The January Pivot: From State Visits to Strategic Value
As the ink dries on the 2026 State Budget and the fallout from the historic 2025 Comprehensive Strategic Partnership settles, the Indo-Indian corridor is moving from diplomatic high-notes to hard-coded economic reality.
1. Latest Trends: The Post-Visit Momentum
Following President Prabowo Subianto’s landmark State Visit to New Delhi as Chief Guest at India’s 76th Republic Day celebrations (January 23-26, 2025), the January 2026 landscape is defined by implementation. We are no longer talking about what we can do; we are seeing where the capital is flowing.
- Bilateral Trade Reality Check: Bilateral trade for FY2024-25 closed at approximately USD 29-30 billion, still short of the ambitious USD 50 billion target originally set for 2025. Both leaders have now set their sights on an accelerated trajectory toward USD 80 billion within the next 3-4 years. Indonesia remains India’s largest trading partner in the ASEAN region.
- The Defence & Maritime Pivot: The 3rd India-Indonesia Defence Ministers’ Dialogue (November 2025) marked a shift from simple trade to co-production in maritime security and hardware. The Joint Defence Industry Cooperation Committee is now operational, with advanced BrahMos missile negotiations signaling a maturing partnership that goes far beyond coal and palm oil.
- Local Currency Settlement (LCS): Real-time settlement in INR and IDR is no longer a concept paper; it’s a boardroom discussion. Bank Indonesia and RBI’s March 2024 MoU is now entering operational phase. Both leaders emphasized “expeditious implementation” during the January 2025 summit. CFOs must prioritize INR-IDR invoicing to mitigate lingering USD volatility.
- Digital Public Infrastructure (DPI) Export: A 10-member high-level delegation from Indonesia’s National Economic Council (DEN) visited India in March 2025 to study the India Stack model. Discussions on connecting QRIS with India’s UPI are nearing operational reality.
2. Tax & Regulatory Radar: January 2026 Updates
The start of the 2026 fiscal year brings several critical need-to-know updates for CFOs and investors:
| Regulation | Key Change / Benefit | Impact for Indian Firms |
| PMK No. 105/2025 | Income Tax Relief (PPh 21 DTP) for workers in 5 labor-intensive sectors: Textiles & Apparel, Footwear, Furniture, Leather Goods, and Tourism. Applicable for employees earning ≤ Rp 10 million/month. | Direct cost-saving for Indian manufacturing subsidiaries in Indonesia. Government bears income tax burden throughout 2026. |
| BKPM Reg. 5/2025 | GAME-CHANGER: Paid-up Capital for PT PMA reduced from IDR 10B to IDR 2.5B. Total investment remains >IDR 10B per KBLI. 12-month lock-up on deposited capital (unless used for CapEx/OpEx). | Significantly lowers the entry barrier for Indian SMEs, tech startups, and consulting firms. Capital-light models now viable. |
| PMK No. 108/2025 | E-Wallet & Crypto Reporting: Payment service providers and e-wallet operators now under financial information reporting. Aligns with OECD’s CARF and CRS amendments. | Indian fintech players must factor compliance costs into expansion plans. Transaction data now accessible to DJP. |
| 2026 State Budget (APBN) | Tax revenue target: IDR 2,693.7 trillion. GDP growth assumption: 5.4%. Deficit: 2.68% of GDP. Focus on compliance enforcement over new taxes. | Expect increased scrutiny on transfer pricing and Tax Residency Certificates (TRC). CORETAX system operational for digital tracking. |
STRATEGIC ALERT – Tiger Global Ruling: The Indian Supreme Court’s January 15, 2026 ruling (Authority for Advance Rulings v. Tiger Global International II Holdings) is a watershed moment. The Court held that GAAR overrides DTAA grandfathering provisions, and a Tax Residency Certificate alone is no longer sufficient proof of treaty eligibility. For Indo-Indian groups: ensure your corporate structures have genuine commercial substance beyond mere tax residency. Legacy offshore structures require immediate reassessment.
3. Trade-Related Highlights
- Aviation Connectivity: The codeshare agreement between Garuda Indonesia and IndiGo is now in full swing, facilitating easier movement for the nearly 150,000 Indian expats in Indonesia.
- Data Center Incentives: Nongsa Digital Park (Batam) has introduced 2026-specific tax holidays of up to 20 years for AI and Cloud infrastructure—a prime opportunity for Indian SaaS giants.
- Capital City (IKN) Perks: Investors in the new capital project now enjoy up to 100% corporate tax exemptions for 10–30 years, depending on the sector. Apollo Hospitals is already collaborating with Mayapada Hospital group for the Batam Health SEZ.
- Palm Oil Surge: Following India’s tariff reduction, Indonesia expects palm oil exports to exceed 5 million tonnes in 2025 (up from 4.8M in 2024). MoU signed between IPOC and IVPA to strengthen sustainable palm collaboration.
- AITIGA Review: Both countries are actively reviewing the ASEAN-India Trade in Goods Agreement to make it more ambitious, inclusive, and relevant for the next decade.
Sampai jumpa di bulan depan. (See you next month.)
Author Bio:
CA Loganathan Anandan, a Chartered Accountant, CISA is the President Director of PT JCSS Management Consulting. He is a senior advisor on cybersecurity, AI, and risk consulting for the Indo-Indian corridor, with nearly 20 years of experience in the Indonesian market. He serves foreign companies, investors, C-suite executives, and public accountants across the Indonesia-India-Singapore business corridor.
