Narendra Modi greets Voreqe Bainimarama upon his arrival at Nausori International Airport, near Fiji's capital city Suva, on Wednesday. Modi is in the Pacific nation for a three-day visit.

Reuters/Suva

Indian Prime Minister Narendra Modi on Wednesday pledged a multi-million dollar line of credit for Fiji's struggling sugar industry, once worked by thousands of indentured labourers from India under appalling conditions.

Sugar was the mainstay of the island economy under British colonial rule before falling into disarray during decades of political upheaval and racial tension between the descendants of early cane field workers and indigenous Fijians.

Sugar growers have long relied on European subsidies to operate and production is dwarfed by that of neighbouring Australia.

India will provide a $70mn line of credit to build a co-generation power plant at a sugar mill, Modi said in an address before the Fiji parliament. He was invited to speak by President Voreqe Bainimarama, a retired naval officer who twice seized power in coups before being voted in after a general election in September.

"Let us create an ocean of opportunity marked with a new horizon and a new era," Modi said in rousing address to parliament while supporters clapped and chanted his name outside.

Modi is only the second Indian prime minister to visit Fiji, despite Indians making up 40% of the population. The first was Indira Gandhi in 1981.

The visit by Modi comes as Bainimarama looks to broaden Fiji's influence in the South Pacific.

"For Modi, this is really another example of reaching out to the Diaspora, while Bainimarama wants to demonstrate Fiji's role in directing South Pacific policies," said Jenny Hayward-Jones, Melanesia programme director for Sydney-based think tank Lowey Institute.

In 2000, ethnic Fijians held the first Indo-Fijian prime minister, Mahendra Chaudhry, hostage in parliament, where rebels beat his son and amassed a weapons arsenal pilfered from the military. After being released, Chaudhry tried unsuccessfully to reclaim his office.

Chinese President Xi Jinping will visit Fiji on Friday, seen as little more than a whistle stop after stopping in New Zealand to discuss tourism opportunities for Chinese vacationers.

"Fiji doesn't have that much to offer China," said Wayward-Jones. "In the South Pacific, China has much stronger interest in Papua New Guinea because of the vast natural resources it holds."

Both Modi and Xi are returning home from a G20 economic summit in Australia this week.