https://sputniknews.in/20250828/us-tariffs-india-should-move-away-from-dollar-referencing-analyst-says-9670867.html
US Tariffs: India Should Move Away From Dollar Referencing, Analyst Says
US Tariffs: India Should Move Away From Dollar Referencing, Analyst Says
Sputnik India
India has distanced itself from the de-dedollarisation process. At the same time, India has been actively promoting trade in Indian Rupee (INR) to shield itself from economic shocks due to sanctions and other factors.
2025-08-28T18:59+0530
2025-08-28T18:59+0530
2025-08-28T18:59+0530
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The imposition of additional 25% tariff on Indian imports by the US on account of New Delhi's purchases of Russian oil, escalating the overall tariff load to 50%, is being viewed as a "wake-up call" of sorts once again highlighting the perils of being overly dependent on the US Dollar (USD)-denominated financial system.Dr Ankit Shah, a financial and foreign policy analyst as well as the conceiver of the 'Sanatan Economic Model', told Sputnik India in an interview on Thursday that the policymakers in the government and the Reserve Bank of India (RBI) should work towards materialising three possible scenarios to hedge against growing US economic volatility in medium to long-term.Various possible alternatives are already being discussed in global economic circles, which include turning to gold as a common reference point, creating a basket of mixed currencies or floating a new BRICS currency altogether.At present, the USD dominates India's FCA stocks, while also being the dominant global reserve currency, though the share has been declining in recent years. According to International Monetary Fund (IMF) data for the fourth quarter of 2024, the share of US dollar holdings in the allocated reserves increased to 57.80 percent from 57.30 percent in 2024 Q3, due to the depreciation of reserve currencies against the US dollar.According to RBI's most recent Bulletin Weekly Statistical Supplement on 22 August, India's forex reserves rose to $695.1 billion in the week ending 15 August. Most of the Indian forex reserves are in the form of FCAs ($585 billion), with other assets held in gold (85.66 billion), Special Drawing Rights ($18.78 billion) and the 'Reserve Position' in the International Monetary Fund (IMF) accounting for $4.75 billion.Given the US Dollar's global dominance, India's Foreign Exchange Reserves (FOREX) are denominated and expressed in USD terms only, according to RBI.The Indian analyst said that BRICS+ could play an increasingly bigger role in hedging efforts against the US as it could provide an avenue to speed up Free Trade Agreements (FTAs) with Global South nations, all of them major markets and emerging economies with a growing consumption.The BRICS members have been involved in efforts to expand the capacity of the New Development Bank (NDB) to carry out more local currency financing and diversify funding sources. At the recent BRICS Summit in Rio Di Janeiro, BRICS nations vowed to continue discussions on the 'BRICS Cross-Border Payments Initiative', which, if implemented, will likely do away with the need to use USD as an intermediary for intra-BRICS digital settlements.Focussing on BRICS' three biggest economies, almost entire of the trading between China and Russia is being conducted in their national currencies, while 90% of settlements between India and Russia are also taking place in local currencies. For its part, India in recent years has allowed banks from 30 countries to open Special Rupee Vostro Accounts (SRVAs) at Indian banks, doing away with the need for using USD as intermediary.According to the Federation of Indian Export Organisation (FIEO), around $47-48 billion worth of Indian exports bound for the US market are expected to be impacted due to the US tariffs, with the loss in value for exporters expected to widen if the tariff rates stay for longer.At the same time, Indian and US remain in touch through various channels to seek a way out of the current trade stalemate. India is currently involved in Free Trade Agreement (FTA) negotiations with EU, Oman, Chile, Peru, Gulf Cooperation Council (GCC), African states, and other Latin American countries. The negotiations between India and Russia-led Eurasian Economic Union (EAEU) are expected to commence in coming days, with the terms of reference (TOR) already having been finalised during External Affairs Minister (EAM) S Jaishankar's recent visit to Moscow.
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US Tariffs: India Should Move Away From Dollar Referencing, Analyst Says
Officially, India has distanced itself from the de-dedollarisation process. At the same time, India has been actively promoting trade in Indian Rupee (INR) to shield itself from economic shocks due to sanctions and other factors.
The imposition of additional 25% tariff on Indian imports by the US on account of New Delhi's purchases of Russian oil, escalating the overall tariff load to 50%, is being viewed as a "wake-up call" of sorts once again highlighting the perils of being overly dependent on the US Dollar (USD)-denominated financial system.
Dr Ankit Shah, a financial and foreign policy analyst as well as the conceiver of the 'Sanatan Economic Model', told Sputnik India in an interview on Thursday that the policymakers in the government and the Reserve Bank of India (RBI) should work towards materialising three possible scenarios to hedge against growing US economic volatility in medium to long-term.
Firstly, Shah suggested that invoicing in trade should be based on bartering rather than US Dollar (USD).
More importantly, the Indian analyst opined that valuation of goods and services should no longer be referenced to the greenback, given America's recent efforts to weaponise trade and US Dollar against India.
Various possible alternatives are already being discussed in global economic circles, which include turning to gold as a common reference point, creating a basket of mixed currencies or floating a new BRICS currency altogether.
Lastly, Shah said that the RBI should accelerate efforts to further diversify its Foreign Currency Assets (FCA) holding, which are majorly held in currencies such as US Dollar, Euro, Pound Sterling and Japanese Yen among others, according to the Indian central bank.
At present, the USD dominates India's FCA stocks, while also being the dominant global reserve currency, though the share has been declining in recent years. According to International Monetary Fund (IMF) data for the fourth quarter of 2024, the share of US dollar holdings in the allocated reserves increased to 57.80 percent from 57.30 percent in 2024 Q3, due to the depreciation of reserve currencies against the US dollar.
According to RBI's most recent Bulletin Weekly Statistical Supplement on 22 August, India's forex reserves rose to $695.1 billion in the week ending 15 August. Most of the Indian forex reserves are in the form of FCAs ($585 billion), with other assets held in gold (85.66 billion), Special Drawing Rights ($18.78 billion) and the 'Reserve Position' in the International Monetary Fund (IMF) accounting for $4.75 billion.
Given the US Dollar's global dominance, India's Foreign Exchange Reserves (FOREX) are denominated and expressed in USD terms only, according to RBI.
Shah also said that diversification of Indian exports to non-western markets in the Global South through signing of long-term free trade deals will be a good hedging strategy for India.
Indian officials have reached out to around 40 countries in recent weeks in a bid to find new markets for Indian exporters affected by US tariffs.
The Indian analyst said that BRICS+ could play an increasingly bigger role in hedging efforts against the US as it could provide an avenue to speed up Free Trade Agreements (FTAs) with Global South nations, all of them major markets and emerging economies with a growing consumption.
The BRICS members have been involved in efforts to expand the capacity of the New Development Bank (NDB) to carry out more local currency financing and diversify funding sources. At the recent BRICS Summit in Rio Di Janeiro, BRICS nations vowed to
continue discussions on the 'BRICS Cross-Border Payments Initiative', which, if implemented, will likely do away with the need to use USD as an intermediary for intra-BRICS digital settlements.
Focussing on BRICS' three biggest economies, almost entire of the trading between China and Russia is being conducted in their national currencies, while 90% of settlements between India and Russia are also taking place in local currencies. For its part, India in recent years has allowed banks from 30 countries to open Special Rupee Vostro Accounts (SRVAs) at Indian banks, doing away with the need for using USD as intermediary.
Shah opined that India should also look towards China for more technology and capital investment across various sectors of the Indian economy, but with proper security vetting.
According to the Federation of Indian Export Organisation (FIEO), around $47-48 billion worth of Indian exports bound for the US market are expected to be impacted due to the US tariffs, with the loss in value for exporters expected to widen if the tariff rates stay for longer.
At the same time, Indian and US remain in touch through various channels to seek a way out of the current trade stalemate. India is currently involved in Free Trade Agreement (FTA) negotiations with EU, Oman, Chile, Peru, Gulf Cooperation Council (GCC), African states, and other Latin American countries.
The negotiations between India and Russia-led Eurasian Economic Union (EAEU) are expected
to commence in coming days, with the terms of reference (TOR) already having been finalised during External Affairs Minister (EAM) S Jaishankar's recent visit to Moscow.
