India has offered US$1.4 billion (S$1.9 billion) in financial aid to the Maldives for infrastructure development, including its water and sewerage systems, in a move to counter China's presence in the island nation and ease the pressure on it of its growing Chinese debt.
Prime Minister Narendra Modi announced the aid, which includes a mixture of soft loans, currency swap and line of credit, after talks with visiting Maldivian President Ibrahim Mohamed Solih.
Mr Modi said in a statement on Monday he had fruitful discussions with Mr Solih and that India wants to deepen ties with the Maldives.
Mr Solih was on a three-day visit to India, his first official trip overseas since he was sworn in as President last month.
Since taking charge, Mr Solih has shifted the Maldivian course slightly away from China, to which it owes millions of dollar.
The previous government, led by Mr Abdulla Yameen, had deepened ties with China at the cost of relations with India.
Said Mr Modi at a media conference with Mr Solih on Monday: "India will always be with you. I am happy to announce that for the Maldives' social and economic development, we are providing US$1.4 billion in the form of budget support, currency swap and concessional lines of credit."
A joint statement released after talks said the aid will go to "various areas of cooperation, including private-sector involvement in the development of housing and infrastructure, water and sewerage systems in the outlying islands, healthcare, education and tourism".
The Maldives, an archipelago of more than 1,192 islands and a population of 400,000, is strategically located in the Indian Ocean and has been at the centre of a jostle for influence between China and India.
While the Maldives has traditionally had a "India First policy", reiterated by successive governments, China has been steadily increasing its presence in the Maldives, particularly during Mr Yameen's rule.
China is spending millions of dollars to upgrade the island nation's infrastructure. The projects include a US$200 million China-Maldives Friendship Bridge linking the capital Male to Hulhule island, where the city's airport is located.
Mr Solih has signalled that he will restore the Maldives' traditionally-close ties with India and re-look decisions taken by the previous government, including the signing of a free trade agreement with China.
On Monday, he emphasised the democratic traditions that bind the two countries. "I had extensive discussions with Prime Minister Modi (on) ways to further enhance the traditionally strong and friendly relations between India and the Maldives, and also reaffirm our mutual commitment to democracy, development and peaceful coexistence."
The joint statement said Mr Solih "reaffirmed his government's 'India-First Policy' and commitment to working closely with India".
The two countries also agreed to strengthen maritime cooperation in the Indian Ocean region "through coordinated patrolling and aerial surveillance, exchange of information and capacity building".
But analysts said China's presence would go on in the Maldives, which would keep seeing the two Asian giants jostle for influence.
"You can't wish away China from South Asia or anywhere," said South Asia expert S. D. Muni .
"As we saw in Sri Lanka, none of the Chinese projects can be rolled back. Some in the Maldives have been completed. The Chinese would remain but the Maldives would be more sensitive to India's security interests.
"It would restore normalcy in relations with India, which badly deteriorated under the previous regime."