THE CONTEXT: India and Indonesia’s bilateral relationship has reached new heights, with trade reaching USD 38.8 billion in FY2022-23, marking a 48% growth from USD 26.04 billion in 2022. Indonesian President Prabowo Subianto’s recent state visit as chief guest at India’s 75th Republic Day celebrations in January 2025 further strengthened their partnership, leading to key agreements, including the Local Currency Settlement Systems (LCSS) between RBI and Bank Indonesia and commitments to expedite the ASEAN-India Trade in Goods Agreement review by 2025.
HISTORICAL AND CULTURAL TIES:
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- Cultural and Religious Exchange: India and Indonesia share over two millennia of cultural and commercial ties. Buddhism arrived in Indonesia in the 2nd century AD, followed by Vedic traditions in the 5th century AD and Hinduism during the 8th century AD, leaving indelible marks on Indonesian society.
- Architectural Legacy: Iconic structures like Borobudur (Buddhist) and Prambanan (Hindu) temples reflect Indo-Javanese architectural brilliance, blending Indian motifs with local influences. The Pallava script and Sanskrit language contributed significantly to early Indonesian inscriptions, such as those from the Kutai and Tarumanagara kingdoms.
- Trade Links: Ancient trade routes facilitated the exchange of spices, textiles, and ideas between Indian kingdoms like Kalinga and Indonesian regions such as Java, Sumatra, and Bali. The term “Yawadvipa” (Java) appears in the Ramayana, highlighting its early importance in Indian maritime trade.
POST-INDEPENDENCE COLLABORATION:
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- Symbolic Beginnings: Indonesia’s founding father, President Sukarno, was the chief guest at India’s first Republic Day celebration in 1950, symbolizing a shared commitment to sovereignty and democracy.
- Bandung Conference (1955): Co-hosted by India’s Jawaharlal Nehru and Indonesia’s Sukarno, this historic Afro-Asian summit laid the foundation for the Non-Aligned Movement (NAM), promoting decolonization, peace, and cooperation among newly independent nations. The conference adopted the “Ten Principles of Bandung,” emphasizing mutual respect for sovereignty and non-interference in internal affairs.
CULTURAL EXCHANGE PROGRAMME (2025–2028): This program, signed during President Prabowo Subianto’s 2025 visit to India, aims to enhance people-to-people ties through knowledge sharing in the arts, heritage preservation, and education. India has offered assistance in restoring UNESCO World Heritage sites like the Prambanan Temple Compounds.
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- Promotion of Cultural Diplomacy: Indian cultural centers in Jakarta and Bali promote yoga, classical dance forms like Bharatanatyam, Carnatic music, and Hindi language studies. Events like Bali Jatra commemorate ancient maritime trade links between Odisha (Kalinga) and Southeast Asia.
- Mutual Admiration: Rabindranath Tagore described Bali as “the Morning of the World,” reflecting India’s admiration for Indonesia’s cultural richness. Indonesia’s Islamic architecture bears Indian Mughal influences, evident in structures like Aceh’s Baiturrahman Grand Mosque.
ECONOMIC PARTNERSHIP:
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- Bilateral Trade: Bilateral trade between India and Indonesia surged from $4.3 billion in 2005-06 to $38.8 billion in 2022-23, marking a remarkable 48% growth from $26 billion in 2022. In FY2023-24, trade stood at $29.4 billion, with Indonesia ranking as India’s eighth-largest trading partner and India as Indonesia’s second-largest buyer of coal and palm oil.
- Key Sectors: India’s exports to Indonesia totaled $7.4 billion in 2023, led by mineral fuels ($1.91 billion), vehicles ($769.86 million), and machinery ($512.48 million). Indonesia’s exports to India were dominated by coal, palm oil, and crude petroleum in 2023.
- Current Investment Trends: Indonesian investments in India amount to $653.8 million, spanning automotive, pharmaceuticals, and banking sectors. Indian investments in Indonesia are $1.56 billion, focusing on coal mining, energy projects, and manufacturing.
- Future Opportunities: Both nations aim to quadruple trade volumes by enhancing clean energy, technology, and manufacturing supply chains within the next decade. Indonesia’s emerging Electric Vehicle (EV) sector, supported by its dominance in nickel (62% of global supply by 2028), presents significant opportunities for Indian investments.
- Key Agreements: Local Currency Settlement Systems (LCSS) were signed between the Reserve Bank of India (RBI) and Bank Indonesia to reduce dependency on the US dollar for bilateral trade and enhance financial cooperation. Both nations agreed to expedite the review of the ASEAN-India Trade in Goods Agreement (AITIGA) by 2025 to address tariff and non-tariff barriers, fostering smoother trade relations. Joint exploration projects like the Nunukan Gas Block Project highlight collaboration in energy security.
GEOPOLITICAL COLLABORATION:
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- Indo-Pacific Synergy: India’s Act East Policy aligns with Indonesia’s Global Maritime Fulcrum (GMF), emphasizing maritime security, economic connectivity, and regional stability in the Indo-Pacific. Both nations advocate for a free, open, inclusive Indo-Pacific, respecting ASEAN centrality and international norms such as the United Nations Convention on the Law of the Sea (UNCLOS).
- Maritime Security: The Shared Vision of India-Indonesia Maritime Cooperation in the Indo-Pacific (2018) underscores joint efforts to combat maritime challenges like illegal fishing, piracy, and smuggling. Strategic sea lanes such as the Strait of Malacca, critical for global trade, are jointly monitored to ensure freedom of navigation and secure supply chains.
- Multilateral Engagements: India and Indonesia collaborate in platforms like G20, BRICS, ASEAN, and the Indian Ocean Rim Association (IORA) to address global challenges. At the G20 Bali Summit (2022) and India’s G20 Presidency (2023), both nations emphasized equitable growth for the Global South.
- Disaster Resilience: Joint efforts under initiatives like the Coalition for Disaster Resilient Infrastructure (CDRI) enhance regional disaster preparedness. Indonesia’s participation in India’s International Solar Alliance (ISA) strengthens their commitment to climate resilience.
- Regional Stability through ASEAN: Indonesia’s leadership within ASEAN complements India’s engagement with ASEAN as part of its Act East Policy. The two nations push for an effective and substantive Code of Conduct in the South China Sea to reduce tensions among regional players.
FUTURE PROSPECTS:
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- Critical Minerals Collaboration: Indonesia, the world’s largest producer of nickel (62% of global demand by 2028), is a crucial partner in India’s electric vehicle (EV) and battery manufacturing industries. Joint exploration and mining projects for nickel, bauxite, silica, and tin are being prioritized, focusing on downstream sectors to enhance value addition.
- Strategic Energy Projects: India’s Bharat Petroleum Resources Limited (BPRL) is partnering with Indonesia’s Pertamina in the Nunukan Gas Block Project, with $121 million committed for early execution. Both nations aim to strengthen their energy security through reliable supply chains and joint ventures in clean energy technologies.
- Biofuels Alliance: Indonesia has positively responded to India’s invitation to join the Global Biofuels Alliance, recognizing the role of biofuels in decarbonizing transportation and other sectors. Collaborative efforts include research and development, trade facilitation, and biofuel standard-setting.
- Renewable Energy Transition: Both countries are committed to achieving their respective renewable energy goals, focusing on solar power, wind energy, and green hydrogen projects. India’s growing refinery capacity offers potential for supplying refined petroleum products to Indonesia.
- Air Services Expansion: The signing of an expanded bilateral Air Services Agreement has restored direct flights between India and Indonesia, boosting trade, tourism, and people-to-people exchanges. This step aligns with increasing travel demand between the two nations.
- Regional Connectivity Initiatives: India’s participation in the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) emphasizes infrastructure development as a key driver of regional integration. Enhanced connectivity through maritime corridors complements both nations’ focus on port-led development under India’s Sagarmala initiative and Indonesia’s Sea Toll Program.
- Digital Infrastructure Collaboration: The recently signed MoU on Digital Development aims to foster cooperation in digital public infrastructure, cybersecurity, and emerging technologies like quantum computing. India has offered to share its expertise in implementing population-scale digital solutions such as Aadhaar and UPI systems with Indonesia.
- QR-Based Payments: Discussions on cross-border payment systems are underway to promote financial inclusivity and seamless business transactions in both countries.
- STEM Research Collaboration: A renewed MoU on STEM research focuses on joint projects in biotechnology, high-performance computing, quantum communication technologies, and space exploration.
- Space Cooperation: ISRO and Indonesia’s BRIN collaboration includes agreements on satellite tracking facilities like the Biak Telemetry Station. This partnership enhances satellite data sharing for disaster management, climate monitoring, and agricultural planning.
- Digital Transformation: India has offered its expertise in digital governance tools like e-governance platforms and AI-driven public service delivery systems to support Indonesia’s digital transformation goals.
- Educational Exchanges: Programs like the Indian Technical and Economic Cooperation (ITEC) and ICCR scholarships strengthen academic ties by providing training opportunities for Indonesian students in IT, healthcare, and engineering. Joint research initiatives between Indian and Indonesian universities are being encouraged under the Cultural Exchange Programme (2025–2028).
THE CONCLUSION:
India-Indonesia relations are poised for transformative growth across energy security, infrastructure connectivity, science and technology, and cultural diplomacy. By leveraging complementary strengths—India’s technological expertise and Indonesia’s resource wealth—both nations can emerge as leaders in sustainable development while contributing to regional stability in the Indo-Pacific. This partnership strengthens bilateral ties and serves as a model for fostering inclusive growth across the Global South.
UPSC PAST YEAR QUESTION:
Q. Act East Policy is India’s effort to cultivate extensive economic and strategic relations with Southeast Asian nations. Discuss the objectives and challenges of this policy.
MAINS PRACTICE QUESTION:
Q. Analyze the strategic importance of Indonesia in India’s Act East Policy and its role in shaping the Indo-Pacific framework. How can both nations leverage their complementary strengths to address regional challenges?
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