India extends $565 mn line of credit to Maldives

India on Friday extended a $565 million line of credit to the Maldives as part of its renewed push to deepen the bilateral ties with the island nation.

The two sides also agreed to begin negotiations on a Free Trade Agreement (FTA) and move forward on a bilateral investment treaty, signalling a broader economic and strategic reset after months of strained relations.

“India is also proud to be the most-trusted friend of the Maldives,” Prime Minister Narendra Modi said after his meeting with Maldivian counterpart Mohammed Muizzu.

Modi landed in the Maldives on Friday for a two-day official visit, where he will serve as the chief guest at the country’s 60th Independence Day celebrations. Upon arrival, he was welcomed by Muizzu and greeted with a traditional cultural performance.

According to Foreign Secretary Vikram Misri, this marks the first official state visit hosted by President Muizzu since he assumed office in November 2023.

The trajectory of the India-Maldives ties over the past 18 months offers a clear illustration of how regional diplomacy in South Asia is shaped by domestic politics, but ultimately guided by strategic priorities. The Rs 4,850 crore credit line — equivalent to nearly $565 million — is expected to finance infrastructure and development projects in the Maldives, where India is seeking to maintain influence amid a growing Chinese presence.

While anti-India rhetoric may yield short-term electoral gains, the demands of governance often require course correction. India’s response, marked by strategic patience, development financing, and restrained diplomacy, helped prevent a rupture and brought the relationship back from the brink.

As the Foreign Secretary puts it, “There will always be events that will impact or try to intrude on the relationship. But I think this is testimony to the kind of attention that has been paid to the relationship, including attention at the highest levels…we’ve continued to work at it, and I think the result is there for you to see."

That result is now on display in the Maldives: the diplomatic ties once under pressure are now back on a path of strategic alignment.

PM Modi and Muizzu also reaffirmed mutual cooperation in defence and maritime security. “Mutual cooperation in the field of defence and security is a testament to mutual trust,” PM Modi said, adding, “India will always support the Maldives to strengthen its defence capabilities.”

The meeting marks the first in-person interaction between both the leaders since the latter took office last year amid tensions over his pro-China tilt and calls for Indian military personnel to leave the island nation, which was implemented shortly after his electoral win.

The political landscape had shifted sharply in 2023 between India and Maldives, when Muizzu assumed office in November that year. He did so on the back of a populist and explicitly anti-India plank. His campaign’s rallying cry, “India Out", targeted the presence of Indian defence personnel stationed to operate aircraft and radar platforms provided by India. Though deployed under bilateral defence cooperation agreements, these personnel were portrayed as symbols of excessive foreign influence.

Despite the provocations, India opted for engagement over escalation. Rather than respond with counter-rhetoric or curtail ties, it took a long view of the relationship. When Muizzu took office, India sent a Cabinet minister — not a junior delegate — to attend his swearing-in. PM Modi met Muizzu on the sidelines of COP28 in December 2023, and External Affairs Minister S Jaishankar followed up with a “frank conversation" at the Non-Aligned Movement (NAM) Summit in January 2024.

India’s response was shaped by an understanding of Maldivian domestic compulsions. When Muizzu demanded the withdrawal of Indian military personnel, India agreed, but replaced the 76 defence staff with trained civilian technicians in May 2024, thus maintaining functional continuity in aviation and surveillance operations.

India also upped its economic engagement. It increased development assistance to Rs 600 crore, raised trade quotas, and accelerated work on key infrastructure, without any fanfare. By May 2024, Maldivian Foreign Minister Moosa Zameer was in New Delhi, seeking support and signalling readiness to restore ties.

From that point, relations began to thaw. In October 2024, President Muizzu visited India for a five-day state visit, during which both countries adopted the landmark “Vision for Comprehensive Economic and Maritime Security Partnership."