RAS question
The concept of 'De-dollarization' refers to:
Correct answer: (C) Reducing dependence on US dollar in international trade and reserves.
De-dollarization means reducing dependence on the US dollar for international trade settlement and foreign exchange reserves.
Explanation
De-dollarization is about a country or group of countries lowering reliance on the US dollar in external transactions and reserve management, not removing dollars from ordinary domestic use. The given examples fit that idea: rupee trade settlement, bilateral currency arrangements and BRICS-level currency discussions all point to alternatives for settling trade or holding reserves. The IMF source supports the reserve side of the concept: it notes a gradual decline in the dollar's share of allocated foreign exchange reserves and a rise in nontraditional reserve currencies. That is why option C is precise: the issue is dependence on the dollar's international role in trade and reserves, not the dollar's exchange value or any digital conversion.
Why the other options are wrong
- (A) Eliminating the dollar from domestic use is too narrow and misdirected, because de-dollarization concerns the dollar's international role in trade settlement and reserves.
- (B) Devaluation refers to a fall in a currency's value, while de-dollarization is about reducing reliance on the US dollar as a trade and reserve currency.
- (D) Converting the dollar into a digital currency is a technology or currency-format issue, not a shift away from dollar dependence in international trade and reserves.
Concept
This tests the external sector part of the economy syllabus: international currencies, reserve composition and trade settlement. It recurs in RAS because changes in dollar dominance affect India's rupee settlement discussions and broader global financial order debates.