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India announces $500 million for Maldives’

Published: 17th Aug, 2020

  • Even as the Covid-19 crisis strained its own economy, India has loosened its purse strings and pledged a new financial package of $ 500 million to support an infrastructure project in the Maldives – ostensibly to counter China’s attempts to spread its geo-strategic influence over the Indian Ocean nation.


  • Even as the Covid-19 crisis strained its own economy, India has loosened its purse strings and pledged a new financial package of $ 500 million to support an infrastructure project in the Maldives – ostensibly to counter China’s attempts to spread its geo-strategic influence over the Indian Ocean nation.


  • The amount announced to help Maldives connect the capital Male to three nearby islands, stepping up New Delhi's diplomatic efforts in a region China has also been focusing recently.
  • The Greater Malé Connectivity Project (GMCP) will get a financial package consisting of a grant of $ 100 million and a new Line of Credit of $ 400 million from New Delhi.
  • Besides this mega project, Delhi also announced the launch of cargo ferry services and air travel bubble between the two nations.
  • Given the financial challenges faced by Maldives due to the Covid-19 situation and India’s commitment to assist Maldives in its economic recovery, Delhi also extended in-principle urgent financial assistance to Male by way of a soft loan arrangement.
  • This is the first financial assistance announced by GoI to any country to deal with Covid-19 pandemic. This assistance will help the Maldives government tide over the financial crisis till their main revenue earners like tourism and fisheries exports return to normal.
  • These announcements were made by Foreign Minister S Jaishankar during a virtual meet with his Maldivian counterpart Abdulla Shahid.

Other development in relations

  • The bilateral engagement confronted numerous challenges after the first democratically elected government of the Maldives led by Mohamed Nasheed collapsed in 2012. Since then the country’s political instability has challenged overall security of the Indian Ocean by increasing radicalisation —over 200 Maldivians reportedly joined the Islamic State —and by the granting of non-transparent permissions for foreign investment.
  • Relations after Yameen government: Bilateral ties improved after the September 2018 elections ended the Abdulla Yameen government. Ibrahim Mohammed Solih, leader of the Maldives Democratic Party (MDP), was elected President with the support of a coalition.
  • The change of government in the Maldives allowed both countries to positively redefine bilateral relationships, as indicated by high level visits. Modi visited the Maldives in September 2018 while Solih made a state visit to India in December 2018. Statements made during the visits underscore the importance of enhancing bilateral relations in trade, energy, security, connectivity, socio-economic developments and cooperation in regional and multilateral forums.
  • Financial assistance: US$4 billion of financial assistance was announced by India for socio-economic development programs in Maldives in an attempt to improve relations. India also announced a US$800 million line of credit to finance infrastructure projects during the visit of External Affairs Minister Sushma Swaraj to the Maldives in March 2019. India’s aid to the Maldives increased from Rs 125 crore (US$18.1 million) in 2018–19 budget to Rs 575 crore (US$83.3 million)in 2019–20.
  • Visa facilitation agreement: came into force in March 2019 to boost people to people contacts. Other important agreements include implementation of high-impact community development projects through local bodies and collaboration in energy efficiency, renewable energy, information and communications technology, and electronics.
  • India first policy: Solih is speaking of an ‘India first’ policy while India is promoting a ‘neighbourhood first‘policy. While these appear mutually agreeable, the challenge lies in implementing them, understanding each other’s security and strategic concerns and providing room for dialogue to address those concerns.
  • India’s assistance in setting up a Coastal Surveillance Radar System and participating in the second Defence Cooperation Dialogue in January 2019 aims at cooperation on maritime security and counter terrorism.
  • The Trilateral Maritime Agreement between India, Sri Lanka and the Maldives is in place and trilateral military exercises are held on a regular basis.
  • But to achieve greater results, both countries need to enhance regional cooperation by using common platforms such as the Indian Ocean RIM Association and the Indian Ocean Naval Symposium. Collaboration through the South Asian Association for Regional Cooperation is stalled due to India–Pakistan tensions.

Significance of Maldives for India

  • Strategically located in the Indian Ocean, Maldives archipelago comprising 1,200 coral islands lies next to key shipping lanes which ensure uninterrupted energy supplies to countries like China, Japan and India.
  • Since China started to send naval ships to Indian Ocean roughly 10 years ago — and right up to Gulf of Aden in the name of antipiracy operations — Maldives' significance has steadily grown and now it's at the heart of international geopolitics.
  • As the pre-eminent South Asian power and a 'net security provider' in the Indian Ocean region, India needs to cooperate with Maldives in security and defence sectors.
  • Maldives is also a member of SAARC. It is important for India to have Maldives on board to maintain its leadership in the region. Maldives was the only SAARC country which seemed reluctant to follow India's call for boycott of SAARC summit in Pakistan after the Uri attack.
  • Under Yameen, radicalisation grew rapidly and it was often said that archipelago accounted for one of the highest numbers of foreign fighters in Syria in terms of per capita. India can ill-afford a neighbour which fails to check religious radicalisation.
  • India and Maldives share ethnic, linguistic, cultural, religious and commercial links. India was among the first to recognise Maldives after its independence in 1965 and later established its mission at Malé in 1972.
  • There are 25,000 Indian nationals living in Maldives (second largest expatriate community). Indian tourists also account for close to 6% of tourists Maldives receives every year.
  • India is also a preferred destination for Maldivians for education, medical treatment, recreation and business. According to MEA, more and more Maldivians are seeking long term visa for pursuing higher studies/medical treatment in India.

China and India exerting influence

  • The Maldives’ reliance on China to develop more than US$2.5 billion in infrastructure projects and the resulting accumulation of foreign debt— 40 per cent of the country’s GDP of US$4.866 billion in 2017— is a concern for India.
  • The Maldives supports the Belt and Road Initiative (BRI) and its debt payment to China alone is close to US$3.4 billion. India is also concerned about any possible future use of civilian facilities for military purposes by China.
  • The popular tourist destination has become a focal point for the world's two most populous nations, particularly in the wake of China's Belt and Road Initiative aimed at improving trade and transport links.
  • India and the West accused China of saddling countries, such as the Maldives, with unsustainable debts while tightening its grip in the region.
  • New Delhi has sought to regain influence in the Maldives since President Ibrahim Solih assumed power after defeating pro-China strongman Yameen in nationwide elections two years ago.
  • Yameen was subsequently convicted of money laundering and sentenced to five years in prison, with his jail-term beginning in February of this year. He was found guilty of awarding construction contracts to Chinese companies at inflated prices.


India–Maldives relations under Maldivian President Ibrahim Mohammed Solih started well. But sustaining the positive momentum will require hard work given complicated domestic politics, external relations and strategic interests.

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