India Diversifying Out of Dollars

We've all heard that China and Russia are diversifying out of Dollars, and that they have argued that the dollar should not be the world's reserve currency.

But given that India has been run by American allies protecting the U.S. and the "Washington consensus", it was not clear if India would join suit.

Recent statements appear to indicate that India's support of the Dollar is weakening. As Bloomberg writes:

Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.“

The major part of Indian reserves is in dollars -- that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview yesterday in Aix-en-Provence, France, where he was attending an economic conference...

Singh adviser Tendulkar said that big dollar holders face a “prisoner’s dilemma” in terms of managing their holdings. “That’s why I’m telling them to do this,” he said.

He also said that world currencies need to adjust to help unwind trade imbalances that have contributed to the global financial crisis.

“The major imbalances which led to the current situation, the current account surpluses and deficits, have to be addressed,” he said. “Currency adjustment is one thing that suggests itself.”