Financing Horizons: India’s Strategic Use of Lines of Credit to Expand Global Trade Footprints.

1. Introduction

A “Line of Credit” (LoC) in India’s economic diplomacy context refers to a concessional credit extended by the Export-Import Bank of India (Exim Bank) (on behalf of the Government of India) to foreign governments, financial institutions or parastatals. These credits are tied to procurement of goods and services from India and thus aim to serve dual goals: 1) facilitating foreign-infrastructure or development projects in partner countries, and 2) creating market access for Indian goods, services, and project-export companies. (MEA India).

With trade dynamics shifting, India has used LoCs as a strategic tool to diversify export markets—especially into Africa, Latin America & Caribbean (LAC), and Southeast Asia—and thereby expand its global trade footprint.

2. Strategic Objectives of India’s LoC Programme

India’s LoC strategy serves multiple objectives:

• Export Market Diversification: By extending credit to markets previously under-penetrated by Indian exporters, LoCs help Indian companies access new geographies.
• Trade Promotion linked to “Make in India” / Export-led Growth: Because LoC conditions require sourcing of goods & services from India (typically minimum 75% Indian origin) the scheme directly drives Indian export volumes. (APN News)
• Economic Diplomacy & Strategic Influence: LoCs build goodwill, deepen bilateral ties, and help India cultivate partners in the Global South—often in competition with other major actors.
• Project-Export Enablement: Many LoCs finance infrastructure, power, transport projects in partner nations which are executed by Indian firms, thereby boosting India’s project export capabilities. (Centre for Financial Accountability)
• Risk Mitigation via Deferred Credit Terms: By offering concessional credit (long tenure, moratorium etc), India helps partner countries import from India in smoother terms—reducing immediate cash-flow constraints for those countries, making Indian exports more attractive.

3. Mechanism & Operational Framework

• The Government of India (GoI) through the Indian Development & Economic Assistance Scheme (IDEAS) authorises the LoC programmes; Exim Bank acts as the implementing agency. (MEA India)
• The LoC contracts typically stipulate: (i) sourcing of goods/services from India (e.g., minimum 75% Indian origin) (Centre for Financial Accountability), (ii) deferred payment terms from the borrowing country, (iii) sector specification (infrastructure, transport, power, agriculture) and (iv) Indian exporters undertake execution of contracts.
• On the trade-export side, Indian companies get contracts funded under these LoCs. Example: As of March 31 2025, Exim Bank listed 293 GOI-supported LOCs with credit commitments aggregating US$ 27 billion. (legacy.eximbankindia.in)
• Regional distribution: According to Exim Bank, as on August 2024, India had extended 196 LoCs worth US$12 billion to 42 African countries; Latin America & Caribbean (LAC) region LoCs were about US$ 811 million. (MEA India)
• Terms: The concessional nature is emphasised—interest lower than commercial market, longer repayment tenure, sometimes grace period. (casi.sas.upenn.edu)

4. Impact on India’s Trade Footprint

4.1 Market Diversification & New Export Streams

• With LoCs, Indian exporters gain access to non-traditional markets in Africa, Latin America, Southeast Asia and the Caribbean. For instance, trade with Latin America & Caribbean doubled over a decade (to about US$ 36 billion by 2017) and was flagged as a “huge opportunity” by Exim Bank. (Business Standard)
• Example: Exim Bank’s LATAM office and 2025 press release noted that bilateral merchandise trade between India and Brazil increased from US$ 9.9 billion in 2013 to slightly more than US$ 13 billion in 2023. (legacy.eximbankindia.in)
• LoCs in Africa are significant: According to an older estimate (2014), India had extended 129 LoCs worth US$ 6,186 million to Africa—about 61% of total value at that time. (casi.sas.upenn.edu)

4.2 Project-Exports & Indian Industry Gains

• Projects financed under LoCs (railways, power plants, irrigation, ports) are executed by Indian firms. Example: Angola, DR Congo, Zambia projects held under LoCs for railway rehabilitation, hydro-electric power, manufacturing. (Exim Bank)
• These project-exports drive demand for Indian goods (machinery, transport equipment, electrical goods) and generate employment in India’s export industries.

4.3 Strategic Trade & Supply Chain Positioning

• By financing infrastructure in partner countries, India strengthens trade corridors and logistical links which indirectly benefit Indian exporters—e.g., better transport networks in Africa mean smoother imports from India.
• Geopolitical advantage: LoCs help secure Indian strategic interests (energy, minerals) in partner regions, helping secure upstream supply chains and raw-material access. (While not always publicly documented, there is analysis suggesting this linkage.) (Reddit)

5. Country/Regional Case Studies & Data Highlights

• Africa (West Africa / SADC): For example, as on January 31 2012, Exim Bank had 106 operative LoCs valued at US$ 4,203 million covering over 40 African countries. (Exim Bank)
• Latin America & Caribbean (LAC): As on March 31 2023, 32 operative LoCs amounting to US$ 801.7 million in LAC region covering 6 countries (Bolivia, Cuba, Guyana, Honduras, Nicaragua, Suriname) under Indian assistance. (alide.org.pe)
• Mauritius: Example of a US$ 100 million LoC (Feb 2021) by Exim Bank to Mauritius for defence/infrastructure procurement from India. (India Brand Equity Foundation)
• Risk & Losses: A cautionary data: Some LoCs have turned into non-performing assets (NPAs). For example, in Feb 2024, the Government of India provided Rs 9,013.72 crore to Exim Bank after invocation of guarantee on old loans to some African countries. (The Indian Express)

6. Challenges and Risks

• Default / Credit Risk: Some partner countries have poor debt servicing capacity; LoCs thus carry risk of non-repayment, as shown by NPAs to Exim Bank.
• Concentration of Contracts: In some sectors/regions the benefits are captured by a few Indian companies. For example, a 2015 Indian Express report flagged that a large number of Africa-LoC contracts went to few firms. (The Indian Express)
• Market Viability & Export Benefit: While LoCs guarantee sourcing from India, the actual increase in Indian exports may be less than the full credit amount because of prerequisites, execution delays, or non-Indian sourcing under exceptions.
• Opportunity Cost and Subsidy Burden: Concessional terms (low interest, long tenure) imply cost/subsidy for India; the sustainability and commercial return of these LoCs is subject to debate.
• Geopolitical & Implementation Risk: Political instability, change in government in borrowing country, currency risk, project execution delays, logistic/regulatory bottlenecks reduce effectiveness.
• Measurement of Export Impact: Quantifying how much additional export volume is generated directly by LoCs is challenging; attribution is not always clear.

7. Policy Recommendations

• Strengthen Risk Assessment & Monitoring: Enhance due diligence on borrowing countries, monitor debt-servicing metrics, include exit/recall clauses, robust guarantee mechanism.
• Broaden Exporter Base & SME Inclusion: Ensure benefits of LoCs reach a broader set of Indian exporters rather than few large contractors; include SMEs in supply chains for LoC-funded projects.
• Linkage with “Atmanirbhar Bharat” / Supply-chain Strategy: Prioritise LoC sectors/goods where India has export strength (engineering goods, rail, telecom, renewable energy) and that complement Make in India.
• Transparency & Data Analytics: Maintain publicly accessible datasets: number of contracts executed, India-export value generated, sectors leveraged, repayment status.
• Regional Prioritisation & Trade Corridor Building: Use LoCs not just for isolated projects but as part of broader trade-corridor development (ports, logistics, connectivity) that facilitate Indian exports.
• Better Commercialisation & Sustainability: While concessionality is needed, design some LoCs with partial commercial terms (blended finance) to ensure sustainability and reduce burden on exchequer.
• Exit & Guarantee Mechanism Refinement: Strengthen guarantee redemption fund, ensure timely invocation when default arises, minimise fiscal burden on India.
• Integration with Export Finance Ecosystem: Tie LoC conditions to ex-export finance instruments (buyer’s credit, export credit insurance) to create smoother ecosystem for Indian exporters in those markets.

8. Conclusion

India’s Lines of Credit represent a strategically significant instrument of trade diplomacy and export promotion. Through LoCs, India finances infrastructure in partner countries, thereby creating demand for Indian goods & services, deepening trade ties, and diversifying export destinations. While the scale is considerable—over US$ 30 billion extended globally (various sources)—the actual export outcome, risk management, and inclusive participation remain critical areas. With proper risk mitigation, broader exporter inclusion, data transparency, and linking LoCs with trade-and-supply-chain strategy, India can leverage this tool more effectively to expand its global trade footprint and strengthen its position in emerging markets.