India and the Maldives appear to be resetting their relationship following recent high-level talks and partnership agreements. During Maldivian President Mohamed Muizzu’s visit to New Delhi, both nations signed a US$400-million currency swap agreement, allowing business transactions in local currencies rather than US dollars. India also committed to further support by rolling over US$100 million in treasury bills and investing in developing a commercial port at Thilafushi Island, easing shipping congestion for the archipelago nation.
This renewed partnership is pivotal, especially given the history of tense relations between the two countries in recent years. During his election campaign, Muizzu had adopted an "India Out" stance, raising concerns over India’s influence in the Maldives. Additionally, China has been increasing its presence in the Indian Ocean region, particularly through ties with the Maldives under previous President Abdulla Yameen, heightening Delhi’s strategic concerns. Despite these challenges, India exercised what many analysts describe as “strategic patience,” choosing continued engagement with the Maldives over retaliation, which seems to be paying off.
Indian Prime Minister Narendra Modi underscored the importance of the relationship by stating, "India has consistently acted as the first responder for the Maldives," emphasizing the vision of a Comprehensive Economic and Maritime Security Partnership. This includes further collaboration on economic development, defense cooperation, and infrastructure projects such as the construction of a high-tech Maldivian defense ministry building in Malé. The Maldives, with its thousands of islands scattered across a vital shipping route, remains a key strategic partner for India in the Indian Ocean.
Analysts argue that both countries’ renewed cooperation is a mutual recognition of the strategic and economic benefits they bring to each other. While China continues to build ties with the Maldives, particularly in areas of military assistance, India’s economic aid and infrastructure investments are crucial for the cash-strapped nation. This growing economic interdependence, coupled with increased defense collaboration, signals a positive shift in bilateral ties.
The Maldives has been facing severe economic challenges, including dwindling foreign exchange reserves that currently only cover around one-and-a-half months of imports. India’s financial backing could help stabilize the Maldives' economy, boosting its domestic tourism industry and enhancing regional security in the Indian Ocean. Both nations have also taken steps to ease diplomatic tensions by agreeing to establish consulates in key locations like Bengaluru and Addu City, facilitating greater trade and travel between the two nations.
India’s middle class has played a significant role in the Maldives’ tourism recovery post-pandemic, solidifying India as a crucial partner for its neighbor. The strategic patience displayed by India in cultivating ties with the Maldives is now proving fruitful as the two nations begin to rebuild and strengthen their relationship.
What you should be taking away:
India and the Maldives have signed a US$400-million currency swap agreement, with additional financial support from India to boost the Maldives’ economy.
Both countries have committed to enhancing defense cooperation in the Indian Ocean, including building strategic infrastructure in Malé.
India’s strategic patience in maintaining ties, despite challenges, has paved the way for a renewed bilateral relationship, while China’s influence continues to be a factor in the region.
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