Maldives to launch India’s RuPay: How relations between the two nations are getting back on track

The Maldives has decided to launch India’s RuPay service soon. While a date has not been announced yet for the same, a senior minister of the Mohamed Muizzu-led government has said the move “will bolster the Maldivian Rufiyaa.”

The development comes amid strained bilateral ties between India and the Maldives. However, the two countries have been attempting to mend the relations after the initial flare-up in January this year.

Let’s take a look.

How ties have been improving

The ties between India and the Maldives appear to be returning back on track.

Maldivian minister of economic development and trade Mohamed Saeed recently talked about the introduction of India’s RuPay in his country. This came up while he was discussing how India and China have agreed to use local currency in bilateral trade, reported PTI.

Speaking to state-run PSM News this week, Saeed said the “upcoming launch of India’s RuPay service is anticipated to further bolster the Maldivian rufiyaa (MVR)”.

RuPay is a global card payment network launched by the National Payments Corporation of India (NPCI).

As per PTI, Saeed stated that the card will be formally used for Rupee-denominated transactions within the Maldives.

A thaw in relations was visible when Maldivian foreign minister Moosa Zameer visited India from 8-10 May. During his official trip, India announced the rollover of a $50 million Treasury Bill for another year through the State Bank of India, extending crucial budgetary support to the Maldives government.

Extending gratitude to External Affairs Minister (EAM) Dr S Jaishankar, Zameer said on X at the time, “I thank EAM @DrSJaishankar and the Government of India for extending vital budgetary support to the Maldives with the rollover of $50 million Treasury Bill. This is a true gesture of goodwill which signifies the longstanding friendship between Maldives and India.”

The Indian government’s decision came following the Maldivian foreign minister’s request.

EAM Jaishankar said during Zameer’s New Delhi visit that India’s relations with Maldives rely on “mutual interests” and “reciprocal sensitivity”.

“The world is today passing through a volatile and uncertain period. In such times, as we saw during COVID, natural disasters and economic difficulties, close partnerships with neighbours are of great value…It is in our common interest that we reach an understanding on how best we take our relationship forward,” Jaishankar said, as per The Hindu.

Commenting on his meeting with Jaishankar, Zameer said, “We reflected on our long history of bilateral partnership shared by mutual respect and understanding.”

He was the first high-level official from Maldives to visit India since President Mohamed Muizzu came to power last November.

In April, India permitted limited exports of essential items like sugar, wheat, rice, and onions to the Maldives. This came despite New Delhi’s curbs on shipments of these food commodities to rein in the domestic prices.

The export of these commodities to the Maldives in the 2024-2025 financial year that began on 1 April “will be exempted from any existing or future restriction/prohibition on export,” the Indian government said in a notification last month, as per Reuters.

Amid growing tensions between New Delhi and Male, Muizzu said on 13 January, after returning from his five-day visit to China, that the Maldives “may be a small island nation, but that does not allow others to bully” the country.

Apparently referring to India, he had said the Maldives “is not in anyone’s backyard”.

The Maldivian president has since then toned-down his approach.

Extending wishes on India’s 75th Republic Day on 26 January, President Muizzu, who is widely seen as a pro-China leader, recalled “centuries old friendship” between the two nations built on “mutual respect and a deep sense of kinship”.

In his first interview since taking charge in November last year, Muizzu had said in March that India would remain the Maldives’ closest ally, adding there was no question about it.

In contrast to his earlier hard-line stance, he said, “Everything can be achieved through discussions and deliberations. That’s what I believe.”

Why did relations sour?

A social media scuffle triggered a diplomatic row between India and the Maldives in January.

It all started when three Maldivian officials made derogatory remarks about India and Prime Minister Narendra Modi after he posted photos and videos of the Lakshadweep Islands on his X account on 6 January.

Their remarks created an uproar in India, with social media users launching a ‘Boycott Maldives’ campaign. While the Muizzu government jumped in to salvage the situation by sacking the three officials, relations had soured by then.

The Maldives’ tourism was hit due to the rift between the two countries as the number of Indians travelling to the island country declined.

Underlining the historical ties between the two nations, Maldivian tourism minister Ibrahim Faisal told the news agency PTI, “We have a history. Our newly elected government also wants to work together (with India). We always promote peace and a friendly environment. Our people and the government will give a warm welcome to Indian arrivals. As the Tourism Minister, I want to tell Indians to please be a part of Maldives’ tourism. Our economy depends on tourism.”

India is one of the biggest sources of tourism for the Indian Ocean nation, whose economy relies heavily on the sector.

Muizzu, who rode to power on an ‘ India Out’ poll campaign, had vowed to remove a contingent of dozens of Indian military personnel from the island country.

The presence of these troops emerged as a big bone of contention between the Muizzu-led Maldivian government and New Delhi.

India withdrew all its soldiers from the Maldives ahead of the 10 May deadline set by President Muizzu. According to the Maldives government, 89 Indian soldiers were present in the island nation.

The Indian troops operated and maintained two helicopters and Dornier aircraft gifted previously by India to the Maldives.

Why Maldives can’t ditch India

India has always been a “first responder” to the Maldives in times of crisis. From development projects to financial assistance packages, New Delhi has a big stake in the island nation.

As per a Businessline report, India earmarked Rs 400 crore of grants to the Maldives in the current fiscal year. This amounts to 1.5 per cent of Maldives’ budget for the financial year 2024.

The trade between the two countries is also robust, with India emerging as Maldives’ largest trading partner in 2023.

In November 2022, New Delhi provided financial assistance of $100 million as budgetary support to help ease the financial challenges faced by the archipelago.

While the Maldives under President Muizzu has been moving away from India and shifting towards China, it cannot completely ditch its long-term partner New Delhi. Both countries need each other.

However, Muizzu is still firm on decreasing the island nation’s dependence on New Delhi.

“Although President Muizzu is signalling a return to normalcy in Maldives’ bilateral equation with India, as compared to his campaign rhetoric, his larger goal of reducing his country’s reliance on India still stands,” Vinitha Revi, an Independent Scholar associated with the Observer Research Foundation, wrote in her piece.

With inputs from agencies