India is not pursuing the creation of a shared BRICS currency, an idea that has met with a strong verbal pushback from incoming U.S. President Donald Trump, but the South Asian giant is making efforts to promote trade in its local currency, according to analysts in New Delhi.
Trump has threatened a 100% tariff on products from BRICS nations if they develop their own currency to replace the U.S. dollar.
The BRICS bloc, which began with China, Russia, India, Brazil and South Africa, expanded this year to include Iran, the United Arab Emirates, Ethiopia and Egypt.
“We require a commitment from these countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty U.S. dollar,” Trump said in a post on the Truth Social media platform.
Talk of a BRICS currency gained some momentum following U.S.-led sanctions on Russia in 2022 and since, in recent years, economic and political tensions have grown between the West and China. Russia and China have publicly expressed a desire to explore diversification of international trade away from the dollar.
Ajai Sahai, director general of the Federation of Indian Export Organizations, though, said New Delhi does not plan to move away from the American currency.
“Trump’s post is like a forewarning to tread carefully down this road. But at the moment, this is just an idea, and a common BRICS currency is simply not on India’s agenda,” Sahai said.
The creation of such a currency is unlikely to gain traction due to mistrust and internal differences within major countries in the alliance such as India and China, according to analysts working in the Indian capital.
“India is not supportive of this particular initiative. Any common currency is not going to help anyone; only the dominant countries like China ultimately will dictate. So, it is very difficult to develop a consensus to have a common currency,” according to Chintamani Mahapatra, founder of the Kalinga Institute of Indo Pacific Studies.
The emerging countries group is also too diverse to make it economically viable to forge a competing currency, according to Mahapatra.
“Unlike the European Union, we [BRICS countries] don’t have a common market. We don’t have a common trade policy. We have nothing in common,” Mahapatra said.
At the same time, several BRICS members have accelerated efforts to explore ways to reduce dependence on the U.S. dollar, which has been the world’s dominant currency since the end of World War II. BRICS countries account for about 40% of the world’s population and an estimated one-third of global gross domestic product.
At a summit held in the Russian city of Kazan in October, BRICS nations agreed to boost efforts to trade in local currencies rather than in U.S. dollars and said they would strengthen banking networks within the group to facilitate settlements in their currencies.
“Trade in local currencies and smooth cross-border payments will strengthen our economic cooperation,” Indian Prime Minister Narendra Modi said.
India, which adopted a new foreign trade policy last year to support using the rupee more frequently for trade, has identified 17 countries with which it wants to use rupees or the other country’s currency, according to Biswajit Dhar, a senior professor at the Council for Social Development in New Delhi.
Those countries include Russia. New Delhi, which did not join U.S. sanctions against Russia, is paying for its crude oil imports from Moscow in rupees. As trade with Russia increases exponentially, though, that also presents problems.
“India runs a huge trade deficit vis-a-vis Russia, which means that when India is buying a lot of oil and is paying in rupees, Russia does not know what to do with the stock of rupees it is holding now,” Dhar said.
“Indian businesses are wary of selling to Russia because of the sanctions.” he said.
Aside from Russia, other countries such as Malaysia, Kenya, Sri Lanka and Bangladesh also have agreed to facilitate trade in rupees. Such efforts however are modest, and India’s international trade is still dominated by the dollar.
Indian External Affairs Minister Jaishankar Subramanian has said that moving away from the U.S. currency is not part of New Delhi’s economic policy.
“We have never actively targeted the dollar. That's not part of either our economic policy or our political or strategic policy,” he said responding to a question on dedollarization at the Carnegie Endowment for International Peace in Washington in October.
But in an indirect reference to Russia, he said that India had to look for “workarounds” when trade in dollars with some partners became difficult.
“It was the U.S. actions targeting Russia that made countries search for mechanisms and options to the dollar. It was not to dislodge the dollar’s position,” according to Ajay Srivastava, of the Global Trade Research Initiative.
However, he said Trump’s threat to impose 100% tariffs on products coming from countries adopting a BRICS currency makes the idea of such a potential new currency “unrealistic and more symbolic than practical.”
