Lessons from the Maldives fiasco- India-Maldives relations under strain after PM Modi’s Lakshadweep visit

Lessons from the Maldives fiasco: India-Maldives relations under strain after PM Modi’s Lakshadweep visit

By Amitendu Palit,

Maldives has become a flashpoint in regional relations. It can turn into a perennial source of regional friction with serious implications for the Indian Ocean region’s economic prosperity and political stability.

Angry reactions of some Maldivian lawmakers—subsequently sacked by the Muizzu government for deescalating tensions with India—appear to have been influenced by deep economic insecurities. The Maldivian economy is heavily dependent on tourism and specifically that from India. Prime Minister Modi’s visit to Lakshadweep seems to have conveyed the impression to disgruntled Maldivian lawmakers that the island is being pitched as an alternative to Maldives for Indian tourists. The fear of Indian tourists finding Lakshadweep a more economical and convenient option has clearly rattled several Maldivian politicians.

The economic insecurity has been fanned by the larger geopolitical rivalries shaping around Maldives. The Muizzu government has not hesitated to demonstrate its pro-China posture. The President’s first state visit to China displays its intention to engage very closely with the country. The intention is notwithstanding Maldives having run up large liabilities from economically unsound projects under China’s Belt and Road Initiative (BRI).

The Muizzu government is also likely to soon operationalise a bilateral FTA with China, which was stalled by the earlier government for being heavily one-sided and with serious consequences for the Maldivian economy. The pro-Chinese actions of the Muizzu government contrast with its efforts to reduce strategic dependence on India visible from its insistence on withdrawal of Indian military presence from the island.

Apart from the China-India strategic competition impacting Maldives’s posturing, the Israel-Hamas conflict is also casting its shadow on these events. Maldivian lawmakers, criticising the Indian Prime Minister’s visit to Lakshadweep, have drawn attention to India’s close strategic ties with Israel and their unhappiness on the proximity. Israel, on the other hand, has committed to working with India for supporting the development of Lakshadweep as a high-class tourist destination.

India’s long-term strategic challenges have increased from the developments. The most obvious concern is the impact of the developments on the strategic competition with China in the region. The competition is heating up in the Indian Ocean region. South Asian countries which are a part of the Indian Ocean region—Sri Lanka and Maldives—have been targets of China’s maritime infrastructure building. The new infrastructure ostensibly can be used for both civilian and military purposes, increasing India’s anxieties.

Looking ahead, the prospects of India’s strategic rivalry with China in the region ebbing are remote in the foreseeable future. Global developments and outstanding bilateral issues will continue to sustain the unease and distance in India-China relations. Both will, as a result, continue to engage in efforts to expand strategic influence in its surrounding geographies. It is important for India to ensure that the cost of the competition doesn’t amount to its ties with other neighbours straining further as a collateral damage.

China has been using its economic clout for obtaining strategic influence in the region. In the process, it has also created conditions for recipients of its economic support to be pushed into economic distress, inflicted by the burden of servicing its loans. But even then, inabilities of small countries to access sufficient funds from alternative sources for building their economies has prevented them from discontinuing their reliance on China.

With national strategic influence becoming synonymous with abilities to fund infrastructure in deficient economies, India has little option other than pitching itself as a major actor in the regional infrastructure development space. In this regard, the template of collaborating with other nations having proven track records in infrastructure financing, should work well for India.

A pertinent example is India’s collaboration with the US in developing a new maritime infrastructure facility in Sri Lanka. The International Development Finance Corporation of the US has invested more than half a billion dollars in developing a deepwater container terminal at the Colombo port. It is working with India’s Adani Ports and Sri Lanka’s John Keells Holdings for developing the facility.

Many of India’s private businesses have developed global reputations in several economic sectors. These businesses can be appropriately encouraged to work with their global counterparts from the US, Europe, Japan, Australia, and elsewhere to offer attractive long-term infrastructure and economic development options to India’s neighbours lacking such capacities.

Telecommunications and digital connectivity, for example, could be areas where new investment ideas can be floated by consortiums of investors led by those from India to an economically insecure country like Maldives. New capacities in these areas developed through transparent funding mechanisms should be distinctly appealing for Maldives and other host nations. They should be welcomed as investments that are necessary and free of difficult conditionalities. The appeal of the investments would increase if prominent local business groups are also roped in as stakeholders in the projects.

The Lakshadweep saga has highlighted Maldives’ economic frailties. Addressing the vulnerabilities upfront can bring India long-term strategic benefits. China’s efforts to ‘win over’ countries through economic support needs to be counterbalanced by India by providing superior alternatives. India’s economic offers should be seen to be addressing critical needs of the host economies, connect to India’s expertise, and distinct in scope and character from offers made by China.

(The author is Senior research fellow and research lead (trade and economics), Institute of South Asian Studies, NUS) Views are personal.