India is seeking closer economic ties with Indonesia to help shield both countries from currency volatility and supply chain disruptions, according to Indian Ambassador Sandeep Chakravorty on Thursday. Bilateral relations have gained fresh momentum following Indian Prime Minister Narendra Modi’s three-day visit to Indonesia earlier this month, though trade and investment remain well below the potential of the two fast-growing economies.
Bilateral Trade Expansion and Economic Integration
Trade between Indonesia and India rose nearly 4 percent year on year to reach $9.6 billion in the first five months of 2026. Despite this growth, Ambassador Chakravorty stated that trade and investment remain below the potential of the two nations. To counter global turmoil, currency fluctuations, food shortages, and oil and fertilizer shocks, both governments are working to deepen economic integration and reduce reliance on the US dollar in bilateral trade.
As part of these financial measures, Indonesia and India are in the last stage of linking their QR-based payment systems—Indonesia’s QRIS and India’s UPI. Additionally, central banks are developing a framework to allow exporters and importers to settle transactions directly in rupiah or rupees. Both currencies have faced pressure against the dollar following recent tensions between the United States and Iran.
Did You Know? During Prime Minister Narendra Modi’s three-day visit to Indonesia earlier this month, the Steel Authority of India (SAIL) and Krakatau Steel signed an agreement to establish a stainless steel slab manufacturing facility in the country.
Strategic Investments and Manufacturing Partnerships
On the investment front, Indian investment in Indonesia reached at least $105.5 million so far this year, as the two countries align their economic priorities. Ambassador Chakravorty highlighted the Self-Reliant India strategy, which aims to strengthen domestic manufacturing while integrating Indian products into global supply chains. This initiative complements Indonesia’s drive to develop downstream industries.
The partnership targets major industrial sectors, including steel and fertilizers. India is exploring investments in Indonesia’s fertilizer industry by leveraging the country’s abundant natural gas resources to serve domestic demand and export markets amid global fertilizer supply vulnerabilities. Producing in Indonesia for global markets will create facilities, employment, and technology transfers, according to Chakravorty.
Frequently Asked Questions
Why are India and Indonesia seeking closer economic ties?
According to Indian Ambassador Sandeep Chakravorty, closer ties help shield both countries from currency volatility, supply chain disruptions, global turmoil, food shortages, and oil and fertilizer shocks.
What steps are being taken to reduce US dollar reliance?
The two governments are in the final stage of linking Indonesia’s QRIS and India’s UPI payment systems. Central banks are also creating a framework for exporters and importers to settle transactions directly in rupiah or rupees.
What are the latest trade and investment figures?
Indonesia’s trade with India rose nearly 4 percent year on year to $9.6 billion in the first five months of 2026, while Indian investment in Indonesia reached at least $105.5 million so far this year.
How might local currency settlements impact small and medium enterprises operating across the Indonesia-India trade corridor?
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