'Neighbourhood first': India increases Maldives aid to Rs 600 crore amid ties reset

Following Muizzu’s visit to India in October and his meeting with PM Modi, relations appeared to stabilise.

The Centre, on Saturday, increased its budgetary allocation for the Maldives to Rs 600 crore in the Union Budget 2025, marking a rise from Rs 470 crore last year. The decision comes as part of India’s "Neighbourhood First" policy, even as concerns persist over Maldivian President Mohamed Muizzu’s pro-China tilt. However, the allocation remains lower than the Rs 770.90 crore provided in the 2023-24 budget before diplomatic tensions arose.

Ties between India and the Maldives soured last January following derogatory remarks made by Maldivian cabinet ministers against Prime Minister Narendra Modi and India. The controversy erupted after PM Modi posted photographs from Lakshadweep, showcasing its scenic coastal beauty, which sparked debates over potential competition between the Indian archipelago and the Maldives in beach tourism.

Among the most controversial comments was a post by Maldivian minister Abdulla Mahzoom Majid, who accused India of targeting his country. His remarks, coupled with a viral social media campaign urging Indian tourists to boycott the Maldives, exacerbated tensions. Other Maldivian officials, including Deputy Minister Mariyam Shiuna and Deputy Minister Malsha Sharif, made offensive comments against Modi and India, referring to him as a "clown" and India as "cow dung." The Muizzu government later suspended the officials, seeking to control the damage.

Following Muizzu’s visit to India in October and his meeting with PM Modi, relations appeared to stabilise. However, concerns remain over the Maldives’ economic distress, driven by mounting debt and a reliance on external financial support. The Maldivian economy has been under increasing pressure, with India closely monitoring its financial situation.

India had extended significant financial aid to the Maldives, including a $400-million loan and a 30-billion rupee ($346 million) bilateral currency swap agreement in October 2024. Despite these efforts, rating agency Moody’s warned in December that the Maldives’ low foreign exchange reserves and high external debt obligations could continue to strain its economy.