De dollarization
Context:
- Recently, Reserve Bank of India (RBI) Governor Shaktikanta Das at the Davos World Economic Forum (WEF) 2024, addressed the topic of de-dollarization.
- He informed that while the Indian economy is expanding its role in international trade, there are no plans to specifically pursue de-dollarization.
- He said that the focus is on offering the Indian Rupee as an alternative currency for settling international payments and trade.
- The highlighted the risks which are associated with a global trade system heavily reliant on a single currency, like the US Dollar.
- He suggested that by integrating multiple currencies into the trade system, risks can be distributed more evenly, making the system more resilient.
What is meant by De-dollarization?
- De-dollarization generally refers to the process of reducing reliance on the US Dollar in international trade and finance, and also shifting towards alternative currencies for global transactions.
- According to International Monetary Fund (IMF), the USD accounted for 59% of allocated currency reserves as of the first quarter of 2023, euro at just under 20% and the Japanese yen at around 5%.
