Jakarta. Indian Ambassador to Indonesia Sandeep Chakravorty said Friday that he hoped both economies could trade using rupiahs and rupees.

Trading in national currencies is expected to slash transaction costs as countries can bypass the use of American dollars. It will also likely bring bilateral trade to greater heights.

“A suggestion … is whether we can trade in rupee and rupiah rather than dollars. Substantial amounts of trade is there. There are commodities which we [India] buy from wherever we can. We need coal, crude palm oil, and that provides some kind of basis and sustainability to our trade relations,” Chakravorty said at the Indonesia-India Business Forum conference in Jakarta.

“Trading in rupiah and rupees can lower our transaction costs. Because you do not have to pay for the foreign exchange,” Chakravorty told the conference.

Indonesia today is already trading in local currencies with Malaysia, Thailand, Japan, and China. Bank Indonesia and Bank of Korea recently agreed on a similar de-dollarization partnership, which is aimed to come into effect next year.

Government data shows that Indonesia-India’s bilateral trade amounted to $32.7 billion in 2022, marking a huge jump versus the $21 billion the previous year. However, the trade balance was hugely in Indonesia’s favor. Jakarta posted a $14 billion surplus last year in its trade with New Delhi.

The Observatory of Economic Complexity (OEC) reported that Indonesia’s main exports to India in 2021 were coal briquettes ($4.58 billion), palm oil ($3.45 billion), and ferroalloys ($495 million). Indonesia mostly imported refined petroleum ($1.77 billion), raw sugar ($795 million), and semi-finished iron ($772 million) from India that year.

India is also seeking a preferential trade agreement (PTA) with Indonesia to reduce tariffs on certain agreed goods.

“A suggestion that has been floating around is whether we need to have an Indonesia-India PTA at least in goods that we are trading more. I think that discussion on the PTA will gather speed when we have some balance in our trade. At the moment, it is very lopsided and is in favor of Indonesia,” Chakravorty said.