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Indonesian President Prabowo Subianto’s visit to India as the chief guest for the 76th Republic Day was a significant milestone in India-Indonesia relations. The two nations share deep historical, cultural, and trade ties. Notably, Indonesia’s first President, Sukarno, was the chief guest at India’s first Republic Day in 1950, underscoring their long-standing friendship.
The Indonesian President’s recent visit also led to the signing of several Memorandums of Understanding (MoUs) in health, digital infrastructure, and defence cooperation, further strengthening ties between the two Indo-Pacific democracies.
How have India-Indonesia Relations evolved over time?
| Early Post-Independence Period (1940s-1950s) | India played a crucial role in supporting Indonesia’s struggle for independence from Dutch colonial rule. Under Prime Minister Jawaharlal Nehru, India emerged as a strong advocate for Indonesia’s freedom on the global stage. Key developments during this period included: a. Treaty of Friendship (1951): Strengthening cooperation in trade, culture, and military affairs. b. Non-Alignment and Anti-Colonialism: Both nations were aligned on principles of non-alignment, peaceful coexistence, and anti-colonialism, leading to their active participation in the 1955 Bandung Conference and the formation of the Non-Aligned Movement (NAM) in 1961. |
| Deterioration in Ties (1960s) | Despite early cooperation, India-Indonesia relations faced setbacks in the 1960s due to geopolitical shifts: a. Sino-Indian Conflict (1962): India’s ties with China worsened post the 1959 Tibetan uprising and the 1962 war, while Indonesia maintained cordial relations with China. b. India-Pakistan Conflict (1965): Indonesia openly sided with Pakistan during the 1965 India-Pakistan war, even providing military assistance to Pakistan, causing a strain in Indo-Indonesian ties. |
| Cold War Era (1966-1980s) | A shift in Indonesia’s political landscape led to the gradual revival of ties: a. President Suharto’s Era: Indonesia distanced itself from China and sought to rebuild relations with India. b. Maritime Boundary Agreement (1977): Strengthened cooperation in maritime affairs and regional security. c. Suharto’s Visit to India (1980): Marked a new phase of improved diplomatic relations between the two nations. |
| Look East Policy (1990s) | India’s economic liberalization in the 1990s and the launch of the ‘Look East’ policy in 1991 significantly boosted Indo-Indonesian ties: a. Expansion of Economic Ties: Trade and investment between the two countries witnessed substantial growth. b. Comprehensive Partnership: Economic, security, and cultural cooperation became key aspects of bilateral relations. |
| Act East Policy and Recent Developments (Since 2000s) | With the launch of India’s ‘Act East’ policy in 2014, Indonesia emerged as a key regional partner. Notable advancements include: a. Trade Relations: Indonesia is India’s 2nd largest trading partner in ASEAN (after Singapore), with trade growing from USD 4.3 billion in 2005-06 to US$ 29.40 billion in 2023-24. b. Comprehensive Strategic Partnership (2018)– PM Modi’s visit to Jakarta led to the signing of the Comprehensive Strategic Partnership and a shared vision on Indo-Pacific maritime cooperation. c. Maritime Cooperation: Both nations jointly advocate for the resolution of maritime disputes and the finalization of the South China Sea Code of Conduct as per UNCLOS (United Nations Convention on the Law of the Sea). d. Defense Cooperation: Indonesia is negotiating with India for the BrahMos missile system, with an estimated deal worth USD 450 million. |
What are the key pillars of cooperation between India-Indonesia?
1. Economic & Trade Relations
- Bilateral Trade: It has reached $29.4 billion in FY 2023-24, with the ambitious goal of increasing it to $50 billion by 2025. Indonesia is India’s second-largest trading partner within ASEAN.
- Key Exports & Imports: India’s key imports include coal, palm oil, and rubber, while its key exports are refined petroleum, telecom equipment, and agricultural products.
- Investment: Indian investment in Indonesia stands at $1.56 billion, with a focus on mining, textiles, and infrastructure, while Indonesian investment in India totals $653.8 million, primarily in manufacturing and trade.
- Trade Facilitation: India and Indonesia have made efforts in trade facilitation, including the ASEAN-India Trade in Goods Agreement (AITIGA) review to reduce trade barriers, and the Local Currency Settlement MoU, which encourages trade in local currencies.
2. Strategic & Security Cooperation
- Defence & Security– Both countries pledged to enhance defense cooperation through initiatives such as Coordinated Patrol, Ex Garuda Shakti (Army), and Ex Samudra Shakti (Naval). Additionally, both sides agreed to set up a Bilateral Maritime Dialogue and a Cyber Security Dialogue.
- Defense Industry Collaboration: India-Indonesia Defense Industry Exhibition (2024) showcased opportunities for cooperation in defense technology and manufacturing.
3. Energy & Health Security
- Renewable Energy & Critical Minerals: Both countries are focused on joint exploration of nickel and bauxite for clean energy and biofuel collaboration for sustainability.
- Health Cooperation: Both countries signed MoUs on Health Cooperation and Traditional Medicine Quality Assurance, focusing on digital health and capacity-building for healthcare professionals.
4. Technological Cooperation
- Digital & Tech Advancements:
- India’s digital initiatives, such as Aadhaar, UPI, and CoWIN, serve as models for Indonesia’s digital growth
- Collaborative efforts in quantum communication, cybersecurity, artificial intelligence, and space technology
5. Cultural & Educational Cooperation
- Heritage & Arts: India supports the restoration of the Prambanan Temple, a UNESCO World Heritage Site in Indonesia, and the Indian Cultural Centers in Jakarta and Bali promote Indian arts and yoga.
- Education: Scholarships for Indonesian students available through ITEC (Indian Technical and Economic Cooperation) and ICCR (Indian Council for Cultural Relations) programs
6. Multilateral Cooperation
- Both countries highlighted the significance of ASEAN centrality and collaboration on regional matters such as the ASEAN Outlook on the Indo-Pacific, the India-Indonesia-Australia Trilateral, the Indo-Pacific Oceans Initiative (IPOI), as well as BRICS and the Indian Ocean Rim Association (IORA).
What are the challenges in India- Indonesia relations?
1. Trade and Economic Barriers
- Lack of Comprehensive Economic Cooperation Agreement (CECA): Unlike Malaysia and Singapore, Indonesia does not have a CECA with India, reducing its competitiveness, particularly in sectors like palm oil.
- Low utilization of AITIGA: The ASEAN-India Trade in Goods Agreement (AITIGA) has a utilization rate of only 25%, limiting the benefits that could be gained from the agreement.
- Trade Imbalance: India imports significant quantities of palm oil ($11 billion in 2022) and coal from Indonesia, contributing to a trade imbalance that favors Indonesia.
- Unrealized trade potential: Bilateral trade could increase by 33% to reach $61 billion, indicating untapped opportunities for growth in trade.
2. Investment and Competition with China
- Dominance of Chinese investments: Under President Joko Widodo, Chinese investments have overshadowed Indian investments. In 2024, Indonesia signed $10 billion worth of business deals with China, further intensifying competition for investment.
- Protectionist policies in India: Indian industries, especially textiles, have raised concerns about the influx of Indonesian products like Viscose Staple Fibre (VSF), fearing increased competition.
3. Geopolitical and Strategic Constraints
- Growing Chinese influence: Indonesia’s participation in China’s Belt and Road Initiative (BRI), including large-scale infrastructure projects like railways, raises concerns for India, particularly regarding regional influence.
- Regulatory challenges in defence: Differences in defense procurement processes have delayed joint defense projects, limiting the scope of strategic cooperation between the two nations.
4. Connectivity and People-to-People Barriers
- Limited air connectivity: Direct flights between India and Indonesia are limited, restricting tourism, business expansion, and people-to-people exchanges.
- Visa barriers: Restrictive visa policies hinder student exchanges, business travel, and cultural engagement, limiting deeper bilateral ties.
What should be the way forward?
1. Enhancing Trade: Accelerating the Comprehensive Economic Partnership Agreement (CEPA) and expanding economic cooperation in renewable energy and agriculture can address trade imbalances.
2. Strategic Partnerships: Encouraging Indonesia to join global initiatives like the International Solar Alliance and the Global Biofuels Alliance can foster mutual growth and innovation.
3. Multilateral Engagement: Strengthening cooperation through ASEAN, IORA, and the Indian Ocean Naval Symposium will align strategic interests and reinforce regional stability.
4. Economic Synergy: Joint defense projects, maritime security initiatives, and infrastructure development will build a robust Indo-Pacific framework to balance China’s influence.
5. Deepened Collaborations: Expanding partnerships in IT, energy, and tourism, while fostering cultural ties, positions India as a reliable partner for Indonesia’s growth trajectory.
| Read more– The Hindu UPSC Syllabus- GS 2– Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests. |
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