India Is Introducing A Unique De-Dollarization Model

All the exports of the smaller partner in any given pair will be de-dollarized, while the larger partner will then match that with their own exports. This pragmatic policy ensures that there’s enough national currency in circulation to meet their minimal bilateral trade needs while also keeping a comfortable amount of dollars circulating to facilitate their trade with other countries that still feel more comfortable using the greenback.

India and Bangladesh agreed to partially de-dollarize their trade according to a unique model that might become the global standard in the coming future. All of Bangladesh’s $2 billion worth of exports to India will be de-dollarized, while India will match that amount in de-dollarizing an equivalent level of its roughly $13.69 worth of exports to Bangladesh. In other words, all the exports of the smaller partner in any given pair will be de-dollarized, while the larger partner will then match that with their own exports.

This pragmatic policy ensures that there’s enough national currency in circulation to meet their minimal bilateral trade needs while also keeping a comfortable amount of dollars circulating to facilitate their trade with other countries that still feel more comfortable using the greenback. It’s so simple that any pair of countries could easily emulate those two’s model if they have the political will, which a growing number of them veritably do after the US weaponized the dollar against Russia last year.

Unbeknownst to most observers who focus solely on the yuan’s role in de-dollarization processes, India’s newly unveiled Foreign Trade Policy officially seeks to internationalize the rupee, which is an extremely promising currency due to that country’s role as the world’s fifth-largest economy. It’s not a coincidence that India chose to introduce its unique de-dollarization model in the region since it hopes to first popularize the use of the rupee in South Asia prior to doing so across the rest of the Global South.

This is part of India’s desire to stimulate more intraregional trade in parallel with its rise as a globally significant Great Power.  The World Bank estimates that it’s only $23 billion, which represents a paltry 5% compared to ASEAN’s 25%. Recalling the earlier cited statistics regarding the level of Indian-Bangladeshi bilateral trade being around a little less than $16 billion in total (though other sources claim it’s over $18 billion), this means that at least two-thirds of South Asia’s intraregional trade involves just those two.

It therefore makes perfect sense for India to unveil its unique de-dollarization model with Bangladesh first in order to perfect everything ahead of rolling this approach out across South Asia and beyond. Other countries would do well to consider following India’s lead with respect to partially de-dollarizing trade with their closest regional partner. This pragmatic model deserves to be employed by the largest number of countries possible since it stands the greatest chance of accelerating financial multipolarity.