2. The Indian argument in favour of wheat runs as follows. Because wheat is in short supply in Australia and Pakistan, India's current wheat purchases from the dollar area cannot be reduced and may have to be increased. Gift wheat from this area would save India precious foreign exchange and indirectly improve the balance-of-payments position of the sterling area. Also, the counterpart funds from the sale of wheat would be welcome in India. The proportion of internal finance to foreign exchange content in India's development programme is about four to one. It is true capital goods are needed from abroad but it appears to be difficult to get capital goods additional to those already on order. Meanwhile the need to provide an adequate continuing supply of internal funds for development purposes remains. This year unusually high receipts from customs and export duties and funds realized from the sale of American loan wheat provided the main cushion enabling India to finance the year's programme to the full extent. Neither of these sources can be counted on to nearly the same extent in the coming year. Therefore aid in the form of wheat or similar raw materials for sale in India would be most helpful.

3. I think this argument is sound. I realize it is desirable to preserve the direct-aid content of our assistance, and I would hope that Canada, the United States, the United Kingdom and other western countries may be able to spare sufficient capital goods for India to meet her real development needs and prevent any possible swing toward iron-curtain countries as a source of such supplies. At the same time, supply is the main problem here; and, so far as the dollar area is concerned, any reduction in India's foreign exchange spending on foodstuffs and essential raw materials would be an effective collateral form of aid.

4. At present India's most acute food shortage is rice (particularly badly needed in drought-aflicted, rice-eating Madras); there is little Canada can do about this, though I suppose it is possible that an easier supply position in wheat might make it a little more feasible for the authorities to divert more rice to, the south from wheateating areas. India can probably buy all the wheat she must have this year but free supply of wheat or other grains cannot be other than helpful both from the point of view of finance and in order to help feed the people.

5. The Canadian people would probably understand that this form of aid is particularly helpful at this stage of India's development; and, since wheat is a commodity of which - with luck - we should have a very good stock this year, it would seem appropriate that Canada should supply India with as much wheat as possible. Supplying wheat for consumption and to set up counterpart funds is rather like grubstaking a prospector: this is a good North American conception Canadians can understand.

6. I am informed that, on the technical assistance side, the Indian authorities expressed the opinion to Mr. Cavell that we might think in the coming year in terms of more aid of the type designed to train an increasing number of industrial trainees in India, where they would learn under conditions comparable to those under which they would afterward be working. I suppose this might involve the sending of experts and possibly some technical equipment. If the latter were desirable and feasible, the Indians, I am sure, would be content to have it supplied out of economic development rather than technical aid funds if we should prefer this.

RICHARD GREW
for High Commissioner