Mauritius launched the first phase of a $525 million light rail system on Thursday, hoping to cut traffic jams with the Indian Ocean island's biggest infrastructure project.

Mauritius has long relied on tourism for public revenue and employment, but the authorities are trying to woo investors in other sectors including finance to diversify the economy and make it more resilient.

The railway's first stage of 13 km inaugurated by Prime Minister Pravind Kumar Jugnauth will connect Rose Hill, a town in the central part of the island, to the capital Port Louis.

When completed, the 26 km (16-mile) route will connect Curepipe, a town in central Mauritius, to the capital Port Louis. It is expected to have 19 stations and four interchanges.

"This is the biggest project ever undertaken in our country," Jugnauth said at the launch ceremony, which Indian Prime Minister Narendra Modi attended via video conference.

The network is being built by Indian firm Larsen and Toubro and funded by an Indian government grant of $275 million and a $250 million line of credit.

Metro Express Ltd, the Mauritian firm supervising the construction of the line, says it expects it to be profitable by 2022.

It is expected that the light rail system will be used by some 55,000 people daily when it is fully operational.