Latest news with #AdityaGowdaraShivamurthy
Indian Express
28-07-2025
- Business
- Indian Express
PM Modi's engagement with the Maldives shows India is playing the long game
Written by Aditya Gowdara Shivamurthy Prime Minister Narendra Modi was on a state visit to the Maldives from July 25 to 26. The visit comes against the backdrop of the President of the Maldives, Mohamed Muizzu, pushing for a recalibration with India. Driven by economic necessities, India's pragmatic outreach, and China's underwhelming support, he has moderated his 'India Out' policy and rhetoric and toned down his unconditional allegiance to China. Given the backdrop, the visit is a strong symbolic message of Delhi's persistent influence in the country. Besides, it has also laid the ground for New Delhi's long game in the Maldives. By pushing for economic and financial connectivity, especially with the Indian Rupee, and doubling down on political engagement, India is creating new leverage. During PM Modi's visit, both leaders reviewed the entire gamut of relations and agreed to strengthen the multifaceted relationship by implementing the Joint Vision Document. They also inaugurated several India-funded projects, including roads and drainage in Addu city, the Ministry of Defence building, and six High Impact Community Development Projects. India also handed over 72 vehicles for the Maldives National Defence Force, 2 BHISHM Health Cube sets, and 3,300 housing flats. Additionally, they signed four MoUs to further cooperation in pharmacopoeia, meteorology, fisheries, and digitalisation. Most importantly, both countries have signed four agreements on financial and economic connectivity, as the Maldives faces debt distress and declining foreign reserves. As of March 2025, the Maldives has a debt of $9.4 billion, of which nearly 60 per cent is in US Dollars. However, the government continues to struggle with low foreign reserves. Currently, it has a reserve of a mere $850 million, and this year alone, the government will have to service over $600 million, along with maintaining its imports. Next year, it will have to service over $1 billion. Maturing debts, specifically bonds (domestic and external) and Chinese loans, have continued to deplete foreign reserves. China's loans have declined from $613 million in 2021 to $473 million in 2025, and its sovereign guarantees have reduced to $567 million. This has left India as the largest bilateral creditor to the country, especially with loans, currency swaps, and credit lines (LOC) taken under the previous government now maturing. Debts from EXIM India have increased from $15 million in 2021 to $572 million, and the sovereign guarantee is at $608 million. To complicate matters, more than $800 million of Indian loans committed are yet to be disbursed. With a looming economic crisis and increasing Indian debts, India and the Maldives signed an amendatory agreement to close the previous LOC. This will be replaced by a Rupee-denominated LOC worth Rs 4,850 crore (equivalent to $565 million), reducing the Maldives' debt obligations by 40 per cent, from servicing $51 million to $29 million annually, and easing the pressure of depleting US Dollar reserves and overall debts. Another major agreement was the implementation agreement on Unified Payment Interface (UPI). This, together with the RuPay card introduced in October 2024, will boost direct transactions between countries. These developments build on the finalisation of the local currency settlement system. Henceforth, India and the Maldives can now trade and allow tourists, diaspora, and businesses to make cross-border payments in local currencies (Rupees and Rufiyaa) rather than in US Dollars. Both countries also finalised the terms of reference for the India-Maldives Free Trade Agreement (FTA) and formally commenced negotiations on the agreement. With the FTA reducing trade barriers and boosting trade, Indian commodities will become cheaper in the Maldives. India is one of the Maldives' largest trade partners. While their trade is worth $680 million, India exports goods worth $561 million. Earlier, the Maldives would have imported goods from India using US Dollars; they can now do the same with the Indian Rupee, which the Maldives can tap from the currency swap, credit line, and direct transactions. This will help ease pressure on the economy and reduce the outflow of the US Dollar. The FTA will also likely be complemented with a bilateral investment treaty, creating new economic leverage for India. Learning lessons from the past, India also doubled down on its engagements across party lines. During his visit, PM Modi met prominent figures from the ruling party, including those who played a crucial role in the 'India Out' campaign and are close to China. These engagements also included bilateral meetings with the President, the Vice President, and the Speaker of the parliament. Modi also held a meeting with prominent figures from the Jumhooree Party, Maldives National Party, and Maldives Development Alliance. Separate meetings were held with the main Opposition, the Maldivian Democratic Party, and former President Mohamed Nasheed. These engagements underline India's attempts at making relations non-partisan and resilient to turbulent domestic politics. PM Modi's latest visit to the Maldives shows that India is letting bygones be bygones, and is more optimistic about the future. There is confidence that the Maldives will understand that regional security is an issue of mutual interest. However, there are some problems. For India, the Maldives' economic stability remains a major challenge. On its part, Malé will continue to engage with Beijing to seek assistance and investments in order to diversify and not become over-reliant on India. Discussions of loan restructuring with China began in January 2024 and have shown little progress, further nudging Muizzu to engage with the country. India, therefore, should not let its guard down. The writer is an associate fellow with the Strategic Studies Programme's Neighbourhood Studies Initiative
Indian Express
09-05-2025
- Business
- Indian Express
As Pakistan plunges region into uncertainty, South Asia should rethink its non-alignment policy
Written by Aditya Gowdara Shivamurthy As hostilities escalate between India and Pakistan, South Asian countries which had been quick to condemn and criticise the terror attacks in Pahalgam, are yet to condemn the perpetrator — Pakistan. Afghanistan, Bangladesh, Sri Lanka and Nepal have continued to maintain neutrality and expressed the need to de-escalate. In the past, India's South Asian neighbours — Nepal, Bhutan, Afghanistan, Maldives, Sri Lanka, and Bangladesh — have remained publicly neutral when India and Pakistan have gone to war. Bhutan's support to India during the 1971 war and the Taliban's passive support to Pakistan during the Kargil war are the few exceptions. However, this policy of non-alignment seems severely misplaced in the current regional and world order. The three factors that influenced their policy are becoming increasingly irrelevant. In the Cold War era, Pakistan emerged as a reasonable trade, development, and defence partner to Afghanistan, Sri Lanka, Nepal, (post-1975) Bangladesh, and the Maldives. Today, however, Pakistan is the hub of extremism and cross-border terrorism, which has become a nuisance to its neighbours and deterred investments in itself. Pakistan continues to witness severe long-term structural issues with looming external debts. Other South Asian countries are overtaking Pakistan on multiple economic indicators. For instance, between 2001 and 2023, Bangladesh's economy grew from $54 billion to $437 billion, and India grew from $500 billion to $3.5 trillion. Pakistan's economy grew from $97 billion to a mere $338 billion USD. In fact, in 2023, its growth rate was -0.2 per cent. For more than three decades, the per capita income and investment rate in Pakistan have been lower than that of India, Sri Lanka, and Bangladesh. The country is also experiencing political instability, and the military has continued dictating most of its politics and security calculations. Two, India's neighbours relied on Pakistan to assert its autonomy and push back against India and its influence in the region. This calculation emerged from the fact that India is a significantly powerful country, and a lack of a revisionist power like Pakistan would have given it a free hand in the region. Perceptions of domination by India, no matter how misplaced, necessitated their ties with Pakistan. Lack of importance to South Asia from other powers further mandated these countries to bet on Islamabad. With the Indo-Pacific becoming important, South Asia is evolving as a geopolitical hotspot. In fact, over the last two decades, China has emerged as a major and viable alternative to India in the region across all areas of cooperation. By 2022, China accounted for 47 per cent of the total outbound FDI for the region. Other powers like the US, Japan, Australia, and the EU have also demonstrated interest in expanding their presence. In other words, South Asian neighbours have more alternatives to balance and diversify relations with India. On its part, the entry of new powers is compelling Delhi to be more accommodating of its neighbours and their interests. It has prioritised connectivity, economic linkages, and assistance in its 'Neighbourhood First' policy. By 2023, India had offered $8 billion to Bangladesh and $1.6 billion to Nepal in credit lines. To Bhutan, India has pledged $1 billion for its 13th five-year plan. India has also offered assistance worth $850 million to the Maldives and $4.5 billion to Sri Lanka to help them recover economically. Indian influence, assistance, and connectivity have, therefore, gradually increased as Pakistan's economy continues to be in deep distress. Finally, India's South Asian neighbours believe that good relations with Pakistan would eventually contribute to more regional stability and integration, especially vis-à-vis SAARC. As a result, they have continued to push Delhi and Islamabad to revive the organisation, despite the latter being the biggest challenge to regional stability and integration. Islamabad has used SAARC to politicise Kashmir, as seen with the leaders' video conference in 2020, and has continued nurturing terrorism. These policies have hindered SAARC's functionality and motivated India to explore alternatives. On their part, despite being victims of cross-border terrorism, South Asian countries are failing to call out Islamabad for hindering SAARC and promoting terrorism. This has only encouraged Pakistan to continue its policy and contribute to the current regional instability and (dis)integration. South Asian countries continue to see Pakistan as a major defence partner, especially in military training and maritime cooperation. In fact, as tensions escalated between India and Pakistan, an annual defence dialogue took place between Sri Lanka and Pakistan in the last week of April, and a military delegation from Pakistan reportedly visited Nepal. That said, the benefits that Pakistan could bring to the region are rapidly declining. As tensions between India and Pakistan escalate, it is perhaps time for South Asian countries to re-evaluate the merits of their non-aligned and neutral policy, and ask themselves how best to further their interests, regional peace, and integration. The writer is an associate fellow with the Strategic Studies Programme's Neighbourhood Studies Initiative
