Apart from this the two countries signed atleast four other agreements to deepen their bi-lateral ties.
Prime Minister Narendra Modi, who concluded his four-day Africa tour on Sunday, said his government would consider giving Tanzania a $500 million (nearly Rs 3326.38 crore) loan to finance water projects in the east African nation.
India and Tanzania signed several agreements, including a loan of $92 million (nearly Rs 612.1 crore) for water projects in Tanzania's semi-autonomous Zanzibar islands.
Modi said his government was ready to offer additional financing for other water projects in east Africa's second-biggest economy.
"India is willing to consider an additional $500 million line of concessional credit," Modi said at a joint news conference with Tanzanian president John Magufuli in Tanzania's commercial capital, Dar es Salaam.
"President Magufuli and I agreed to deepen India-Tanzania ties in agriculture, food security, trade, natural gas and other vital sectors."
Tanzania announced in February it has discovered a possible additional 2.17 trillion cubic feet (tcf) of natural gas in an onshore field, raising its total estimated recoverable gas reserves to more than 57 tcf, which it is aiming to exploit.
Tanzania and India also agreed to boost cooperation in health, education, industry and information and communications technology.
Modi, on an African tour, arrived in Tanzania late on Saturday from South Africa and was also due to visit Kenya on Sunday.
Tanzanian president's office said in March the country expects to receive a total of $380 million (nearly Rs 2,528.05 crore) in loans from India to finance two major water projects in Dar es Salaam and elsewhere.
Dar es Salaam, where the authorities expect the population to more than double to 10 million people in 15 years, generates more than 40% of Tanzania's GDP.
However, the city suffers from both flooding and scarcity of water supplies, and insect-borne diseases.
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