In the recent budget document released by the government on Thursday, India has proposed a 22% reduction in aid to the Maldives for the 2024-25 financial year. The Maldives now is slated to receive INR 600 crore for developmental assistance, ranking it as the third-highest recipient of aid from the government for foreign countries.

It was also outlined that Bhutan and Nepal are slated to be the top two recipients of government grants. Bhutan is allocated INR 2068.56 crore for developmental assistance, while Nepal is earmarked INR 700 crore.

Several other countries are also witnessing decreases in their allocations for the 2024-25 fiscal, including Afghanistan, Bangladesh, Myanmar, and the Latin American nations. But surprisingly, budget allocations for Sri Lanka, African countries, Mauritius, and the Seychelles have seen increases.

Coming back to the Maldives, in the previous fiscal year (2023-24), the Maldives was granted INR 770.90 crore in aid, marking an increase of more than 300% from the INR 183.16 crore allocated in 2022-23. Notably, the initial allocation for the Maldives in the 2023 Budget was INR 400 crore, but it was later revised to INR 770.90 crore.

India has consistently been a key aid and assistance partner to the Maldives, contributing to sectors such as defence, education, healthcare, and infrastructure. Government data indicates that in 2018, the Maldives received 2.1% of the total foreign aid allocation, a figure that rose to 6.8% in 2019 and reached 6.84% in the fiscal year 2023-24.

The reduction in aid is not exclusive to the Maldives, as the government plans an overall 10% cut in aid to foreign countries for the upcoming fiscal year. India has earmarked INR 4883.56 crore for foreign aid in 2024-25, a decrease from the INR 5426.78 crore allocated in the 2023-24 budget.

India and the Maldives have found themselves entangled in a diplomatic dispute triggered by disparaging remarks made by certain Maldivian ministers directed at the Indian Prime Minister Narendra Modi.

Things went a little sour when PM Modi visited Lakshadweep and shared pretty images of the place. In the Maldives, this was interpreted as an attempt to promote Lakshadweep as an alternative tourist destination, posing a potential threat to the island nation's heavily tourism-dependent economy.

This dispute resulted in a wave of cancellations for myriad hotel bookings and flight tickets bound for the Maldives.

For information, the government grants to foreign nations serve various purposes, including aid for cultural and heritage projects, as well as assistance for disaster relief.