Trade Decline Sets the Stage for High-Level Talks
Prime Minister Narendra Modi's upcoming visit to Indonesia from July 6 to 11 is expected to prioritize strengthening economic ties, even as bilateral merchandise trade has witnessed a sharp decline over the past three financial years. According to a Rubix Data Sciences trade outlook report, bilateral goods trade fell from USD 38.8 billion in FY2023 to USD 24.8 billion in FY2026.
The report highlights that overall bilateral goods trade registered a compound annual growth rate (CAGR) of minus 14 per cent during the period, primarily driven by falling exports and moderating imports. India's exports to Indonesia declined from USD 10 billion in FY2023 to USD 4.5 billion in FY2026, recording a CAGR of minus 23 per cent.
Exports Halved, Imports Also Decline
"India's goods exports to Indonesia fell from USD 10.0 billion (FY2023) to USD 4.5 billion (FY2026), more than halving over the period, with a steep CAGR of -23%, reflecting sustained export weakness," the report stated. Imports from Indonesia also declined, falling from USD 28.8 billion in FY2023 to USD 20.3 billion in FY2026, at a CAGR of minus 11 per cent.
"Imports from Indonesia declined from USD 28.8 billion to USD 20.3 billion, with a CAGR of -11%, indicating that import demand has also fallen but at a relatively slower pace than export demand," the report added. As a result, India's trade deficit with Indonesia narrowed from USD 18.8 billion in FY2023 to USD 15.8 billion in FY2026, though the imbalance remains significant.
Indonesia Remains Key ASEAN Partner
Despite the downturn, Indonesia continues to be one of India's most important economic partners in Southeast Asia. ASEAN accounted for around 11 per cent of India's total merchandise trade in FY2026, with Indonesia remaining India's second-largest merchandise trading partner within the bloc. The visit follows the 8th India-Indonesia Joint Commission Meeting held in New Delhi last month, which focused on expanding cooperation in trade, maritime security, defence, digital connectivity, health, and critical minerals.
Shifting Composition of Trade
The report also noted changes in the composition of bilateral trade. India's exports to Indonesia have become more diversified, with the share of refined petroleum products declining, while exports of frozen bovine meat, auto components, groundnuts, and unmanufactured tobacco have increased. This indicates a gradual shift from energy products towards agricultural and industrial goods.
On the import side, coal and palm oil continued to dominate India's imports from Indonesia. Indonesia remained India's largest supplier of palm oil, accounting for around 40 per cent of India's palm oil imports in FY2026, while imports remained largely commodity-driven despite gradual diversification, the report said.
