Why a BRICS currency and de-dollarisation are not in India's interest

Time of India

5 days ago

When the US President Donald Trump described BRICS as pursuing an 'anti-American' agenda and threatened member countries with additional tariffs – possibly up to 10 percent – if they sought to build an alternative financial system to the US-led global order, it reflected a perception rather than a reality. Such rhetoric overlooks the broader transformation in the global economic architecture.
BRICS, now expanded to 11 countries (Brazil, Russia, India, China, South Africa, Saudi Arabia, Egypt, United Arab Emirates, Ethiopia, Indonesia, and Iran) and comprising 45 percent of the global population and around 35 percent of global GDP, is not an inherently adversarial bloc. It is a reflection of the multipolar world that is emerging and seeks to create space for a more inclusive and balanced global order. Its evolution is aimed less at weakening the United States and more at amplifying the voice of the Global South in institutions that have traditionally favoured a few.
The real strategic anxiety for Western-led institutions stems from BRICS' push for financial reform and discussions around de-dollarisation. The proposal of a BRICS currency by the Brazilian president in 2023 attracted attention, but no consensus has been reached among member countries. A shared currency faces serious practical hurdles. BRICS is a multi-regional, heterogeneous grouping whose members come from vastly different political systems and economic landscapes. Relations among some member states are not entirely smooth either, ranging from strategic competition to transactional partnerships.
Moreover, unlike the Eurozone which evolved into a monetary union with policy coordination, BRICS lacks a common economic zone, a central fiscal authority, or even a network of free trade agreements across its members. These structural inconsistencies make the idea of a unified BRICS currency aspirational rather than immediately feasible.
The most tangible form of financial cooperation under BRICS so far is BRICS Pay, a cross-border payment mechanism launched in 2018 to reduce dependence on the SWIFT network. Yet even this initiative remains underdeveloped and largely supplementary to existing systems. Former Reserve Bank of India Governor Shaktikanta Das described the use of local currencies in trade as a risk-management tool rather than a genuine push toward de-dollarisation. External Affairs Minister Dr. S. Jaishankar echoed this sentiment in October 2024, stating clearly that India 'has never been for de-dollarisation' and that 'there is no proposal to have a BRICS currency.' These official positions reaffirm India's pragmatic stance toward the evolving financial narrative within BRICS.
The most pressing technical challenge lies in pegging a hypothetical BRICS currency. Currencies like the Chinese yuan or renminbi, the Russian rouble, and the UAE dirham are more likely to be chosen as benchmark anchors because of their high levels of floating liquidity and circulation in global trade. The Indian rupee, by contrast, is still relatively under-internationalised and would have a limited role in determining the value of such a currency. If pegged predominantly to the more robust currencies of other BRICS economies, the new BRICS currency could diminish the relative value of the rupee. This would weaken India's monetary leverage and raise the cost of external transactions, especially when such a currency would be limited for use within BRICS markets and lack universal acceptability like the US dollar.
India's trading patterns further reduce the appeal of a BRICS currency. Although India's trade with BRICS nations is substantial, a significant portion of its trade lies outside the bloc. The proposed BRICS currency would offer limited utility in transactions with non-member economies, and would thus be an inefficient substitute for the US dollar. The dollar's role as a global reserve currency and its near-universal acceptance across markets continues to serve India's trade interests more effectively than a restricted-use currency.
Moreover, pegging to yuan, rouble or dirham would not only increase India's dependence on these specific economies but also provide disproportionate economic influence to China and Russia, countries with whom India has complex strategic relationships – though with Russia, India maintains a friendly strategic partnership that is rooted in history and shared interests.
A BRICS currency would also challenge India's monetary sovereignty. For such a currency to function, macroeconomic policies would need to align – an improbable outcome given the divergent development models and national priorities of BRICS members. India has historically preferred to maintain policy autonomy, and being party to a common currency would curtail that flexibility, potentially undermining domestic growth and inflation control mechanisms. In essence, India would risk ceding economic space to geopolitical competitors under the guise of collective financial reform.
India's position on de-dollarisation has also been carefully measured. Rather than pursuing wholesale abandonment of the US dollar, India has explored bilateral and limited local currency trade mechanisms, particularly with countries facing dollar shortages. Such arrangements help maintain trade momentum in the short term but are not designed to challenge the dollar's dominance. They are adaptive rather than transformative. Even within the BRICS framework, India has refrained from endorsing any sweeping move away from the dollar. Its foreign policy approach is rooted in strategic autonomy and pragmatism, not ideological alignment against the West.
This does not mean India is unwilling to reform the global financial system. On the contrary, India has consistently advocated for greater representation of the Global South in Bretton Woods institutions such as the IMF and the World Bank. The demand is for a more inclusive and fair institutional framework that gives countries like India a greater say in global financial governance, rather than for a separate bloc-based architecture. India's priority is to democratise decision-making within existing structures, not dismantle them. In this, the BRICS platform can play a constructive role as a voice for global equity but not necessarily as a challenger to the dollar.
Another limitation of the BRICS currency proposal is its potential to increase financial volatility rather than reduce it. Aligning with highly fluctuating currencies such as the rouble or yuan exposes India to risks stemming from external geopolitical developments. For instance, sanctions on Russia or capital controls in China would have ripple effects on a BRICS currency, pulling India into crises not of its own making. Similarly, the dirham's value is closely tied to energy market volatility, something India would prefer to avoid anchoring its currency to. The relatively stable dollar still provides India with a safer and more predictable trading environment.
Despite this, there is space for cooperation within BRICS on financial innovation. Cross-border digital payment systems, improved financial transparency, and coordinated efforts to reduce transaction costs in South-South trade are achievable goals. These do not necessitate a common currency. Local currency trading, when conducted in a controlled and transparent manner, could improve resilience for BRICS members during periods of external shocks. However, any initiative that threatens to undermine India's economic sovereignty or binds it to unevenly matched partners would be counterproductive.
India is also cautious about deepening financial integration with countries like China and Russia through a common currency. Political and military tensions with China and transactional complexities with other BRICS partners mean that India would be wary of any economic arrangement that could tilt strategic leverage in favour of these nations. Additionally, the fact that India does not have substantial local currency trade agreements even with major BRICS players like China and Russia underlines its discomfort with the idea. A controlled bilateral engagement is preferable to a wholesale reordering of its trade ecosystem.
The United States' threats of punitive tariffs and aggressive protectionist measures based on laws like the International Emergency Economic Powers Act may generate headlines but will do little to prevent the organic evolution of multipolar economic partnerships. In fact, such actions may hurt American exporters and producers more than they dissuade countries from seeking alternative arrangements. At a time when global economic cooperation is key to recovery and growth, punitive measures are likely to be seen as regressive and self-defeating.
Ultimately, BRICS is a platform that enables India to pursue multilateral diplomacy and elevate the concerns of the Global South. It is not a vehicle for establishing an economic order dominated by a few powerful states, nor should it become one. India's interest lies in maintaining strategic autonomy, preserving its monetary flexibility, and engaging with the world through dialogue and innovation. De-dollarisation and a BRICS currency do not serve these objectives. For India, the challenge is not to find alternatives to the dollar but to make the global financial architecture more inclusive and fair. And that begins not with new currencies, but with structural reform of existing institutions.
In conclusion, while BRICS has evolved into a meaningful global platform, the notion of a shared currency or coordinated de-dollarisation lacks coherence and utility for India. The Indian economy thrives on diversity, flexibility and openness. Tying its fate to a new and untested monetary experiment would undermine the very strategic space it has worked so hard to preserve. For India, the future lies not in rejecting the dollar, but in reshaping the financial world to reflect a more balanced and equitable order where all voices are heard, and none dominate.
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Views expressed above are the author's own.