India – Maldives Bilateral Relations

Recently, Prime Minister Narendra Modi and Maldives President Mohamed Muizzu met in New Delhi to review and strengthen their historically close bilateral ties. 

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• Maldivian President Mohamed Muizzu is currently on a significant five-day state visit to India from October 6 to 10, 2024. This visit marks his first bilateral trip to India since taking office.
• The visit assumes significance, as ties between the two countries took a hit as Muizzu came to power on an “India Out” campaign.

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Key Highlights of the Meet

• Agreement: The Reserve Bank of India and the Maldives Monetary Authority have signed a $400 million swap arrangement and an additional ₹3,000 crore ($357 million) under the SAARC Currency Swap Framework, valid until 2027. 
  • This agreement allows payments between the two countries in different currencies.
  • The currency swap agreement is aimed  to help Maldives tide over its current foreign currency crunch.

• Comprehensive Economic and Maritime Security Partnership: India and Maldives agreed to transform the bilateral relationship to a “Comprehensive Economic and Maritime Security Partnership.
• Initiation of Free Trade Agreements Negotiations: The two countries have agreed to initiate negotiations for a Free Trade Agreement (FTA).
• Rollover of T-bills:  India has extended crucial financial support to the Maldives by rolling over a $50 million Treasury Bill for another year.
• Launch of RuPay Card in the Maldives: By introducing the RuPay card, India aims to facilitate financial transactions for Indian tourists, supporting the recovery of Maldives’ tourism sector.
• Handover of Houses: India handed over 700 houses built with its assistance.
• Pacts Signed: Signed pacts including training of judicial officers, prevention of corruption, law enforcement training, sports and youth affairs.
• Airport Runway: The jointly constructed runway at Hanimadhoo Island for international air traffic was inaugurated.
• Coast Guard Support:  Hoping to revive defence and security cooperation, India decided to refit and repair a Maldivian Coast Guard vessel that it had gifted some years ago.
• Requests from Maldives: For debt repayment waivers and additional credit lines.
  • Maldives President expressed hope for the return of Indian tourists, whose numbers have halved following a social media boycott campaign in India.

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Importance of Maldives for India

• Strategic Location: Situated in the Indian Ocean, Maldives is positioned along crucial Sea Lanes of Communication (SLOCs) that facilitate maritime trade between the Gulf of Aden, Gulf of Hormuz, and the Strait of Malacca.
  • Approximately 50% of India’s external trade and 80% of its energy imports pass through these SLOCs in the Arabian Sea.
• Regional Stability: The Maldives is recognized as vital for peace and stability in the Indian Ocean, with India as an important partner in maritime security. 
• Shared Challenges: Both countries acknowledge shared challenges such as terrorism, drug trafficking, and piracy, fostering a collaborative strategic landscape.
• SAGAR and Neighbourhood FIrst Policy: It is an important component  in India’s vision for Security and Growth for All in the Region (SAGAR) and Neighbourhood First policy. 
  • A politically and economically stable Maldives aligns with India’s “Neighbourhood First” policy.
• Member of Groupings: Maldives is a member of the South Asian Association for Regional Cooperation (SAARC) and the South Asia Subregional Economic Cooperation (SASEC).

Importance of India for Maldives

• First Responder of Maldives: India has consistently been the first responder in times of crisis for the Maldives. 
  • Example: India was the first to assist Maldives during the 2004 Tsunami as well as the water crisis in Malé in Dec 2014.
  • India’s swift dispatch of 30,000 doses of measles vaccine in Jan 2020 to prevent an outbreak in the Maldives.
  • During Covid-19, Maldives was the first foreign recipient of a vaccine from India to fight the pandemic. 
• Net Security provider: In 1988, under Operation Cactus the Indian Armed Forces helped the Government of Maldives in the neutralisation of the coup attempt.
• Development Efforts: India has been providing LIne of Credit (LOC) to Maldives for various developmental projects like Addu Development Project (Roads and Land Reclamation), Gulhifalhu Port project, Hulhumalé Cricket Stadium, Greater Male Connectivity Project etc.
• Trade Relations: India emerged as Maldives’ 2nd largest trade partner in 2022 & the largest in 2023. 
• Tourism Revenue: In 2023, Indians constituted the largest group of tourists visiting the Maldives, with over 200,000 travellers making the journey.
• Indian Diaspora: Indians are the second largest expatriate community in Maldives.

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Challenges in India-Maldives Bilateral Relations

• Shift in Alliances: Changes in government in the Maldives can lead to shifts in foreign policy and priorities, impacting the consistency of bilateral relations. For example, the recently elected President Mohamed Muizzu, who is believed to have a Pro China Stance.
• Perception of Indian Influence: In the Maldives, there is an increasing belief that India’s influence in local affairs is excessive, leading to heightened anti-Indian sentiments among some groups.
  • Example: The “India Out” campaign in Maldives politics has branded Indian presence as a threat to the country’s sovereignty in recent years.
• China’s Influence: China’s growing influence in the Maldives through investments and infrastructure projects poses a challenge for India. Example: Maldives became a participant in China’s Belt and Road Initiative (BRI).
  • India’s “Neighborhood First” policy aims to counterbalance China’s increasing presence.
• Security Concerns: The Maldives is susceptible to threats like terrorism and piracy, necessitating robust security cooperation. 
  • However, differing approaches to security, particularly regarding foreign military presence, can lead to friction.
• Infrastructure Project Delays: Delays in the completion of Indian-backed infrastructure projects, such as the Greater Malé Connectivity Project, can lead to frustration within the Maldivian government and public, straining relations further.
• Tourism Challenges: The tourism sector in the Maldives has been strained by a diplomatic dispute following derogatory comments aimed at the Indian Prime Minister during his visit to the Lakshadweep Islands, resulting in a social media trend to boycott the Maldives.

Way Forward For Improving India and Maldives Relations

• Promoting Economic Collaboration: India should emphasise a development-oriented approach with Maldives by prioritising infrastructure projects and enhancing economic cooperation. Example:
  • India’s High Impact Community Development Project (HICDP) should focus on creating employment opportunities for the youth.
  • Fast-tracking of the Greater Malé Connectivity Project, Collaborate to develop a state-of-the-art commercial port at Thilafushi to decongest Malé port. 
  • Maldives should remain aware of China’s “debt trap” policy, as seen in Sri Lanka, and work proactively to avoid similar pitfalls in its foreign relations.
• Strengthening Defence Cooperation: Enhance joint military exercises such as “Ekuverin”, “Dosti” and “Operation Shield.
  • The ongoing “Ekatha” harbour project at Uthuru Thila Falhu (UTF), supported by India, will significantly enhance the operational capabilities of the Maldives National Defence Force (MNDF). 
  • Strengthening of the Trilateral Maritime Security Cooperation between India, the Maldives and Sri Lanka 
• Enhancing Health Cooperation: Work towards the recognition of the Indian pharmacopoeia by the Maldivian government and establish India-Maldives Jan Aushadhi Kendras to supply affordable, quality generic medicines.
• Trade Cooperation: Both countries should initiate discussions on a Bilateral Free Trade Agreement focusing on trade in goods and services.

• • Operationalize the settlement of trade transactions between India and Maldives in local currencies with an aim to deepen trade linkages and to reduce dependency on foreign currencies.
• Regional Cooperation: Actively engage in South Asian Association for Regional Cooperation (SAARC) and Indian Ocean Rim Association (IORA) meetings to address regional issues such as piracy, IUU (illegal, unreported and unregulated) fishing, drug smuggling and terrorism etc
• Reaffirming Colombo Security Conclave: Strengthening the recently signed Colombo Security Conclave will enhance collective efforts in maritime security, foster regional cooperation.

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Conclusion

The recent visit marks a crucial moment in India-Maldives relations, with both leaders focused on infrastructure and economic recovery. As the Maldives faces economic challenges, India’s partnership remains vital for strengthening bilateral ties.

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