Targeting US dollar is not India’s economic policy but looking for ‘workarounds’: Jaishankar

“We have never actively targeted the dollar. That’s not part of our economic, political, or strategic policy. Some others may have done so. What I will say is that we have a natural concern. We often have trade partners who lack dollars for transactions. So, we must decide whether to forgo dealings with them or find alternative settlements that work. There’s no malicious intent towards the dollar,”Jaishankar said in response to a question at the Carnegie Endowment for International Peace, an American think-tank in Washington during an interaction.

The minister’s remarks come at a time when some of India’s close trade partners, such as Bangladesh, Sri Lanka, and Nepal, have faced acute shortages of dollars, which has limited their ability to import essential commodities. Both Bangladesh and Sri Lanka experienced significant unrest in recent years as the value of the US dollar surged sharply.

Moreover, US sanctions on Iran had posed problems for Indian tea and rice exporters who once enjoyed a large market share in the Iranian market. India’s oil imports from Russia had also elicited sharp reactions from the West despite being one of the top importers of the refiled oil from India.

Meanwhile, US presidential candidate Donald Trump last month said, if elected, he would impose 100 per cent tariffs on imports from countries which shun the dollar. The Reserve Bank of India had come out with the rupee settlement mechanism for trade in 2022.

“We spoke about multipolarity. Obviously, all of this will also be reflected in currencies and economic dealings,” the minister added.

This comes as Russia and China have actively reduced the use of dollars in bilateral trade after the US excluded Russia from the international payment system ‘SWIFT’ following the invasion of Ukraine. The Russian government had stated last year that trade between Russia and China conducted in rubles and yuan had reached 95 per cent. Notably, bilateral trade between the two countries during the last financial year crossed $200 billion.

Meanwhile, the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) points to a gradual decline in the dollar’s share of central bank and government foreign reserves. However, the reduced role of the US dollar over the past two decades has not been matched by corresponding increases in the shares of the other “big four” currencies—the euro, yen, and pound, according to the IMF.

“Rather, this has been accompanied by a rise in the share of what we refer to as non-traditional reserve currencies, including the Australian dollar, Canadian dollar, Chinese renminbi, South Korean won, Singaporean dollar, and the Nordic currencies,” the IMF said.

The IMF in July this year said that one nontraditional reserve currency gaining market share is the Chinese renminbi, whose gains match a quarter of the decline in the dollar’s share.

“The Chinese government has been advancing policies on multiple fronts to promote renminbi internationalization, including the development of a cross-border payment system, the extension of swap lines, and piloting a central bank digital currency. It is thus interesting to note that renminbi internationalization, at least as measured by the currency’s reserve share, shows signs of stalling out,” IMF said.