September 23, 2010Aside

How important is India to the Indonesian economy?

Exports to India account for 1.6% of Indonesia’s GDP

This is an archived blog post from The Acorn.

A research note from CLSA notes that from Indonesia’s perspective India is one of the smaller markets (accounting for 6% of its exports) but a rapidly expanding one. ASEAN (21%), Japan (16%) and China (9%) are bigger export destinations. From India’s perspective, imports from Indonesia constituted around 3% of India’s total. This translates to 1.6% of Indonesia’s GDP.

CLSA notes:

The benefits to Indonesia will extend beyond rising export revenues. There will be added investment inflows as Indian power and steel companies look at Indonesia to secure a reliable energy source. Investment has already been initiated in East Kalimantan by the Essar Group in March while Reliance Power and Adani Global have projects lined up in South Sumatra.

Investment by the foreign mining companies confers the added benefit of spurring infrastructure development. The ports, railways and roads needed to service the mining projects will be constructed by the mining companies themselves, much more efficiently than government infrastructure spending.Now, there is clearly an opportunity for Indian businesses to explore the Indonesian opportunity. For Jakarta’s part, CLSA argues that India could potentially be a much larger market if Indonesia were to push ahead with reforms that could galvanise its manufacturing and services sectors.

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