India Tightens Economic Play in Indonesia as Digital Links and Trade Frictions Take Center Stage

JAKARTA, Investortrust.id — India has accelerated its economic push into Indonesia as Ambassador Sandeep Chakravorty said bilateral trade has averaged $30 billion over the past three years, lifting India to Indonesia’s third-largest export destination and signaling deeper integration through digital and industrial cooperation. The expansion underscored New Delhi’s effort to lock in long-term market access while pressing Jakarta to address trade distortions that have discouraged some legacy investors.

Speaking at a business forum of India Night 2026 on Wednesday, January 28, 2026 in Jakarta, Chakravorty said India had climbed from fourth place only a few years ago after overtaking Japan as a buyer of Indonesian goods. “We were fourth about a year or two back,” he said, adding that Indonesia is now India’s eighth-largest trading partner.

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A key pillar of the next phase is digital public infrastructure, where officials from both countries are working to link Indonesia’s QRIS system with India’s Unified Payments Interface. The integration was aimed at streamlining cross-border payments for consumers and businesses, particularly small merchants engaged in bilateral trade.

Beyond payments, Chakravorty highlighted plans to roll out the Indonesia Open Network, or ION, modeled on India’s Open Network for Digital Commerce. The platform was designed to allow small and medium enterprises to trade directly with minimal fees, reducing dependence on dominant e-commerce platforms. “This may become a game-changer,” he said, noting that the decision was finalized during President Prabowo Subianto’s visit to India last year.

Indian companies have also begun translating diplomatic momentum into physical investments across Indonesia. Major hospital chains were breaking ground on facilities in Batam, while pharmaceutical manufacturing plants were under construction in several regions to serve domestic demand and exports.

Food security, a priority under the Prabowo administration, has emerged as another anchor of cooperation. Indian conglomerates Tata and Mahindra have secured large contracts to supply agricultural vehicles and trucks, with plans for local assembly tied to Indonesia’s push to modernize farming logistics.

Despite the rapid expansion, Chakravorty acknowledged persistent frictions, particularly in the steel sector, where regulatory imbalances have weighed on investor sentiment. Steel imported from India faces a 5% duty, while Indonesian steel exports to India enter duty-free under an ASEAN-India trade agreement that is more than 15 years old.

Those imbalances have had concrete consequences, he said, pointing to the exits of major players such as Lakshmi Mittal and Jindal Steel from Indonesia. “Every country seeks new investment, but I think the challenge is also to keep existing investors happy,” Chakravorty said, citing steel dumping that left Indian-backed producers at a disadvantage.

He called for a dedicated bilateral working group to resolve what he described as “small irritants,” arguing that clearer rules and faster dispute resolution were essential to prevent further investor departures.

Looking ahead, both sides see 2026 as a pivotal year as diplomatic and financial ties converge. Indonesia’s accession to BRICS last year has added a multilateral dimension, while Prime Minister Narendra Modi is expected to visit Indonesia in the first half of 2026 to advance strategic and economic agreements.

For Indian officials, the message to investors was increasingly direct. As Chakravorty told the audience, the relationship was no longer driven by symbolism alone but by scale and necessity, with trade flows and digital networks binding the two economies more tightly than at any point in their modern history.