India-Indonesia Relations

Posted 22 Feb 2025

Updated 27 Feb 2025

6 min read

Why in the News?

In the context of the 75th Anniversary of India-Indonesia Diplomatic Relations, the Indonesian President visited India.

The two countries signed MoUs on Health Cooperation, Traditional Medicine, Maritime Safety and Security, Digital Development and Cultural Exchange Programme (2025-2028).
A joint report was presented by the co-chairs at the 3^rd India- Indonesia CEOs Forum.
He was also the chief guest at India's 76th Republic Day celebrations.
A joint statement was released by the 2 countries highlighting the areas of cooperation.

Economic engagement: India–Indonesia Economic and Financial Dialogue (EFD Dialogue) (2023) aims to enhance collaboration and foster a shared understanding of global issues.
Maritime Security: Enhancing cooperation through engagement with regional mechanisms to ensure the safety and security of sea lanes of communication.
- E.g. Safety of Navigation in the Straits of Malacca and Singapore (SOMS)

Defence and Security:
- Strategic and operational interaction between the defence forces: E.g. India–Indonesia Coordinated Patrol (CORPAT), bilateral exercises Garuda Shakti (Army) and Samudra Shakti (Navy), and participation in other multilateral exercises- Milan, Komodo, Tarang Shakti and Super Garuda Shield.
- Developing defence indigenization and modernization capacities: E.g. talks on technology transfer of Brahmos missile are in progress.
Multilateral reforms: Close coordination in the multilateral fora including UN and the G20 and focus on reformed multilateralism.
Regional partners: Indonesia recently became a full member of the BRICS and both are part of other forums Indian Ocean Rim Association (IORA), Indo-Pacific Oceans' Initiative (IPOI), Indian Ocean Rim Association (IORA), Pacific Islands Forum (PIF), etc.
Infrastructure & Connectivity: E.g. India's Development Partnership with the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT)
Cultural and Heritage Cooperation: E.g. Cultural Exchange Programme (2025-2028), Annual festival 'Bali Jatra' commemorates the maritime trade and cultural exchange between India (Odisha) and Bali (Indonesia).
Other areas of common interests: Condemning all forms of terrorism, Collaboration in Digital Public Infrastructure (DPI), cybersecurity etc.

Trade: Indonesia is the second largest trading partner of India in the ASEAN region (after Singapore).
- Bilateral trade increased from $4.3 billion in 2005-06 to $29.40 billion in 2023-24.
Geostrategic significance: India, in line of its Security and Growth for All in the Region (SAGAR) initiative, is aiding development of Sabang port in Aceh, Indonesia.
- It enhances maritime connectivity and provides a geostrategic leverage in the Indo-Pacific region to counter China's influence.
- Sabang port would allow India easier access to the Malacca Strait and there is a proposal to establish connectivity to Andaman and Nicobar.
Internationalization of rupee: MoU on Local Currency Settlement Systems (LCSS) for financial integration through usage of local currency for bilateral transactions (2024).
Health and Pharmaceuticals: Sharing best practices on Digital Health initiatives increase capacity building programmes for healthcare professionals etc.

Market Access: India is an important export destination for Indonesia as it is the 2nd largest buyer of coal and crude palm oil from Indonesia.
Investment: Indian companies have made significant investments in Indonesia in infrastructure, power, textiles, steel, automotive, etc.
- E.g. India's GMR Airports Limited will be developing and operating Kualanamu International Airport in Medan, Indonesia.
Climate Change and Disaster Resilience: Humanitarian Assistance and Disaster Relief (HADR) activities by India have aided Indonesia which is prone to earthquakes, tsunamis etc.
- Indonesia joined the India-led Coalition for Disaster Resilient Infrastructure (CDRI).
Food Security: India's support in Indonesia's new mid-day meal scheme through the sharing of knowledge and experience.
Space Cooperation: Cooperation between ISRO and its Indonesian counterpart (BRIN) on Integrated Biak Telemetry, Tracking and Command (TTC) Facilities for Satellites and Launch Vehicles (2024).
Education and Skill Development: Capacity building training for Indonesian professionals under the Indian Technical and Economic Cooperation (ITEC) Programme, cooperation under the ASEAN-India Network of Universities (AINU).

Unrealized Trade Potential: The bilateral trade potential between India and Indonesia stands at US$ 61 billion which around 33% higher than the actual current trade volume.
- High tariff, non-tariff barriers along with low FTA (India-ASEAN Free Trade Agreement) utilisation are major constraints to trade.
- The bilateral trade of $29.40 billion (2023-24) is low compared to the set target of US$ 50 billion in trade by 2025.
China's influence: China plays a dominant role in the development of Indonesia. Indonesia has accepted huge investments from China under the Belt and Road Initiative (BRI) which raises concerns for India.
Slow Progress of strategic projects: Progress on strategic projects like Indonesia's purchase of Brahmos missiles, development of Sabang Port etc. has been slow with impact of various economic and geopolitical factors.
Lack of connectivity: Limited direct air connectivity, visa issues have hindered greater people-to-people interactions.

Identifying areas of collaboration: India and Indonesia must also identify areas of collaboration for convergence beyond the China factor by creating an "ASEAN Plus" policy.
- E.g. Aligning ASEAN's Outlook on the Indo-Pacific (AOIP) with India's Indo-Pacific Oceans Initiative (IPOI)- Indonesia has committed to supporting the maritime resources pillar under the IPOI.
Trade Reforms: Rationalizing FTAs, accelerating consensus on a Comprehensive Economic Partnership Agreement (CEPA) etc. be encouraged to improve economic integration.
Capitalizing on Regional cooperation: Engaging more actively in fora like ASEAN, East Asia Summit (EAS), BRICS, IPOI etc.
- Indonesia can be invited to join the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) for realizing the goal of Act East Policy.
Cooperation in the Global South: Work together on issues of importance to the Global South through South-South Cooperation.
- E.g. Indonesia acts as a bridge connecting India to the Pacific Island countries.
Developing Minilaterals: Minilaterals like the trilateral partnerships like India-Indonesia-Australia can be promoted to act on focussed sectors of cooperation.
People-to-people Ties: Promoting cultural exchanges, opportunities for education and employment and tourism.
- E.g. Capitalizing on 2025 being declared as the ASEAN-India Year of Tourism.