BRICS members India and Russia ditched the US dollar and settled payments worth $4 billion in local currencies. Russian exporters purchased Indian-made arms and equipment for defense purposes and cleared the payment using the rupee. The US dollar played no role in the cross-border trade making local currencies the sole beneficiary of the transactions.
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The BRICS alliance kick-started the de-dollarization agenda and is moving in the direction of using local currencies for cross-border transactions. Read here to know how many sectors in the US will be impacted if BRICS ditches the dollar for trade.
BRICS: India & Russia Settle Trade Worth $4 Billion in Local Currency, Ditch the US Dollar
The Russian exporters held $8 billion in reserves in India’s special Vostro bank account for global exchange of trade settlement. Now, 50% of the funds have been used to settle arms payments in the rupee with India. Another $4 billion is parked in the account and a new trade settlement could be initiated in the coming months. The development gives the local currencies of BRICS a boost in the global market and not the US dollar.
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On the other hand, India is also settling local currencies for its BRICS counterpart Russia through the special Vostro accounts. “Indian exports are also being settled from the Russian funds from the Vostro account,” said an official on the condition of anonymity.
Russia and India’s intent of using local currencies for trade falls in line with the BRICS de-dollarization initiative. The goal is to move away from the US dollar and make local currencies the beneficiary of all transactions. This would strengthen local currencies and give a boost to their native economies making businesses thrive and creating more jobs.
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We will have to wait and watch how both the BRICS countries plan to settle another $4 billion from the Vostro account. The US dollar is the only currency that receives a hit as developing countries settle trade in local currencies.