Although the fractured diplomatic ties between the US and India appear to be at an all-time high at the moment, the South Asian nation’s central bank decided to ease off on its reliance on the American dollar even before tariffs hit the country.
According to Bloomberg’s analysis of the US Treasury Department data, India’s purchase of Treasuries started slipping months back. The figures receded from $235.3 billion in May to $227.4 billion in June. More data on the front further shed light on the Reserve Bank of India doubling down on its gold holdings instead.
Over the past few months, core BRICS nations – Brazil, Russia, India, China and South Africa – have positioned themselves as a counter-argument to Western dominance, which US President Donald Trump has particularly envisioned a threat to the US dollar. Although India backed a significant deal of the sentiment underlined at the summit earlier this year, MEA spokesperson Randhir Jaiswal refuted targeting the American currency.
Jaiswal affirmed in August “de-dollarisation” was not part of “India’s financial agenda.” Meanwhile, External Affairs Minister Dr S Jaishankar further clarified the focus was more on “derisking ” trade by keeping doors to diverse partners open and exploring other payment systems to reduce the sole-dependence on a single currency.
India cutting US debt: Report
Last week, India’s finance minister announced that the RBI was acting on a “very considered decision” to diversify the country’s reserves, which is currently deemed the world’s fourth-largest, valued at about $694 billion.
With the US having frozen Russia’s reserves in 2022 in light of Ukraine being invaded, the current geopolitical scenario has inevitably influenced India’s moves on this front. Gaurav Kapur, a chief economist at IndusInd Bank Ltd, said, “There is a sense that if the US can shut Russia off from its assets, that can be repeated with any country. Any central bank will want to diversify.”
India is already grappling with Trump’s imposition of 50% tariffs since last month. The US president has repeatedly defined these punitive levies as “secondary sanctions” on the country, which are meant to exact additional pressure on Russia to end its war in Ukraine.
India’s boosted gold holdings
On the contrary, data from the country’s central bank indicated that its gold holding had gone up to 880 metric tons in July, marking a significant surge from 841.5 tons in 2024.
Former RBI deputy governor Michael Patra noted that the strategic decision focussed on reducing the US dollar’s influence on India, in addition to expanding its global reserves. In a column last month, he alerted the world to the central banks’ “concerns about their ability to access gold stored overseas in the event of a crisis or in the case of sanctions, freezing and confiscation.”