(SANITIZED) INDIA: ECONOMIC CONSEQUENCES OF EXODUS FROM E. PAKISTAN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700010097-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 14
• Document Creation Date: December 22, 2016
• Document Release Date: May 18, 2010
• Sequence Number: 97
• Publication Date: July 1, 1971
• Content Type: IM

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"DOC.
Confidential
ER IM 71-145
July 1971
Copy No. 57
Confidential
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
India: Some Economic Consequences
Of The Exodus From East Pakistan
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 arid 794, of the US Code, as amended,
its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law,
ONOUP I
Endudad Lam o.omallc
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
July 1971
INTELLIGENCE MEMORANDUM
INDIA: SOME ECONOMIC CONSEQUENCES
OF THE EXODUS FROM EAST PAKISTAN
Introduction
1. The influx of about 7 million refugees from East Pakistan is
exerting severe pressures on India's already heavily burdened economy. The
refugees have to be fed, housed, doctored, and dispersed in India, and
international aid has been slow in arriving. Moreover, there is little prospect
that many refugees will soon leave India, as most are Hindus forced out
of East Pakistan by Islamabad's troops. In the short run, those Indian states
bordering East Pakistan will bear the brunt of the inflow. One of these,
West Bengal, has long been an area of chronic political and economic
discontent. The costs of caring for the refugees in the long run will set
back Mrs. Gandhi's plans both to improve economic and social conditions
and to accelerate economic growth. This memorandum describes the current
refugee situation, assesses the costs associated with their care, and examines
the economic impact of the exodus on India.
Discussion
Nature of the Exodus
2. Within a month after West Pakistan's army began its crackdown
on the Bengali separatist movement in East Pakistan on 25 March, about
1.5 million refugees had fled from border areas in the East wing to adjacent
Indian areas. The exodus greatly accelerated in May, and by June refugees
were arriving in India from the East Pakistani interior. Hindus accounted
for more than 90% of the new arrivals, reflecting a campaign of terror
by the West Pakistani troops against that minority religious group. Although
Note: This memorandum was prepared by the Office of Economic Research
and coordinated within the Directorate of Intelligence.
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 fear was the main motivating force behind the emigration from the East,
hunger too played an important role as food distribution in the East wing
was vitally disrupted.
3. By mid-July, Indian estimates placed the total number of refugees
at about seven million, J largely women and children. The refugees have
increased the Indian population by more than 1 % in two months and
reduced East Pakistan's population by about 9%. Moreover, although the
flow has slowed considerably from its average daily rate in May of something
slightly in excess of 100,000, there are no indications that the exodus is
coming to an end. The refugee influx to date is far greater than the
approximately S million who moved into India from West Pakistan and
East Pakistan combined in the first year and a half following the partition
of British India in 1947, and much of that influx was offset by the
movement of Muslims from India to Pakistan. An additional 5 million
refugees - almost all from the East wing -- arrived in India during the
subsequent two decades.
4. By late May, international pressures had forced Islamabad to make
public appeals for the return of the refugees to East Pakistani. Small receiving
camps were set up to process a return flow. The government's words,
however, could not overcome its actions, and few refugees seized upon the
invitation which included offers of amnesty. Along with the fear of
persecution and death, Hindu refugees doubtless were aware that their
property had been distributed to non-Bengali residents - mainly Biharis -
of East Pakistan. Even Islamabad was claiming only 75,000 returnees as
of mid-July, and these claims probably were exaggerated. Some of those
who returned did so because of the hostility they had faced from the
impoverished population in India.
Economic Conditions Met by the Refugees in India
5. The state of West Bengal, which received about 5.5 million
refugees between March and July - more than it received since Indian
independence - was already heavily overpopulated even by Indian
standards. Although it was India's wealthiest state at the time of
independence, economic progress since then has been slow. Indeed, average
living standards now are actually worse than they were in 1950. J In recent
years, political instability and the disruptive behavior of
Communist-dominated labor unions have accelerated the state's economic
deterioration, and unemployment has spread rapidly.
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Upward of 10,000 additional refugees reportedly fled into Burma.
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6. A large number of refugees settled in the environs of Calcutta,
West Bengal's capital, the center of its industry, and a city which exemplifies
the state's problems. Calcutta has deservingly gained the reputation as
perhaps the world's least inhabitable city. It suffers from massive
overcrowding and unemployment and is a breeding ground for disease and
politically motivated violence. Municipal services - especially the water and
sewage systems - are severely strained.
7. Although the preponderant number of refugees fled to West
Bengal, the influx into the remote Union Territory of Tripura created great
problems for that area as well. Tripura has received only about one-fifth
as many new arrivals as West Bengal, but before the influx Tripura had
a population of only about 1.5 million, compared with some 45 million
in West Bengal. Thus the arrival of more than I million refugees increased
Tripura's population by 70%. Moreover, most of Tripura's population is
concentrated in the lowlands close to the densely populated areas of East
Pakistan from which the refugees fled. The state is three-quarters encircled
by Pakistani territory, and communications links with the rest of India are
poor, with road and air travel heavily circumscribed, particularly during
the summer monsoon season. Finally, Tripura was a food-deficit area before
the arrival of the refugees. Besides West Bengal and Tripura, the tiny substate
of Meghalaya and the states of Assam and Bihar have received relatively
small numbers of refugees (see the map).
8. In an effort to ease the problem in the border states, the Indian
government mobilized its transport system to move refugees inland. New
Delhi planned eventually to move 2.5 million refugees from the hundreds
of small relief camps along the border into about 50 large camps further
inland in the border states and in the states of Madhya Pradesh, Bihar,
Uttar Pradesh, Orissa, and Andhra Pradesh. Bureaucratic delays and
shortages of construction material are delaying dispersal and, in any event,
India's over-burdened transportation system will need a long time to
accomplish the task. In West Bengal, for example, the system is capable
of moving out only 10,000 refugees per day at most, and by mid-July --
even with Soviet airlifts supplementing the rail movement - the number
moved apparently amounted to only about 125,000, or less than 3% of
the total influx at the time. Most of those moved to date have been sent
to a previously established resettlement area in Madhya Pradesh where some
90,000 earlier refugees from Pakistan have been located since the late I 950s.
US airlifts have also dispersed more than 20,000 refugees from Tripura to
Assam.
9. Many of the refugees in West Bengal prefer to stay there because
of ethnic affinities with the Bengalis who make up most of the state's
population. Their aversion to leaving West Bengal for an unfamiliar location
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EAST PAKISTAN AND EASTERN INDIA
P R A D E H
HI N A
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inhabited by non-Bengalis was shown in the high incidence of refugees
leaping off the trains carrying them to the interior. In some cases, food
rations had to be cut off to pressure refugees to leave West Bengal. The
interior states, of course, had little desire to receive the refugees and
compound their own economic and social problems.
10. Under the circumstances, the Indian government has done an
admirable job of administering to the needs of the refugees and especially
in keeping cholera from spreading rapidly throughout the area. Nevertheless,
the living conditions of many of the refugees are very primitive (see the
photographs). Shelter for many of those living in camps takes the form
of crude thatch leantos or even uninstalled concre,'e sewage pipes. Many
camps in West Bengal are on low-lying ground and have been flooded by
monsoon rains, which began in June and will extend until September. Those
not in camps, or not living with friends or acquaintances, live with other
homeless people on the streets, in parks, or the like. The government has
already stated that little expensive area development will be attempted.
Refugee camps are being located mainly on wasteland, army camps, and
abandoned airfields. These lands are not very suitable for cultivation, and
many refugees probably will attempt to move to urban areas or better
agricultural land.
Cost of Refugee Relief
11. The direct cost of adequately caring for 7 million refugees for
six months will amount to more than $400 million, based on data supplied
by the Indian government and the US Embassy in New Delhi. Food will
account for perhaps $150 million of the total, and other recurring costs -
vitamins, drugs, transport, spare parts, etc. - another $80 million. One-time
costs, predominantly sanitation, shelter, and transport, make up the
remainder. The estimate of the costs for shelter assumes 'that, as at present,
about one-third of the refugees will not settle in approved refugee camps
and that inexpensive plastic sheeting will be used for cover instead of cotton
tents and tarpaulins. The following tabulation shows a breakdown of costs
for a six-month period:
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Refugees in Camps and Makeshift Homes in India, June 1971
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 } ii,r' t1 x"ts"c7r ,?'fit 3`atiu,k y' 4~ 7i 3? " U" (p~~ nt:,:'
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Recurrent costs
Million
US $
For refugees in camps 168
Of which:
Food 99
For refugees outside of camps 63
Of which:
Food 49
One-time costs 192
For refugees in camps
For refugees outside of camps 20
For each additional six months that the refugees remain in India the total
direct cost will increase by more than $200 million, excluding any increased
costs resulting from an increased number of refugees. Indian experience
with the costs of resettlement and rehabilitation of earlier refugees from
East Pakistan on a long-term basis substantiates the order of magnitude
of these estimates. J
12. The direct costs do not take into account the diversion of
administrative, educational, and transport services, nor do they include the
costs of forgone investment. Mrs. Gandhi's plans to alleviate poverty,
institute social reforms, accelerate industrialization, and extend the "green
revolution" reportedly have already suffered delays because of
administrative preoccupation with the refugee problem. Planned investment
in Tripura, Meghalaya, and border districts of Assam and West Bengal most
3. Some 14,000 refugee families were resettled on reclaimed forestland
in the states of Madhya Pradesh and Orissa during 1958-7G. Direct costs
for shelter, agricultural loans, and maintenance subsidies for the first few
agricultural seasons amounted to about $30 million. Thus the coat per family
to the Indian government over 12 years amounted to over $2,000, or upward
of $500 per refugee, inasmuch as many refugees were in the camps for
much less than 12 years. The estimates for the new refugees equate to
a 10 year cost of roughly $600 per refugee.
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likely have been most affected by the priority given to refugee relief. The
US Embassy estimates that there will be a decrease of about $80 million,
or about 30% in the budgeted investment expenditure of some $285 million
in the states of West Bengal, Assam, Tripura, Meghalaya, and Bihar in fiscal
year 1971 (1 April 1971-31 March 1972). _4J Moreover, the forgone
investment is being converted, in part, to consumption spending which is
adding to inflationary pressures in the economy.
Meeting Costs from Domestic Resources
13. In July an Indian official indicated that the 4.7 million refugees
in camps were costing India $1.8 million per day, only slightly less than
the outlay estimated to be needed for adequate care. The official also noted
that the government had not yet begun to provide support for those refugees
not in camps. New Delhi's budget for FY 1971 called for only $80 million
for refugee relief, admittedly only a symbolic allocation inasmuch as the
budget was presented in late May when it was clear that much higher
expenditures would be required./ 7
14. India can provide foodgrains for the refugees from its foodgrain
stockpile, which amounted to a seasonal high of about 8-8.5 million tons
in early July. These stocks, built up to stabilize foodgrain prices as well
as for emergency use, have been accumulated from four successive good
harvests and from foodgrain imports. The refugees, however, and the Indians
are mainly rice eaters, and Indian stocks consist predominantly of wheat.
Thus New Delhi will need to have the rice used for refugee relief replaced
by donations from abroad. The planned daily adult refugee ration of 500
grams would equal about 1.2 million tons per year.
15. The estimates of food costs assume that the refugees will be given
a diet roughly equivalent in caloric content to that received by the Indian
population, or slightly more than 2,000 calories per day. Such a diet would
probably be somewhat higher in caloric content than the normal diet in
East Pakistan. Rice would be the major food input, but milk, vegetable
oil, and special protein-supplement foods will also pay important roles. Thus
far the refugee ration provided by the Indian government appears to be
up to 20% short of the planned level.
16. India is critically short of supplies other than foodgrains - such
as dry milk, oil, and pulses - which are needed by the refugees. Essential
materials such as raw cotton, cloth, and steel for construction are also in
4. The present discounted value of the diverted investment amounts to
about $350 million.
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relatively short supply. Demand for some manufactured items - mosquito
netting, bedding, etc. - is placing a strain on India's production capabilities.
Foreign Aid
17. Foreign aid for the refugees amounted to about $125 million as
of mid-July. The United States was by far the largest contributor, providing
$70 million in aid, followed by the USSR, United Kingdom, and Sweden.
Almost 60% of the US aid was offered as food support.
18. The United Nations High Commissioner for Refugees (UNHCR)
is coordinating the greater part of the flow of refugee relief to India in
the biggest operation of its kind ever undertaken by the UN. (The UN
supplies aid in one form or another to some 1.4 million Palestinian refugees.)
Some 32 governments as well as organizations in the UN system and
voluntary agencies have made pledges amounting to about $100 million
to the UNHCR. Agencies of the UN system which have made contributions
include the World Food Program, World Health Organization, and the
Children's Fund. In addition to aid sent under the UN umbrella, a number
of governments and private agencies have provided bilateral assistance. All
aid has been turned over to Indian authorities for distribution.
19. A Central Coordination Committee for Refugee Relief was set
up in May in India, comprising representatives of New Delhi, the UNHCR,
and other UN organizations. Despite the efforts toward coordination,
however, the operation has been plagued by inefficient administrative
procedures. The early sluggishness of international response was due in part
to this inefficiency. Occasional clashes between Indian and Pakistani troops
stationed in the border areas are complicating relief activities.
20. India is far from satisfied with the scope of the international
response, Mrs. Gandhi categorizing the assistance as "practically next to
nothing." New Delhi also is unhappy that special provisions for refugee
relief were not included in the recent aid recommendations of the Western
Consortium that met in Paris in June. Most Western donors, however,
pparently do not intend that aid for refugees will be at the expense of
developmental aid.
21. An international relief and rehabilitation effort also has been set
up under UN auspices in East Pakistan. A part of the program will be
concerned with assisting in the care of any returning refugees. The emphasis,
however, will be focused on bringing some semblance of normality to the
economic situation, especially the food situation, in the East wing. The
exodus itself has been an important factor in the delay of new foreign
aid for Pakistan as a whole.
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Other Economic Consequences in India
22. Several economic problems soon became evident in the areas of
West Bengal where the refugees first settled. Agricultural laborers' wages
were depressed as much as 60% as experienced rice and jute farmers flooded
the local labor market. Some refugees even brought their own rickshaws.
Prices of such essential items as rice, cooking oil, vegetables, and kerosene
increased rapidly. Speculative hoarding brought on by the inflow of the
refugees added to the problem. The finances of the State government also
suffered. By early June, although West Bengal had spent only about $6.5
million on refugee care, less than 10% of this sum had been reimbursed
by the central government.
23. Price and wage data for the smaller states which received large
numbers of refugees are not available, but the economic situation may be
comparable to that in West Bengal. In Shillong, joint capital of Assam and
Meghalaya, there was rioting in June because the local population thought
that the refugees were getting better food and housing than the natives.
Outlook
24. Despite Mrs. Gandhi's public statement that "we have no intention
of allowing them to settle here" and despite Islamabad's guarantees of
amnesty and property restitution to returnees, most of the refugees are
likely to remain in India and be an economic burden there for the indefinite
future. Changes that would encourage the refugees to return willingly to
East Pakistan - a transfer of authority by Islamabad to an East wing civilian
government, a withdrawal of West Pakistani troops from East Pakistan, or
credible international guarantees - do not appear imminent. Another
alternative, an Indian "military solution" would create its own economic -
let alone diplomatic - problems, although there reportedly is an official
Indian estimate showing that war would be less expensive than long-term
refugee care. Finally, despite Islamabad's public statements to the contrary,
there are strong indications that it has no intention of permitting the Hindus
to return to East Pakistan, and Hindus make up about 90% of the 7 million
refugees.
25. The food crisis in East Pakistan probably also will be a strong
deterrent to any major return flow of refugees. The poor rice crop there
and the inability of the distribution system to handle needed foodgrain
imports point to severe food problems even without a reversal of refugee
flows. The seriousness of the food distribution problem - a problem
exacerbated by sabotage actions by the East Bengali resistance fighters -
even suggests that a massive new exodus might emerge before the end of
1971.
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26. In the next several months the major economic drawback
produced by the refugees already in India is likely to be the continued
disruption of normal day-to-day economic activity. The impact will be most
evident in the eastern border states, but inflationary pressures may spread
throughout India. Consumption demand will be increased by the refugees'
d f
nee
or such materials as clothing and construction materials as well as
C__J
Foreign aid is certain to increase and probably will offset food and shel::
costs, but it is very unlikely that aid will be adequate to cover many of
the other costs. The total direct costs of caring for 7 million refugees for
six months would be almost equal to the total budgeted expenditures of
West Bengal in FY 1971.
27. Given the potential explosiveness of the situation, any longer term
predictions are very hazardous. If, for example, the number of refugees
in India does not change appreciably in the next five years the direct costs
of relief could amount to over $2 billion for the period. It is conceivable
that foreign aid for refugee relief will become less available as time passes
and as the international spotlight shifts. Even over the longer run, the
refugees are not likely to make any significant contribution to India's
economic output. Those who eventually find employment probably will
largely replace more expensive local labor. Perhaps most important for
India's longer term economic outlook will be the indirect costs resulting
from diversion of developmental resources.
28. On the other hand, if the average daily flow of refugees in the
second half of 1971 were to approximate that in June - whether because
of a sharp deterioration in the food situation, an upsurge in tho fighting
in East Pakistan, or both - the total number of refugees in India by year's
end would reach almost 19 million. This addition to the Indian population
would be substantially more than the approximately 13 million expected
from one year's normal population growth. Long before this point is
reached, the economic, social, and political pressures would reach
near-unmanageable proportions. The logistics of meeting both refugee needs
and local economic demands would be beyond Indian capabilities and
probably would strain international aid efforts to the utmost. Under these
conditions, the chances for Indian military intervention in East Pakistan
could increase significantly.
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