Global Politics Explainer

CWA # 1796
Global Politics Explainer
India and the Maldives: Was Modi’s visit to the Maldives a diplomatic reset?

Ditipriya Ghosh
20 August 2025

Photo Source: India Today

On 25 July, Indian Prime Minister Narendra Modi visited the Maldives. The occasion addressed the celebration of the Maldives’ 60th Independence Day and honoured 60 years of diplomatic relations between the two countries. Prime Minister Modi and President Mohammed Muizzu met and recalibrated India-Maldives relations by signing major economic and strategic agreements, and reached concrete decisions regarding the changing geopolitical landscape in the Indian Ocean. Modi’s visit has sparked hopes for a shift in India-Maldives ties. The visit acknowledged the shift in political and strategic relationships, moving from an “India-Out” to an “India-In” approach.

What were the major hits and misses of the visit?
The visit marked several developments reflecting India’s growing interest in the Maldives.

New Delhi has put forward its soft power strategy and has leveraged the Male with economic advantages. The most important of all was the signing of the new Line of Credit (LoC) of INR 4,850 crore (USD 565 million).  India also signed an agreement reducing the Maldives’ debt repayment by 40 per cent.

Additionally, negotiations have begun on the India-Maldives Free Trade Agreement (IMFTA) and a Bilateral Investment Treaty. A total of eight MoUs were signed in various sectors, including fisheries, aquaculture, pharmaceuticals, meteorology, renewable energy and fintech. Modi virtually inaugurated 3,300 housing units in Hulhumale, and roads and drainage systems in Addu City, under the Addu Roads Project. A cross-border payments agreement was reached between the Maldives Monetary Authority and India’s NPCI to enable UPI and RuPay payments in the Maldives, allowing tourists and businessmen hassle-free transactions.

However, diplomatic tensions over the Hydrographic Survey Agreement, which was scrapped by President Muizzu in 2023, claiming that it threatened the country’s sovereignty, were left unaddressed.

What was the immediate bilateral background to the visit?
In 2024, India-Maldives relations hit a setback after Mohamed Muizzu’s pro-China administration came to power. The Muizzu administration had introduced an anti-India ‘India Out' campaign, criticising India’s military presence on the Island. Meanwhile, the Maldives' closeness with China had irked India. For India, the visit was a channel to regain its lost significance in its maritime backyard. For the Maldives, it was about securing economic relief. The Maldives’ economy, predominantly relying on tourism, faced a major setback due to increasing debt.

What were the larger issues between India and the Maldives?
Recently, India-Maldives relations faced various ups and downs due to domestic politics, geopolitical issues and sovereignty sensitivities. The Maldives raised the issue of threatening the country’s sovereignty over India’s military presence on the island. Further, the agreement regarding the Hydrographic Pact raised anxieties as many Maldivians viewed foreign mapping of territorial waters as invasive and exploitative. Modi’s visit to Lakshwadeep and the social media campaign against the Maldives in 2024  triggered a disconnect between the countries, limiting the scope of the security partnership and impacting the tourism-driven Maldivian economy.

What is next for New Delhi and Male?
Modi’s visit to the Maldives marks a crucial step to enhance India-Maldives relations, moving away from distrust towards each other. Male’s interest in enhancing its ties with New Delhi was visible in President Muizzu’s invitation to Modi as a Guest of Honour on the occasion of the Maldives’ 60th Independence Day, giving India the status of a reliable and non-intrusive partner. Similarly, India described the Maldives as the cornerstone of its “Neighbourhood First Policy.”

The negotiations on the FTA and BIT look out to a deeper economic integration. It would sustain if both countries can deftly manage the evolving dynamics. The meeting has opened the gate to more Indian infrastructural investments in the Maldives, including ongoing projects like the Thilamale Bridge and the upgradation of the Hanimadhoo Airport. The initiatives for debt restructuring have given the Maldives the confidence to rely on India as its trusted economic partner. Further, it is important for India to position itself as a net security provider to the Maldives in the Indian Ocean region under the MAHASAGAR vision. The INS Sharda HADR drill in early 2025 has made a positive trajectory. More attention would be paid towards enhancing humanitarian and capacity-building efforts, surpassing the traditional sectors. The Maldives aims to achieve 33 per cent renewable energy capacity by 2028, with India’s technical and financial support. The visit sets the tone for both countries to reconcile and enlarge the scope of cooperation and mutual trust.

The visit has reinstated India’s identity as a reliable and secure partner in the Indian Ocean archipelago. Additionally, the visit marked India’s step to counter Chinese influence in the Maldives. However, there have been a few lacunas that continue to foster scepticism and mistrust. This visit could act as a cornerstone for persistent stability and an exemplary model for India’s “Neighbourhood First “ policy in action.

References
A Kumar, "PM Modi offers $565 mn credit line to Maldives, opens door for FTA," Business Standard, 25 July 2025, https://www.business-standard.com/external-affairs-defence-security/news/modi-offers-565mn-credit-line-to-maldives-fta-talks-to-begin-125072501279_1.html 

S Patel, & U Jaisinghe, "Modi announces $565-million credit line for debt-plagued Maldives," Reuters, 25 July 2025, https://www.reuters.com/world/china/modi-announces-565-million-credit-line-debt-plagued-maldives-2025-07-25 

"Line of credit, trade talks, direct flights: Modi, Muizzu mark turnaround in ties," The Indian Express, 26 July 2025, https://indianexpress.com/article/india/pm-modi-proud-most-trusted-friend-maldives-10149558 

D Bhattacharya, "India extends Rs 4850 crore credit line to Maldives during PM's visit," India Today, 25 July 2025, https://www.indiatoday.in/amp/india/story/india-extends-rs-4850-crore-credit-line-to-maldives-under-new-mou-during-pms-visit-2761361-2025-07-25 

A Kumar, "PM Modi offers $565 mn credit line to Maldives, opens door for FTA," Business Standard, 25 July 2025, https://www.business-standard.com/external-affairs-defence-security/news/modi-offers-565mn-credit-line-to-maldives-fta-talks-to-begin-125072501279_1.html 

N Sathiya Moorthy, "PM Modi's visit to Maldives: From friction to forward-thinking," Firstpost, 25 July 2025, https://www.firstpost.com/opinion/pm-modis-visit-to-maldives-from-friction-to-forward-thinking-13912359.html 

Patel S & Jaisinghe U, "Modi announces $565-million credit line for debt-plagued Maldives," Reuters, 25 July 2025, https://www.reuters.com/world/china/modi-announces-565-million-credit-line-debt-plagued-maldives-2025-07-25 

Sumeda, "Unravelling the shift in India-Maldives relations," The Hindu, 12 Januay 2024, https://www.thehindu.com/news/national/india-maldives-diplomatic-tensions-controversies-recent-explainer-muizzu-modi/article67722833.ece 

About the author
Ditipriya Ghosh is a postgraduate student at the Department of Politics and International Studies, Pondicherry University

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