Prime Minister Narendra Modi's recent visit to the Maldives has underscored a deepening of ties between the two nations, with a particular focus on enhancing economic cooperation and easing transactions for Indian tourists. A key development is the imminent introduction of India's Unified Payments Interface (UPI) in the Maldives, a move that promises to revolutionize the way Indian travelers make payments in the island nation.
The integration of UPI is expected to streamline transactions for Indian tourists, eliminating the need to exchange currency or rely on international credit cards. Instead, they will be able to use familiar mobile payment apps like Google Pay, PhonePe, and Paytm to make instant payments directly from their Indian bank accounts. This will not only enhance convenience but also lead to significant savings on transaction fees and greater financial security. The first UPI transactions are expected to occur by the end of 2024.
Beyond the benefits for tourists, the introduction of UPI is also poised to boost the Maldivian economy. Local businesses, ranging from luxury resorts to small vendors, will be able to accept payments from Indian tourists with greater ease. This increased spending power is expected to drive sales and improve customer satisfaction. Moreover, the adoption of UPI is anticipated to promote digital literacy among the local population, fostering greater financial inclusion and digital innovation.
In addition to the UPI integration, India and the Maldives have signed a Memorandum of Understanding (MoU) to facilitate a local currency settlement system, allowing trade to be conducted directly in rupees and rufiyaa. This move is intended to reduce dependency on foreign currencies and enhance economic resilience for both nations.
During his visit, Prime Minister Modi extended a Line of Credit (LoC) of ₹4,850 crore (approximately $565 million) to the Maldives for infrastructure development. This financial support will be directed towards projects aligned with Maldivian priorities, such as the construction of social housing units, the Greater Malé Connectivity Project, the Addu Road Development Project, and the redevelopment of Hanimaadhoo International Airport. These initiatives are expected to transform the region into a vital transit and economic hub.
Furthermore, an amendatory agreement has been finalized to reduce the Maldives' annual debt repayment obligations to India by approximately 40%, from $51 million to $29 million. This measure aims to ease the financial burden on the Maldives and reflects India's commitment to supporting its neighbor's economic stability.
The two countries have also agreed to expedite the finalization of a Bilateral Investment Treaty to accelerate mutual investment. These efforts signify a shared commitment to strengthening economic ties and fostering prosperity in the region.
Prime Minister Modi's visit also served to reaffirm India's commitment to the Maldives' security and well-being. He emphasized that India has always been the "First Responder" in times of need, whether it be providing essential commodities or managing the economy post-COVID. The growing security cooperation between the two nations reflects the depth of their trust and shared commitment to peace, stability, and prosperity in the Indian Ocean region.
