India has pledged a five-part aid package to the Maldives to help manage the economic impact of the COVID-19 pandemic. The package ratified includes components for air, sea, intra-island, and telecommunications support.
Key Components of the Aid Package
The package is made up of various initiatives:
1) Greater Malé Connectivity Project (GMCP): This venture includes a financial package that comprises a grant of 100 million USD and a new line of credit of 400 million USD. This will be the largest civilian infrastructure project in the Maldives, linking Malé with three nearby islands — Villingili, Gulhifalhu and Thilafushi – by constructing a bridge-and-causeway link. This project aims to stimulate economic activity, create jobs, and encourage comprehensive urban development in the Malé region.
2) Direct Cargo Ferry Service: Designed to run between India and the Maldives, this initiative is expected to improve sea connectivity while providing predictability in supplies for both Indian exporters and Maldivian importers.
3) Air Travel Bubble: The first of its kind with a neighbouring country, the purpose of this arrangement is to ease the movement of individuals for employment, tourism and medical emergencies.
4) Quotas for Essential Commodities: Renewed for the fiscal year 2020-21, this provision includes food items and essential construction materials to ensure food security.
5) Financial Aid: Lastly, an extra financial aid of 250 million USD will be provided by India to the Maldives.
India-Maldives-China Relations and Implications
India’s financial support is viewed positively, contrasting with the allegedly “debt-trap diplomacy” of China that sees it offer large commercial loans to other countries with the intention to exploit economic or political concessions from the debtor country. Recent actions show a strengthening of India-Maldives relationships, with improved diplomatic ties following the election of a pro-India government in the Maldives.
Existing Indian Projects in Maldives
Currently, India is supporting various projects in the region, such as water and sewerage projects across 34 islands, reclamation work for the Addl island, a port on Gulhifalhu, redevelopment of Hanimaadhoo airport and building a hospital and cricket stadium in Hulhumale. Furthermore, in December 2018, India announced an 800 million USD line of credit to the Maldives.
Significance of Maldives to India
From a geographical standpoint, the Maldives’ proximity to the west coast of India is significant. The Maldives is barely 70 nautical miles away from Minicoy – the southernmost island of Lakshadweep. Moreover, more than 97% of India’s international trade by volume and 75% by value passes through the region.
India and Maldives also share historical ethnic, linguistic, cultural, religious and commercial links, and have conducted numerous bilateral visits. Since China’s naval expansion into the Indian Ocean, the Maldives’ strategic importance has increased. India now provides the largest number of training opportunities for the Maldivian National Defence Force (MNDF), meeting approximately 70% of their defence training requirements.
Economic Relations and Trade
India is the Maldives’ fourth largest trade partner after the UAE, China and Singapore. Bilateral trade stands at US$ 288.99 Million, heavily favouring India. In the tourism sector, India was the fifth largest source of tourist arrivals in the Maldives in 2018. Both nations signed a trade agreement in 1981, which covers the export of necessary commodities.
Disaster Management and Indian Diaspora in Maldives
The Indian government provided large-scale support to the Maldives following the 2004 Indian Ocean tsunami and during the 2014 Male water crisis. Furthermore, there is a substantial Indian diaspora in the Maldives: Indians form the second largest expatriate community in the Maldives with estimated numbers around 22,000, and comprise about 25% of Doctors and Teachers in the Maldives.
In light of the financial struggles faced by the Maldives due to the COVID-19 pandemic and previous debts, India’s aid package is expected to help strengthen the relationship between the two nations and also give India a strategic advantage over China in relation to the Maldives.