In recent years, India has been steadily increasing its gold reserves while exploring alternatives to the US dollar for international trade. This shift aligns with a broader trend among BRICS nations, which are seeking to reduce their reliance on the dollar and establish a more balanced global financial system. With discussions about a potential BRICS currency gaining momentum, could India be preparing for a financial revolution? In this blog, we explore India's gold accumulation strategy, its impact on global trade, and whether the dominance of the US dollar is at risk.
The controversy began when Russian President Vladimir Putin showcased a symbolic BRICS banknote at the 16th BRICS Summit held in Kazan. The banknote featured the flags of the founding BRICS nations—Russia, India, China, Brazil—along with an image of the Taj Mahal and the Indian flag. This move sparked global speculation and controversy, especially in the United States, which sees this as an attempt by BRICS nations to challenge the dominance of the US dollar in international trade and finance.
The United States believes that India, along with other BRICS nations, is planning to replace the US dollar as the global reserve currency. The summit emphasized the development of an independent international payment system, providing an alternative to the Western banking order. Reports suggest that as many as 14 nations are ready to adopt this BRICS currency, further intensifying concerns in the US.
One of the key points of concern for the US is India's increasing gold reserves. A report published by the Atlantic Council in June 2024 revealed that the Reserve Bank of India (RBI) has been stockpiling gold at an accelerated rate since 2017. In 2024, India became the second-largest gold buyer in the world, quadrupling its gold purchases in just a year. For civilians, this might seem like a regular financial move, but for the US, it is a significant threat to dollar hegemony—one that has led to military interventions in the past.
Historical examples include Libya in 2011, where US-led NATO forces invaded the country under the pretext of protecting civilians from dictator Muammar Gaddafi’s human rights violations. However, leaked emails from Hillary Clinton later revealed that Gaddafi had amassed 150 tons of gold and silver to introduce a new African currency—the Libyan Dinar. This move would have weakened the dominance of the US dollar, prompting military intervention. Following Gaddafi’s assassination, Libya’s economy collapsed, inflation soared, and basic necessities became scarce. A similar fate befell Iraq when Saddam Hussein attempted to sell oil in euros instead of US dollars, leading to the 2003 invasion.
Given these precedents, the question arises: Why is India challenging a superpower like the United States? Does India have ambitions to turn the Indian Rupee into a global reserve currency? While this remains a matter of debate, history shows that the Indian Rupee was once a widely accepted international currency. In the 1950s, Gulf nations, lacking their own currencies, used the Indian Rupee for trade. However, a series of economic and geopolitical events—including the Indo-China war (1962), Indo-Pakistan war (1965), and the Bihar drought (1966)—weakened the Rupee’s international standing.
For India to reduce its dependency on the US dollar today, a strong and self-reliant economy is essential. This requires massive infrastructure development, including roads, bridges, smart cities, and commercial buildings. Businesses need modern management tools to streamline operations, and construction companies, in particular, face challenges in managing vendors, inventory, and project timelines.
India introduced the Gulf Rupee in 1959 to curb gold smuggling, which had surged due to the Rupee’s widespread use in the Middle East. This special pink-colored currency was exclusively valid in Gulf nations. Additionally, the Haj Rupee was introduced for Indian Muslims traveling to Saudi Arabia for pilgrimage, allowing easy exchange with the Saudi Riyal. However, multiple geopolitical and economic crises in the 1960s—including wars and a severe drought—led to the Rupee losing its status as a potential global reserve currency.
The question remains: Can India revive the Rupee’s global influence and challenge the dollar’s dominance? While history shows that international currency shifts are possible, it requires a combination of economic strength, strategic alliances, and financial resilience.
