No plans for de-dollarisation: Das

• The Reserve Bank of India (RBI) has clarified that India has no intention to pursue de-dollarisation, despite global discussions on reducing reliance on the U.S. dollar. RBI Governor Shaktikanta Das emphasized that India's efforts are focused on de-risking trade, ensuring macroeconomic stability, and maintaining robust foreign exchange reserves.

Highlights:

• The Reserve Bank of India (RBI) has clarified that India has no intention to pursue de-dollarisation, despite global discussions on reducing reliance on the U.S. dollar. RBI Governor Shaktikanta Das emphasized that India's efforts are focused on de-risking trade, ensuring macroeconomic stability, and maintaining robust foreign exchange reserves.

Context: BRICS Currency and Global Trade

• BRICS Common Currency:
  • The idea of a common currency for BRICS nations was proposed but remains under discussion without any formal decisions.
  • Geographical dispersio n among BRICS nations was cited as a significant challenge, contrasting with the Eurozone's proximity and shared economic structures.
• De-dollarisation Perspective:
  • India has not taken steps toward de-dollarisation. Instead, it has signed agreements for local currency-denominated trade with a few nations to mitigate risks associated with over-reliance on a single currency.
  • This approach aims to protect Indian trade from currency volatility, not to challenge the dominance of the U.S. dollar.
• Potential Impact of Tariff Wars:
  • The Governor acknowledged the uncertainties surrounding a hypothetical tariff war, particularly in light of U.S. President-elect Donald Trump’s proposed tariffs on BRICS nations.
  • Ripple Effects: A tariff war could lead to retaliatory measures, such as currency devaluation by other nations, impacting global trade dynamics.
  • Indian Exports: While such scenarios could pressure the Indian rupee, the RBI’s robust forex reserves and preparedness were highlighted as key factors in mitigating potential disruptions.

Forex Reserves and Financial Stability:

• Robust Reserves: India’s foreign exchange reserves remain strong, providing a buffer against potential spillovers from global financial instability.

Policy Actions:

• The RBI has raised interest rate ceilings on FCNR(B) deposits to attract inflows and provide NRIs with more investment opportunities.
• These measures aim to enhance macroeconomic and financial stability without signaling concerns over current reserve adequacy.

Prelims Takeaways

• BRICS nations
• Reserve Bank of India (RBI)