Image used for representative purpose only
| Photo Credit: The Hindu

Maldives President Mohamed Muizzu has taken “necessary steps” to introduce India’s Unified Payments Interface (UPI) in the archipelago nation, slated to benefit the Maldivian economy substantially.

Developed by the National Payments Corporation of India (NPCI), UPI is an instant real-time payment system for facilitating inter-bank transactions through mobile phones.

Mr. Muizzu on Sunday set up a consortium to introduce UPI in the country and appointed TradeNet Maldives Corporation Limited as its leading agency, according to a press release by the President’s Office.

The president also suggested the participation of the country’s banks, telecom companies, state-owned companies and fintech companies in the consortium.

He “decided to take the necessary steps” on the recommendation of the Cabinet, the press release said.

“This move is expected to bring significant benefits to the Maldivian economy, including increased financial inclusion, improved efficiency in financial transactions, and enhanced digital infrastructure,” it said.

Mr. Muizzu also constituted an inter-agency coordination team comprising the Ministry of Finance, the Ministry of Homeland Security and Technology and the country’s Monetary Authority to lead the Ministry of Economic Development and Trade in overseeing the establishment of the UPI in the Maldives.

The agreement to introduce UPI in Maldives was signed during External Affairs Minister S. Jaishankar’s three-day official visit to the country in August.

Earlier this month, dollar-starved Maldives floated a new foreign currency regulation, limiting types of transactions allowed in foreign currency and imposing mandatory foreign currency exchange controls on tourism establishments and banks.

The Maldivian economy appears to have taken a hit after calls to Indian tourists to avoid the picturesque island nation as a response to President Muizzu’s ‘India Out’ campaign last year.

Mr. Muizzu won the presidential election last year on an ‘India out’ campaign and asked New Delhi to withdraw its military personnel posted in the archipelago nation by May this year. However, Muizzu has since toned down his anti-India stance and visited India on his first state visit to the country earlier this month.

Tourism is the main source of economic activity for the Maldives, contributing nearly 30 per cent of the GDP and generating more than 60 per cent of foreign exchange.

Maldives tourism hit: Controversial tweets by Maldives ministers against PM Modi sparked a call by some Indians on social media to boycott the Maldives
| Photo Credit: AFP

In January, controversial tweets by deputy ministers of the Maldives on Indian Prime Minister Narendra Modi’s visit to Lakshadweep led to a diplomatic row between the two countries. The consequences of this row have been two-fold. The tweets sparked a call by some Indians on social media to boycott the Maldives. This was an attempt by them to puncture the biggest money-maker for the Maldives, the tourism industry. Meanwhile, Maldivian President Mohamed Muizzu strengthened ties with one of India’s rivals, China. Just a few days after tensions between the Maldives and India flared up, Mr. Muizzu visited China, met with Chinese President Xi Jinping, and appealed to Chinese tourists to visit his nation in large numbers and reclaim the top spot in tourist arrivals, which they once held.

Chart 1 | The chart shows the number of tourists who visited the Maldives in the first 35 days of 2023 and 2024.

Charts appear incomplete? Click to remove AMP mode

While the number of Indian tourists visiting the Maldives has declined marginally, Chinese tourists have swifty filled this gap, resulting in an overall increase in tourist inflows, data show. The number of Indians who visited the archipelago dropped marginally from 21,460 to 16,895 in the period considered. It is important to note that the decline cannot be entirely attributed to the boycott call as a considerable share may also have dropped their plans fearing repercussions of the ongoing row, among other reasons. Moreover, the number of Russian tourists also decreased from 26,305 to 22,577 in the period, so India is not an outlier.

Also read: Indian tourists’ boycott call post Modi visit to Lakshadweep may impact Maldives | Data

The decline in Indian visitors did not have an impact on the overall number of tourists to the Maldives. In fact, if the first 35 days of 2023 and 2024 are compared, the number of tourists went up slightly from 1,97,252 to 2,22,502. This increase is entirely due to the sudden surge in the number of Chinese tourists from just 6,563 to 25,303 in the period.

Chart 2 | The chart shows the number of medical tourists from the Maldives who visited India for treatments.

More worryingly, the impact of the diplomatic fallout has been felt by more than just the tourism industry. Generally, 20,000 to 40,000 medical tourists from the Maldives visit India annually for treatment (Chart 2). On January 13, Mr. Muizzu announced that the government’s health insurance scheme will cover visits to the UAE and Thailand too, to “diminish reliance on a select group of countries”. He made this announcement immediately after his return from China. He also said that a 100-bed hospital with Chinese aid will be built.

Mr. Muizzu and Mr. Xi signed key agreements, including agricultural schemes that would “end its [Maldives’] dependence on one country for imported staple foods such as rice, sugar, and flour,” by growing them locally. Currently, the Maldives relies heavily on India for a number of products.

Chart 3 | The chart shows the value of commodities imported by the Maldives from India, between 2019 and 2021, in $ (vertical axis). On the horizontal axis, India’s share (%) in the Maldives’s total imports, across commodities is depicted.

The Maldives imports over 95% of its granite, 40% of its steel bars and coils, over 30% of tubes/pipes, electric motors and cement, 65% of flat-rolled iron and stainless steel sheets, and over 50% of bulldozers from India (Chart 3). Moreover, it sources over 80% of rice, 60% of eggs, close to 30% of cattle meat, 50% of onions, melons and nuts, 25% of wheat, over 45% of crabs/shrimp/prawns and cabbages, and 40% of tomatoes from India. Essentially, the tourism boom in the Maldives — from food to stay — relies heavily on the supply of raw materials from India.

Chart 4 | The chart shows the value of commodities exported by India to the Maldives in $ (vertical axis) and the Maldives’s share in India’s total exports (horizontal axis).

India exports 70% of its cabbages/cauliflowers, over 20% of eggs, over 10% of its melons and live animals and nuts to the Maldives. The archipelago’s key agreements with China after the fallout with India threatens this mutually beneficial relationship, and gives China more sway in the Indian Ocean region.

Source: UNcomtrade portal, India Tourism Statistics, Republic of Maldives’s Ministry of Tourism

vignesh.r@thehindu.co.in, sonikka.l@thehindu.co.in

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