The Reagan administration's unexpected interest in a North-South summit conference on the world economy is a sign that Washington apparently has decided to try to limit the political damage that its conservative policies on foreign aid are doing in the Third World and among America's allies.

The North-South meeting, planned for late October after more than a year of diplomacy, is expected to the first occasion when President Reagan tells other world leaders in detail how the United States envisages Western economic cooperation with developing countries.

Nominally a question of economics, development policy actually effects Washington's overall relations with its allies, the Third World and the oil-exporting countries, diplomats said last week at talks here to arrange the summit, which will meet in Mexico.

The original plan for a restricted summit on North-South issues dates back to the February 1980 report of the Brandt Commission, a board of prominent Westerners and representatives of developing countries. They said only urgent action could rescue the economies of the West and the Third World.

Despite this call and an additional sense of crisis imported by the second oil shock in 1979, efforts to convene a North-South summit conference met resistance in most Western capitals until the United States showed new interest.

Reagan's message in Mexico is expected to emphasize the U.S. desire to break with recent attempts to bridge the gap between rich and poor countries. The administration is impatient with multilateral aid formulas, appeals for massive transfers of resources, and Third World demands for global reform; it challenges the very concept of a Third World power bloc.

This skepticism is shared in many respects by European allies of the United States. But most are also concerned that Washington may concentrate so exclusively on the East West conflict that it neglects a historic opportunity with developing countries.

Arguing that ignoring Third World grievances would be shortsighted, the French and West German foreign ministers have urged the Reagan administration to attend the summit session because many developing countries are becoming more pragmatic about their economic problems and therefore less susceptible to Soviet propaganda appeals based on resentment of former colonial powers.

Unless the West maneuvers skillfully, the Europeans argued, instability in the world, and opportunities for revived Soviet influence, will grow because of economic hardship aggravated by mounting oil bills and other financial strains that have wiped out many countries' prospect for growth.

"There is no reason," a European diplomat said, "to present a propaganda advantage to the Soviet Union, which aside from arms transfers give virtually no foreign aid except to Cuba, Vietnam and Turkey."

To avoid getting drawn into a discussion of aid, Moscow is expected to boycott the Mexico summit meeting and as a result to face some embarrassment in the Third World.

The participants are expected to be 22 countries, including the main Western industrial countries; four members of the Organization of Petroleum Exporting Countries, or OPEC; and some representative oil-poor developing countries.

At the Mexico meeting, optimists at the Vienna talks declared, it might be possible to lay foundations for a deal about global energy supplies. If the energy outlook can be stabilized it might be possible to strike a new deal about aid that would open both OPEC and Western purses and markets.

At the moment, Western governments are anxiously waiting for Saudi Arabia, which will attend the Mexico session, to provide new finances for the International Monetary Fund, the basic facility for recycling oil profits to developing countries. But this relief probably will not continue without some wider break-through on the full range of issues covered in the Saudi-backed, long-term OPEC strategy -- the same basic issues tentatively mentioned as probable topics for the Mexico meeting.

Even if the meeting produces no concrete agreements, several diplomats said, it will help reduce Third World exasperation about the trend among recession-hit industrial countries to cut back assistance to developing countries.

A European foreign minister in Vienna was asked whether the postponement imposed by the Reagan administration would complicate the summit meeting because industrial countries would first coordinate their economic policies at a July summit meeting in Ottawa. He replied that the prospects of the Mexico meeting would oblige the United States to focus on development issues at Ottawa, thus enhancing the Mexico meeting.

The Reagan administration is even cooler than its predecessors to calls from the Third World for a global economic new deal. Instead, U.S. officials note that the Third World is breaking up into often rival groups. The officials say Washington intends to use aid funds selectively to support friendly governments.

Some points in this approach are congenial to other participants in the Mexico session. The oil exporters, who hold a key to the economic outlook, also seem convinced that extensive public debates are fruitless.

Some European leaders, who acknowledge privately that the U.N.-sponsored global negotiations have bogged down, share many of Washington's views. In Britain, Prime Minister Margaret Thatcher's government insists that it will no longer listen to demands for assistance based on a colonial past. France, 85 percent of whose aid is bilateral, has always preferred helping its clients directly rather than through international organizations. West Germany prefers to direct its aid to regions it considers vital to European security.

The Europeans are nervous, however, about seeing Reagan's policies pushed too hard and fast. The Mexico summit meeting, diplomats said, should be a format for Reagan to explain his ideas and perhaps agree to adjustments