Indonesia and India Push Trade Diversification Amid Global Uncertainty

JAKARTA, Investortrust.id — Indonesia and India strengthen trade diversification as rising reciprocal tariffs and global uncertainty pressure cross-border commerce, a move expected to reduce reliance on single markets and stabilize growth. The push emphasizes broader partnerships, deeper investment links, and expanded digital cooperation to cushion tariff shocks.

India’s Ambassador to Indonesia, Sandeep Chakravorty, said diversification was critical for business resilience. He illustrated the point with an Irish joke about the Murphy twins, warning against relying on a single source of truth or profit.

“We have to diversify, network, and have more partners than we have today. I think this is one of the keys behind the success of a business,” Sandeep said at the India Chamber Gala Dinner on Thursday, Dec 11, 2025 in Jakarta.

He said the India Chamber should deepen synergy with the Indonesian Chamber of Commerce and Industry, or Kadin, to lift both economies. Stronger ties between the two associations could unlock trade and investment momentum.

“And one thing I have noticed is how a 1 percent economic growth in India can affect GDP growth in Indonesia. I think we also need to look at the reverse, how Indonesia’s GDP growth can affect India’s GDP growth,” he said.

Sandeep said he hoped more Indonesian companies would expand into India, mirroring the growing presence of Indian firms in Indonesia. “Indian investment and entrepreneurship have contributed very significantly to Indonesia’s economy and growth,” he said.

Kadin Indonesia chairman Anindya Bakrie said cooperation between Indonesia and India was gaining momentum. He cited President Prabowo Subianto’s invitation as guest of honor at India’s Republic Day and both countries’ membership in BRICS.

“People see the leaders of both countries as a bright spot in the Global South. We know that between the two governments, Indonesia and India are ready to move from political goodwill to economic action,” Anindya said.

He urged the India Chamber to help translate long-standing trade ties into higher investment flows. Indonesia, he said, offered broad opportunities supported by loyal Indian entrepreneurs operating locally.

“I agree that we need to take advantage of the big momentum we already have,” Anindya said, adding that he also wanted to see more Indonesian investors entering India.

Digital Technology Cooperation

Deputy Minister of Communication and Digital Nezar Patria said India was one of the world’s most dynamic digital economies. World Bank data showed India processed more digital payments than the combined total of the United States, China, and the European Union.

“Through India’s UPI, which is projected to handle 12 billion transactions per month by 2035, India is also a global leader in digital public infrastructure via Aadhaar, a biometric national identity system covering more than 1.35 billion people,” Nezar said.

He said the model had been adopted or studied by more than 50 countries. India’s information technology and digital services industry continued to grow rapidly.

According to data he cited, the sector generated about $254 billion in revenue last month and employed more than 5.4 million technology professionals. India added more than 800,000 tech workers over the past three years.

“These numbers describe a transformation driven by ambition, innovation, and technology,” Nezar said.

Indonesia, with 215 million internet users, was projected to see its digital economy reach $360 billion by 2030. Studies by Google and Temasek also ranked Indonesia among the fastest adopters of artificial intelligence in Southeast Asia.

Nezar said collaboration between Indonesia and India could deepen development in digital and technology sectors. “This is why collaboration is no longer an option, but a strategy,” he said.

Beyond AI, he said both countries could strengthen digital public services, semiconductor supply chains, talent development, cybersecurity, and data governance. “We hope to build resilient systems to support digitalization,” Nezar said.

Shared Challenges

Permata Bank chief economist Josua Pardede said reciprocal tariff regimes posed risks beyond higher duties. He warned of spillover effects such as business uncertainty, rising trade costs, and weakening global demand.

“The key lesson is that tariff shocks usually hit investment and exports first, then spread to consumption and the current account. Even when reciprocal tariffs are lower, the impact tends to remain negative for growth,” Josua said.

He said Indonesia and India needed to reduce uncertainty by clarifying rules and accelerating trade agreements. Regulatory certainty, he said, improved investment prospects and helped keep inflation under control when tariff pressures eased.

Bilateral trade between Indonesia and India has risen over the long term, with Indonesia consistently posting a surplus. Josua said trade balance issues could become more prominent as countries grow more protectionist.

He noted bilateral trade reached about $32.7 billion in 2022 before falling to around $26.0 billion in 2024. Indonesia’s exports to India stood at about $14.7 billion in 2024 and around $10.5 billion by September 2025.

Indonesia’s exports to India were dominated by minerals, especially coal, along with agricultural and metal products. India’s exports to Indonesia mainly included petroleum products, vehicles, and agricultural goods.

“This means that amid tariff wars, the most rational strategy is to deepen partnerships that reduce transaction costs and expand value-added goods,” Josua said.

He said both countries should move beyond commodity trading toward joint production chains through industrial processing, quality standardization, and customs facilitation. Such steps would make trade flows more resilient to tariff changes.

For Indonesia, deeper access to India’s market remained important as India’s economy continued to post solid growth. Stronger trade and investment ties could act as a buffer when global markets weaken.

For India, maintaining stable energy and raw material supplies from Indonesia was crucial to contain domestic production costs. This could offset tariff increases elsewhere and protect industrial competitiveness.

Josua said India could rebalance trade by expanding exports to Indonesia and regaining market share lost between 2019 and 2024.

“This can be achieved by widening product offerings suited to Indonesia’s needs, improving logistics connectivity and standards compliance, and building distribution partnerships with Indonesian businesses,” he said.

At the same time, India could use direct investment as a lever by building joint production bases in Indonesia. This approach would help balance trade flows and strengthen industrial ties as global markets fragment under reciprocal tariffs.