Trading in Rupee – Rubal – Yuan – UPSC Prelims

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  • The use of the dollar as a financial weapon against Russia by the U.S. has resulted in countries taking up accelerated measures to reduce their dependence on the U.S. dollar.
  • Countries now want to hold fewer dollars and euros by switching to alternative currencies such as the yuan.
  • Also, India is exploring trade with Russia without using USD.
  • Why Rupee-Rubal trade is not feasible?
    • As the Russian rouble and the Indian rupee are not widely accepted global currencies, there is a problem if there is a trade imbalance between the countries.
    • In 2021, Russia’s exports to India stood at $6.9 billion compared to India’s exports to Russia being worth $3.3 billion.
    • India has a trade deficit of over $3 billion.
    • Russia cannot accept the rupee instead of the dollar in bilateral trade, as it would be difficult for it to get rid of its excess rupee holdings as the rupee’s acceptability in global trade is meagre as compared to that of the dollar.
    • Hence the use of the yuan, which is more widely accepted, can help solve the issues.
  • Potential impact of using Yuan:
    • The use of the yuan might result in a potential fall in the status of the dollar unless the U.S. takes up measures and continues to be the most dominant economic superpower.
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