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India Announces Package to Maldives

  • 22 Aug 2020
  • 7 min read

Why in News

India has committed to Maldives a five-pronged package including air, sea, intra-island and telecommunications to help it deal with the economic impact of the Covid-19 pandemic.

Key Points

  • The package includes:
    • Greater Malé Connectivity Project (GMCP)
      • A financial package consisting of a grant of 100 million USD and new line of credit of 400 million USD.
      • This will be the largest civilian infrastructure project in Maldives, connecting Malé (the capital) with three neighbouring islands — Villingili, Gulhifalhu (where a port is being built under Indian line of credit) and Thilafushi (new industrial zone) – by construction of a bridge-and-causeway link.
      • This will boost economic activity, generate employment and promote holistic urban development in the Malé region.
    • Direct Cargo Ferry Service: It will be run between India and Maldives.
      • The service is expected to enhance sea connectivity and provide predictability in supplies for importers in Maldives and exporters in India.
    • Air Travel Bubble Between India and Maldives: This will facilitate movement of people for employment, tourism and medical emergencies.
      • Maldives is the first neighbouring country of India with which an air bubble is being operationalised.
    • Quotas for Supply of Essential Commodities: This was renewed for 2020-21. The commodities include food items as well as river sand and stone aggregates to assure food security, and supply of essential construction items.
    • Financial Aid: In addition a financial aid of 250 million USD will be provided to Maldives by India.
  • Impact on India-Maldives-China
    • The Indian aid is being appreciated and contrasted with the previous expensive commercial loans to Maldives by China which are being termed “debt-trap diplomacy” of China, wherein China intentionally extends excessive credit to another country with the intention of extracting economic or political concessions from the debtor country.
    • The GMCP is also being compared to the Chinese built Sinemale Friendship bridge connecting Male to two other islands as it will be much bigger than the latter.
    • The India-Maldives relationship suffered a setback when Maldives entered into a Free-Trade Agreement (FTA) with China in 2017.
    • Since September 2018, India and Maldives have seen a number of bilateral visits.
    • At present, India-assisted projects in the region include water and sewerage projects on 34 islands, reclamation projects for the Addl island, a port on Gulhifalhu, airport redevelopment at Hanimaadhoo, and a hospital and a cricket stadium in Hulhumale.
    • India had also announced a 800 million USD Line of Credit to Maldives in December 2018.

Significance of Maldives for India

  • Geographical: Maldives’ proximity to the west coast of India.
    • Maldives is barely 70 nautical miles away from Minicoy -the southernmost island of Lakshadweep.
    • Lakshadweep group is separated from Maldives by Eight Degree Channel.
    • It is situated at the hub of commercial sea-lanes running through Indian Ocean. More than 97% of India’s international trade by volume and 75% by value passes through the region.
  • History: India and Maldives share ethnic, linguistic, cultural, religious and commercial links.
    • India was among the first to recognize Maldives after its independence in 1965 and later established its mission at Male in 1972.
    • Operation Cactus: In 1988, in response to a request from the Maldives, India activated Operation Cactus to deploy its military and ensure regime continuity in Male.
  • Defence: Its potential to allow a third nation’s naval presence in the area.
    • Since China’s naval expansion into the Indian Ocean, Maldives' significance has steadily grown and now it’s at the heart of international geopolitics.
    • India provides the largest number of training opportunities for Maldivian National Defence Force (MNDF), meeting around 70% of their defence training requirements.
    • ‘Ekuverin’ is a joint military exercise between India and Maldives.
  • Geo-political: Maldives is an important aspect of India’s ‘Neighbourhood First’ policy.
  • Trade and Tourism: India is Maldives’ 4th largest trade partner after UAE, China and Singapore. In 2018, India was the 5th largest source of tourist arrivals in Maldives.
    • In 2018, India was the 5th largest source of tourist arrivals in Maldives.e.
    • India and Maldives signed a trade agreement in 1981, which provides for export of essential commodities.
    • India-Maldives bilateral trade now stands at US$ 288.99 Million heavily in favour of India.
  • Disaster Management: The Government of India has provided large-scale assistance to Maldives in the aftermath of the 2004 Indian Ocean tsunami and during the 2014 Male water crisis.
  • Diaspora: There is a significant Indian diaspora in the Maldives. Indians are the second largest expatriate community in Maldives with an approximate strength of around 22,000. About 25% of Doctors and Teachers in Maldives are Indian nationals.

Way Forward

Given the economic hardships being faced by Maldives due to Covid-19 pandemic and previous debts, this package will definitely warm up the relationship between both the countries. This will also provide a strategic edge to India over China with regards to Maldives.

Source : TH

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