Abstract: Ethiopia is one of the few countries in Africa with whom India has enjoyed a long standing partnership in development cooperation. In 2006, India provided a US$ 640 million line of credit to Ethiopia for development of its sugar industry. In this paper, we analyse the impact of India’s line of credit (2007-12) on Ethiopian sugar industry. We find that on completion of the ongoing projects Ethiopia would be able to produce 1.6 million tonnes of sugar per year. This will lead Ethiopia towards self-reliance in sugar production and by the end of 2015 the country will be a net exporter of sugar. We also find that estimated economic gain from sugar and ethanol production in Ethiopia would be close to US$ 961 million per year. Based on field visits, we have explored several practical challenges to India’s endeavour like inadequacy of appropriate mechanisms for monitoring and verification of the project. This leads to delays, information gaps and coordination failures in project implementation. India’s engagement in Ethiopia’s sugar sector signifies a major boost for the agriculture value chain in Ethiopia; and the ancillary support for railway tracks building is likely to play an important role in facilitating port connectivity and exports.