India and Indonesia have had a long and turbulent relationship. So it is not surprising that the economic cooperation between the two countries is far below its potential. But with India?s efforts to deepen cooperation with its eastern neighbours, the stage seems set for a new era in business and trade linkages between India and Indonesia.
However, a working paper brought out by the CII takes a cautious view of their Comprehensive Economic Cooperation Agreement (CECA), noting that while there is a convergence of business interests between the two countries, there is an immediate need for reducing the cost of doing business. Consequently, CII is of the view that the cost of logistical linkages and some systemic issues related to infrastructure and regulatory constraints would keep India sub-optimal as an investment choice. But despite such limitations, the potential is vast as Indonesia holds some of the largest reserves of oil, natural gas, coal, sulphates and timber, all crucial resources that India can explore.
Indian big businesses have already made a good beginning pumping in estimated foreign investments of over $2 billion. The paper also estimates the potential for India-Indonesia trade at around $18 billion in 2020, compared to just $10 billion in 2009.