Quiet rewriting of global finance

India is driving a recalibration by fostering bilateral trade settlements in local currencies, a calculated bid to enhance monetary sovereignty and reduce dollar dependency

- RAVI POKHARNA KUNTALA KARKUN Respectively Executive Director and Senior Visiting Fellow, Pahle India Foundation

FOR DECADES, THE US dollar has been the world’s financial operating system, anchoring commodity pricing, trade invoicing,and reserve accumulation. But every operating system has a vulnerability: tho-sewhorely onit are exposed toits owner’s commands.This has turned global finance intoa textbook prisoner’s dilemma. Individually, countries benefit from remain-ingin the dollarsystem; itis liquid,trusted, and universally accepted. Collectively, however, overdependence leaves them exposed to sanctions risk, liquidity shocks, and policy spillovers beyond theircontrol.

Indiais nowdrivinga structural recali-bration by fostering bilateral trade settlements in local currencies. This isn’t just political posturing; it’s a calculated move to enhance monetary sovereigntyand reduce dollar dependency. Instead of challenging the USD head-on, Indiais altering theincentives by building alternative payment rails. By prioritising bilateral trade, India is quietly breaking the status quo and raising global economic resilience.

Rather than calling for de-dollarisa-tion, India has focused on reducing the marginal cost of cooperation, one trade corridoratatime.The foundational tool is the RBI’s Rupee Trade Settlement framework. This mechanism allows trading partner countries to hold the INRin spec-ialrupeevostroaccounts(SRVAs) in Indian banks, bypassing the need for dollars.As of February, 123 correspondent banks from 30 countries have opened 156 SRVAswith Indian banks. In absolute terms, it repre-sentsasmall share of India’s overall trade. But directionally, it marks a shift from experimentation to adoption across corridors.Some key relationships include: