De-dollarisation Will Be a Slow Grind, Says DBS Chief Economist

De-dollarisation Is a Gradual Process

Radhika Rao said discussions around reducing dependence on the US dollar have been present in BRICS meetings for several years. However, the pace of change differs significantly across countries.

Within BRICS, the Chinese yuan has seen relatively greater use in bilateral trade. India, meanwhile, has encouraged the use of the rupee and has been strengthening the financial infrastructure required to conduct international transactions in the local currency.

No Immediate Replacement for the Dollar

A decline in the dollar’s share of global trade and reserves does not necessarily mean that another currency will immediately take its place.

Rao expects the global monetary system to become more multipolar over time, with currencies such as the yuan and euro gaining greater importance. However, she does not expect the dollar to suddenly lose its dominant position.

Rupee Has Scope to Grow as a Trade Currency

The Indian rupee could become a more important regional trade currency even without full capital-account convertibility, Rao said.

Expanding local-currency trade arrangements, developing deeper financial markets and maintaining macroeconomic stability could strengthen the rupee’s international role. However, greater use of the currency as a reserve or investment asset would require easier deployment, investment and repatriation of rupee balances.

Challenges Facing the Indian Economy

India has shown considerable resilience despite several external shocks, according to Rao. Domestic consumption, manufacturing and public capital expenditure have provided support to economic growth.

However, prolonged high oil prices, a weaker rupee, US interest-rate movements and geopolitical tensions could create additional pressure on the Indian economy.

India’s FY27 Growth Outlook

DBS expects India's economy to grow by around 7.3 percent in FY27, compared with 7.8 percent in the previous financial year.

Strong domestic demand has provided an important cushion, with consumption, public investment and manufacturing supporting the expansion. Rao said investors would nevertheless be watching for a broader recovery in private capital expenditure during the second half of the year.

Three Major Risks for Asia

Rao identified geopolitics, the direction of US interest rates and a potential AI-related downturn as major macroeconomic risks for Asian economies.

A sharp slowdown in the AI and technology cycle could have wider consequences because several Asian economies have invested heavily in electronics and semiconductor supply chains. A weaker global technology cycle could therefore affect exports, investment and economic activity across the region.

BRICS and a More Multipolar Economy

The global economy is gradually moving from a unipolar structure towards a more multipolar one, Rao said. BRICS could play a role by making trade relationships smoother and encouraging greater use of local currencies.

Rather than expecting a new BRICS currency to quickly replace the dollar, the more realistic scenario is a gradual increase in alternative currencies in regional trade and financial flows.

Conclusion

Radhika Rao’s assessment suggests that de-dollarisation is likely to be a long-term process rather than a sudden shift in the global monetary system. Local currencies are gaining ground, particularly within BRICS trade, but the US dollar remains deeply embedded in global finance. For India, the trend creates an opportunity to strengthen the rupee’s role in international trade while continuing to build deeper financial markets and stronger economic foundations.