A month after India announced financial aid to Maldives to help the island recover from the economic crisis, the Indian government is rethinking the decision. This rethink comes after Maldives decided to implement a free trade agreement with China, The Economic Times reported. 

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The Free Trade Agreement (FTA) between Maldives and China is expected to cause revenue losses for the island nation. It is further likely to create a trade imbalance for the country led by Mohamed Muizzu. 

WATCH: Maldives Defence Minister In India: First Ever Visit By Defence Minister Since Muizzu Took Charge

Maldives may face a loss of around $30-40 million per annum in customs fees due to the agreement with China, The Economic Times reported. 

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Moreover, Maldives is further in talks with Turkey for a similar agreement that would result in similar losses. 

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Last month, India announced a $760 million aid for Maldives to help the country prevent a sovereign default. 

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Moreover, in October 2024, India gave a $50 million interest-free loan to Male to help it meet its debt obligations. The loan was extended after a request by the Maldivian government. 

In October 2024, Maldivian President Mohamed Muizzu visited India, and both nations agreed to discuss an FTA on the trade of goods and services. 

Also read: India hands over defence equipment worth Rs 35 crore to Maldives

The 2024 row 

In early 2024, India and Maldives faced some diplomatic tensions after derogatory remarks by the Maldivian ministers about the Indian Prime Minister Narendra Modi. 

This happened when PM Modi praised the beauty of India's Lakshadweep on social media in order to boost tourism. 

Maldives' ministers, now suspended, responded with some derogatory remarks against the PM. 

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After the row, the Indian tourist arrivals in Maldives decreased by 42 per cent in the first four months of the year 2024. 

(With inputs from agencies)