Last year, Bank Indonesia and the Reserve Bank of India signed a memorandum of understanding (MoU) on local currency settlements, the Jakarta Globe reported. The agreement will allow exporters and importers to pay in Indonesian rupiah or Indian rupee, thereby eliminating the need to use the US dollar as an intermediary.
Late last month, Indian Prime Minister Narendra Modi welcomed Indonesian President Prabowo Subianto on his first state visit to New Delhi. A joint statement issued after the meeting mentioned the use of local currencies in bilateral trade.
"Both leaders stressed the importance of the rapid implementation of the use of local currencies. They expressed their belief that the use of local currencies in bilateral transactions will further promote trade between Indonesia and India and deepen financial integration between the two economies," a joint statement released by the Indonesian Ministry of Foreign Affairs said.
The bilateral meeting also touched on Indonesia’s entry into BRICS, a group of emerging economies known for their efforts to de-dollarize. BRICS includes Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, the United Arab Emirates (UAE), and most recently Indonesia.
India welcomes Jakarta's BRICS membership. Meanwhile, Indonesia believes that its membership in BRICS can further strengthen the bloc's unity.
Currently, Indonesia has used its local currency in bilateral transactions with China, Japan, Malaysia and Thailand. Russian Ambassador to Indonesia Sergei Tolchenov recently revealed that BRICS founding member Russia has been negotiating to reach an agreement on local currency transactions with Jakarta.
India-Indonesia trade totaled $24.1 billion from January to November 2024. Indonesia exported more than it imported from India, with a surplus of nearly $13.7 billion.
ASEAN - of which Indonesia is a member - is looking to finalize a review of a free trade agreement with India this year. The upgraded ASEAN-India Trade in Goods Agreement (AITIGA) is expected to make it easier for businesses.
