India-Indonesia Relations: Bilateral Relations & Challenges

Table of contents

In 2024, India-Indonesia Relations marked 75 years of diplomatic ties, underscoring a long-shared history. However, a significant political shift has emerged with the election of nationalist Prabowo Subianto as Indonesia’s President, succeeding Joko Widodo.
This transition underscores the need for India to recalibrate its engagement with Indonesia to counter China’s growing influence in the region.

About India-Indonesia Relations

Bilateral Relations

Political Relations:
- India and Indonesia share common struggles against colonialism and uphold democracy and pluralism, with President Sukarno attending India’s first Republic Day (1950) and collaborating in the Bandung Conference (1955) to establish the Non-Aligned Movement.
- The political ties were further strengthened through India’s ‘Look East Policy’ (1991) and ‘Act East Policy’ (2014), enhancing bilateral relations.
Economic Relations: India and Indonesia’s bilateral trade in 2022-23 amounted to USD 38.85 billion, with major imports from Indonesia including coal and crude palm oil, and exports from India consisting of refined petroleum products, vehicles, and agricultural items.
Cultural & Historical Ties: India and Indonesia share over 2,000 years of cultural and commercial interactions, with religious exchanges in Hinduism, Buddhism, and Islam, and strong cultural influences evident in Indonesia’s adaptations of Indian epics like the Ramayana.
G20 Engagement: India actively participated in Indonesia’s G20 presidency in 2022, with the Indian PM attending the G20 Summit in Bali, and later assumed the G20 presidency (2022-2023), fostering close cooperation with Indonesia.
Investment: Indian investments in Indonesia totaled USD 1,219 million (2000-2022) across 4,750 projects, with significant investments channeled via Singapore, suggesting a higher potential than recorded.
Blue Economy Cooperation: India and Indonesia jointly focus on the blue economy for sustainable maritime development, with Indonesia’s expertise in leveraging marine resources providing opportunities for collaboration.
Defence Relations: Defence ties between India and Indonesia were strengthened through the Comprehensive Strategic Partnership (2018), with regular joint military exercises like GARUDA SHAKTI.

Challenges in India-Indonesia Relationship

Trade Imbalance: India’s heavy imports of palm oil and coal from Indonesia create a trade imbalance, with palm oil imports alone reaching $11 billion in 2022.
Unrealised Trade Potential: Bilateral trade potential is estimated at $61 billion, 33% higher than current trade, highlighting untapped opportunities in agriculture and renewable energy sectors.
Dominance of China: Indonesia’s substantial Chinese investments under the Belt and Road Initiative, such as railways, have raised concerns in India about growing Chinese influence in the region.
Regulatory Challenges: Differences in defense procurement processes have stalled joint defense projects, limiting deeper defense cooperation.
Ineffective Investor Window: A special window to address Indian investors’ concerns has been dysfunctional, hindering business expansion in Indonesia.
Connectivity Issues: Limited direct air connectivity and visa barriers restrict people-to-people interactions, impeding tourism and business growth between the two nations.

Way Forward

Tourism Diplomacy: Launch a ‘RICH’ (Religious, Cultural & History) tourism initiative to boost people-to-people ties and promote shared heritage.
Enhance Trade: Accelerate the Comprehensive Economic Partnership Agreement (CEPA) to remove trade barriers and expand economic cooperation.
Strategic Partnerships: Encourage Indonesia to join global initiatives like the International Solar Alliance, Coalition for Disaster Resilient Infrastructure, and Global Biofuels Alliance for mutual growth.
Multilateral Engagement: Strengthen cooperation through regional forums such as the ASEAN Regional Forum, IORA, and IONS for strategic alignment and regional stability.
Strategic & Economic Synergy: Focus on joint defense, maritime security, and infrastructure projects to build a robust Indo-Pacific framework that balances China’s influence.
Deepen Collaborations: Expand partnerships in IT, energy, and tourism, fostering cultural ties and positioning India as a trusted partner for Indonesia’s growth.

Reference: Indian Express

PMF IAS Pathfinder for Mains – Question 33

Q. Discuss the geopolitical significance of India-Indonesia relations and analyze how India can strengthen this partnership to counterbalance Beijing’s influence. Highlight the key areas of cooperation that could further India’s strategic interests. (250 words) (15 Marks)

Approach

Introduction: Briefly Introduce the answer about India and Indonesia relations.
Body: Discuss the geopolitical significance and key areas of cooperation between India and Indonesia.
Conclusion: Write a way forward by highlighting the need for enhanced partnership.