Regional powerhouse India had been concerned that its small, yet strategically located neighbour was drifting towards the orbit of its rival China following the 2023 election of President Mohamed Muizzu on an anti-India platform.

Since coming to office, Muizzu has secured the withdrawal of a small contingent of Indian military personnel who operated search-and-rescue aircraft in the archipelago.

But he has since toned down his anti-India rhetoric, and on Friday he touted the two nations' collaboration on security and trade.

"India has long stood as the Maldives' closest and most trusted partner," Muizzu said in a banquet speech alongside Modi, whom he met with twice last year.

"We deeply value the friendship of India and are grateful for the timely assistance your country has extended to us in moments of need," Muizzu added.

Shortly after his arrival on Friday, Modi unveiled a $565 million credit line for the Maldives, which is facing a severe foreign exchange shortage despite its thriving tourism industry.

India also reduced annual repayments of an earlier credit line from $51 million to $29 million, and the two sides discussed a potential free-trade agreement.

Muizzu said the new credit line would bolster the Maldives' security forces, and improve healthcare, housing and education.

During his two-day trip, Modi also inaugurated a new defence ministry headquarters and several India-funded infrastructure projects, including roads and a 4,000-unit housing scheme.

Modi's visit had set "a clear path for the future of Maldives-India relations", Muizzu wrote on X on Saturday as the Indian leader left the capital Male after 60th Independence Day celebrations.

"Our relationship continues to grow, shaped by people-to-people ties and cooperation in various sectors," Modi wrote in his own post on X.

"India remains committed to supporting the aspirations of the Maldivian people."

Known for its luxury tourism and pristine beaches, the Maldives is also a geopolitical hotspot, with key global shipping lanes passing through its 1,192 islands, stretching across 800 kilometres (500 miles) of the equator.

China and India are the Maldives' two largest bilateral lenders.