Maldives’ President Mohamed Muizzu is in India on a bilateral visit to mend his country’s strained ties and restore the flow of Indian tourists to the island nation.
Mint looks at the rise of outbound Indian tourists and their importance to countries such as Maldives.
Are Indian travellers continuing to boycott Maldives?
It seems so. According to data from the island nation’s ministry of tourism, the flow of Indian tourists in the first six months of 2024 was down by 43%. India, which was the top source of tourists in 2023, has now dropped to sixth place. Last year, Indians made up 12% of the 1.7 million tourists who visited the Maldives, but this share has halved to 6% in 2024 do far.
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The anti-India rhetoric in the Maldives has driven Indian tourists to other destinations like Thailand, Indonesia, Malaysia, Vietnam, and Georgia, as well as domestic spots like Lakshadweep.
Has this affected tourism in Maldives?
In absolute numbers, not much. In the first six month of 2024, Maldives registered a 10% increase in tourist arrivals. This was largely due to a resurgence of Chinese tourists, who made up for the largest number of visitors before 2020. Beyond China, tourists from Russia, the UK, Italy, and Germany make up the top five sources of visitors. (see chart)
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The Maldives is aiming to welcome over 2 million tourists in 2024, a milestone for the country. However, BBC has estimated the loss on account of Indian boycott at $150 million.
How vital is tourism for the island nation?
Maldives, thanks to its rich biodiversity (it is home to seventh largest coral reef in the world) and beautiful beaches, is heavily dependent on tourism which contributes to about 30% of the nation’s gross domestic product directly (about 78% indirectly) and 60% of its foreign exchange reserves.
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The World Bank has cautioned that the island nation’s heavy reliance on tourism and limited sectoral diversification makes it vulnerable to macro-economic shocks.
Has the World Bank’s warning come true?
Yes. Maldives’ economy is in a bad shape. Growth has slowed to below 5%, compared to pre-pandemic levels of 7.4%. Revenue from tourism has dipped, driven by a decline in average period of stay and lower tourist spending. Rising imports have led to a significant current account deficit, putting pressure on foreign exchange reserves, which fell to $395 million in July 2024, the lowest since December 2016. Fiscal deficit is high and so is public debt.
President Muizzu is looking at a bailout package during his India visit including currency swap and debt restructuring.
Why does Muizzu want Indian tourists back?
The return of Indian tourists would bolster the Maldives’ foreign exchange reserves and support its economy. Beyond that, Muizzu recognizes the long-term significance of Indian tourists. India’s outbound tourism is growing faster than any other country in the world. In 2023, over 28 million Indians travelled abroad, a number expected to exceed 90 million by 2040.
Recognizing this potential, 27 countries are now offering visa-free entry to Indian travellers, with many more easing visa norms. The Maldives has realized, albeit late, that it cannot afford to mix politics with tourism.