**India and Indonesia Strengthen Financial Ties to Reduce Dollar Dependence**
In a significant move to enhance bilateral financial relations, Indonesia and India are implementing a local currency settlement (LCS) mechanism aimed at reducing their reliance on the US dollar. This initiative was confirmed by Yudho Sasongko, the deputy chief of mission at the Indonesian Embassy, in an interview with RT India ahead of Indian Prime Minister Narendra Modi's recent visit to Jakarta.
During the visit, which was marked by a ceremonial welcome from Indonesian President Prabowo Subianto, Sasongko elaborated on the agreement between Bank Indonesia and the Reserve Bank of India. He noted that while the central banks are still finalizing the operational aspects of the LCS framework, its introduction is anticipated to lower transaction costs and facilitate trade and investment between the two nations.
The LCS mechanism is expected to streamline financial transactions, allowing businesses and individuals to conduct trade using their local currencies rather than relying on the US dollar, which has traditionally dominated international trade. This shift is seen as a strategic move to enhance economic stability and sovereignty for both countries.
In addition to the LCS framework, Sasongko mentioned that the two nations are exploring the use of quick response (QR) code linkages to simplify retail payments, particularly for tourists. This initiative aims to make transactions more efficient and accessible, further promoting tourism and trade.
Sasongko emphasized the shared commitment of Indonesia and India to amplify the voice of the Global South, advocating for necessary reforms within the United Nations, particularly concerning the Security Council. He expressed strong support for India's chairmanship of BRICS, highlighting the importance of a collaborative approach to global governance.
As two of the largest economies in the Indo-Pacific region, Indonesia views India as a crucial partner that respects sovereignty and international law. Sasongko articulated the desire for a deeper ASEAN-India Comprehensive Strategic Partnership, which would involve concrete initiatives and greater synergy between the ASEAN Outlook and India's Indo-Pacific Oceans Initiative.
The diplomat also pointed out that enhancing maritime and air connectivity between the two nations could lead to increased investment, job creation, tourism, and overall regional prosperity. He identified critical minerals and rare earths as priority sectors for collaboration, emphasizing their importance in supporting resilient supply chains for clean energy and advanced manufacturing.
Furthermore, Sasongko highlighted potential areas for cooperation, including the steel and downstream metal industries, pharmaceuticals, renewable energy, the electric vehicle battery ecosystem, digital technologies, and food processing. These sectors are seen as vital for fostering mutually beneficial partnerships that leverage Indonesia's resource base alongside India's manufacturing capabilities.
Bilateral trade between Indonesia and India has been growing, with figures indicating a total trade volume of $28.16 billion in the fiscal year 2025. India primarily imports mineral fuels, such as coal, palm oil, iron, and steel from Indonesia. Additionally, Jakarta's cumulative foreign direct investment in India from April 2000 to March 2025 is estimated at $659.30 million.
As both nations continue to strengthen their economic ties, the implementation of the local currency settlement mechanism and other collaborative initiatives may significantly reshape their financial landscape, paving the way for a more independent and resilient economic future.