DAR ES SALAAM India said on Friday it would give Tanzania $180 million to upgrade water supplies in the East African nation, and the two countries agreed to remove tax hurdles and boost bilateral trade.
New Delhi earmarked a further $10 million of aid for the education sector.
The two countries also signed a deal for the construction of a $150 million hospital specialising in heart surgery in Dar es Salaam, helping Tanzania save millions of dollars spent each year sending patients for referral treatment in India.
India is trying to increase its presence in Africa as well as get the continent's support for its bid for a permanent place on the UN Security Council as the body is reformed to include emerging powers and developing nations.
In common with its high-growth emerging Asian rival China, it is also scouring the globe for fresh sources of energy, minerals and food.
Trade between India and Tanzania stood at $1.3 billion in 2010, according to the Indian High Commission.
The two countries also pledged to boost mutual cooperation in the global fight against terrorism and piracy.
(Editing by George Obulutsa, John Stonestreet)