India Becomes Indonesia's 3rd Top Export Market Amid Global Trade Shifts

Indonesia, which had ranked India fourth at the end of 2024, saw India surpass Japan by a narrow margin in early 2025 and hold that position through the June quarter. The report stated that Indonesia's exports to the United States increased by 2.5 per cent in Q2 2025 compared to the previous quarter, while exports to China rose by 8.8 per cent and to India by 9.6 per cent.

The analysis, covering trade until June 2025, comes just before the United States imposed a 19 per cent tariff on Indonesian goods in July. "Future trade patterns may see exporters strategically redirect shipments towards higher-growth, lower-tariff markets such as China and India," the report noted.

Despite the new tariff, Indonesia remains competitive among ASEAN peers due to its low production costs and diversified exports, including coal briquettes and palm oil, said the report.

Between FY2023 and FY2025, India's imports from Indonesia declined at a compound annual rate of 11 per cent, falling from USD 28.8 billion to USD 22.8 billion. Coal briquettes continued to dominate India's import basket, though their share dropped from 43 per cent in FY2020 to 34 per cent in FY2025. The shift reflects India's growing focus on renewable energy and efforts to reduce dependence on coal-based fuels. Lower global coal prices and diversification towards suppliers such as the US and Russia also contributed to the decline.

Indonesia's earlier decision to temporarily ban palm oil exports in 2022 to stabilize domestic prices continues to influence trade flows. Although the ban was lifted in May 2022, stricter export levies and domestic supply regulations remain in place.

In May 2025, Indonesia raised its export levy on crude palm oil from 7.5 per cent to 10 per cent. India, the world's largest edible oil importer, is expected to import more than 5 million tonnes of palm oil in 2025 compared to 4.8 million tonnes the previous year. The higher levy could raise import costs and push domestic prices higher or encourage sourcing from other countries.

Meanwhile, India's exports to Indonesia nearly halved during the same period, falling from USD 10 billion in FY2023 to USD 5.4 billion in FY2025, registering a 27 per cent annual decline. The report highlighted that, while overall exports declined, petroleum products saw a growing share, increasing from 4 per cent in FY2020 to 13 per cent in FY2025, indicating a shift in trade composition. The decline was mainly seen in items such as shelled groundnuts, frozen beef, and dredging vessels.

- ANI