G. CHANDRASHEKHAR, Advisor, ERTF
India and Indonesia, two major economies in the Indo-Pacific, share a long-standing relationship and possess significant unrealized bilateral trade potential. While trade has grown substantially, both nations are actively seeking to expand and diversify their economic cooperation.
Current Trade Landscape:
- Growing Trade Volume: Bilateral trade increased from US$ 4.3 billion in 2005-06 to US$ 29.40 billion in 2023-24. The target is to reach US$ 50 billion by 2025.
- Key Imports from Indonesia to India: Coal, crude palm oil, minerals, rubber, pulp & paper, and hydrocarbons.
- Key Exports from India to Indonesia: Refined petroleum products, commercial vehicles, telecommunication equipment, bovine meat, animal feed, agricultural products, steel, and plastics.
- Trade Imbalance: India typically has a trade deficit with Indonesia, largely due to significant imports of palm oil and coal.
Key Opportunities for Bilateral Trade Growth:
For Indian Businesses in Indonesia:
- Energy: Significant opportunities in coal, oil, gas, and renewable energy (solar, wind, energy storage solutions). Indian companies like Tata Power and Adani are already active.
- Infrastructure: Investment in airports, ports, railways, toll roads, river navigation projects, and power plants.
- Pharmaceuticals & Healthcare: Indonesia is the largest pharmaceutical market in ASEAN. Opportunities for local manufacturing, supplying healthcare products and services, and export of generic drugs.
- Agriculture & Food Processing: India can introduce agri-tech solutions, export seeds and fertilizers, and form agribusiness partnerships. Opportunities exist in farm modernization, supply chain enhancement, and developing value-added processed food products (including halal products).
- Automotive & Components: India's expertise in the automotive sector offers potential for exports of vehicles and components.
- Information Technology (IT) & Digital Economy: Indonesia's booming digital economy (projected to reach US$130 billion by 2025) presents opportunities in fintech, digital payments, and collaborations with Indonesian startups in e-commerce, logistics, and ride-hailing.
- Textiles: Traditional area of Indian business in Indonesia.
- Biotechnology: A sector with broad prospects for deepening economic relations.
- Mining: As Indonesia is a major nickel producer, there are opportunities for Indian businesses looking into green technologies and renewable energy.
- Tourism: Promoting "RICH" (Religious, Cultural & History) tourism initiatives can boost people-to-people ties and shared heritage.
For Indonesian Businesses in India:
- Processed Food: Several Indonesian processed food companies (e.g., PT. Mayora Indah Tbk, Garuda Polyflex Foods Pvt Ltd, PT. Kaldu Sari Nabati, Indofood, Kopi Kenangan, CP Prima, PT Sumber Jaya Mitra) already have a presence in India.
- Poultry Feed and Breeding: Companies like Japfa Comfeed India Pvt Ltd are active in this sector.
- Paper Products: APP India Ltd and Quantum Select International Pvt Ltd are examples.
- IT and Startup: Gojek Indonesia and Anabatic Technologies India Pvt Ltd demonstrate opportunities in the digital space.
- Aviation & Shipping: PT. Garuda Indonesia (aviation) and PT. Samudera Indonesia (shipping) highlight potential in these sectors.
- Construction & Manufacturing: Bukaka Teknik Utama is involved in high and low transmission lines and airport infrastructure.
- Viscose Rayon (Textile products): APR is an example of Indonesian investment in textiles in India.
- Electric Vehicles (2-wheeler): iMOTO indicates emerging opportunities in the EV sector.
- Banking: Bank Indonesia International has a presence.
Facilitating Factors & Way Forward:
- Comprehensive Economic Partnership Agreement (CEPA): Accelerating negotiations and reaching a consensus on a CEPA is crucial to remove trade barriers and expand economic cooperation.
- Trade Reforms: Rationalizing FTAs and encouraging economic integration.
- Investment Incentives: Indonesia's Special Economic Zones (SEZs) offer tax breaks, duty exemptions, and infrastructure support to attract investment. India also has a favorable investment regime.
- "Act East Policy": India's policy emphasizes stronger ties with Southeast Asian nations, including Indonesia.
- Regional Cooperation: More active engagement in forums like ASEAN, East Asia Summit (EAS), and BRICS. Indonesia's invitation to join BRICS enhances cooperation within this bloc.
- Addressing Trade Imbalance: While inevitable given the nature of current trade, efforts to diversify Indian exports to Indonesia and identify new areas of collaboration can help mitigate the imbalance.
- Joint Forums: Continuing to hold business forums (like the Indonesia-India Health Business Forum) to promote dialogue between government officials, industry representatives, and dignitaries.
- People-to-People Ties: Strengthening cultural exchange and tourism.
- Despite challenges like high tariffs and non-tariff barriers, the significant unrealized trade potential and the growing strategic and economic alliance between India and Indonesia suggest a promising future for bilateral trade and investment.