India-Maldives

India’s Prime Minister’s participation as the guest of honor at the 60th Independence Day celebrations of the Maldives represents a significant reset in bilateral relations, offering a fresh start after a period of tensions. This visit comes amidst strained ties under the current Maldivian President, largely due to the India Out campaign and derogatory remarks by officials linked to his administration.

Key Outcomes of the Visit

1. Progress on Strategic Partnership:

   • Both nations reviewed the 2024 Economic and Maritime Security Partnership. India reaffirmed its Neighbourhood First policy and the MAHASAGAR policy, emphasizing the importance of closer cooperation in economic and maritime security.

2. Economic & Digital Partnership:

   • India proposed an FTA (Free Trade Agreement) and a Bilateral Investment Treaty (BIT) to open up new avenues for trade and investment.

   • UPI, RuPay card, and local currency trade agreements were signed, reflecting a mutual commitment to enhancing the digital economy and tourism.

3. Financial Support and Infrastructure:

   • India extended a USD 550 million Line of Credit (LoC) for infrastructure development in the Maldives.

   • An Amendatory Agreement on existing LoCs was signed, which reduced the Maldives' annual debt repayment by 40%.

4. Infrastructure and Social Projects:

   • Key infrastructure projects were inaugurated, including roads and drainage systems in Addu City, community development projects, and the construction of 3,300 social housing units.

5. Healthcare & Disaster Support:

   • India provided two Aarogya Maitri Health Cubes (BHISHM) equipped for emergency medical assistance, capable of treating up to 200 casualties.

What Encouraged the Maldives to Recalibrate Ties with India?

Several factors pushed the Maldives to reconsider its previously strained relations with India:

1. Severe Economic Crisis:

   • The Maldives was facing a severe economic downturn, with foreign exchange reserves dropping to USD 440 million, and a downgrade in its credit rating by Moody's due to the risk of debt default.

2. Economic Dependence on India:

   • India is a critical economic partner, with Indian tourists accounting for a significant share of the Maldives' tourism sector. Strained relations had resulted in the loss of USD 150 million in revenue.

   • India also supplies essential goods like food, medicines, and construction materials to the Maldives, reinforcing its economic importance.

3. India's Strategic Role:

   • The historical significance of India in the Maldives’ development and security was acknowledged. India had always been the ‘First Responder’ during crises, such as the 2014 water crisis, Operation Cactus (1988), and the Covid-19 pandemic.

4. Geopolitical Balancing with China:

   • The Maldives' recalibration is an effort to balance relations with both India and China. It allows the Maldives to benefit from India’s support, while still maintaining a diversified foreign policy and engagement with China.

5. Political Realism:

   • Recognizing India’s economic and geopolitical significance, the Maldives is making a strategic recalibration, signaling its desire to protect and strengthen ties with India.

Why is a Reset in India-Maldives Relations Crucial?

For India:

1. Strategic Location:

   • The Maldives sits at a key geopolitical location along major International Shipping Lanes (ISLs) in the Indian Ocean. This is critical for India’s own trade and energy flows, with 50% of India’s external trade and 80% of its energy imports transiting these waters.

2. Countering China’s Influence:

   • The Maldives is essential in helping counterbalance China’s growing presence in the Indian Ocean region. A stable Maldives contributes to the regional maritime stability that India strives to maintain, safeguarding its security interests.

3. Indian Ocean as India’s Strategic Sphere:

   • India considers the Indian Ocean its strategic backyard, and the Maldives plays a pivotal role in ensuring regional maritime stability. Strong bilateral ties are key for India’s strategic goals in the region.

For Maldives:

1. Security Cooperation:

   • India has long been a trusted security provider for the Maldives, notably through Operation Cactus in 1988 to thwart a coup. Regular joint exercises like Ekuverin, Dosti, and Ekatha enhance defense collaboration.

2. Tourism Contribution:

   • Indian tourists form the largest source market for the Maldives, comprising 11.2% of arrivals in 2023. This makes strong ties with India vital for the Maldives' tourism-dependent economy.

3. Education and Cultural Exchange:

   • India is the preferred destination for Maldivian students pursuing higher education. Offering scholarships and access to prestigious institutions strengthens the people-to-people ties.

4. Climate Change Cooperation:

   • Given the Maldives' vulnerability to sea-level rise, cooperation on climate change adaptation and mitigation is essential for both nations, enhancing India's role as a responsible regional power.

5. Disaster Relief and Humanitarian Support:

   • India has been a reliable partner in times of crisis, providing humanitarian aid during the tsunami, water shortages, and the Covid-19 pandemic. This reinforces India’s role as a dependable neighbor.

What Can Be Done to Further Strengthen India-Maldives Relations?

1. Economic & Developmental Cooperation:

   • Expedite the FTA and Bilateral Investment Treaty (BIT) to enhance economic ties.

   • Focus on reducing China’s influence by fast-tracking key projects like the Greater Malé Connectivity Project (GMCP) and developing undersea cable links to boost digital infrastructure.

2. Security & Strategic Collaboration:

   • Enhance maritime security through joint patrols, EEZ (Exclusive Economic Zone) monitoring, and the donation of patrol vessels and drones.

   • Strengthen intelligence-sharing and collaborate through the Colombo Security Conclave to bolster regional security.

3. People-to-People Ties:

   • Engage Maldivian youth and support independent media to counter the India Out narrative.

   • Encourage cultural exchanges, including film collaborations, to deepen ties at the grassroots level.

4. Diplomatic & Political Outreach:

   • Conduct frequent high-level visits and promote Track-II diplomacy through think tanks, academic exchanges, and people-to-people engagement.

   • Ensure sensitive handling of sovereignty concerns, especially around the India Out campaign, and avoid public spats.

Conclusion

The reset in India-Maldives relations is crucial for regional stability, countering China's influence, and fostering mutual economic growth. India must focus on trade, security, and people-to-people ties to solidify its position as the Maldives' trusted partner. By strategically engaging in economic, security, and cultural initiatives, India can ensure long-term cooperation and contribute to the stability of the Indian Ocean region