In the Union Budget 2025, India has significantly increased its developmental aid to the Maldives, marking the highest rise in financial assistance among South Asian nations. The allocation for the island nation now stands at ₹600 crore, a sharp increase of nearly 28% from the ₹470 crore granted in the 2024-25 fiscal year. This boost comes in the aftermath of a year marked by diplomatic tensions between the two countries, particularly following derogatory remarks made by some Maldivian leaders against Indian Prime Minister Narendra Modi after his visit to Lakshadweep in January 2024. The visit was perceived by sections of the Maldivian leadership as an effort to promote Lakshadweep as an alternative tourist destination to the Maldives, leading to a public outcry and straining bilateral ties. As a result, India had reduced its aid allocation for the Maldives in the previous budget, signaling its displeasure over the remarks and the growing strain in relations.
However, the dynamics began to shift following a crucial diplomatic engagement between the two nations. Maldivian President Mohamed Muizzu, who had campaigned on an ‘India Out’ platform and was perceived as being closer to China, visited India in October 2024 for bilateral talks with PM Modi. During the discussions, Muizzu acknowledged India’s crucial role as a "key partner" in the Maldives’ development, paving the way for a renewed partnership. The increased allocation in the 2025-26 budget indicates a revival in India-Maldives relations, underscoring India's commitment to maintaining strong ties with its neighbors despite past diplomatic hiccups.
As part of India's broader ‘Neighbourhood First’ policy, the budget has also prioritized development assistance to other regional allies. Bhutan continues to receive the largest share of financial aid, with an allocation of ₹2,150 crore, reaffirming India's strategic and historical ties with the Himalayan nation. Nepal follows with ₹700 crore in aid, maintaining its position as one of India's key development partners. With its revised ₹600 crore allocation, the Maldives now ranks third in terms of financial assistance among India's neighboring nations.
Mauritius, another longstanding ally of India, has received an allocation of ₹500 crore, reflecting a slight reduction from last year’s ₹576 crore. Meanwhile, Myanmar, which remains in political turmoil following a military coup, saw a cut in its budgetary allocation from ₹400 crore to ₹350 crore. Aid to Bangladesh and Sri Lanka remains unchanged from the previous year, signaling stable diplomatic relations with both countries. Additionally, African nations have witnessed a modest increase in India's developmental assistance, with the allocation rising from ₹200 crore to ₹225 crore, reflecting India's growing engagement with the continent.
The enhanced financial support to the Maldives underscores India's strategic approach to strengthening regional partnerships, particularly as China continues to expand its influence in the Indian Ocean region. By reinforcing economic ties with key neighbors, India aims to bolster its presence and counterbalance geopolitical shifts in South Asia. The renewed commitment to the Maldives signals not just a diplomatic reset but also a broader effort to ensure regional stability and cooperation in the coming years.
