India's Firm Position on Currency Dynamics at SCO 2024 Summit

In a demonstrative stand against China's proposal to replace the US dollar with the yuan at the SCO 2024 summit, India has chosen to uphold the US dollar, diverging from the perspectives of China and Russia. This decision by India could have extensive repercussions on the global trade scenario and currency dynamics.

The recent SCO 2024 summit showcased India's dissatisfaction with China, as Prime Minister Narendra Modi opted out of attending and instead designated Foreign Minister Subrahmanyam Jaishankar as the country's representative.

During the summit, China aggressively advocated for de-dollarization, with Russia endorsing this move by pushing for the utilization of local currencies in trade transactions over the US dollar.

India's Resolute Stand Against Yuan-Dollar Substitution

Contrary to the intentions of China and Russia, India remains resolute in its preference for using the US dollar in trade dealings. Despite the pressure from other SCO members to transition away from the dollar, India remains unwavering in its choice.

Russia's preference for crude oil buyers to transact in Chinese yuan or Russian ruble prompted India to initially direct payments in yuan and rubles for Russian oil in 2022, leading to significant exchange rate savings. However, India's objection arose when Russia mandated settling all crude oil shipments in yuan, prompting India to switch to purchasing oil from the US and paying in dollars.

Impact of China's De-Dollarization Endeavors

Recent trade data highlights a notable shift within China, with approximately 52.9% of trade transactions settled in yuan as of March 2024, surpassing the 42.8% concluded in US dollars. Should other BRICS members emulate China's approach, the dominance of the US dollar in global trade could face challenges.

The value of the US dollar in forex markets hinges on its demand-supply dynamics. A transition towards local currencies for trade transactions could potentially diminish the dollar's value in international markets.

Russia's Collaborative Role in De-Dollarization

Russia's collaboration with China to promote de-dollarization is evident in its advocacy for buyers to pay for crude oil purchases in yuan or rubles instead of dollars. This initiative aligns with the broader objective of stimulating the use of local currencies within the SCO.

India's Apprehensions and Strategic Response

India expresses concerns regarding China's agenda at the SCO 2024 summit, perceiving it as a means for China to bolster its de-dollarization strategy and enhance its economic standing. The Modi administration remains cautious, emphasizing the retention of the US dollar's significance in trade settlements and refraining from adopting the yuan.