PM Modi with Indonesian President Joko Widodo before a meeting in New Delhi on Monday.

India and Indonesia, the world's most populous Muslim nation, today agreed to strengthen defence and security ties with a major focus on maritime space and deepen cooperation for effectively combating terror, its financing, money laundering and arms smuggling.

In talks between Prime Minister Narendra Modi and Indonesian President Joko Widodo, the two countries with impressive growth rates also decided to boost bilateral trade and investment, particularly in areas like oil and gas, pharmaceuticals, IT and skill development.

A joint statement issued after the talks said the two leaders condemned terrorism in all its forms and manifestations in the strongest terms, emphasising "zero tolerance" for acts of terror.

Referring to the South China Sea disputes - where Indonesia is also a party - the two leaders called for a peaceful resolution in accordance with universally recognised principles of international law, including the UNCLOS (UN Convention on the Law of the Sea).

Emphasising on the need to improve connectivity and encourage people-to-people contact, the two leaders also welcome Garuda Indonesia's decision to commence direct flights from Jakarta to Mumbai.

On combating terrorism, the joint statement said Mr Modi and Mr Widodo called upon all countries to implement the UNSC Resolution 1267 and other relevant resolutions designating terrorist entities, in an apparent reference to China blocking India's move to get Jaish-e-Mohammed chief Masood Azhar, designated as a global terrorist by the UN.

The two leaders also asked all countries to work towards eliminating terrorist safe havens and infrastructure, disrupting terrorist networks and their financing channels, besides stopping cross-border terrorism, seen as a message to Pakistan.

Mr Modi and Mr Widodo also underlined the need for all nations to deal with transnational terrorism emanating from their territory by effective criminal justice response while agreeing to extend bilateral cooperation to combating terror, organised crime, drugs and human trafficking, money laundering and arms smuggling.

In his media statement, Mr Modi said the talks focused on the full range of bilateral cooperation and both sides agreed to prioritise defence and security cooperation, besides enhancing efforts to ensure safety and security of the sea lanes.

"As the world's most populous Muslim nation, Indonesia stands for democracy, diversity, pluralism, and social harmony. These are also our values. Our nations and societies have nurtured strong bonds of commerce and culture throughout our history," he said.

The Prime Minister said both sides agreed that early implementation of India-ASEAN Free Trade Agreement in Services and Investment, and finalisation of the Regional Comprehensive Economic Partnership would be important steps to further boost trade ties.

"To sustain the momentum of our partnership, President Widodo and I have directed for an early meeting of the existing ministerial-level mechanisms to carry forward the bilateral cooperation agenda," he said.

The Indonesian President, on his first visit here, said there were detailed talks on ways to strengthen economic partnership, adding Indonesia wants to diversify exports to India.