The Central Intelligence Agency generate favorable publicity to successfully promote small anti-Communist political groups into positions of leadership in two countries during the 1950s, former Director William E. Colby said yesterday.

Colby, testifying before the House Intelligence Committee, did not reveal the names of the countries. But he said the political situation in each was dramatically reversed after a CIA-directed public relations barrage was unleashed relatively insignificant political organization was transformed into a potent national power.

The fomer intelligence chief, who was CIA director from 1973 to 1976, citied the countries as examples of how the CIA was abale to "create facts" with manipulation of the press.

"In other words, if you do the job well it becomes true," said Rep. Les Aspin (D-Wis.) who presided at the committee hearing.

"Yes." answered Colby.

"I'm not sure that is what we want to have happen," said Aspin.

Colby acknowledged that in seeking to influence foreign political developments the CIA used both American and foreign reporters and news services. In addition, Colby said, the CIA dispatched its own employees "on intelligence missions abroad who served as real or pretended journalists."

The practive has drawn sharp criticism from within and outside the news business, and several CIA directors - including Colby - have cut back on using American reporters for CIA missions in recent years. Last month, Director Standfield Turner issued a directive noting the CIA would no longer enter into any relationship with full or part-time journalists to carry out intelligence activities.

In his testimony before the House committee, which is holding hearings on the relationship between the CIA and the press, Colby said he was in general agreement with Turner's directive. But he warned against totally cutting the CIA's ties with the press.

"I strongly recommended that we not establish any blanket prohibition against any relationship whatsoever between American journalists and intelligence services," Colby said. He urged that such relations be kept between foreign journalists and the CIA.

The problem, said Colby, is that U.S. intelligence agencies are gradually seeing their sources of information being whittled away. He criticized federal prohibitions against recruiting CIA informants from the Peace Corps, the Fullbright scholar program, the U.S. Information Agency and the U.S. Agency for International Development.

"Additional groups," said Colby, "are clamoring to be admitted into this charmed circle."

He urged that the restrictions be loosened somewhat to allow certain federal agencies to employ small numbers of intelligence officers "under proper administrative procedures."

Colby admitted, however, that the need for such covert operatives has shrunk drastically since the 1950s and early 1960s when the Cold War was at its height. At that time, the said, up to 50 per cent of the CIA's budget went for clandestine activity. Now the figures is around 2 per cent and the CIA has announced it is cutting one-fourth of its operations, or clandestine branch , and shifting emphasis toward technological intelligence gathering.

While the CIA employed American journalists in some cases in the past, Colby called reports that the CIA dominated U.S. media output "a myth." He gave no figure during his testimony on the number of U.S. reporters the CIA used or who the reporters were.

Colby said that he had employed journalists himself for various intelligence missions when he was a CIA officer abroad. "I had a clear understanding," he said, "that they did their intelligence work for me, but that the news reports they wrote were a matter between themselves and their editors and not given prior clearance or direction by me."

When he became director, Colby said, he was approched by a number of persons in the news business with suggestions that the CIA purchase a failing newspaper and run it as a proprietary operation of its own. Although there have been reports of such operations by the CIA, Colby said he always rejected the proposals.

"I really didn't want to get involved with a newspaper," Colby said. "It's a terrible nuisance. Everybody back in headquarters wants to run it."