De-Dollarisation

• According to reports quoting Russian lawmaker Alexander Babakov, the BRICS nations are in the process of creating a new medium for payments – established on a strategy that “does not defend the dollar or euro”. He reportedly indicated that the new currency would be secured by gold and other commodities such as rare-earth elements.
• The Ministry of External Affairs announced that India and Malaysia have agreed to settle trade in the Indian rupees

De-Dollarization

• De-dollarization refers to the process of reducing the use of the US dollar in international trade and finance.
• This may involve countries diversifying their foreign currency reserves by holding fewer US dollars and more of other currencies.
• Need for De-Dollarization : Several countries have alleged that the US has been misusing dollar dominance by the imposition of sanctions as a tool to achieve foreign policy goals.

BRICS

• In 2001, the British Economist Jim O’Neill coined the term BRIC to describe the four emerging economies of Brazil, Russia, India, and China.
• Formalized during the first meeting of BRIC Foreign Ministers in 2006. South Africa was invited to join BRIC in December 2010; (HQ of BRICS: Shanghai).
• The chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.
• South Africa is the 2023 chair of the BRICS.
• Each country has one vote.

India-Malaysia Agreement

• The Ministry of External Affairs announced that India and Malaysia have agreed to settle trade in the Indian rupees.
• The announcement came in the backdrop of ongoing official efforts to Safeguard Indian trade from the impact of the Ukraine crisis.
• It indicates India is willing to take concrete steps towards the de-dollarisation of its international trade.
• Significance
  • This mechanism will allow the Indian and Malaysian traders to invoice the trade in Indian rupee and therefore achieve better pricing for goods and services traded.
  • Malaysia is the third largest trading partner of India in the ASEAN region, after Singapore and Indonesia.

Practice Questions for Prelims

Consider the following statements:
1. Headquarters of BRICS is in Beijing
2. Russia is the chair of BRICS for 2023

Which of the above given statements are incorrect?
a) Only 1
b) Only 2
c) Both 1 and 2
d) Neither 1 nor 2

Ans. c)

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