De-dollarisation
Kartavya Desk Staff
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?
• 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.
• 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.
• 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:
• 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: 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.
• 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.
• Trade Diversification: Enhances resilience against dollar volatility.
• Risk Mitigation: Shields the economy from sudden dollar-driven shocks.
Insta links:
• Pros-and-cons-De dollarisation
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