Bilateral trade between India and Indonesia currently stands at US$38 billion and is growing rapidly thanks to the India-ASEAN Free Trade Agreement (FTA).

A day after New Delhi announced it would create a framework to settle bilateral trade with the United Arab Emirates, one of its largest trading partners, in rupees and dirhams and link their fast payment systems, the country Indonesia has proposed a similar move .

The talks took place at a meeting between Indian Finance Minister Nirmala Sitharaman and her Indonesian counterpart Mulyani Indrawati on Sunday (July 16) on the sidelines of the third meeting of G20 finance ministers and central bank governors in Gandhinagar, Gujarat.

The agreement between New Delhi and Jakarta will be similar to that with Abu Dhabi and could result in Indian exporters conducting their trade in Indonesian rupees, while those exporting goods from India could earn in Indian rupees. Indonesia’s finance minister said Sunday she and her Indian counterpart had discussed working together to strengthen policy dialogue on trade, digital technologies, payments systems and growth.

The two countries are also reportedly looking to expand the scope of digital payments using the framework of India’s Unified Payments Interface (UPI), instant payments system developed by the National Payments Corporation of India.

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This comes just days after Indian Prime Minister Narendra Modi announced during a visit to Paris that the UPI system would be made available in France, allowing Indian tourists to access the famous Eiffel Tower by making a payment via a mobile application in afford rupees. On Saturday, India announced that it is linking its UPI to the UAE’s instant payments platform.

New Delhi is actively working to make the Indian rupee a strong international currency that could potentially be used as an alternative to the US dollar for conducting international trade. A recent report by the Reserve Bank of India Working Group says the rupee has the potential to become an internationalized currency

India is one of the fastest growing countries and “has shown remarkable resilience even in the face of major headwinds.”

At Sunday’s G20 meeting, India and Indonesia unveiled the “Economic and Financial Dialogue,” a platform aimed at boosting cooperation between the two nations and promoting a common understanding of global issues, India’s finance ministry said in a statement Explanation. The aim of the platform is to improve cooperation in bilateral and international economic and financial matters by bringing together economic policymakers and financial regulators from both countries.

The ministry added that the two finance ministers recognized the potential of the digital economy and had also pointed to the potential for fintech collaboration on financial inclusion.

“The development of India’s ‘Look East Policy’ in 1991, followed by the ‘Act East Policy’, has enabled rapid development of our bilateral ties, particularly in the commercial and cultural spheres,” Sitharaman said, adding that Indonesia is moving towards India’s largest trading partner in the ASEAN region has developed one of these. Bilateral trade has grown eight-fold since 2005, reaching $38 billion in fiscal year 2022-23. Among the most important trade goods between the two countries are palm oil and petroleum.

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Dezan Shira & Associates assists foreign investors entering Asia and has offices in India and Indonesia. For assistance with all treasury, incorporation and tax matters of companies with and between the two countries, please contact us at [email protected].