The Reserve Bank of India’s (RBI) latest step to ease international trade settlement in Rupees may look technical, but it carries significant geopolitical weight. By allowing Indian banks to open special Rupee Vostro accounts without prior approval, the RBI has made it easier for cross-border partners to trade in the local currency. At a time when Washington has chosen tariffs as a weapon, and US President Donald Trump has imposed 50% duties on Indian imports while threatening more if BRICS weakens the Dollar, New Delhi has quietly fired its salvo of financial resilience, not confrontation.
India’s official line remains cautious. Both External Affairs Minister S Jaishankar and the Ministry of External Affairs have stated clearly that India is not part of any ‘de-Dollarisation’ drive. New Delhi has no interest in undermining the Dollar, nor is it backing the idea of a BRICS trade currency. But in the same breath, Jaishankar underlined that India is committed to internationalising the Rupee. The dual message is deliberate: India will not join an anti-Dollar bloc, but it will also not remain hostage to US currency dominance.
The economic logic is simple. The Rupee has depreciated by over 3.5% against the US Dollar in the past year, making Indian imports more expensive. If trade is invoiced in Dollars, Indian companies are at the mercy of currency swings driven by the Federal Reserve and speculative global flows. A weaker Rupee means higher costs for importers. By settling trade directly in Rupees, Indian firms bypass these risks. For exporters, too, Rupee settlement provides predictability. In short, the RBI’s move reduces the vulnerability of Indian businesses to external shocks.
This step is part of a pattern. India has already created frameworks for Rupee trade with partners like Russia, Sri Lanka, and parts of Africa. The RBI has even permitted lending in Rupees abroad. The goal is not to make the Rupee a global reserve overnight, but to build gradual acceptance. Every incremental transaction settled in Rupees adds to credibility. And credibility, not coercion, is what eventually builds a currency’s international role.
The backdrop matters. Trump’s threats to punish BRICS nations for “weakening the Dollar” highlight how financial dominance can be weaponised. For India, which has seen Washington use sanctions and tariffs against partners ranging from Russia to China, creating an alternative cushion is not optional; it is necessary. As ORF’s Vivek Mishra notes, the RBI’s move is one of those “micro signals” that India will not simply accept U.S. pressure.
Critics point out that the Dollar is too entrenched to be displaced, and they are right. Nearly 60% of global reserves and the majority of trade invoicing still use the greenback. Scholars like Jamus Lim note that de-Dollarisation has been happening for decades, but slowly. There is no credible challenger yet. The Rupee, with its volatility and capital controls, is far from being a global rival. Oil, gold, and semiconductors will not be priced in Rupees anytime soon.
But this misses the essence of India’s strategy. New Delhi is not trying to dethrone the Dollar; it is creating room for manoeuvre. By internationalising the Rupee step by step, India builds insulation from sudden shocks, whether from US tariffs, sanctions, or Fed-driven volatility. If even a fraction of trade with willing partners can shift to Rupees, that reduces exposure. This is pragmatic self-preservation, not ideological rebellion.
It also fits into India’s broader doctrine of strategic autonomy. Just as New Delhi avoids binding military alliances while deepening ties with both Washington and Moscow, it also avoids currency blocs while strengthening its financial sovereignty. India refuses to be boxed into a binary choice between Dollar loyalty and BRICS adventurism. Instead, it wants options.
Seen in this light, the RBI’s move is not just about economics; it is about politics and national confidence. Promoting the Rupee in global trade signals that India is no longer content being a passive rule-taker in a Dollar-dominated order. Even if the Dollar remains king for decades, India is ensuring it has buffers and bargaining power.
The global financial system is unlikely to see an overnight upheaval. The US Dollar will remain dominant, but its monopoly is steadily eroding. In that context, India’s Rupee push is not about dismantling the system but adapting to its flaws. It reflects a new pragmatism: neither romantic about BRICS nor submissive to Washington.
The RBI’s step may not dominate headlines like tariffs or summits, but its long-term impact could be profound. It is a quiet assertion of economic sovereignty, a recognition that in an uncertain world, financial independence is as critical as military strength. The Rupee’s internationalisation is not a war against the Dollar; it is a shield to protect India’s future.
(The writer is a technocrat, political analyst, and author)
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