After Diplomatic Strains, Maldives Seeks Free Trade Talks With India

After months of strained ties, the Maldives appears to be making efforts to reset its relationship with India by initiating discussions on a free trade agreement (FTA).

"We have also decided to initiate talks on a free trade agreement to strengthen our economic ties," Prime Minister Narendra Modi announced after his talks with Maldivian President Mohamed Muizzu, who arrived in New Delhi for a five-day state visit.

However, both leaders refrained from sharing further details about the proposed trade agreement.

While India signed an FTA with all SAARC members, including the Maldives, in 2004, the two nations do not yet have a separate bilateral trade pact. After his victory in the October 2023 presidential election, President Muizzu's government expressed a strong intent to pursue trade agreements with as many countries as possible, aiming to facilitate smoother trade activities.

A formal proposal from Muizzu to begin negotiations with India was made on 10 August during Indian External Affairs Minister Dr S Jaishankar’s three-day visit to the Maldives.

“This agreement alongside other economic and trade-related agreements will facilitate trade liberalisation and ease the risks of doing business in both our countries,” Maldives Foreign Minister Moosa Zameer had said in a statement.

India and the Maldives first signed a trade agreement in 1981, focused on the export of essential commodities. From these modest beginnings, bilateral trade steadily grew, crossing the USD 300 million mark for the first time in 2021 and surpassing USD 500 million in 2022.

By 2023-24, bilateral trade had nearly reached $1 billion, with India’s exports valued at $892 million and imports from the Maldives at $86.84 million.

India's imports primarily consist of scrap metals, while its exports to the Maldives include a diverse range of engineering and industrial products, such as pharmaceuticals, radar equipment, rock boulders, aggregates, cement, and agricultural goods like rice, spices, fruits, vegetables, and poultry. Efforts are being made to tap the potential of seafood exports from Maldives to India.

The renewed interest in negotiating a free trade agreement between the two countries is particularly noteworthy, given recent diplomatic strains. After taking office in November last year, President Muizzu, perceived by many as a pro-China leader, called for the withdrawal of Indian military personnel from the Maldives, raising concerns about the future of India’s influence in the archipelago.

The discussions on an FTA with India also come at a critical time, as the Maldives' first bilateral trade agreement with China is set to take effect on 1 January 2025.

The controversial FTA with China, signed in December 2017 under former President Abdulla Yameen, faced delays under his successor, Ibrahim Mohamed Solih of the Maldivian Democratic Party (MDP), who chose not to pursue the necessary legislative steps for its implementation.

As the Maldives balances its partnerships, the potential FTA with India reflects Male's reconciliatory overtures to New Delhi.