The year 2026 may not bring a sudden fall of the US dollar. But it could mark the moment when its quiet decline gathers speed. As the US increasingly uses the dollar as a tool of pressure, other countries are working harder to trade and pay without it.
America’s role in global trade has been shrinking for years. In 2000, it accounted for about one-third of world trade. Today, that share is closer to one-quarter. At the same time, emerging economies are trading more among themselves. As these links grow, the dollar becomes less central.
This change is already visible. India and Russia now settle much of their trade in rupees, dirhams, and yuan. China routes more than half of its trade through its own payment system, CIPS, instead of SWIFT. Other country pairs—such as Brazil and Argentina, India and the UAE, Indonesia and Malaysia—are also testing trade in local currencies.
Central banks are responding too. In 1999, the dollar made up about 72 percent of global foreign exchange reserves. Today, it is down to around 58 percent, and the trend is downward. A reserve currency works on trust. And trust depends as much on perception as on facts. That perception is changing.
Domestic problems in the US are adding to the strain. Government deficits are large and still growing, expected to reach nearly $2 trillion in 2025. The current account gap is widening as well. To cover these gaps, the US relies heavily on creating new money. For years, the dollar’s special status absorbed the shock. Now, that cushion looks thinner.
Even US government bonds no longer feel as solid as they once did. There are now more than $27 trillion worth of US Treasuries circulating worldwide. This means more bonds to trade, settle, and hold. But the banks that are meant to provide liquidity have not expanded fast enough. When markets come under stress, there are simply not enough balance sheets to absorb heavy selling—unless the Federal Reserve steps in.
This weakness was exposed in March 2020, when the Treasury market froze during a crisis and needed direct central bank support. It was a rare moment when the world’s safest market failed to function on its own.
Looking ahead to 2026, the biggest risk to the dollar is unlikely to be another currency replacing it. Instead, the threat comes from new payment systems that bypass the dollar altogether. This is especially true in emerging markets, where access to dollar liquidity has often been costly, slow, or political.
Several alternatives are already taking shape. One is mBridge, a project involving central banks from China, Hong Kong, Thailand, and the UAE, supported by the Bank for International Settlements. It aims to allow countries to pay each other instantly using digital versions of their own currencies. Another is BRICS Pay, which would let BRICS and partner countries settle trade and investment directly in their local currencies.
Then there are stablecoins. These digital tokens allow money to move across borders quickly and cheaply, without traditional banks. Most stablecoins today are linked to the US dollar, which actually strengthens its reach. But that may change. If stablecoins tied to multiple currencies—or not tied to the dollar at all—become common, they could offer a neutral way to settle global trade.
China is unlikely to challenge the dollar openly. Instead, it is likely to build around it. Yuan-linked stablecoins may spread through Hong Kong, the Gulf, and Southeast Asia. Some could be backed by commodities like gold or oil. These tools could be used to pay for ports, energy shipments, or infrastructure projects without using dollars or US banks.
Traditionally, it has taken hundred years for one global currency to replace another. But technology is speeding things up. Digital finance, new trade routes, and shifting power balances are shortening the timeline. The dollar is still dominant. But the cracks are clearer than before. And in 2026, the risk of slipping is higher than it has been in a long time.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.