Trade pact, UPI and more: How PM Modi’s visit will reset ties with Maldives

India and Maldives are looking to reset ties.

The development comes as Prime Minister Narendra Modi heads to the Maldives today (July 25) after a trip the UK.

India and the UK signed a landmark  free trade agreement in the backdrop of Modi’s visit.

Modi’s trip to Maldives is his first since the new Mohamed Muizzu administration took charge in November 2023.

But what do we know about Modi’s trip? And what can we expect from it?

Let’s take a closer look:

What do we know about the trip?

Modi will be in Maldives today (July 25) and tomorrow (July 26).

Modi will be the guest of honour as Maldives celebrates the 60th  anniversary of its independence.

Modi’s trip also comes as India and Maldives mark six decades since the establishment of diplomatic relations.

More from Explainers

PM Modi addresses Lok Sabha on Operation Sindoor: Full speech here Watch: PM Modi gets guard of honour as India’s national anthem plays at Male’s Republic Square

It is Modi’s third visit to the island nation since coming to power in 2014.

India was among the first to recognise the Maldives and establish diplomatic relations after it gained independence in 1965.

The prime minister will hold a bilateral meeting with President Muizzu.

His trip is the first state visit Muizzu is hosting since taking power in late 2023.

He will also meet other senior political leaders.

Modi is also set to inaugurate some infrastructure projects.

“I will join the celebrations marking the 60th anniversary of the Independence of Maldives. This year also marks the 60th anniversary of the establishment of diplomatic relations between our two countries. I look forward to my meetings with President Muizzu and other political leadership, to advance our joint vision of a Comprehensive Economic and Maritime Security Partnership, and to strengthen our cooperation for peace, prosperity and stability in the Indian Ocean Region,” PM Modi said in his pre-departure statement.

Editor’s Picks

1

From ‘India out’ to strategic embrace: Maldives resets ties with New Delhi 2

India readies fresh line of credit for Maldives as PM Modi prepares to visit

What can we expect?

India is reportedly set to launch its UPI services in Maldives.

The two countries are also slated to begin discussions on a free trade agreement (FTA) 2025.

The two countries previously signed a trade agreement in 1981.

Bilateral trade between the two countries was valued at around $548 million as of 2023.

It has more than doubled since 2020 when bilateral trade was valued at around $245 million.

India mainly imports scrap metals from the Maldives.

It exports engineering and industrial products such as drugs and pharmaceuticals, radars, cement,  agricultural produce such as rice, spices, fruits, vegetables and poultry produce.

This gains significance in light of the fact that Male earlier signed an FTA with China – which came into effect on January 1.

A possible announcement regarding Maldives National Defence Force (MNDF) building is also in the offing.

Modi and Muizzu will also review the ‘Comprehensive Economic and Maritime Security Partnership’ the two countries agreed to in October 2024.

“The two leaders will also take stock of the progress in the implementation of the India-Maldives Joint Vision for a ‘Comprehensive Economic and Maritime Security Partnership’, adopted during the State Visit of the President of Maldives to India in October 2024,” said MEA.

According to officials, this partnership has become the ‘guiding framework’ for the relationship.

The two countries are likely to announce steps to combat drug trafficking in the Indian Ocean and Arabian Sea.

This includes stepping up cooperating in defence and maritime security including sharing of intelligence.

Muizzu has described drugs as a national scourge and vowed to make rooting it out a priority in his administration.

A number of MoUs on infrastructure and capacity building that will deepen cooperation and economic ties are also likely to be signed.

Step to mend relations

Modi’s visit is yet another step towards resetting relations between the two countries.

Muizzu, who is known to be pro-China, came to power on an “India Out” campaign.

Muizzu, remember, had demanded that Indian military personnel in the Maldives leave the island.

Modi, regardless, was the first world leader to congratulate Muizzu on his victory.

India and Maldives’ ties nosedived further in January 2024 after three deputy ministers in the then cabinet made derogatory remarks about Modi.

This nadir resulted in many in India carrying out a boycott campaign that badly hit Madives’ tourism.

The island nation is hugely dependent on tourism to fill its coffers.

However, ties between the two countries slowly began to mend.

Muizzu late last year arrived in India for a state visit.

At the time, the two countries took began efforts at rebuilding the relationship.

“Patience has its benefits; it helps if you don’t give in to the compulsion and expectation to retaliate against each provocation,” a senior government source told The Times of India.

Foreign Secretary Vikram Misri pointed to these developments in his remarks on Tuesday.

Misri said Maldives has been an extremely important partner in India’s  Neighbourhood First policy and Mutual and Holistic Advancement for Security and Growth Across Regions (MAHASAGAR) vision.

“There will always be events that impact or try to intrude on the relationship. But this is testimony to the kind of attention paid to the relationship, including at the highest levels. We’ve continued to work at it, and the results are visible. We’ve also had close discussions with our partners in the Maldives to provide clarity and assurances about our bilateral intentions, and the results are evident”, Misri said.

India and Maldives may also decide to establish a Rs 30-billion swap line.

This comes after Male has spent most of the $400 million comprising the first two currency swap agreements with New Delhi.

India’s outreach to Maldives

Misri mentioned the help India had provided Maldives during tough times.

“Our recent assistance has improved the foreign exchange position of the Maldives, which has been cited by international financial organisations, including the IMF, as a positive factor that has helped the Maldives avoid difficult outcomes. My understanding is that the $400 million swap line has been almost completely utilised, and now the 30 billion rupee Indian swap line might also be drawn upon," Misri added.

New Delhi is also financing several projects in Male via concessional credit and buyer’s credit facilities.

This includes the Greater Malé Connectivity Project, which will link four islands.

India in May 2024 had announced that it would let a $50 million loan roll over.

This came after US ratings agency Fitch downgraded Maldives’ credit rating to ‘junk’ status.

India over the years has provided the Maldives’ with over a billion dollars in assistance.

Muizzu himself acknowledged India’s role during his visit last year.

“India is a key partner in the socio-economic and infrastructure development of the Maldives, and has stood by the Maldives during our times of need.”

Former Maldives president Mohamed Nasheed said, “Maldives is positioned across some of the most navigable waters of the region of the Indian Ocean. It stretches 1,000 kilometres from north to south and another 600 kilometres from east to west. Prime Minister Modi’s visit to the Maldives reaffirms the strategic importance India places on its long-standing relationship with us”.

The Federation of Indian Export Organisations (FIEO) said on Wednesday that Prime Minister Narendra Modi’s visit to the United Kingdom and the Maldives will boost Indian exports and promote regional stability in the Indian Ocean region.

FIEO president SC Ralhan said that this visit comes at a pivotal moment of Comprehensive Free Trade Agreement (FTA) negotiations reaching the final stages.

With inputs from agencies