In the wake of a global trend towards dedollarization, India has declared its support for the dollar as a reserve currency. This decision raises questions about New Delhi’s strategic motives.
Support for the Dollar Amid Dedollarization
India's External Affairs Minister Subrahmanyam Jaishankar clarified the nation’s position: 'There is no policy on our part aimed at replacing the dollar. At the end of the day, the dollar as a reserve currency is a source of international economic stability.' This statement comes at a time when many major economies are looking to reduce their dependence on the US currency. Despite being a member of BRICS, India doesn't follow a hardline stance of its partners on monetary issues. Supporting the dollar aids in maintaining financial stability and attracting foreign investments.
Dual Strategy: Rupee Internationalization
India aims to internationalize its currency without challenging the dollar. Jaishankar highlighted: 'We are clearly promoting the internationalization of the rupee, as we are actively globalizing India.' This strategy is reflected in trade agreements with settlements in rupees, reducing dependence on dollar fluctuations and strengthening the country’s monetary sovereignty.
Adapting to the Global Financial System
India takes a pragmatic approach amidst global monetary tensions. US threats of sanctions against countries practicing dedollarization have led some nations to adopt a cautious stance. Donald Trump, for instance, mentioned tariffs up to 150% on nations attempting to move away from the dollar. As a result, India focuses on preserving economic interests and strengthening ties with the US. This hybrid strategy helps avoid economic turmoil and prepare the economy for future transformations.
By shaping its own course, India maintains the dollar as the core of its monetary policy while adapting to global financial system changes. This positions India as a central player in a multipolar world.
