Prime Minister Narendra Modi meets Indonesian President Prabowo Subianto during his state.
JAKARTA: Prime Minister Narendra Modi and Indonesian President Prabowo Subianto signed twenty bilateral agreements on Tuesday, including deals for Indonesia to acquire India’s BrahMos supersonic cruise missiles and Astra air-to-air missiles, alongside a memorandum on critical minerals cooperation. PM Modi’s visit running from July 6 to 8, marks the first bilateral state visit since India and Indonesia elevated ties to a Comprehensive Strategic Partnership in 2018 and he was conferred Indonesia’s highest civilian honour on Tuesday, with engagements continuing through the remainder of the week.
Combat Record Becomes a Sales Pitch
The defence agreements carry a significance that goes beyond their dollar value. Indonesia’s decision to acquire the Astra beyond visual range missile follows directly from its combat performance during Operation Sindoor in May 2025, when Indian Air Force Sukhoi jets used the missile in real engagement conditions for the first time. That track record appears to have done what years of trade shows could not, giving Bharat Dynamics Limited a credible entry into a market historically dominated by American and European manufacturers. The commercial logic sharpens further once Indonesia’s fleet composition is considered. Jakarta’s Russian-origin Sukhoi fighters have run short on spares since sanctions on Moscow disrupted supply lines, leaving their existing R-77 missiles increasingly difficult to sustain. An Indian missile integrated onto the same airframes through work that will draw on Hindustan Aeronautics Limited’s two decades of experience with Su-30 platforms offers Jakarta a way around that bottleneck without switching aircraft altogether.
BrahMos Finds Its Third Buyer
The BrahMos agreement builds on a similar logic. Indonesia now joins the Philippines and Vietnam as a coastal defence customer, with its own contract valued at roughly $630 million and structured as a phased acquisition covering missile batteries, training and long-term maintenance support. For an archipelagic nation watching over the Sunda, Lombok and Malacca straits, a mobile anti-ship system fills a genuine operational gap left by the ageing Russian-made Yakhont missiles it previously relied on. Taken together these three Southeast Asian contracts help explain why India’s defence exports climbed to roughly $4.6 billion in the last fiscal year, a fifty six fold increase over a twelve year span, with New Delhi now targeting $6 billion annually by 2029.
The Nickel Question
Not every outcome carries the same immediate weight. The memorandum on critical minerals cooperation addresses a resource India badly needs, since the country imports all of its nickel and expects demand to grow more than tenfold by 2047 as electric vehicle and battery manufacturing scale up. Indonesia holds the world’s largest nickel reserves, which makes the pairing appear obvious on paper. The commercial reality looks more complicated. Chinese-linked firms already control more than three quarters of Indonesia’s nickel refining capacity, built through billions of dollars invested in processing hubs like the Morowali and Weda Bay industrial parks and nearly all of that refined output currently flows to Chinese battery manufacturers. A memorandum of understanding does not by itself redirect that trade. Indian companies would need to invest directly in Indonesian refining infrastructure of their own, since Jakarta’s ban on exporting raw ore rules out simply shipping nickel home for processing.
A Steel Venture With a Clearer Path
One agreement offers a more concrete route around that obstacle. The joint venture between Steel Authority of India and Indonesia’s Krakatau Steel to build a stainless steel slab facility would let SAIL draw on locally processed nickel pig iron without needing to build its own refinery from scratch. It is a sensible workaround though not without risk, given that global steel markets are currently oversupplied and Chinese production continues to weigh on prices worldwide. A parallel rare earths initiative, pairing an Indian technology centre with Indonesia’s state mining arm to extract magnet-grade minerals from tin mining byproducts, points toward a longer and more technically demanding path to reducing dependence on Chinese supply chains.
Sabang Adds a Maritime Dimension
The agreement to jointly develop Sabang Port carries strategic weight that extends beyond its stated commercial purpose. Sitting at the northern mouth of the Malacca Strait and barely a hundred miles from India’s Great Nicobar Island, the port’s natural deep water basin can accommodate vessels well beyond typical commercial shipping. Framed publicly as an infrastructure and connectivity project, it also gives the Indian and Indonesian navies a closer vantage point over one of the world’s busiest and most contested maritime corridors, at a moment when both countries are watching Chinese naval activity in the region with growing attention.
Trade Numbers
Beyond the headline agreements, the underlying trade relationship offers a useful reality check. Bilateral trade has actually declined over the past three years, slipping from a peak of $38.84 billion in FY23 to roughly $24.8 billion in FY26, largely due to softer coal and commodity prices. India still runs a wide trade deficit with Indonesia, driven by its reliance on Indonesian coal and palm oil, and New Delhi is now pushing to use the broader ASEAN trade agreement review to secure better access for its own pharmaceutical, agricultural and engineering exports.
What to Watch Next
With two more days remaining on Modi’s itinerary, further announcements are still possible before the visit concludes on Thursday. The defence contracts signed so far look commercially real rather than aspirational. Whether India actually secures a meaningful share of Indonesia’s battery mineral supply chain will depend less on this week’s signatures and more on whether Indian companies are willing to commit the capital needed to build refining capacity of their own, on Indonesian soil against well established Chinese competition.
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