In this video, geopolitics commentator David Oualaalou explains the recent decision by India and Malaysia to settle their bilateral trade in Indian rupees, a move announced on April 1st. He frames the agreement as a decisive step toward de‑dollarisation, driven by three main forces: (1) the broader ASEAN shift away from the US dollar, yen, euro and pound; (2) India’s desire to shield its trade from sanctions linked to the Russia‑Ukraine conflict; and (3) the operational framework created by the Reserve Bank of India (RBI) that allows special rupee Vostro accounts for partner‑country banks – now 18 countries, including Malaysia. Oualaalou details how Union Bank of India opened the first such account for Malaysia, explains the mechanics of Vostro accounts, and cites trade figures (US$19.4 billion in FY 2021‑22) and Malaysia’s rank as India’s third‑largest ASEAN trading partner. He then connects the currency shift to India’s macro‑economic outlook, referencing S&P, Morgan Stanley and IMF forecasts that project India’s GDP growth at 6.1‑6.5 % and suggest India could overtake Japan and Germany to become the world’s third‑largest economy by the early 2030s. The presenter critiques the IMF’s past forecasts, argues that de‑dollarisation is accelerating globally, and concludes that the rupee‑based settlement will reduce transaction costs, lessen reliance on the US dollar, and reinforce India’s rising economic influence. The video ends with a reminder that geopolitics affects everyday life.
Chapters
Hello everybody and welcome to Geopolitical Trends. My name is David Oualaalou. I was told to speak slow a little bit. So anyway, so good to be with you here, guys. I'm very, very excited as always. India and Malaysia, yeah, India and Malaysia moved beyond now the US dollar to settle their trade. And it's going to be settled in Indian rupees. How significant is this development and what will it mean for the regional and the global economy moving forward? In this video, I am going to provide you my assessment given just what just happened with ASEAN and how to put this within the global context economically and geopolitically. But before I'll do all this, like always, I like to extend my thanks to the channel's members and supporters and to you as a subscriber. And if this is your first time landing on this channel, please make sure to subscribe and smash that notification button so you will be notified every time I upload a new video. And I can't thank you enough, all of you guys, for the continued support. Let's dive in into this. India and Malaysia have agreed now. Yeah, it just happened yesterday, April 1st, agreed now to settle in Indian rupees. And this was announced by the Ministry of External Affairs, as I said, on April 1st, yesterday. Yeah, so the announcements, and this is what I'm gonna give you guys, my assessments, just how I see it moving in both directions economically and geopolitically. The announcement is seen as a decisive— yeah, I'll use the term for that— decisive step forward to de-dollarize, and also in an effort to safeguard India trade from the impact of the Russian, uh, conflict, you know, because of the sanctions, uh, and so forth. That is the reason why India decided to move forward with this decision. So as I said, the announcement came in the backdrop, or against the backdrop, of the ongoing official efforts to safeguard Indian trade from the impact of the Ukraine crisis. Okay, but there are two other, uh, uh, sort of, uh, elements or reasons that also push India into this direction. One of them has to do with ASEAN. Well, what did ASEAN just decided on is they decided to move away, or to— I'm being polite here, let's just use the word for what it is— dump the US dollar in, uh, in, in their trade. Okay, actually dump the US dollar, the Japanese yen, the, the euro, and the British pound. All of them are gone. So now they're gonna be trading in their own currency. So this comes on the heels of that, Esyan. And the second element is that India and Bangladesh decision to also dump the dollar and trade in their currencies when it comes down to the bilateral trade. That's why this is very important to put it within the context of— you don't look at just that issue, you look at the big picture, like I always say. And remember, Uh, it's, it's very significant in that part of the world, uh, economically speaking. So the shift away from the US dollar, which has become, of course, the dominant— has been the dominant reserve currency for international trade so far, has added, yeah, has added significance as it indicates to India that it is willing to take concrete steps to de-dollarize when it comes down to its international trade. Because you all remember, and I mentioned this to you guys, that India was under pressure from the US because India said no to the United States by not stopping its import of Russian oil. And what India end up doing is they decided they're gonna trade with Russia using the rubles and rupees and bypass the US dollar altogether. And the US, Washington DC, was furious about that. And India kind of shrugged its shoulder and said, who cares? We gotta do what's good for us. This is another— and I'll use the term— another blow to the US because India is looking for its own interest, and rightly so. So the Union Bank of India announced that it has become now the first bank in India to operationalize this option by opening— get this, guys— special Rupee Vostro account through its corresponding banks in Malaysia. That is very, very interesting. And by the way, uh, uh, what is the, uh, the special Rupees Vostro? This one basically has to do with Indian government when authorized Indian banks must open and maintain special rupee Vostro accounts of the partner trading countries' banks. And this account basically will keep foreign banks' holdings in India, or Indian counterparts. It will be— the holdings will be in rupees. So for example, when an Indian trader wants to make a payment to a foreign trader in rupees, the amount will be credited to this Vostro account. So basically an account where the rupees are deposited there and the countries can just manage between them. India has about 12 countries involved with this Vostro account. So the minute— just to go back to our topic about Malaysia and India. The Ministry of External Affairs in India stated, and I quote, let me get you guys to quote it: Trade between India and Malaysia can now be settled in Indian rupees, in addition to the current modes of settlements in other currencies. This follows the decision by the Reserve Bank of India in July 2022 to allow the settlements of international trade in the Indian rupees. This initiative by the Reserve Bank of India, RBI, is aimed at facilitating the growth of global trade and to support the interest of the global trading community in Indian rupees. End of quote. So you can just see, because here is the reason why you have again to keep in mind why India is embarking on these steps. It's because some estimates— and I looked some different analysis, financial one, that is about the, the outlook for India economically speaking— and majority of them stated between 6.3 to 6.5 growth for next year. That's what's expected. So this is why India is taking the concrete steps, as I said earlier. So trading in the US dollar has faced growing— now when you look at all around the world, country after country is thinking in terms of— because there's this— seeing the writing on the wall. So they're gonna have to make decision, financial that is. So trading in the US dollar has faced growing now difficulties, especially after the Russian economy— the Russian economy was sanctioned. By the West following Russia's military— special military operations in Ukraine, that is. So the fallout, as a fallout of the sanctions placed on Russia, making payments to Russia in US dollars becomes increasingly difficult now, which in turn triggers a search for alternative solutions in international currencies and de-dollarization worldwide. This is why you're seeing India taking this kind of steps. And for better trade, on March 14th this year, I recall this one, the government, Indian government, that it has informed the Rajya Sabha. Rajya Sabha is an Indian term for the Council of States. Which is the upper house of the bicameral parliament in India. Bicameral means it has two houses, the upper house and the lower house. So basically they asked that the banks from 18 countries— yeah, 18, not 12, I said earlier 12— 18 countries were allowed by the Reserve Bank of India to open special rupees Vostro accounts. And the reason for it is to settle payments in Indian rupees. So Malaysia was one of those 18 countries that figured in the statement laid out before the, the, the Raja Sabha. So this is why India is moving forward with this decision, and Malaysia is saying, sure, we we can bypass the dollar because it costs them when they trade. When India and Malaysia trade together, as I said, they have to go through the middleman. Middleman is the US dollar, and the US— they have to pay on both ends to the US dollar. And they're saying enough of this, we don't want it. So, uh, by the way guys, if you like the content of, uh, of this video here, make sure to hit the like button and subscribe if you have not done so. And I truly appreciate your support. So, so India and Malaysia bilateral trade— by the way, just to give you some stats, and I will provide you the link to all this— India and Malaysia trade reached about $19.4 billion in 2021-22. And this recent announcement on April 1st, which was yesterday, is expected now to help bilateral trade between India and Malaysia to overcome the currency-related obstacles, you know. And why is this important for you to know? You have to keep in mind Malaysia is the third— yes, third largest trading partner of India in ASEAN region, after Singapore and Indonesia. It's no small matter. So, which by the way, that accounts— the Singapore and Indonesia, they counts for $30 billion $26.1 billion trade with India respectively. That means Singapore has about $31— $30.1 billion in trade with India, and Indonesia has about $26.1 billion in trade with Indi— with India. So, so here's my conclusion, because I always like to keep my videos short, concise, and to the point. India is set to overtake— get this, guys, which you don't read much, you don't hear much about— India is set to overtake Japan and Germany to become the world's third largest economy. And this is according to Standard Poor's Global and Morgan Stanley. Yeah, because the forecast, like I said, I saw, I read some analysis, different analysis, and And the ones that I came across suggested between, uh, 6.1 and 6.5 growth for the upcoming year. So, so the S&P forecast is based on the projection that India's annual nominal gross domestic product growth will average 6.3 through 2030. But I said, no, no, no, no, no, you gotta take a step back because the IMF, which I looked into the IMF assessments, which was wrong by the way, the same thing they did about China, their projection was way off. So the IMF, which predicted, which predicted in April about a year ago or so that India cannot— get this, guys— cannot become a $5 trillion economy until 2028, 2029, 2028 or 2029, which basically, basically we're wrong. Why? Because IMF went back and reversed its assessments. In other words, reworked its forecast earlier this month. That's how surprising is. So per the revision, as per revision, India will be at a $5 trillion economy by 2026, 2027. Yeah, 2 years earlier, 3 years earlier, that is. So that tells you, you know, IMF assessments, I would not put too much faith on it because I've seen on many occasions they've been a little bit off. Way off. So, so I hope you find this, guys, informative. And as always, remember, geopolitics impact your daily life in more ways than one. Till next time, guys. Bye-bye.
