In a bold and solid strategic assertion across the fiscal playbook of India, New Delhi is subsequently scaling down its dependence on the dollar-denominated assets including the US treasury holdings. The Reserve Bank of India, the monetary bulwark of the country, is dismantling itself from strong alienation towards the dollar denominated assets, thus seeking self-reliance in the economic and fiscal architecture of the country. India is articulating this economic preposition, in the wake of irrational tariff war unleashed by the US President Donald Trump.
As the geopolitical landscape is evolving towards paramount uncertainty and upheavals coupled with economic ramifications, it is vital to reroute the monetary channels of the country to ensure long-term fiscal stability and economic growth. The President of the United States and his hypertransactional style of administration considered geopolitics as a zero-sum game, which is in antagonism to the global economic stability and prosperity. In order to shield from such fiscal catastrophes stimulated by trade wars and tariff tantrums of the US President, catalysing alternative pathways is imperative. India, being the fourth largest economy and rapidly scaling towards being the third largest economic powerhouse of the world, is marching in the right direction, characterised by economic self-reliance away from the dollar hegemony.
Dismantling the dependence on US treasury bonds
With embroiling trade and tariff bottlenecks, India no more considers US treasury bonds as an attractive yield destination. In fact, over-dependence on the US dollar makes the monetary scenario of India more cumbersome and volatile in the foreign exchange market, given the unravelling economic episodes from Washington DC. Thus, to seal economic stability and herald growth momentum, New Delhi has been drastically reducing its investments in the US federal reserves compared to the previous financial years.
According to the Bloomberg data, India’s holdings denominated in the US treasury bonds fell by 21 per cent between October 31, 2024 to October 31, 2025. In terms of dollar value, the Indian investment in the US treasury bonds have declined from USD 241.4 billion to USD 190.7 billion. These numbers are attributed to spiking trust deficit in the US treasury bonds as an impact of trade and tariff volatility triggered by Donald Trump. This is a drastic fall in the previous four years of New Delhi’s investments in the yield of the United States. This sharp shift in India’s forex strategy is not sudden, swift and rampant and will not totally disconnect the fiscal relations between New Delhi and Washington. But, this a gradual and calculated geopolitical alertness to ensure India’s growth story and not get harmed by the hegemonic tantrums of the United States.
Strategic concerns beyond economic considerations
As per economic experts, India’s gradual subsidence is earmarked not merely with economic or fiscal considerations but implies larger geopolitical or strategic assessments, given the current phase of India-US bilateral relations. Beyond an effort to protect the domestic currency from the volatilities of the US dollar, the aim is to ensure gradual subsidence of dollar hegemony and accelerate de-dollarisation. This will gradually but consistently lead to global fiscal balance and multilateral order beyond economic considerations. The dollar hegemony will lead to power consolidation of the US, who will by default dictate the terms of the emerging geopolitical order, Thus, the ultimate aim is to debunk this concentration of power.
The shift in India’s forex strategy thus has larger implications in the decades ahead beyond ensuring fiscal stability in the forex market. This strategic vision embarked by India and other emerging economies seeks to thwart the distorted foreign and economic policies of the US President Donald Trump who wage tariff wars at break-neck speed. The Trump administration has currently imposed 50 per cent tariffs on India, which includes 25 per cent additional tariffs for purchasing Russian oil. Moreover, the latest bill tabled in the US Congress aspires to burden India with a massive 500 per cent tariffs for importing the energy from Moscow. These economic sanctions dwindle the credibility of the dollar and the US treasury bonds as an attractive investment destination. Thus, de-dollarisation is critical in terms of national security as well to protect the domestic markets, away from the currency conundrum.
De-dollarisation and gradual reduction of dependence on the US treasury yields is thus inevitable to protect the domestic economy from the ruptured world economic and geopolitical latitude along with creating a balanced world order away from the US hegemony.
Gold as a guarantee against forex market flux
In the era of weaponisation of trade and the dollar to nurture hegemonic priorities, India has anchored on gold as a stable reserve against the US treasuries. Gold is deemed as a strong and credible non-dollar asset to protect the economic and fiscal interests of India. Gold indeed acts as a strategic cushion against the unpredictable oscillations of the forex market, if the domestic currency is pegged to the US dollar. Apparently, gold is not a confrontational currency. No country can consolidate their hegemonic aspirations around gold. It is insulative of the forex market upheavals and ensures economic stability.
Gold as a reserve currency shields the rupee from the US market tantrums marked by low productivity, inflation, encapsulating cost of living crisis, weakening labour market conditions etc. which ultimately leads to currency volatility and minimal yield on the investments. The forex reserves should act as a buffer and protection against the global economic gridlocks and gold will indeed fulfill this agenda. Thus, India’s fiscal muscle is tilting towards gold, a neutral asset beyond the US dollar. Currently, the share of gold in India’s reserve currency is around 13 to 15 per cent and this is set to spike in the coming fiscal years, as a major guard against the geopolitical and geo-economic shocks.
The strategic posture of India to ensure disenchantment of India will herald a new chapter in the global economic corridor in terms of crafting a multilateral and balanced world order devoid of the hegemonic ambitions along with securing domestic stability, growth and prosperity. This is unlike the aspirations of Donald Trump who heeds for visible wins beyond fair deals. New Delhi’s fiscal playbook does not bow down for these fiscal compulsions, but will carve a path to climb the ladder of being a responsible and credible economic giant that will secure both the domestic economy and the world from unilateral geopolitical shocks, in a hitherto jeopardized and scrambled politico-economic landscape.
