When Mrs Indira Gandhi again became Prime Minister in 1980, she recalled Kao from his retirement and appointed him as her senior advisor on internal and external developments. She used to consult him on political and intelligence matters. His professional guidance was of general nature. In one major development, when Mrs Gandhi wanted to go USA she was not getting her choice of appointment date with the US President through External Affairs Ministry channels. Kao through his friend George Bush Senior – who was then US Ambassador in China – arranged her meeting with the US President.
The declassification of vital CIA and US State Department documents relating to South Asia reveals that the American spy agency (CIA) had a vital source in Mrs Gandhi's cabinet. CIA's 'reliable source' leaked India's war objectives to the US, thereby compromising India's plan to teach Pakistan a lasting lesson.