The historic maritime routes that once carried spices and philosophies between India and Indonesia are being redrawn for the 21st century. Today, the currents shaping the relationship between the Indo-Pacific’s two largest democracies are not trade winds, but the terabits flowing through Fiber-optic cables and the instant signals of digital payment systems.
Quietly but with strategic intent, Jakarta and New Delhi are forging a landmark digital alliance. Solidified through a series of memorandums of understanding (MoUs) signed over the past year, this partnership is about more than just technology. It is a calculated move by Indonesia to accelerate its digital economy, enhance public services, and assert its digital sovereignty in a world increasingly defined by a U.S.-China tech rivalry.
For the average Indonesian, the promise is tangible: cheaper cross-border transactions, more efficient government services, and greater opportunities for local businesses. For the nation, it represents a powerful “third way”, a partnership model built on open, sovereign-friendly technology, offering a compelling alternative to proprietary, geopolitically fraught ecosystems.
At the heart of this digital handshake is the plan to interconnect Indonesia’s BI-Fast with India’s Unified Payments Interface (UPI). This initiative, formalized in an MoU between Bank Indonesia and the Reserve Bank of India during Indonesia’s Group of 20 presidency, is an economic revolution in waiting.
The immediate impact will be a boon for two vital sectors: tourism and remittances. Indian tourists, a rapidly growing and digitally native demographic, will soon be able to use their familiar mobile apps to scan QRIS codes and pay instantly, from a warung (food stall) in Bali to a department store in Jakarta. This seamless process bypasses the high fees and friction of international credit card networks and currency exchange counters.
Similarly, for the Indonesian diaspora and businesses transacting with India, sending money home or making payments will become instantaneous and dramatically cheaper. But the true long-term prize is the empowerment of Indonesia’s 64 million micro, small and medium enterprises (MSMEs), the backbone of the national economy. By integrating these real-time payment rails, the cost barrier for MSMEs to participate in regional e-commerce will plummet. This infrastructure is the foundation for creating open, interoperable digital marketplaces, inspired by India’s Open Network for Digital Commerce (ONDC), that can level the playing field and reduce the dominance of large platform aggregators, fostering a more inclusive digital economy across the archipelago.
Perhaps the most profound aspect of this cooperation is Indonesia’s exploration of the Digital Public Infrastructure (DPI) model, a concept championed by India on the global stage. DPI is a state-led, open-source framework of foundational digital systems, like digital identity, payment platforms, and data exchange layers, that governments, businesses, and individuals can build upon. India’s “India Stack”, comprising the Aadhaar digital ID, the UPI payments system, and the DigiLocker document wallet, serves as the primary case study. It is promoted as a blueprint for digital sovereignty, a “third way” that avoids the private-sector-led model of the West and the state-surveillance model of China.
Indonesia, a leader in its own right with its long-standing electronic ID card (e-KTP) program and the new Digital Population Identity (IKD), is not seeking a simple copy-paste solution. The strategy is one of selective and sovereign-minded adoption. The focus is on learning from India’s experience to enhance Indonesia’s own systems, harmonizing data standards, and adopting governance frameworks that ensure digital services, from healthcare records to social benefit distribution, are secure, transparent, and interoperable across thousands of islands. Success here could radically improve public service delivery, especially in reaching remote and underserved communities.
This digital vision, however, relies on a physical foundation of hard infrastructure, an arena fraught with geopolitical competition. The ambition to lay new undersea cables and build shared data centers, creating a resilient data superhighway between South and Southeast Asia, places this partnership directly in the middle of a strategic battleground for influence between Washington and Beijing. The race to lay the fiber-optic backbone for 5G and next-generation technologies is capital-intensive, and Chinese state-backed financing has often been faster and larger than alternatives.
However, the strategic driver for both Jakarta and New Delhi is resilience. For Indonesia, collaborating with India and its formidable private sector telecom giants helps diversify its critical infrastructure, reducing dependency on any single power. This aligns perfectly with Indonesia’s long-held “bebas-aktif” (free and active) foreign policy, extending it into the digital domain. For India, a successful infrastructure partnership with Indonesia is a cornerstone of its “Act East Policy”, demonstrating its capacity and commitment as a reliable, long-term partner in securing a free and open Indo-Pacific.
This digital partnership is a beacon of opportunity, poised to elevate Indonesia’s stature as a regional digital hub. Yet, its success hinges on bridging the notorious gap between signed agreements and on-the-ground implementation. Analysts suggest that overcoming the high costs of physical infrastructure may require creative financing, such as a dedicated Bilateral Digital Implementation Fund, potentially de-risked with support from multilateral partners like Japan or Australia.
The immediate priority must be the tangible “quick wins”. Successfully launching the QR-based payment linkage will build crucial public trust and generate the political momentum needed to tackle the more complex, long-term challenges of regulatory alignment and data governance.
Ultimately, the India-Indonesia digital cooperation is rooted in a shared vision for the future, one where nations can become technologically advanced without sacrificing their sovereignty. It is about building open, inclusive and citizen-centric digital societies. As Indonesia charts its course as a leader in ASEAN and the Global South, this peer-to-peer partnership offers a strategic and powerful model for the digital age.
Brijesh Singh is an Adjunct Distinguished Fellow, Cybersecurity Studies, and a senior IPS officer.
This article was first published in The Jakarta Post.