Defence and Digital Cooperation Power India-Indonesia Ties

It is not always easy to visualize, but the Indonesian archipelago straddles the Indian and Pacific oceans, stretching more than 5,000 km and spans as much as a 1,700 km north-to-south. If there is a geography that embodies the Indo-Pacific it is this nation of more than 17,000 islands and a population of 287 million, fourth largest after China, India and the United States. Add to that a steady growth rate of 5% over the past decade and Indonesia is just the partner India seeks to secure its maritime trade and security interests in a time of turmoil and uncertainty.

India is the second largest importer of coal and the largest buyer of crude palm oil besides minerals, rubber and pulp. After Philippines and Vietnam, China has serious maritime disputes with Indonesia too. And while China and Indonesia have managed their tensions over the Natuna islands, the communist giant poses a constant threat despite the economic gains of the Indonesia-Chinese trade. It is not coincidental that the India-Indonesia defence relationship has progressed with joint military exercises and collaboration in industrial production.

Security Agenda

Prime Minister Narendra Modi’s visit to Indonesia that began on Monday is a state visit and the defence agenda is likely to see discussions on India’s exporting the Brahmos missile with an enhanced order. The missile acquitted itself well in the pin point strikes on Pakistani military targets carried out by the Indian armed forces during the May 7-10 hostilities between India and Pakistan. India has supplied Brahmos batteries to Philippines, another nation at the receiving end of China’s grey zone warfare in the south China sea.

Indian and Indonesian militaries regularly participate in the naval KOMODO and MILAN multilateral exercises and cooperation in science and technology is on an upward curve. The Indian Space and Research Organisation (ISRO) has set up two telemetry, tracking and command stations at Biak that support Indian missions too. Joint committees and working groups on defence, science and technology and health are meeting regularly to deepen cooperation in these areas in tangible ways. Indian technical and economic cooperation (ITEC) scholarships are offered to Indonesian students with a 100 slots on offer every year.

Just a few days, Modi’s visit to Seychelles was intended to secure Indian interests in the eastern Indian ocean and the turn towards Indonesia reflects the MAHASAGAR (Mutual and Holistic Advancement for Security and Growth Across Regions) policies of the Modi government.

Key Trade Partner in ASEAN

Direct connectivity by way of flights from Mumbai to Jakarta and Delhi and Bali since 2023 have added to ease of travel and business. The air connections also help link the close of 1,50,000 people of Indian origin in Indonesia with their roots. There are around 15,000 NRIs in Indonesia that includes entrepreneurs, engineers, chartered accountants, IT professionals, consultants and bankers.

Modi met President Prabowo Subianto on the sidelines of the G 20 summit in Rio de Janeiro in November, 2024 for the first time and the Indonesian leader was chief guest for India’s Republic Day in January, 2025. The Indian PM’s state visit is expected to see the two leaders cover the gamut of political, defence, trade and investment, digital technologies, critical minerals and rare earths, culture and tourism and people-to-people relations.

UPI and ONDC

An important development in the bilateral relationship is Indonesia’s interest in India’s digital infrastructure with regard to platforms like Open Network for Digital Commerce (ONDC) and the United Payments Interface (UPI). The ONDC is particularly beneficial for smaller businesses and Indonesia is keen to consider the applications in its economy with a consuming middle class of 140 million. China remains a key supplier, importer and investor but there is room for a substantive growth in India-Indonesia ties at a time when every country is seeking to diversify and reduce dependence on just one or two partners.

A team from Indonesia specifically travelled to India to study the DPI policy and Indonesia Open Network (ION) has since been launched. “Platform commissions and fees frequently range between 25 and 40 percent of transaction value, locking small sellers, farmers and cooperatives out of the digital economy’s gains. ION seeks to reduce that to below 8 percent,” writes Sachin Gopalan, founder of Indonesia Economic Forum elaborating on the likely gains of Indonesia’s 65 million small and medium businesses. Similarly there is a proposed integration of UPI with Indonesia’s interoperable QR payment systems.