From UPSC perspective, the following things are important :
Mains level: Economic difficulties in Male
Why in the news?
Amid mounting domestic and foreign policy challenges in Male, Mohamed Muizzu appears to be seeking reconciliation with India.
Economic Difficulties in Maldives
- Debt Burden: Maldives faces severe economic strain with a debt-to-GDP ratio of 110% and significant debt servicing obligations, including around $512 million annually in 2024 and 2025.
- Foreign Reserves: Foreign reserves are critically low at $622 million, insufficient to cover debt maturities and sustain imports amid rising inflation.
- Dependence on Imports: Heavy reliance on imports for essential goods exacerbates economic vulnerabilities, particularly amidst food and fuel inflation.
- Revenue Generation: The government struggles with low domestic revenue generation capacity, further complicating fiscal management and debt sustainability.
- Diversification Efforts: Efforts to diversify economic partnerships beyond traditional allies like India and China reflect a strategy to mitigate economic dependencies and attract diverse investments.
What do the ties between India and China imply?
- Geopolitical Competition: India and China’s engagements in countries like the Maldives reflect a broader competition for influence in the Indian Ocean region. Both countries strategically invest in infrastructure and security partnerships to enhance their regional foothold.
- Economic Leverage: China’s substantial investments in the Maldives, including infrastructure projects under the Belt and Road Initiative (BRI), provide economic leverage but also raise concerns about debt sustainability and strategic dependencies.
- Strategic Alignment: While India emphasizes developmental assistance and strategic partnerships focused on security and governance, China’s engagements often prioritize infrastructure development and economic cooperation, reflecting different strategic priorities.
- Regional Stability: Both India and China play pivotal roles in ensuring stability and security in the Indian Ocean region. Their respective approaches influence regional dynamics and perceptions among neighbouring countries regarding economic partnerships and security alignments.
India’s stand
- Balanced Approach: India continues to engage with the Maldives despite geopolitical shifts and maintains a stance of constructive diplomacy, offering economic support and emphasizing mutual respect.
- Long-term Engagement: Inviting President Muizzu to Prime Minister Modi’s swearing-in signals India’s commitment to long-term bilateral relations and stability in the Indian Ocean region.
- Strategic Importance: India views the Maldives as crucial for maritime security and regional stability, underpinning its continued diplomatic efforts and economic assistance.
Conclusion: India can increase its economic assistance to the Maldives through grants, concessional loans, and capacity-building initiatives aimed at improving fiscal management and revenue generation capabilities. And focus on projects that enhance infrastructure resilience, promote sustainable development, and support economic diversification efforts beyond traditional sectors.
Mains PYQ:
Q Discuss the political developments in Maldives in the last two years. Should they be of any cause of concern to India? (UPSC IAS/2013)
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