India to offer Maldives a loan of ₹4,850 crore, as announced by Prime Minister Modi
India and Maldives Move Towards Free Trade Agreement
India and the Maldives are currently in the active initial negotiation phase for a Free Trade Agreement (FTA) and a Bilateral Investment Treaty (BIT), as announced by Maldives President Mohamed Muizzu in July 2025.
During Indian Prime Minister Narendra Modi’s visit to Maldives in late July, both countries reaffirmed their commitment to deepen economic cooperation. The FTA and BIT discussions were officially initiated with the objective to boost mutual investment and trade.
The FTA is expected to significantly enhance bilateral trade by reducing tariffs, easing market access, and facilitating investment flows between India and the Maldives. This move fits within India’s “Neighbourhood First” policy framework and “Vision MAHASAGAR,” aiming to deepen regional economic integration, maritime cooperation, and infrastructure connectivity.
India has been a significant development partner for the Maldives, providing support through lines of credit, grants, buyer's credit, and capacity building programs. In 2024, India provided emergency financial assistance to Maldives in the form of $400 million and ₹3,000 crore currency swap lines.
During his visit, Modi also announced that India will extend a ₹4,850 crore line of credit to Maldives and agreed to reduce the annual debt repayments owed by Maldives to New Delhi by 40 percent. Beyond trade talks, India also extended financial support through a new Line of Credit (~$565 million), eased debt repayments for Maldives, and fostered digital payment connectivity (UPI, RuPay, local currency trade), signaling strengthening economic ties.
The BIT alongside the FTA could additionally secure investment protections, encouraging more Indian and Maldivian enterprises to invest in each other’s markets. Ongoing infrastructure projects (e.g., Greater Male Connectivity, airport redevelopment) funded by India complement the trade partnership by improving logistics and mobility, which could amplify trade volumes and business linkages.
The FTA between India and Maldives is a significant step forward in strengthening their economic partnership. Modi and Maldives President Mohamed Muizzu are working on building diplomatic bridges and cementing economic ties. Modi said he was deeply touched by the gesture of President Muizzu welcoming him at the airport.
Ambassador Anil Trigunayat stated that the Maldives is a story where political sagacity and economic imperatives have survived the myopic domestic discourse. He also emphasized that India's neighboring region has become more complex due to the Chinese challenge and needs to be handled ambidextrously.
Prime Minister Modi is confident that India-Maldives friendship will scale new heights of progress. The UK market has opened doors for Indian turmeric farmers due to the Indo-UK FTA, and India can take balancing action regarding carbon tax in the Indo-UK FTA.
In conclusion, the India-Maldives FTA is in the active initial negotiation phase as of July 2025, with strong political will on both sides, backed by complementary financial and infrastructural cooperation. Its finalization and implementation could substantially expand trade and investment flows, strengthening the long-standing bilateral economic and strategic partnership.
- Both India and the Maldives are actively negotiating a Free Trade Agreement (FTA) and a Bilateral Investment Treaty (BIT), with the goal to boost mutual investment and trade.
- The FTA is expected to reduce tariffs, ease market access, and facilitate investment flows between the two countries.
- India has provided significant development support to the Maldives, including emergency financial assistance, lines of credit, grants, and capacity building programs.
- During Narendra Modi’s visit to the Maldives, India extended a line of credit of ₹4,850 crore and agreed to reduce annual debt repayments owed by Maldives by 40 percent.
- The Bilateral Investment Treaty (BIT) could provide investment protections, encouraging more Indian and Maldivian enterprises to invest in each other’s markets.
- The FTA and BIT, along with ongoing infrastructure projects and digital payment connectivity, could significantly amplify trade volumes and business linkages between India and the Maldives.
