India is pursuing currency diversification alongside efforts to strengthen supply chains and expand exports through free trade agreements to counter US administration's pullback from Indo-Pacific Economic Framework for Prosperity (IPEF), a new report has said.

The report from Think China said, "currency diversification is a key determinant for national economic security at a time when reducing external dependence and increasing self-reliance are non-negotiable goals."

India’s sovereign digital currency, the e‑rupee, "is being used in retail transactions and is picking up traction among customers," the report said.

It noted that greater acceptability of e-rupee and interoperability between digital currencies of the BRICS could lead to its greater use in trade. This could happen between countries piloting their own sovereign digital currencies, including China, Russia, Brazil, South Africa, Saudi Arabia, Qatar, Indonesia and the UAE, most of which are members of BRICS, it suggested.

"Apart from safeguarding supply chains and entering multiple FTAs, India’s efforts to reduce economic dependence has motivated it to settle more trade in its local currency," it said.

Apart from the economic benefits India is pursuing FTAs for geopolitical gains due to "political confidence-building mechanisms between countries."

FTAs help enlarging strategic influence by cultivating a bigger group of global allies, "at a time when the global order is fragmenting fast," the report said.

The US President Trump’s second term in office was marked by a noticeable lack of interest in the IPEF and as a result the China plus one diversification strategy has lost some momentum, it noted.

The report said that unilateral trade restrictive measures from the US in 2025 made India and other major economies realise the importance of diversifying away from the US.

India has accelerated FTA negotiations to diversify markets and concluded deals with the UK, New Zealand, Oman and the EU. In recent years the country signed trade agreements with Australia, the UAE and the European Free Trade Association (EFTA) group, while FTAs with Israel, Chile and the GCC (Gulf Cooperation Council) countries are under negotiation.