TERMS OF LOAN TO INDIA (Hansard, 28 October 1965)

§ LORD BARNBY
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (LORD WALSTON)
My Lords, the recent loan of £10 million to India is for the purchase from this country of goods essential to India's economic development and cannot be used for buying military equipment. No political conditions are attached to British aid loans. Interest and capital repayments due from India on earlier British aid loans are expected to total about £14.6 million in 1965 and £19.9 million in 1966.

§ LORD BARNBY
My Lords, arising out of that reply and in view of the imbalance of payments, does it not seem that loans of this kind must increase that imbalance, particularly if they are producing no interest? Does it not seem to the noble Lord that this granting of loans without interest is a dangerous precedent in that it will attract requests for loans without interest from other sources? Lastly, may I also ask him, further to the Question, whether it is to be understood that the United Kingdom representative at the United Nations has instructions to support the Motion of the United Nations requesting India to institute a plebiscite on Kashmir, and would not notification of that, supported by this loan, have assisted in bringing a satisfactory answer?

§ LORD WALSTON
My Lords, I think that the final supplementary question of the noble Lord is really outside the scope of this particular Question. The other supplementary questions which he asked me are, as I understood them, briefly, whether it would not be a dangerous precedent to grant loans without interest and will not this further add to India's imbalance of trade with us, and will it not encourage other countries to ask for more loans? There are always many other countries only too anxious to ask for loans if they think they have any chance of getting them. Whether interest is charged or not, we have far more requests, and far more deserving requests, than we can possibly meet. I do not believe that the absence of interest, or a waiver of interest, which has been going for some time in the past, makes our job of selecting the most deserving and beneficial cases any harder.
With regard to the imbalance of trade with India, a large part of the imbalance arises from the very heavy interest and repayment charges that they have to meet on previous loans, and as the object of such loans is primarily to stimulate the economy of India, or whichever recipient country it may be, it is obviously defeating that purpose if we burden the receiving countries with interest charges which can be met only from further loans. That was the reason why my right honourable friend the Minister for Overseas Development announced the interest-free loans several months ago.

§ LORD CONESFORD
My Lords, from whom are we borrowing the money that we are lending to India?

§ LORD WALSTON
From you. From the noble Lord, and from other taxpayers and lenders in this country.

§ LORD BARNBY
My Lords, I thank the noble Lord for his considerate reply. I hope he will permit me to differ from him—

SEVERAL NOBLE LORDS
No!

§ LORD BARNBY
With the indulgence of the House—

SEVERAL NOBLE LORDS
No!

§ LORD BARNBY
The noble Lord said that my final supplementary question had no relation to the Question, but my question specifically raised that point. Therefore I ask the noble Lord whether he can lead us to have any hope that, while the imbalance continues, loans will be kept under strict control? Lastly, is it within his knowledge that a loan of £4 million was granted, or reported to have been granted, by India to the Sudan, apparently for belligerent purposes?

§ LORD WALSTON
My Lords, I apologise to the noble Lord if I have not answered his original Question sufficiently fully. I thought that was dealt with in my first Answer. There are no political conditions attached to British aid loans, but these loans are for economic purposes and not military purposes. I think there is an answer to the noble Lord's question in that. Naturally—and we have made it quite clear on many occasions—we deplore any continuation of hostilities between India and Pakistan and we are doing the best we can, through every means at our disposal, to bring these to an end, but we do not tie our loans with political strings.

§ LORD BLYTON
My Lords, is my noble friend aware that I do not object to loans to poorer nations without interest, but I am afraid that on loans to India we have to remember that there is terrific Indian lobby in both Houses and that Pakistan has been a faithful ally of this country, both in CENTO and in SEATO.

§ THE LORD PRIVY SEAL (THE EARL OF LONGFORD)
My Lords, I am afraid that I shall have to ask my noble friend not to follow the rather dubious example set by the other side.

§ LORD BLYTON
My Lords, regardless of the admonishment of my noble friend the Leader of the House, I will continue my question. The point I am putting is this: will the Government take note of the terrible anxiety in Pakistan that favouritism is being shown to India, because of the terriffic lobby here, while people who have been loyal to us for years are left on the shelf?

§ LORD WALSTON
My Lords, I can assure my noble friend that no favouritism is shown either to India or to Pakistan. They are both fellow members of the Commonwealth. We have long and close ties of traditional friendship with both of them, and when it comes to the question of granting loans, or of any other matter, this is dealt with purely on its own merits and with no favouritism or effect from any lobby of any kind.

§ LORD PEDDIE
My Lords, my noble friend having given a clear indication that the interest-free loan is free from political strings, I wonder if he could inform the House whether the goods purchased will be confined to capital goods, and, if so, what is the nature of these capital goods?

§ LORD WALSTON
No, my Lords, it is not confined to capital goods, but it is confined to those goods which, in the opinion of my right honourable friend the Minister of Overseas Development, will be of value to the economic development of India.