India-Indonesia Relations 2025 Introduction

• The visit of Indonesian President Prabowo Subianto to India as the chief guest for the 76th Republic Day was a significant milestone in strengthening the longstanding relationship between the two nations. 
• This visit serves as a reminder of the deep historical, cultural, and trade ties that bind India and Indonesia. 
• Their connection dates back to 1950 when Indonesia’s first President, Sukarno, was the chief guest at India’s first Republic Day. The relationship has evolved remarkably, and in recent years, it has been further solidified through key collaborations in health, digital infrastructure, and defense, which are setting the stage for future growth.

Evolution of India-Indonesia Relations: From Historical Bonds to Strategic Alliances

• Early Post-Independence Period (1940s-1950s): India’s role in supporting Indonesia’s independence from Dutch colonial rule laid the foundation for the strong ties that would follow. Under the leadership of Prime Minister Jawaharlal Nehru, India not only advocated for Indonesia’s freedom but also established a shared vision of non-alignment and peaceful coexistence:

• • • Treaty of Friendship (1951): The Treaty of Friendship was a pivotal moment that set the framework for strengthening cooperation in trade, culture, and military affairs.
    • Shared Ideals of Non-Alignment: Both India and Indonesia were aligned on anti-colonialism and non-alignment, with their active participation in the 1955 Bandung Conference and the formation of the Non-Aligned Movement (NAM) in 1961.

• Tensions in the 1960s: Despite the early cooperation, relations between India and Indonesia faced turbulence during the 1960s:

• • • Sino-Indian Conflict (1962): While India’s relations with China deteriorated after the 1962 war, Indonesia maintained cordial ties with Beijing.
    • India-Pakistan War (1965): Indonesia’s decision to side with Pakistan during the 1965 war strained the relationship, marking a period of tension between the two nations.

• The Cold War Era (1966-1980s): The 1970s and 1980s witnessed a shift in Indonesia’s foreign policy, leading to the revival of diplomatic and strategic relations with India:

• • • President Suharto’s Leadership: Suharto’s policies gradually distanced Indonesia from China and encouraged the rebuilding of relations with India.
    • Maritime Boundary Agreement (1977): The agreement provided a framework for regional security and maritime cooperation.
    • Suharto’s Visit to India (1980): This visit marked a new phase in Indo-Indonesian relations, focusing on diplomacy and strengthening bilateral ties.

• Look East Policy (1990s):  India’s economic liberalization in the 1990s and the launch of the ‘Look East’ policy in 1991 played a critical role in boosting India-Indonesia relations:

• • Economic Expansion: During this period, trade between India and Indonesia saw significant growth, with both nations focusing on enhancing economic cooperation.
  • Security Cooperation: Regional security, particularly in Southeast Asia, became a key focus, further fostering stronger relations.
•  Act East Policy and Recent Developments: Since 2014, the ‘Act East’ policy has positioned Indonesia as a crucial regional partner. Key advancements in the relationship include:
  • Trade Growth: Bilateral trade surged from USD 4.3 billion in 2005-06 to USD 29.4 billion in FY 2023-24, positioning Indonesia as India’s second-largest trading partner in ASEAN.
  • Comprehensive Strategic Partnership (2018): The partnership was formalized during Prime Minister Modi’s visit to Jakarta, which highlighted shared visions on Indo-Pacific maritime cooperation.
  • Defense Cooperation: Negotiations for defense projects, including a significant deal for BrahMos missiles worth USD 450 million, are indicative of the deepening strategic ties between the two countries.

Key Pillars of India-Indonesia Cooperation

• Economic & Trade Relations:

• • • Bilateral Trade: The trade relationship between India and Indonesia reached $29.4 billion in FY 2023-24, with an ambitious target of $50 billion by 2025. Indonesia is India’s second-largest trading partner within ASEAN.
    • Exports & Imports: India imports essential commodities such as coal, palm oil, and rubber from Indonesia, while it exports refined petroleum, telecom equipment, and agricultural products. Bilateral trade agreements like the ASEAN-India Trade in Goods Agreement (AITIGA) aim to improve trade relations further.
    • Investment: Indian investments in Indonesia amount to $1.56 billion, with a focus on sectors such as mining, textiles, and infrastructure. Conversely, Indonesian investments in India stand at $653.8 million, primarily in manufacturing and trade.

• Strategic & Security Cooperation: 

• • • Defense & Security Initiatives: India and Indonesia have pledged to enhance defense ties through joint exercises such as Ex Garuda Shakti (Army) and Ex Samudra Shakti (Naval). Both nations are also discussing the establishment of a Bilateral Maritime Dialogue and Cyber Security Dialogue.
    • Defense Industry Collaboration: The India-Indonesia Defense Industry Exhibition (2024) highlighted potential cooperation in defense technology and manufacturing.

• Energy & Health Security: 

• • • Renewable Energy & Critical Minerals: The countries are working together to explore nickel and bauxite for clean energy initiatives and collaborate in biofuels to enhance sustainability.
    • Health Cooperation: MoUs signed on health cooperation and traditional medicine quality assurance aim to improve healthcare capacity-building and foster digital health solutions.

• Technological Cooperation: 

• • • Digital Transformation: India’s digital initiatives, such as Aadhaar, UPI, and CoWIN, are helping shape Indonesia’s digital future. Collaborative projects in areas like quantum communication, cybersecurity, AI, and space technology are expanding technological cooperation between the two nations.

• Cultural & Educational Cooperation: 

• • • Heritage and Arts: India’s involvement in restoring the UNESCO World Heritage-listed Prambanan Temple in Indonesia and the promotion of Indian arts and yoga through cultural centers in Jakarta and Bali are strengthening bilateral cultural ties.
    • Educational Exchange: Indian scholarships through ITEC and ICCR programs provide Indonesian students with educational opportunities in India, fostering deeper people-to-people connections.

• Multilateral Cooperation: 

• • • Regional Partnerships: Both nations share a commitment to ASEAN’s centrality and engage actively in forums like the India-Indonesia-Australia Trilateral, the Indo-Pacific Oceans Initiative (IPOI), and the Indian Ocean Rim Association (IORA), ensuring greater regional stability.
    • Subregional Program:  The Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) subregional program aims to stimulate economic development in 32 of these three countries’ less-developed states and provinces, which are home to over 54 million people.

• Space Cooperation:

• India and Indonesia have signed Agreement on Transfer of Title of Integrated Biak Telemetry, Tracking and Command (TTC) Facilities and Implementing Arrangement on Operation, Maintenance and Utilisation of Integrated Biak Telemetry, Tracking and Command (TTC) Facilities for Satellites and Launch Vehicles between Indian Space Research Organisation (ISRO) and National Research and Innovation Agency (BRIN) in March 2024. 

• Food Security Cooperation:

• • • India’s support for Indonesia’s new mid-day meal scheme has been a notable highlight in the bilateral relationship. 

• India has reaffirmed its commitment to help Indonesia implement this initiative, extending an invitation for more Indonesian officials to benefit from the expertise of India’s Food Corporation in managing the Public Distribution System. 

Challenges in India-Indonesia Relations

• Trade and Economic Barriers: 

• • • Utilization of AITIGA: The ASEAN-India Trade in Goods Agreement (AITIGA), signed in 2009, is a key mechanism for enhancing trade between the two regions. However, the utilization rate of AITIGA stands at only 25%, indicating that the full benefits of the agreement have not been realized. For example, Indonesian exports to India, including commodities like rubber and timber, remain underutilized, partly due to bureaucratic barriers and logistical inefficiencies in both countries. 
    • Trade Imbalance: India’s imports from Indonesia, particularly palm oil, are substantial, creating a trade deficit. In 2022, India’s imports of palm oil from Indonesia amounted to $11 billion, while its exports to Indonesia totaled around $3 billion. This imbalance affects India’s position as an equal trade partner and reduces the benefits of the bilateral trade relationship.  
    • Lack of CECA: Unlike Malaysia and Singapore, which have CECA agreements with India, Indonesia lacks a similar agreement, limiting its trade potential in critical sectors. For instance, palm oil, one of Indonesia’s largest exports to India, faces significant tariff barriers, limiting its competitiveness in the Indian market. In 2022, India imported around $11 billion worth of palm oil from Indonesia, but the lack of a CECA hampers the ability to fully exploit trade opportunities. 

• Investment and Competition with China: 

• • • Indian Industries’ Concerns:  India’s industries, particularly textiles, face growing competition from Indonesian products. One key example is Viscose Staple Fibre (VSF), a textile product that has been a significant export from Indonesia to India. Indian textile industries have raised concerns over the increasing influx of Indonesian VSF, fearing it may undermine local production and lead to higher competition in the Indian market. 
    • Chinese Influence:  China’s increasing presence in Indonesia, primarily through its Belt and Road Initiative (BRI), poses a challenge to India’s efforts to secure investments and influence in Indonesia. For example, in 2024, Indonesia signed $10 billion worth of agreements with China under the BRI, focusing on large-scale infrastructure projects like railways, ports, and energy. This growing Chinese involvement raises concerns for India about its regional influence. 

• Geopolitical and Strategic Constraints: 

• • • Belt and Road Initiative (BRI): Indonesia’s participation in large-scale infrastructure projects under the BRI, such as the Jakarta-Bandung High-Speed Rail, funded largely by Chinese loans, is seen as a way to strengthen China’s presence in the region. The Chinese-backed rail project in Indonesia, worth around $6 billion, has raised alarms in India about the potential for Chinese strategic leverage over Indonesia, especially in terms of security and maritime control in the Indo-Pacific.
    • Defense Procurement Delays: Differences in defense procurement processes between India and Indonesia have led to delays in executing joint defense projects, limiting the scope of strategic collaboration. A notable example is the delayed negotiations over joint defense projects involving missile systems like BrahMos. While there have been talks regarding the sale of the BrahMos missile system to Indonesia, progress has been hampered due to regulatory delays and differences in defense procurement procedures. 

• Connectivity and People-to-People Barriers: 

• • • Limited Air Connectivity: Direct flights between India and Indonesia remain limited, hindering tourism and business expansion.
    • Visa Restrictions: Strict visa policies are impeding greater student exchanges, business opportunities, and cultural engagement.

• Environmental Challenges:

• • Renewable Energy Collaboration: While both nations have expressed interest in enhancing cooperation on renewable energy, challenges persist in areas like clean energy collaboration and critical mineral exploration. For example, Indonesia is rich in nickel—a critical mineral for battery production—which is essential for India’s renewable energy and electric vehicle ambitions. However, Indonesia’s export restrictions and inconsistent mining regulations make it difficult for India to secure long-term supplies of these minerals.

Way Forward

• Enhancing Trade and Economic Cooperation: Accelerating the Comprehensive Economic Partnership Agreement (CEPA) and expanding cooperation in renewable energy and agriculture can help address the trade imbalance and unlock new economic opportunities.

• • • There is a shared goal to quadruple the volume of trade within the next 10 years. Achieving this requires addressing existing trade barriers, such as tariffs and non-tariff barriers, which currently hinder trade.  India’s $1.56 billion investment in Indonesia and Indonesia’s $653.8 million investment in India represent just the beginning of what can be achieved.

• Strategic and Defense Partnerships: Security has been a key pillar of the India-Indonesia partnership, and both nations have made significant strides in strengthening defensive ties, notably through the Comprehensive Strategic Partnership signed in 2018. 

• • • Both nations should continue to deepen defense cooperation through joint projects, particularly in maritime security and cyber defense.
    •  Additionally, expanding partnerships in clean energy initiatives like the International Solar Alliance and the Global Biofuels Alliance will foster mutual growth.
    • The Shared Vision on Maritime Cooperation could stand as the basis for ASEAN-India maritime cooperation. It is one of the most potent approaches to sovereignty and the security of regional interests to create a regionally integrated set of standards.
  • Multilateral Engagement: As members of global organizations like BRICS, the Indo-Pacific Oceans Initiative (IPOI), and the Indian Ocean Rim Association (IORA), both countries should use these platforms to enhance cooperation on critical global issues such as climate change, sustainable development, and trade.
    • The ongoing shifts in U.S. policies, especially regarding tariffs, offer opportunities for both nations to align their positions and advocate for free and fair trade policies that benefit emerging economies. A shared commitment to reforming global trade practices, such as addressing tariffs and non-tariff barriers, will foster economic growth and integration for both countries.

• Infrastructure and Economic Synergy: Collaborating on joint defense projects, infrastructure development, and maritime security will enhance Indo-Pacific security, balancing China’s growing influence.

• Expanding Collaborations in Technology, Energy, and Tourism:  Increased collaboration in IT, energy, and tourism, coupled with a focus on cultural exchanges, will help solidify India’s role as a reliable partner in Indonesia’s growth trajectory.