India announced its first ever rupee-denominated Line Of Credit to Mauritius, an island nation in the Indian Ocean off the southeastern coast of Africa on Thursday.
Extended under the Indian Development and Economic Assistance Scheme (IDEAS), The INR 487.60 crore credit facility will finance a vital water pipeline replacement project in Mauritius, replacing around 100 kilometres of obsolete infrastructure, said a ministry of external affairs release.
The credit line marks a new phase in India’s economic diplomacy as it looks to boost the global relevance of the Indian rupee in international transactions, and also underlines India’s growing role as a voice of the Global South.
The LOC will be facilitated by the State Bank of India on concessional terms, a significant shift from the traditional reliance on US dollar-denominated loans.
According to the release, the LoC was “a reflection of India’s long-standing commitment to the overall socio-economic development of the Global South.” The focus on rupee-based funding not only strengthens bilateral ties but also reduces reliance on foreign exchange reserves, opening the door for more such agreements with other countries in the Global South.
India and Mauritius share a unique historical and cultural relationship, with over 70% of Mauritius’ 1.2 million people being descendants of indentured Indian labourers brought to the island during the British colonial era.
This relationship blossomed and flourished further after Mauritius gained independence from the British in 1968.
India’s been a consistent support of Mauritius’ claim to the Chagos Islands, a remote but strategically important cluster of islands in the Indian Ocean which the UK also claimed.
This stand was vindicated in early October when following an International Court of Justice Ruling against the British claim in 2019 and growing international pressure, Britain announced it was renouncing it’s claim to sovereignty over the islands except for the tropical atoll of Diego Garcia, used by the US as a base for its navy ships and long-range bomber aircraft.
According to the BBC, “The US-UK base will remain on Diego Garcia – a key factor enabling the deal to go forward at a time of growing geopolitical rivalries in the region between Western countries, India, and China”
Apart from being a significant contributor to Mauritius’ development, financing numerous infrastructure projects that have transformed the country’s landscape, India has also consistently been Mauritius’ “First Responder” in times of crisis.
During the COVID-19 pandemic, India was among the first to supply vaccines and medical aid to Mauritius. Similarly, following the Wakashio oil spill in 2020, India deployed a technical response team and provided crucial equipment to aid in the recovery, underlining the close strategic and humanitarian bonds between the two countries.
In fiscal 2022-2023, bilateral trade reached USD 554.19 million, with India exporting pharmaceuticals, cereals, and other goods to Mauritius, while Mauritius exported vanilla, medical devices, and apparel to India.
Mauritius is also one of India’s largest sources of foreign direct investment (FDI), contributing over USD 167 billion since 2000, thanks largely to the bilateral Double Taxation Avoidance Convention (DTAC).
The Comprehensive Economic Cooperation and Partnership Agreement (CECPA), signed in 2021, further boosted trade between the two nations, making Mauritius India’s first African partner in such a deal. The CECPA has expanded market access for both countries, with exports from India and Mauritius steadily rising since its implementation.
For New Delhi, this agreement marks a significant step in its effort to position itself as a leader of the Global South, championing development cooperation based on mutual respect and shared prosperity.
