India is Becoming a Tougher Challenge for China in $$$ Diplomacy

India is fast catching up with China in terms of Line of Credit. Modi govt seems to be the prime catalyst of this changing dollar diplomacy.

The Export-Import Bank of India (Exim Bank), in a recently released statistic, states that India has doubled its Line of Credit (LoC) from 10 billion USD to 24.2 billion USD in last three years.


Since May 2014, 52 LoCs have been granted and 21 more are in pipeline. India’s fast pace in providing LoC has seen a steady growth under Modi regime and is believed to soon catch up with neighbour China. Exim bank is responsible for extending financial support for export of projects, equipment, goods & services from India to other countries.

Of the total sum of LoC extended to all the countries in the last 15 years, 54% or USD 13 bn has been offered since the Modi Government came into power. These LOCs not just shows India’s rising international stature but also shows its improving relations with new nations.

However, a closer look at the data unveils a different story. Perhaps it is the new strategy of Modi-led government to give larger LoCs to fewer countries than many LoCs to many countries unlike UPA government.


For instance, India has signed 18 projects in Africa amounting to 1.5 bn USD with major portions going to Mauritius and Tanzania. Another major chunk of the LoC pie, i.e $7.86 bn has been given out to Bangladesh.

Modi’s Endeavour to Make LoC Corruption Free:

India’s major concern is the number of projects in the pipeline for years. As many as 29 deals remain unsigned, of which 21 belongs to Modi government. The possible reason for this maybe the country’s faulty guidelines which are being put to check. The country had lately earned a bad name in project delays and corruption over a period of time.

IDEAS (Indian Development & Economic Assistance Scheme) guidelines govern LoCs and were revised by BJP-led government in 2015 and will remain so till 2019. In the past, most of the contracts in developing countries (especially African countries like Sudan and Nigeria), were taken up by 5–6 Indian companies who had successfully lobbied and build good relations. These companies often lacked expertise and therefore had no clear Feasibility reports. Moreover, there was no mechanism to check and evaluate the tender reports submitted by these companies.

The new guidelines set by BJP government, however, makes it mandatory for willing companies to submit Detailed Project Report (DPR) with project proposal. It is then followed by a Pre-Qualification (PQ) exercise to identify competent and experienced companies capable of implementing projects. EXIM bank in a bid to make LoC implementation more effective has empanelled as many as 117 firms as EPC contractors in varied sectors.

The New IDEAS guidelines also classify LoC recipient countries. The rate of interest of concessional loans will henceforth depend on the levels of development and income of countries.

India shifts focus to Infrastructure and Defence:


India with its focus on key infrastructure projects has successfully taken up two such endeavours in Africa — National Assembly building complex in Gambia and Presidential office in Ghana. MEA’s Development Partnership Administration (DPA) has completed 20 major ventures in last two years and also curbed down the malpractices present in Country’s African undertakings.

Another major shift in India’s foreign credit policy is stepping into Defence sector. Till date, 1.2 bn USD worth LoC has been extended to countries like Vietnam, Bangladesh, Sri Lanka and Mauritius. Other countries like Africa, SE Asia and Latin America have been seeking help too. It is expected that with new policies and guidelines, India will soon be at par with China’s and make its presence felt in the Global market.

We must also note that 7 bn USD to neighbouring country remains unmatched to the amount China is sinking in the country, i.e, 24 bn USD.

China’s investment in continents like Africa is more than the French, British and Indian investment combined. The Chinese companies are expected to earn 440 bn USD revenue from African continent alone.