India reluctant to join de-dollarisation chorus at BRIC

June 15th, 2009 - 12:23 pm ICT by ANI  

By Naveen Kapoor

New Delhi, June 15 (ANI): While China and Russia are likely to pitch for the induction of a new global currency to replace the dollar as the world’s main reserve (de-dollarisation) at the first BRIC summit beginning tomorrow in Yekaterinburg, it is most unlikely that India will join the chorus on this issue, according to government sources.

Although India has found congruence in the agenda of other BRIC nations on key international issues like the longstanding demand for restructuring and democratization of international institutions like IMF and the World Bank, tackling terrorism, climate change, it so far distanced itself from challenging the supremacy of dollar and is in favor of increasing SDRs’ (Special Drawing Rights), which is the IMF’s indigenous currency.

In the face of a deepening economic crisis and the balance of economic power tilting from west to east, Beijing and Moscow are concertedly canvassing for the induction of new currency in the international system. The issue of currency replacement was also raised by Beijing during the G-20 London summit in April this year, but could not find many takers.

Currently the dollar represents about 65 percent of foreign exchange reserves and both Russia and China have parked huge funds in the US treasury and invested heavily in the US treasury bonds, which is widely used by the administration for bailing out domestic industry. According to sources this is the main reason why both Russia and China are ranting for a neutral currency.

According to the most recent U.S. Treasury Department data Russia holds about 30 percent of its 404.2 billion dollars foreign exchange reserves in treasuries, making it the fifth-largest holder of U.S. government debt.

China, the world’s largest holder of U.S. Treasuries, has 767.9 billion dollars. India has not invested so heavily in the treasury bonds, and therefore, it does not have a reason to worry according to a source.

Authoritative sources in the government see this issue as more of an ideological one than a substantive one and, officials on condition of anonymity, say that New Delhi would not like to upset Washington by challenging the dollar supremacy at the BRIC summit, especially at a time when the US is pressurizing Pakistan to nail down terrorism and US Secretary of State Hillary Clinton is about to make her maiden visit to India.

Foreign Secretary Shivshankar Menon has already set the record straight by saying that there will be no America bashing at BRIC and this group of four fastest emerging economies is not directed against anyone. (ANI)

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