Not dollar but..., Putin's new plan to bring Trump on his knees, will India gain from Russia's move?
In what could be another standoff between Russia and the US, President Vladimir Putin has called for increasing the use of national currencies in trade between BRICS countries. He has proposed to create an independent settlement system on the BRICS platform in order to make transactions faster, more efficient and secure. The Russian President's appeal to create an 'independent settlement system' in national currencies between BRICS countries can harm US in many ways.
Why Putin wants this?
Russian President Vladimir Putin's appeal to establish an 'independent settlement system' in national currencies between BRICS countries to reduce the global dominance of the US dollar. For decades, the US dollar has been the world's main reserve currency. This means that central banks around the world keep a large part of their foreign exchange reserves in dollars. Most international trade, especially the trade of oil and other important commodities, takes place in dollars. This dominance has given the US a unique position in the global economy. This gives it the ability to borrow at low interest rates and maintain significant control over the international financial system.
How has the US been dominating the world?
This dominance of the dollar brings several direct benefits to the US. First, the US government can raise funds at a low borrowing cost to meet its needs. The reason is that there is always a global demand for the dollar.
Secondly, it can use the dominance of the dollar as a tool of economic pressure, as it has done in imposing sanctions on countries like Russia. By excluding a country from the dollar-based financial system, the US can cause serious damage to that country's economy. This increases its geopolitical power.
Thirdly, it is easier and cheaper for American companies to do international business because they do not have to worry about currency exchange rates constantly and the US can export some of its inflation to other countries. Strong global demand for the dollar helps keep its domestic inflation low.
How can India benefit from this?
Amid the ongoing tariff war, India can get many big benefits by not dealing in dollars and promoting trade in national currencies. India has to depend heavily on the US dollar for its international trade and the fluctuations in the value of the dollar have a direct impact on the Indian economy. This can make imports expensive and exports less competitive. India can reduce this currency risk by trading in national currencies. When trade is done in rupees, Indian businesses will be less worried about losses due to fluctuations in the dollar-rupee exchange rate. This will also reduce the cost of doing business and make exports more competitive.
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