India rolls over $50 million worth Treasury Bill to help Maldives

Syllabus: GS2/IR

Context

• India has rolled over a $50 million-treasury bill to support Maldives.
  • Treasury bills are short-term debt instruments issued by a government to meet immediate funding needs.

About

• The rollover of the $50 million treasury bill helps provide temporary relief to the Maldives, which is grappling with significant debt and economic strain.
• Despite the economic challenges and tensions in bilateral relations, this extension of financial assistance underscores India’s strategic interest in maintaining stable ties with the Maldives, a key partner in the Indian Ocean region.
• The transaction was carried out by the State Bank of India, reflecting India’s active involvement in supporting the Maldives’ financial stability.

Brief on India – Maldives

• India considers the Maldives as a key maritime neighbour and an important partner in its ‘Neighbourhood First’ policy and Vision ‘MAHASAGAR’ i.e. Mutual and Holistic Advancement for Security and Growth Across Regions.
• Participation in Multiple Forums: Both nations are founding members of the South Asian Association for Regional Cooperation (SAARC), the South Asian Economic Union and signatories to the South Asia Free Trade Agreement. 
• Economic partnership: India and Maldives signed a trade agreement in 1981, which provides for export of essential commodities.
  • India-Maldives bilateral trade crossed the USD300 million mark for the first time in 2021 which further crossed the USD 500 million mark in 2022. The trade in 2023 stood at $ 548 mn.
  • India is one of the biggest investors and tourism markets for the Maldives, with significant trade and infrastructure projects underway.
• Defense and Security Cooperation: Since 1988, defence and security has been a major area of cooperation between India and Maldives.
• Tourism: In 2023, India was the leading source market for Maldives with a 11.8% market share. 
  • In March 2022, India & Maldives agreed for an open skies arrangement which will further improve connectivity between two countries.
• Connectivity: The Male to Thilafushi Link project, popularly known as the Greater Male Connectivity Project (GMCP),

Significance of Maldives for India

• Strategic Importance: The Maldives is strategically located in the Indian Ocean, and its stability and security are of interest to India.
• Trade Route: Situated along crucial maritime trade routes between the Gulf of Aden and the Strait of Malacca, the Maldives acts as a “toll gate” for nearly half of India’s external trade and 80% of its energy imports.
• Counterbalancing China: Maldives presents an opportunity for India to counterbalance China’s growing influence in the Indian Ocean, fostering regional balance of power.
• Diplomatic Leverage: Strong bilateral relations with the Maldives enhance India’s leadership role in the Indian Ocean Region (IOR) and in forums like the Indian Ocean Rim Association (IORA).

Challenges in Relations

• Change in Power: Changes in government create uncertainty and complicate long-term cooperation projects.
• Chinese Influence: China’s growing economic presence in the Maldives, evidenced by investments in infrastructure projects and debt-trap diplomacy, is perceived as a challenge to India’s strategic interests in the region.
• Non-traditional threats: Piracy, terrorism, and drug trafficking remain concerns in the region, requiring continuous collaboration and intelligence sharing between India and the Maldives.
• Extremism and radicalization: The Maldives’ vulnerability to religious extremism and radicalization poses a security threat that necessitates joint efforts in countering such ideologies.
• Trade imbalance: The significant trade imbalance between India and the Maldives leads to resentment and calls for diversifying trade partnerships in Maldives.

Way Ahead

• The evolution of India-Maldives relations reflects a combination of geopolitical dynamics, changes in leadership, and shared regional interests. 
• India is steadfast in its commitments towards Maldives and has always walked the extra mile towards building relations. 
• By acknowledging and addressing the challenges, India and the Maldives can navigate the complexities of their relationship and build a stronger, more resilient, and mutually beneficial partnership for the future.

Source: TH