India is renegotiating its trade pact with the Association of Southeast Asian Nations (ASEAN) to address structural imbalances that have widened its trade deficit over the past decade. India-Indonesia bilateral trade surpassed $28 billion in FY25, making Indonesia India’s largest trading partner in the ASEAN region. In an interaction with The New Indian Express, Mari Elka Pangestu, Special Advisor for International Trade to the President of Indonesia, talks about Indonesia’s plans to enhance trade relations with India. Edited excerpts:
The ASEAN-India free trade agreement has been under review for some time now. Many believe the deal has been asymmetrical in its current form. In which areas do you see the most scope for change?
I think there has to be some forward-looking thinking about the importance of increasing trade and investment. And, it requires greater opening up because in very uncertain times, with more restrictions that we face with the US market and fragmented supply chains, we need to increase trade within the region, including between the ASEAN and India. So, it requires a serious commitment to reduce the barriers to trade and investment, both in goods and services. My understanding is that India wants to balance the two, but we shouldn't move back; we shouldn’t backtrack from our commitments; we should accelerate our commitments.
How do you think India and Indonesia could work hand-in-hand to navigate the challenges that are arising from the current geopolitical situation and tariff issues?
Indonesia and India are large countries, and we are actually, I would say, quite complementary in the sense that Indonesia has the natural resources that India needs, like palm oil, coal and the minerals, and Indonesia also needs India’s kind of more engineering capability and IT capability. With something like electric vehicles, I think, or any of the other kinds of higher-end electronic semiconductor sectors, those are complementary and also in services.
And there’s also another platform which India was part of, but has not joined, which is the Regional Comprehensive Economic Partnership (RCEP). We know India has concerns with regard to China, but we think in today’s world where we really need to enhance economic integration and your Minister of Finance said it very well, integration and interdependence. But, it has to be based on our trust with each other inside a multi-polar world, and we should use our existing regional cooperation mechanisms to deepen that. I believe India will become more part of the East Asia region, only then we would really be very, I would say, invincible in the sense that it would be half of the world’s population, with a lot of complementarities between us. We should see services embedded inside the supply chains, which India is very strong on.
Do you think ASEAN can tap India as a counterweight in the supply chain, or will it just remain a secondary market for Indonesia?
It should be. I believe once you open up the possibility for a more diversified supply chain, which includes East Asia and India. There will be room for complementarities and growth in each of our economies in different parts of the global value chain. And, I do not see India as secondary at all. I see India as a potential partner that could help us to deepen and strengthen, and make this regional supply chain resilient for our region, and also to make it open. To make it diversified enough that it doesn’t pose whatever security threat or whatever concentration threat that seems to be worrying some countries in the world.
What kind of amendments does Indonesia expect India to pursue in the ASEAN FTA and vice versa?
In general, Indonesia would like to see more market access, obviously, to the Indian market inside the ASEAN-India FTA. And for us, obviously, the issue of palm oil has always been and continues to be an issue. So, how can we overcome that in a win-win way? I think, in Indonesia, by and large, if we follow the other ASEAN plus one FTAs, as long as there are concessions from the Indian side, I believe the ASEAN side is already quite open for the goods side. So it’s more about the services side.
Maybe one of the key issues is actually the movement of people, talent mobility, which I think increasingly also see as important. It would have to come, I think, with a kind of package where we do see the benefits from both sides.