Source: TH
Context: RBI Governor Shaktikanta Das clarified that India is not taking steps toward de-dollarisation despite discussions within BRICS about a common currency to reduce reliance on the U.S. dollar.
About De-dollarisation:
- What is De-dollarisation?
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- Definition: The process of reducing reliance on the U.S. dollar in international trade and reserves to mitigate risks associated with currency volatility.
- Global Context: Countries like China and Russia have initiated measures such as bilateral trade in local currencies and increasing gold reserves.
- India’s Initiatives:
- Local Currency Trade Agreements: India has signed agreements with select nations for bilateral trade in local currencies, reducing transaction costs and exchange rate volatility.
- Diversification of Forex Reserves: Increased focus on gold and other currencies in reserves.
- Promoting INR Trade: Steps to internationalize the Indian rupee for global trade settlements.
- Impact of De-dollarisation:
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- On the Global Economy:
- Reduced Dollar Dominance: Weakens the U.S. dollar’s role as a global reserve currency.
- Geopolitical Tensions: May lead to trade blocs and financial realignments.
- Alternative Currencies: Promotes regional currencies or gold as trade and reserve assets.
- On India’s Economy:
- Trade Diversification: Enhances resilience against dollar volatility.
- Risk Mitigation: Shields the economy from sudden dollar-driven shocks.
- On the Global Economy:
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