India extends first-ever rupee denominated Line of Credit to Mauritius
New Delhi, Oct 18: India has extended its first-ever Indian Rupee-denominated Line of Credit (LOC) under the Indian Development and Economic Assistance Scheme (IDEAS) to Mauritius, a major step forward for India’s development assistance strategy.
Rupees 487.60 crore LOC to Mauritius will finance a water pipeline replacement project, covering approximately 100 kilometres of obsolete pipeline infrastructure.
The LOC, extended on concessional terms by the State Bank of India, speaks volumes of India’s growing role and trust as a development partner in the Global South.
During recent discussions, External Affairs Minister Dr S Jaishankar made the formal offer to Mauritius' Attorney General and Minister of Agro-Industry, Maneesh Gobin, further solidifying the close relationship between the two nations.
Mauritius, which has already accepted the offer, is set to benefit from this project, reflecting India’s long-standing support for the socio-economic development of smaller nations, particularly those with historic ties to India.
A Historic First for India
This Rupee-denominated LOC marks a watershed moment in India’s external development assistance strategy. Traditionally, Lines of Credit extended by India have been dollar-denominated, but this shift to the Indian Rupee highlights a broader effort to internationalise the currency and deepen financial engagement with partner nations. By ensuring that repayment will occur in rupees, India enhances the value and circulation of its currency abroad while also securing stronger bilateral trade flows with Mauritius.
In recent years, India has emerged as one of Mauritius' most important development partners, providing financial and technical assistance in a wide range of areas including education, healthcare, and infrastructure.
The LOC for the water pipeline project is yet another example of India’s focus on building critical infrastructure that directly impacts the daily lives of Mauritians, enhancing access to clean water and improving public health outcomes.
This LOC is part of a broader push by India to offer concessional loans through the IDEAS initiative. These loans aim to finance infrastructure, social welfare, and capacity-building projects in countries across Asia, Africa, and the Caribbean, enabling recipient nations to address pressing developmental challenges without being overburdened by debt.
India’s Strategic Benefits
Boosting the Indian Rupee: By providing the LOC in Indian Rupees, India is actively encouraging the use of its currency for international transactions, a critical step toward the global acceptance of the rupee. This move could also pave the way for similar arrangements with other countries, helping reduce India’s dependence on the US dollar and diversifying its foreign exchange exposure.
Strengthening Trade Links: The structure of LOCs under IDEAS often requires that a portion of the goods and services procured for projects must come from Indian companies. This directly benefits Indian industries, as construction, engineering, and technology companies can tap into new markets abroad. In this case, India’s water management and infrastructure firms stand to gain from the project in Mauritius, further strengthening trade links between the two countries.
Geopolitical Influence in the Indian Ocean Region: India and Mauritius share a unique and long-standing relationship, rooted in both historical and demographic ties. With around 70% of Mauritius’ 1.2 million population being of Indian origin, the cultural and diplomatic bonds between the two nations run deep. By extending this LOC, India not only aids Mauritius' infrastructure development but also deepens its influence in the strategically important Western Indian Ocean, a region where India is keen to maintain its presence amid growing competition from other powers, particularly China.
A Symbol of India’s Soft Power
India’s commitment to the Global South through initiatives like IDEAS is a key pillar of its soft power strategy. By extending Rupee-denominated LOCs on concessional terms, India positions itself as an alternative to other global powers that offer development. For India, such projects also foster goodwill and lay the foundation for long-term diplomatic and economic partnerships, which are crucial in an increasingly multipolar world.
India’s extension of its first-ever Rupee-denominated LOC to Mauritius under IDEAS is a landmark event that signals a new phase in India’s global development strategy.
The water pipeline project not only addresses a critical infrastructure need in Mauritius but also reinforces India’s broader goals of enhancing the international use of the rupee, expanding its geopolitical influence in the Indian Ocean, and deepening trade relations with key partners.
As India continues to refine and expand its development assistance toolkit, this move exemplifies its commitment to fostering economic growth and development, particularly among nations with which it shares historical ties and strategic interests.
