Indian Businesses, Families Fret As The Dollar Comes Under Threat

The falling value of the US dollar is causing uneasiness among millions of Indians who receive export incomes or remittances from their relatives in foreign countries in this currency.

Indians received US$ 129 billion just from remittances in 2024, which accounts for 14 per cent of global remittances. The greenback's value is closely tracked by a significant part of the Indian diaspora, numbering around 35 million.

India's export earnings, which stood at a staggering US$ $821 billion in 2024-25, was also mostly denominated in US dollars regardless of where it came from. 

The value of the dollar has slipped significantly, by 1.4 per cent against the Indian rupee, in the past month, raising serious questions about its image for stability. Many Indians have opted for low interest rates on dollar deposits because it has been continuously rising against the rupee, resulting in higher returns. In actual terms, the value of one dollar has slipped by Rs 1.19, from Rs 86.58 on March 18 to Rs 85.39 on April 17.

“The weakening dollar means I will receive less money in rupees. This hurts my bottomline,” said Chandra Pal Singh, a garments exporter who manufactures for American labels.

“Since its peak in mid-January, the dollar has fallen by over 9 per cent against a basket of major currencies. And the yield on 10-year treasuries has crept up since April 1 by 0.2 percentage points,” the Economist said in an editorial. “The really shocking thing is that this scare has been triggered by the White House.”

The tariff war launched by US President Donald Trump is having a much wider impact than was expected, and is impacting Indian businesses and families in the process. There is a strong suspicion that China might start dumping American bonds, mostly treasury bills (T-bills), exacerbating the situation. Beijing might use it as a shock treatment in its tussle with Trump, who is stonewalling Chinese goods with a never-heard tariff of 245 per cent.

Unstable Dollar Affecting Indians

The financial skies for millions of Indians with dollar incomes and savings appear cloudy, as analysts are predicting a further slide in its value. There are strong signs of the dollar weakening further because Trump refuses to budge from his position that high tariffs will make America richer.

Trump initially slapped high tariffs on 90 different countries, including India, and later stayed his own decision for 90 days. He is now training most of his guns at China, a crucial player in the global supply chain. What prompted the duty rollback for most countries is the volatile movement in the bond market. Finally, Trump got cold feet if, even it is a little bit.

Investment banker Goldman Sachs has issued a grave warning that over the next 12 months, the dollar might slide 10 per cent versus the Euro, and 9 per cent against the Japanese Yen and the British Pound. If the prediction comes true, it might further strengthen the rupee against the US currency, affecting Indian exports as well.

“We have earlier argued that the US’s exceptional return prospects are responsible for the dollar’s strong valuation,” said Michael Cahill, senior currency strategist for Goldman Sachs Research. “But, if tariffs weighs on US firms’ profit margins and US consumers’ real income, they can erode the exceptionalism, and in turn, crack the central pillar of the strong dollar,” he added.

There are already some signs of inflation in the US, which will have a negative impact on the value of the dollar. High tariffs on Chinese goods will mean higher prices for the lower strata of Americans who patronise Dollar Shops and low-end retailers besides Amazon.

Trump's Policy Flip-Flops

The Trump administration’s problems with Canada and Mexico — major suppliers of food items to the US — are also regarded as trigger points for rising inflation.

His flip-flop decision-making has affected investor trust in the US government, which is reflected in the shock losses suffered by the American stock markets. The market for US T-bills has also become volatile amid rising interest rates.

The Federal Reserve, the financial markets regulator, also appears confused. “These are very fundamental policy changes,” Fed Chair Jerome Powell said Wednesday. “There isn’t a modern experience of how to think about this.”

Powell even risked his job as he said, “We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension.” There are some reports that the US President is sore about his remarks and might soon show him the door.

The big question is whether some countries like China and Russia would ditch the dollar, and if India would reluctantly join this bandwagon. Trump has threatened to take retaliatory action against anyone talking about de-dollarisation. But his threats might begin to ring hollow if the American President is unable to rein in rising inflation and falling markets in his home country.

Some of the BRICS countries — Brazil, Russia, India, China and South Africa — are already conducting their business by swapping each other’s currencies and reducing their reliance on the US dollar. India’s purchases of Russian oil, for example, is independent of the dollar.

Will The US Dollar Lose Its Reserve Currency Status?

Already, a large number of investors are moving towards gold and cryptocurrencies, as they fear that the dollar’s status as the reserve currency is weakening. Some even expect that gold and crypto will start acting as the second and third pillars in the global financial market.

Weeks after Trump won the election, India bought US$ 26 billion worth of American bonds, raising its total holdings to US$ 225.7 billion in January. There are serious questions about whether New Delhi would be as enthusiastic about expressing its trust for these bonds in the next round of buying.

The biggest argument against bond selling is that it would push down their prices, resulting in losses for the seller. But China’s President Xi Jinping might agree to suffer some losses if he has to fight the tariff battle for the sake of Chinese companies. Saving local companies from burnout may be a bigger incentive for the Chinese leader.

The final question is whether Trump would swallow his pride and take remedial measures. Even if he has set his face against China, he can start by going back to the old tariff system for other countries, including India and European countries.

(Saibal Dasgupta was a senior journalist posted in China for a long time, and has authored 'Running with the Dragon: How India should do business with China'. Views are personal.)