In less than two years, the Maldives shifted from pushing India out to initiating Free Trade Agreement (FTA) talks with it. This investigative report explores the economic fallout, Chinese overreach, tourism disruption, and India’s patient diplomacy that led to the dramatic policy reversal in 2025.
New Delhi (ABC Live): Maldives India FTA: In November 2023, Maldives President Mohamed Muizzu rose to power under the “India Out” banner, expelling Indian military presence and embracing Chinese aid. By July 2025, the same government launched formal Free Trade Agreement (FTA) negotiations with India.
This drastic policy reversal was not just about geopolitics—it was driven by tourism economics, public backlash, Chinese delivery failures, and India’s strategic restraint. This report decodes the data and diplomacy behind the Maldives-India FTA shift, backed by PIB releases and expert insights.
1. Anti-India Rhetoric: The Rise of ‘India Out’
After winning with 54% of the vote, Mohamed Muizzu:
- Ordered the withdrawal of Indian military personnel by May 2024.
- Activated the dormant Maldives–China FTA on January 1, 2025.
- Signed multiple infrastructure and security agreements with China.
- India quietly complied with the withdrawal, choosing strategic silence over confrontation.
2. Tourism Collapse: The Real Turning Point
? Tourism Data (2023–2025)
| Year | Indian Tourists | Chinese Tourists | Total Arrivals | India Share | China Share |
|---|---|---|---|---|---|
| 2023 | ~118,500 | ~186,000 | ~1.88 million | 6.3% | 9.9% |
| 2024 | ~106,000 | 263,340 | 2.04 million | 5.1% | 12.9% |
| Q1 2025 | 29,601 | 70,797 | ~594,000 | 5.0% | 11.9% |
Sources: Maldives Tourism Ministry, Travel Trade Maldives, Raajje.mv
?? Key Insight: While Chinese arrivals surged, Indian tourists—who typically spend more—dropped significantly. This caused a $150 million revenue loss, harming resorts and coastal communities.
3. Debt Dependency and Operational Gaps
Maldives’ reliance on Chinese loans became a liability:
- China held 70% of Maldives’ foreign debt (~$3.4 billion).
- Annual debt servicing hit $92 million.
- Chinese radar systems and medevac aircraft proved operationally weak and lacked trained local handlers.
Public confidence in Chinese assistance began to decline—especially during emergencies, once covered by Indian SAR teams.
4. India’s Strategic Re-Engagement
India avoided reactionary politics and instead:
- Offered a $400 million currency swap.
- Extended a ?30 billion (~$346 million) concessional line of credit.
- Announced a ?4,850 crore (~$565 million) Line of Credit in July 2025.
? PIB-Confirmed Diplomatic Reset
According to the Press Information Bureau (PIB India):
- India and Maldives formally launched FTA negotiations on July 25–26, 2025.
- MoUs were signed on:
- Debt restructuring
- Fisheries and aquaculture
- Housing and digital payments (UPI, RuPay)
- Health cooperation via BHISHM HealthCube
5. Expert Insight: Immigration and Trade Interlinked
“Immigration and trade are intertwined. A treaty-based framework ensures that mobility of people complements mobility of capital and services—making the FTA a bridge not just between markets, but between societies.”
— Ms. Jatinder Kaur, Senior Advocate & Immigration Analyst
Ms. Kaur highlights that the Maldives has long depended on Indian healthcare workers, aviation technicians, teachers, and hospitality staff. The India Out policy disrupted these human resource pipelines.
She adds that the Maldives-India FTA offers a platform for:
- Work visa liberalisation
- Skill exchange agreements
- Bilateral migration protocols
These elements are essential for restoring operational capacity in tourism and services—making the FTA not just about goods, but people.
6. Why the Reversal Happened
| Factor | Impact |
|---|---|
| Loss of Indian tourism | Crippled revenue and job creation |
| Debt pressure | Elevated repayments to Chinese lenders |
| Chinese inefficiency | Public backlash over failed delivery |
| Indian soft power | Economic aid and silent re-engagement |
| Resort/business voices | Pressured Muizzu to restore balance |
7. Conclusion: The FTA as Strategic Anchor
The Maldives-India FTA is more than a trade deal—it marks the restoration of trust, the revival of essential services, and the resurgence of Indian influence in the Indian Ocean. By focusing on stability, partnerships, and soft power, India reversed a hostile narrative without firing a shot.
As the FTA progresses, both countries are expected to build deeper ties in the digital economy, skilled migration, debt management, and strategic cooperation—turning a crisis into a blueprint for sustainable diplomacy.
? References
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