Animesh PradhanAIR 2 · CSE 2023 · 214 wordsTheir whole copy
Opening · a definition
De-dollarization refers to the reduction in global transactions and influence of US dollar and reduction of usage of US $ as storage of currency <-- US $ --> unit of value --> medium of exchange
Body · points and prose
- Geopolitical tensions due to Russia-Ukraine war & west's sanctions on Russia
Factors for dedollarisation --> Chinese dominance increasing with more countries' dependence on China's economy & rise of Remnibi --> Multilateral setups like Asian Clearing Union using regional currency --> Currency Swap Programs e.g India with Japan/SAARC
→ Increased volatility in capital markets due to sudden withdrawals by FPIs.
→ Reforms in IMF - Ex Inclusion of chinese yuan and increase in its strength.
→ Rise of cryptocurrency and bitcoin - reduction in US $ transactions
- Dollar will not lose its dominance soon --> > 80% of forex reserves in US $. --> US economy has consistently seen higher rating from credit rating agencies --> Political alliances like G7, IPEF, I2U2, QUAD has US dominance --> China is criticised for intervening in Forex Market- discourages FPI --> > 60% of international trade & settlements in US $ --> Dominance of US in organisations like IMF
Close · a way forward
Hence, India must take steps to benefit from the wave of dedollarisation but with calculated risks.