Reserve Bank Governor Shaktikanta Das has downplayed the punitive tariffs threatened by U.S. President-elect Donald Trump against BRICS nations if they move away from the dollar, stating that each punitive action would likely provoke counteractions from the affected countries.
However, Das clarified that India has not taken any steps toward de-dollarisation but is instead focused on de-risking its domestic trade from geopolitical upheavals.
“There is no de-dollarisation bid on the table,” Das stressed categorically and also ruled out offering an assessment on how that will impact the rupee if higher tariffs are imposed by the US on our imports.
In response to media queries at the customary post-monetary policy press conference in Mumbai on Friday, the governor also said it is too early to assess how such punitive tariffs would impact the rupee which has already been reeling under an impact of a rally in the greenback.
"As far as we are concerned, we have not taken any steps specifically aimed at de-dollarisation. All that we have done is that we have permitted opening of Vostro accounts and we have entered into agreements with two countries by now to do local-currency denominated trade. That is basically to de-risk our trade, dependence on one currency can be problematic due to appreciation or depreciation," Das said.
Trump had on November 30 asked for a commitment from BRICS countries that they would neither create a new currency nor back any other “to replace the mighty dollar or, they will face 100-percent tariffs, and should expect to say goodbye to selling into the US".
BRICS is a grouping of five key economies of Brazil, Russia, India, China and South Africa. The grouping expanded to 10 members from January 1, 2024, with Egypt, Ethiopia, Iran, Saudi Arabia and the UAE joining the bloc, which for all practical purposes have lost relevance given the one-upmanship that China has been up to.
Trump's threat was triggered by to BRICS countries welcoming the use of local currencies between themselves and their trading partners after a meeting in Russia’s Kazan in October. Though Moscow did not pitch the idea of a BRICS currency, Russian president Vladimir Putin termed it as a long-term prospect and not under active consideration.
“Though one of the members had pitched a separate currency for the BRICS grouping, no decision was taken,” Das added.
Unlike the Eurozone, BRICS nations are spread all over and that a geographical continuity would have to be factored in before deciding on a separate currency for this multi-nation bloc, Das added.
After the RBI announced the setting up of a mechanism to settle global trade in rupees in July 2022, the government started exploring this system with Russia soon after it invaded Ukraine in February 2022 due to the sanctions imposed by the US and its allies on Moscow.