India's Approach to US Dollar in Trade Policy
India has made it clear that completely moving away from the US Dollar is not part of its economic Strategies, despite being a strong member of BRICS. The country's External Affairs Minister, S. Jaishanka, recently explained that India's focus is on conducting trade smoothly, even with US-sanctioned nations. The stance taken by India signifies a unique approach compared to other nations within the BRICS alliance.
India's Trade Policy Stance
Amid the global trend of de-dollarization, India has positioned itself differently by stating that targeting the US Dollar is not a deliberate part of its economic Policies. Speaking at the Carnegie Endowment for International Peace, Jaishanka emphasized that India's primary interest lies in enabling trade with ease. As a result, the country plans to settle trade with US-sanctioned countries such as Russia in their local currencies, while maintaining trade using the US Dollar with other nations.
"We have never actively targeted the dollar. That's not part of our economic, political, or strategic policy. Some others may have done so," Jaishanka clarified during his speech. He highlighted the necessity to find alternative settlements for trade partners lacking dollars to continue economic relationships.
This decision from India comes at a significant time when both Russia and China have reduced their dependence on the US Dollar for bilateral trade. With trade volume surpassing $200 billion between these two countries last year, the impact of shifting away from the dominant role of the US Dollar in global trade is becoming evident.
US Dollar Dominance Under Scrutiny
Recent reports from the IMF's currency Composition of Official Foreign Exchange Reserves (COFER) highlight a decline in the central bank and government foreign reserves held in US Dollars. While the US Dollar has maintained a predominant position in global trade for decades, its role has been slowly diminishing, without a proportional increase in other major currencies like the euro, yen, and pound.
A detailed analysis by CNF revealed that non-traditional reserve currencies, including the Australian Dollar, South Korean Won, and Chinese renminbi, have shown increased shares in global reserves in comparison to the US Dollar. Notably, the Chinese renminbi has made significant gains, matching a quarter of the decline observed in the US Dollar.
"The Chinese government has been actively promoting renminbi internationalization through various policies and initiatives, resulting in the Currency's rising prominence in global trade and reserves," the report highlighted.
BRICS Summit Impact
As the upcoming BRICS Summit approaches, the pressure on the US Dollar is intensifying. Reports suggest that alternative Payment systems are on the agenda, further challenging the dominance of the US Dollar in international trade. This summit, scheduled for October 22 – October 24, poses a potential shift in global trade dynamics.
To counter these strategies and mitigate potential impacts, US presidential candidate Donald Trump has proposed imposing a 100% tariff on goods entering the US from countries participating in alternative payment systems, as previously reported.
India's stance on the US Dollar in trade policies reflects a pragmatic approach to ensure smooth trade relations while adapting to the changing landscape of global economics. As the dynamics of international trade continue to evolve, countries like India Play a crucial role in shaping the future of economic partnerships.
