from the manynd potentially rebellious tribal groups In the Northeast Knmlier Agency. Despite the1 use of0 troops, the centralha* been unable lo pacify Nagaland. Unlet*uccessful in reaching an agreement with the Kaga relielililloliticalas wrll a* some louden On men and resources. i

lie political n'tualinn and outlook in Kerala are gloomy. Thearty ha* split. The main Imdyt its political allies, and hn* littlefrgHuKhvhe5 election.ood chance, however, tliot ihe Iwo rival Gwnmunlstlong with some oflie otliiT parties In opposition lo theillommon electoral alliance. roup, if formed, might *rin. hot even so. it will prohahlv be

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i-naMe to stay united for long after the elections. In any ease, effective elected pAvernment In Krralu will be unlikely for tbe next several years, and nib* by the central government may well continue.

he national elections scheduled for7 will come increasingly to occupy India's attention, Despite the lossibllity of renewed food shortages or other cconc.ic setbacks, the activities of opposition parties, and its own internal weaknesses, we believe that Congress will retafn its dominant position both at the national level and in most of the stales. Alt! xtgh Congress' popular vote may be fu-*her reduced, it b> unlikely that any effective national opposition party will develophile the two wings of the Communist Party mayon specific occasions and may form electoral alliances, we do not believe they willerious threat to the Congress in the foreseeable future. The communal and sectional parties, particularly the fan Snngh and the DMK, may increase in strength. Indeed, they might capture control of one or more states if their Congress rivals tn those areas become seriously weakened by fuctlonal infighting. In this event, the difficulties of the rrntral government would be increased, but we think ft unlikely that thh would und ermine India's basic political stability.

III. ECONOMIC AffAIRS The Currant Situcrltein I

he pace of economic growth during the Third Five-Yearas been considerably slower that that ochieved under earlier plans. As againstplanned increase In national income of five to six percent annually, the actual rate was only aboutercent in each of the first two years of the plan, and aihoiit four percent in the third year. Population has increased by nearlyercent annually, so per capita income has hardly advanced at all. andand underfmplos-rnent have increased- Even the modest rale of growth achieved has been dependent on utilisation of over II billion in foreign aid aofhe repayment of these debts isroblem and will become an Increasing one. Moreover, greatly expanded defense re-

' TV US am otWrrhr Aht-tn-ladu Conaorttamoat II bllioa yrar of Oikhe USSRimrtean Orniniunl-'j nation* haiTii SIMear.

1 The prut ihli tonaliti o(nd irprrscnu approil.

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uiretnenls areurther burden onndia's outstanding economic problem has been the failure of agrtcultiire to achieve any Increase in output frr the past three years. Since agricultural production makes up aboutercent of national Income, failure in this sector considerably limits the gains from fairly rapid Industrial growth. Despite record imports of fondhe current rear (expected to be six millionhere hasharp tnerease incci. due to the static level of domestic

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Ihe animal population incicosr of about ten million, the expandedupply, and bssreaucrattc inadequacies in food distribution controls. In the period Julyunche prices of principal food grains roseercentational average and as muchercent in some places. Prices have sincetinned to rise sharply, stimulated by hoarding on the port of dealers and consumers. The governments various attempts to apply price control and antihoardmg measures have not hern effective.

Agrleultnro stagnation during the Third Plan is hi sharp contrast toord1hen production Increased byercent. Thoshortfalls are due to several factors. Weather conditduring tlie past twobeen generally adverse, andeavily dependent on the monsoons. Roughly hall of the increase in agricultural11 was apparently due tn an increase in the amount of1 cultivated, and India is running out of unused cultivable land Accordingly, future gains now depend heavily on the ability to increase productivity, which Is presently about as low ashe world. Although the government has recently attempted to stimulate agricultural production,aking only slow progress in its efforts to overcome the Indian peasant's inertia, traditionalism, and fear of the unknown, and in inducing him to adopt new techniques.responsibility for agtk-ultiffal|rnaltcr* Is dividedlethora ofcentral, state, and locall tons. Finally, the use of die miertilisers, while steadilytill very modest in relet ton to the countryeeds.

The record of the industrial sector has been better, but it too has not readied plannedndustrial growth has averaged between eight and ten percent per year, instead of theercent envisaged in the Third Plan. To some cstrnt this shortfall was the result of power and transportation shortages In the early years of the plan, and these have now been largely overcome. However, the shortage of foreign exchange has limited the import of materials needed for the maintenance and operation of much of the Industrial plant. This, together with an overvalued rirpec. has hampered the country's anrmptt to exportand lo rutwt irate domestically prodmed goods for Imports. During, private foreign investment provided important stimulus to Indian Industrial growth, and sisch Investment Is continuing, though at levels well below current Indianowever, repatriation of profits and other withdrawals are currently resultinget outflow ofillion annually In foreign exchange on the tovrstment account.

The Indiannder additional straing defenseUnder the present Five.Year Defensethernvtoorw an outlay of2 billion,4 billion in foreign exchange. Total expenditures are now more than double those budgeted before the Chinese attack Innd four times ihe level of ten year*vlnuslv. Besides leading to heavier taxation and reduced availability of con-

not be

sumer goids, the defense buildup means that some foreign exchange

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available for: tin- economic dm-kipim-nt program.art ol new defense need* have hern met hy increased deficit financing, which has coo-rributcd further to inflationary prcssores.

W. Tlie pace of IndlnVeconomic development liiw Ix-cn slowedtherho limited supply of top rank administrative, managerial, and technicalhe complicated web of bureaucratic regulation* and co.rfrobt; tlte prlvute sector's current lack of icmfkh-nee as reflected In it* recent reluctance lo Invest In large scale Industrial enterprises.

Outlook

The final record of the Third Plan willixed one. Investment In tlie public scytnr will k* greater tlian originally planned, but because of rising price* pnilnibly will nrovide ol mostercent of tho ctHistructlon scheduled. Tlie private sector, which surpassed Its Investment goals In the first two plans. Is currently burdened with hlglicr taxes andnd probably will achieve only aboutercent of Its Investment target. While most Industrial goals will not be reached, industrial production is likely to grow0 percent over the fivend impressive gains will lie made in nlnombcr of Industries.ood harsTSt likely. CNP probably will rise Iw four ot five! percent in the fourth war of the plan. Over the entire five-year period. CIN'P Is likely lo Increase hy aboutoercent Instead of theereent| orix to eight percent per enpito increase.

Sf^ET

esult of the difficulties and strains experienced In recent years, and tbe adventew government, some changes In Indian economic thinking awl policynirrfng. Even ln-forc Neltru's death, tbe govennmiil had Itegun to rely somewhat more on tlie market meclianisin,ew controls ami simplifying others that sverc inhibiting the public as well as the private sector. Tlie Shaslri government, while less doctrinaire than Its predecessor, is basically cnmmltudocialist pattern of development. It will continue to rely upon the public sector as the drivingconomic development, and will not hesitate to Impose control* on the private sector when lielk-ved to lie necessary. .Shaslri is seeking mnre rapidly maturing projects with an emphasis on providing more widespread employment and greater production of consumer goods. Ills government proUihly will'also place greater emphasis on utilizing idle eapodty. on the expansiiMi of existing plants rather than liuilding new ones, and onprivate foreign rns-estmont.

I losses er. lmrcaticraticas well as Inertia will I* serioys obstacles to any movement tmvord- decontrol. Tbe less buoyant stole of the economy and the higher loses of recent years will also make It difficult for the Indianenmtnunity to seize what it recognizeselcome opportunity. Despite the official desire fur greater private foreign investment, it seems unlikely that lhe Indians will change present laws ami regulations suffielc-ntly to altract large amounts of private foreign capital. Finally, if inflationary pressures continue | be under

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control* lo tumbat hoarding nmlInill further burden iff civil service antl be difficult to ntondle with the movement Inward decontrol. All things considered, however, we believe lh.it under the SSutrioderate shift to greater realism in economic polity wdl occur.

The Fourth FIve-Yeartill being formulated.mdk'alions are Iruit it will call for total expenditures ofnearly double those of the Third Plan. Agricultural production will probably lie ex|)ected to rise annually hy five to six percent and Industrial growth by aboutercent, thus producing an,overall average rate ol economic growth ol six to seven percent. '

These targets almost certainly will not be achk-ved. Like the original Third Plan, the Fourth appears to underestimate costs and the time required to bring new plants into prodnctlonj and to gloss over the inability of theapparatus to! carry out sorogram. India will also have extreme difficulty raising the domcstk- resources forarge plan, as the only people not already heavily burdened withfrom tbe many who evad'.1the prmprrom farmers svbo form the backbone of the Congress Parly.lan nf this sire wouldubstantial Increase In the level of foreign aid lo cover |lwth anticipated deficits In current account and the rapidly Increasing delit servicing requirements; tbe latter will call for.0 billion In foreign exchange during the Fourth Plan, about double Ihe amount required during tlie Third Plan. While exports have increasedate faster than Imports In the recent past, this has been due in part to larger sale* to the USSR, to the limited availability of free foreign exchange tomports, and to tlie expanded export promotion efforts of the government There is almost no likelihood that foreign exchange earnings will increase enough to meet the rcqnircrncnts for import demands and debt servicing. Hence, India

; Is likely to seek some further softening of the terms of future loans andwell as renegotiation of present; jj

the Fourth Plan agriculture will probably 'receivefforts to provide incentives to peasants will probably be alongof the price supports recently adopted. There will be more emphasis.

, on fertilizer factories, improved and expanded irrigationnd ruret extension services. Increased' attention will probably lie given to. the need of1 India's pUsunt* for belter credit and marketing facilities. These measure* are likely lojsbow result* In Increasing food production by the end of, the Fourth Plan. Iliiwever, at Ileast In the early years of tlie Fourth Plan, agricultural production Is likely to Increase little If any faster than population growth.

tmliiioid high! level of foreign nkl, Ihe rate of growth through the rest of this decade is likcey to average ulsoiit four percent nnntuilly. The Inability of the Indians to increase llielr growth rate despite successively higher levels ofnow amount tooercent of CNPi* an indication of the failure ofconomic polkic* to take full advantage

of the resources devoted to economic dewlopment Moreover, basic olwtaclc*igher rule of [growth are deep seated and will change only slowly. In particular, India's efforts a> population control are unlikely to have moreimited effect for many years, and the growing population will continue to ahsorh much of the nations production increases. Nonetheless, tlie deeplypathy of the mass'of Indians actsmikc against dissatisfaction witharty in power. Thus, svhik* most of India's basic economic problems will persist througliout this decode, and some may become more acute, they areo place the country's political system in jeopardy.

IV. FOREIGN AFFAIRS

India's size, population, and relative polftkal sophistication makeignificant factor in world affairs. Nehni himself, however,egree of intcrnatiunid Influence that noikely to command. In any case, Shastrl and his colleagues will probablynte less attention In foreign policy, preferring lo concentrate on domestk issues, tlmugh this change Is likely toatter of emphasis raths.itlKlrawal from an active role In world affairs. The new leadership will have difficulty In enlisting the domestic support svhkrh almost automatically accrued to most of Nehru's foreign policies, simply liecause they were his. and Shaslri could nut jettison tlie fundamentals of Nehru's policies even slmuld he want to. There is, however, some Indication that he is approaching internal dinnl problemsresh perspective and is reassessing India's national interests* in new terms. The change fn kadcrship and the Chinese challenge havtj already leiMled to make Indian foreign policy less rigid and doctrinaire, with greater attention devoted to specific national Interests.

Nonalignment was the hallmark of Nehru's foreign policy, and this is the element that his successor* would fltisl mosl dflBcnlt to cliange, even if they so desired. In fact. Sliastrf and his government have repeatedly reaffirmed their (sjmmitrnent to it. Originally, nonalignment meant the maintenance of India's indcpeiKJcncc Iiy divoeiation from tlie great power blocs. The Chinese attack2 appeared to undermine thfc premise of nonalignment. However, the Sino-Indian oulUeak coincided with the Sino-Soviet conflict, so that Soviet political and military ninport to India, as well as economic assistance, appeared

j to parallel that whkh was forthcoming from the US. and enabled India to main-italn her eiwfliliriuin lietwceo the two siipr. powers. In addition, thisechnirpie of drasving support from both sides in the cold war has paidinndsomcly in substantial economic assistance and is widely accepted by public opinion,

main It-nonce of ibis ciniililnium will lie India's major foreignconc-eni for some lime1 to come. India's most Immediate fear will I* that a

Sinn-Soviet ranprochement following theussian leadership could weaken or! disrupt Mosciiw's support of India. Tills fear has been heightened by ollcgatKins that one reason for KlmislKhev's fall was his favored treatment of India dnrmg tlie Sino-IiMlInn border fighting. At least until tho views of the newttiwnrds Cliina and India liecomc clear. India will be extremely

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can-nil lo nvnid doing anything which would antagonize the USSR. India is oko anxious lo maintain Soviet ninport on the Kashmiradical shUt In Soviet policy would'cause India to reassess Its nonalignment. and would probably lead to closerwith tlie West,oviet shift now appears unlikely. Rather, we bclh-veoscow, which, along with tlie East Europeanlready committedn economic aid to India.

Its support of New Delhiajor Asian counterweight i

relation* with tlie US will continue lo be Iwscdroad area of sharedndia's present leader, an- probably somewhat better div posed loward the US and the West than was Nehru; however, given aof present Soviet policy, we doubt Hint any considerable changesreater pro-Wc-stern nricntallon will lake place. The feeling that the new Labor Cosemmcnt in the UK shares India's socialist elms will make forloser thrtjlictwccn the two countries. Continued membershipbmrnonwenlth Is now axinma ic and generally accepted innd thereare no significantikely to bring ibent withdrawal New Delhi willontinue to beisputed towards West Germany and the otheruropean nathai* which ore contrilnitors of economic aid.

Aittfohwae feeling* are still running high In India, and prospc-cls for'ln-*Indlan relations airpear slight. New Delhi has recently repeated its acceptaiice of tbe] proposal* of the Colombo conference2 and I* unlikely to offer, on Its own. any further concessions. The Chinese, on the nther land, have Irciteralcd their refusal to accept those proposals asmoreiasU for mutualnarm, should the new Soviet leadership seek lo conciliate tlie Chinese ond urge the Indian* to do likewise. India might feel compelled to make some concessions, if only lo retain Its close association with Moscow. Even if this occurred, or If the Chinese relinquished tlicir border claims (which wemostasic hostility between India and China would almost certainlyHowever, the renewal of large-scale fighting in tlie Under areas Is unlikely unless China became so Involved in northern Burma, Nepal. Sikklm. or Bhutan that the Indian* felt oMfgrd to lake forceful measures to counteract Chinese Influence.

In the post year. India's relationship with Pakistan hasew and somewhat ambivalent pliasc. Tension* have increasedesult of Karachi's closer relationship with- Communist China and Its alarm at India's military buildup The situation has been made yet more Inflammable by recent unrest in Kashmir, the rise In. incidents along the cease-fire line, tlie eviction of Muslims from Eastern India, lind the flight of Hindus from East Pakistan. On the other hand. Nchm. In his lost weeks, showed greater interest In Improving

mvrr4he tntol es.inomte *ldy the USSR anrlfrirnpt- In

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with Pakblan, and Shastri ha* continued lo give evidence of aapproachesire for rapprochement.

he most alwiulve and Intracllble Issue between the two countries Is the prohlrm of Kashmir, and no settlement Is possible unless India yields part of Hi position there. Yet Shastri. even were he prepared to make such concessions, would Isr hamstrung by the fact thai both the leftCornmunlsts and Ihe Congreiathe right wing groups, ranging from the Congress "right" through the Hindu (isnuntmalrsts, would vigorously oppose them. Pakistan's Presideul Ayiib, while aware of the cost of Indo-Pakistan hostility. Is convinced that the present Indian leaders cannot or will not make concessions on Kashmir. Thus the odds are still against any fundamental Improvement in rclatlonireen the two slates In the nest few years. Nevertheless, while continued mutual Intransigence may precipitate new crises, the two countries will probably remain well aware of the need to prevent the outbreak of ma|nr hostilities, and may be able to settle specifictween them as they hove In tlie past,

ntil the facade of cordial Sino-Indian relations began to collapseakistan hod been the only significant area of conflict In Indian foreign relations. Thus India had been able to concern itself primarily with broad International Issue* and to pay comparatively little attention to local affairs In Asks. In his later years, Nehrn had already begisn lo devote more attention to India's Immediatend ihe post-Nehru leadership lsa* intern-Bed these efforts. Generous concessions lo Riirma and Ceylon have been mode ondispute* conciTning the statu* of Indhnhose countries. Attempt* to Improve relations with Nepal were begun at the time of the Clilne.se attack2 and arc likely to continue. Elsewhere along the itrateglc northern frontier, Indian concern with Bhutan and Sikklm has been intensified. Wethat the Indians will continue toubstantial part ofttention to their ncighlttn In an effort to solidify their position In Sooth Alia and to reduce possible Communbt Chinese Influence.

retain its traditional

imilaraking place tn India's relations with itsro-Asian powers. Where Nehru wasajor and significant leader of the non-alignedis successor* possess considerably leas stature and Influence. WhileatJBJ and power wtTI ensure Its remaining an Important member of the nonallgned bloc, Indiaation can no longer assume it isominant leader In that group. It must now compete with the Chinese and to some extent tbe Pakistanis for following and tnAuence. Its effort* along these linn have not always been successful, as many countries have preferred to take no position In theseew of the new A'rican states perceive common interest* with India, and some have large Indian minorities which ere hated and dtstnnted- .The more radical polkie* pursued by Indonesia and sorne of the emerging ecamrrse* have also undercut Indian Influerxe. Over the nest few years, we believe that India willenerally moderating but on the whole less inflnmtl.iI.he nonaligned world, while at Ihe same time tryingro-Asian, nntUolonialUt, artcl-lmpcrialist credential*.

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ndia's Initial ration to the proposed setting op of US/UK militaryon several Islands In the Indianas been guarded, lest It appear to support resurgent Western Imperialism In Asia. Other Afro-Asian nations mightajorthe UN andthese facilities. If this occurs. India would probably feelsatisfy both Afro-Asian and domesticJoin In opposition to those facilities, at least in public.

Delhi will; continue In play an activeoderating role inand will liend Itseep the organization functioning.will prolsahly. in its efforts to keep Its good relations with tlie USSR,latter^ position on nonpayment of such special assessments as that forpeacekeeping mission. At the same time, the Shastrl governmentlikelyl than In the past to participate In ventures requiring theto contribute troops to peacekeeping forces. India willto support Chinese Communist representation in tliebelief (hat membership In tlie world body would actestraint ondo not. however,ft to resume itsole ft* anof the Chinese Communist regime.

V. MILITARY AFFAIRS

India's Military Buildup

leaders wont armed forces capable of containing both Pakistan andChina. AJ sharp Increase In defense spending and recruitmentpast tsyo years has significantly expanded the Indian military establishment,thehich Is now the fourth largest in the world.1 Atpolitical and military leaders relied heavily on increased manpowermodern weapons to Improve military capabilities. More recently;becnj at least initiated to test new training, organization, and tacticalemphasizing mountain warfare. Considerable emphasis is beingprocuring and producing greater qiiantltici of more modem weaponsTransportation and communicationsChinesebeing sharply improved. Nevertheless, In view ot' pres-and prospective obstacles, proposed goals of the Five-Year Defense Plan

robablyjwill take about seven years to meet.

II. The military buildup has been made possible by large-scale assistance from both the US and the USSR, andesser extent from the UK. Most American military aid has been for the Indian army. India is now counting on US aid during the next five years at an annual level ofillion dollars in grants and

map of the IikIIsb Ocean appears '

ThrDrI.o* Fton tails lor an army ofotpintsrsl IntolMslnns andmWiwntlmtlowe**f. ihfc"drrnilymleil.the anm presently0 wlililKI-kim. so tmlrprndVntaflalhus-sln- combatie units. Thr airas0 mmOT aircraft,ri Behn-rs or fleH-rr/bombrr*t HrM hombrrs.5sl few vnus.y. with0 men. li trfklng In os-pilir ra-wbut has iheehtni on Indian resoune..

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SmieT* have

a likeredits. The Soviet* have no far contributed mostly to the buildup ofImli.in air1 the Soviets have committed0 million In military assistance to India, altonl half of this Inhey have promised orumber of Jet aircraft, transports, helicopters, ulr-to-air and surfuce-to-nir missiles and hrw undertaken to assist India Inassembly prndiKtinn compk'x. In Its first major contribution tu supporting the Indian army, the USSR has agreed to supplym oh lb-tons tanks. Moscow la* also apparently ofliTed suhstantial assistance to the Indian navy, including sultmarlnc*.

hese mnvrs are prufhahh/ motivated not merelyesire to build up Indian military potential against the Chinese, tail also to increase Soviet influence ran the Indian military, the Indian government, and Indian public opinion. The Indian government and public his accepted Sosiit as well a* Western military aid svitli enthusiasm. As aid Is received, contact* licrsveen Soviet and Indian military personnel svlll liter rase sharply. However.Indian naval and air forte officers share their nrmy colleagues* basic orientation towards the British and the West, and this altitude is unlikely to change significantly In the foreseeable future. Further, most Indian officer* share theiew that tbe friendship of both the USSR and tbe US should be sought as support in India's dispute with Pciping, Thus they will he reluctant Inomiiiantlyrole tof Ihe great powers. Ratltcr. they will try lo retainncWpcndincc In the csxrtcst of their continued pursuit nf India's policy of nonalignment.

prestsitly produce*mall part of its defenselight artillety.nd similarplans lo produce radarand modern communications equipment hy the. Astill under constriKtlon, ha* already produced two prototypenicxls probably willigher priority than0 million I* toInvested In defense productionWhile It I* unlikely that India's plan to be relatively .self-sufficientproduction of military Items9 will he met, the total output ofwill Increase rap'dly and provide Indiaonsiderablebase.

Indian Military CopaWitie*

combat eflcctbenev* of India's armed force* I* Imposing as amibcary buildup and of tbe addition of modern arms. The officer corps

i* dedicated, and the morale of the service*hole Is high. OlTicers up through the division commander level have, as result of tbe army's expansion, risen rapklry. and many lack the training and experience necessary for their newfficer* at higher level* are generally qualified for Ihcir position* but lockn trie command of large units. Indeed, the unwillingness of tlie government to spend money on large-scale maneuvers Is limiting the improvement

of the armys combat effectiveness. Further, the!

hole is still un-

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wiih the use of many of Ira new weapons. Despite considerablecommunkaltons and logistic capabilities are sttll dcflcif.ni. and military rnirllijjmce It In need of Improvement. There are also indications that the Indian military Iradrn have ocuy partially adapted their tactka and training tofigSnnglnth, Himalaya,.

4ft. Even so, theu flaws probably would not seriously weaken the combat erTectivanru of the army in any conflict with Pakistan. The Pakistani army, while qualitatively lunertoc to India's. Is so much0 men) that it would probably be overwhelmed by an Indian offensive. At the least, the Indian amy couldhold off any Pakistani assault, while at the same time engagingr conflict on the other front.

Chineseore serious military threat. Over the pastChinese force* In Tibet and southwest Slnklang have decreased togrotmd rroopv However, with existing facilities, the Chinesesupport the employmentround troopsJet Rghtcrs.et light bombers, andiston light bombers) fromAgainst them, tlie Indians, without withdrawing any force* fromPakistan liorder. haveombathe Indian*commit most of their an* force, though they might once again refrainso lest Communist China bomb Indian cities. In any conflict, theInitialr/ have the terrain In their favor, being able to approach thefrontier from thetcau ofhik the Indians mustfrom the much lower plains of the subcontineit Therefore thealmost certainty make initial gains,EFA, but asthetheir communications and logisticbecome strained, white comparable Indian problems would bethese conditions, we believe the Indian military would be capablethe Chinese before they reached the plains of the subcontinent.India will probably be abk loomewhat more forwardwould not be able to prevent the Chinese from making Initial gains.

Nucbor Affstkn J

now has the technical and economic capability tolready has three research reactors tn operation and plans toslzabk power stations In the nest four lo eight yean. It also hasseparation plant With nirttng facilities. India could probablyanduclear device In one to three yearsecision to domodesteapon deliverable by the Indian Air Force's Canberracould probably be produced about two years after the first test,year or two thereafter India could produceoren weapons inKT range. India's leader, have long opposed nuclear weapons onand moral grounds. Since the4 Chinese explosion ofdevice, the Indian Government has reaffirmed Its Intent not toweapons. oncerned with! ihc costilitarily significant

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have called (or Indfa to mumifavture It* own nuclear deterrent,ew cabinet member* have qiwstionfd the government'* policy. Wc believe that at aIndia will continue to build up it* nuclear capability and this will ctrjie It toeapon* program promptly alterdecision to do so. Whether ihe Indians decide lo do so will depend on whether effective mtcroatkmal controls arc established, on the pace and scope of the Chinese program and the nature of Chinese policy, on future Slno-Soviet relations, and on the importance the Indians attach to assurances from the US and other nuclear powers.

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