Are BRICS and India set to replace the dollar as the world’s main trading currency? |News explained

Earlier, in his inaugural address after being sworn in in the Capitol Rotunda, he said his administration would “raise all tariffs, tariffs, and taxes on foreign countries to enrich our people.” He stated that he would establish an “External Revenue Service” to collect the tax.

In December 2024, then-President-elect Trump posted on social media: “We ask these countries to commit not to create another BRICS currency or support another currency to replace the mighty US dollar.” he posted. Tariffs are measured in cents and we should expect to bid farewell to the great U.S. economy. ”

Are BRICS countries planning to replace the dollar with a new currency?

Indeed, countries around the world have sought to reduce their dependence on the US dollar and the US-led global financial system.

The issue has taken on renewed urgency after the United States expelled Russia from the Society for World Interbank Financial Telecommunication (SWIFT), which holds the key to international financial transactions.

Iran was separated from SWIFT in 2012, which is believed to have helped bring Tehran to the negotiating table in 2015. After the US reimposed oil and financial sanctions on Iran under the first Trump administration in 2018, SWIFT again suspended access to that country’s banks.

At the 2023 BRICS Summit in Johannesburg, Brazilian President Luiz Inácio Lula da Silva said that “the creation of a new (BRICS) currency…will increase payment options and reduce vulnerabilities.” Ta.

At the BRICS summit held in Kazan in October 2024, Russian President Vladimir Putin said the following: “The dollar is being used as a weapon, and I think that’s really the case. I think this is a big mistake on the part of people who do this.”

Has India also taken steps to reduce its dependence on the US dollar?

yes. In an attempt to reduce dependence on the US dollar and internationalize the Indian rupee in the wake of sanctions imposed on Russia amid the Ukraine war, the Reserve Bank of India (RBI) will increase its international trade invoicing and payment system in 2022. approved in Indian rupees.

In his speech in Kazan, Prime Minister Narendra Modi said that India “welcomes efforts to strengthen financial integration among BRICS countries” and that “trade in local currencies and smooth cross-border payments will strengthen economic cooperation.” I will.”

In November 2024, External Affairs Minister S. Jaishankar said at a meeting of the India-Russia Intergovernmental Committee in Mumbai that “mutual settlement of trade in national currencies is of great importance, especially in the current situation.” Ta.

Does this mean India wants to target the US dollar in international trade?

No, at least not “aggressively” or “malicious”. However, India has expressed “reasonable concerns” over the issue.

In October 2024, President Jaishankar said that U.S. policy often complicates trade with certain countries and that India is seeking “workarounds” to pursue trade interests, but that the dollar He clarified that he was not trying to “target” or break away from the dollar.

“We have never actively targeted the dollar. It is not part of our economic, political, or strategic policy. Others may have done so as well. What I want to say is that we have legitimate concerns, and we often have trading partners who don’t have the dollars they need to trade. So we have to decide whether to abandon the deal with them or find an alternative settlement that works,” Jaishankar said. He spoke in response to questions at the Carnegie Endowment for International Peace, an American think tank in DC.

What is RBI’s stand on so-called ‘de-dollarisation’?

In December 2024, then RBI Governor Shaktikanta Das said that India was not pursuing “de-dollarization” and that recent measures such as allowing Vostro accounts and entering into local currency trade agreements would “impact” India’s trade. Its sole purpose is to “reduce risks.”

BRICS countries are discussing the possibility of a common currency, but no decision has been reached, Das said.

“This is not about de-dollarization. It’s about de-risking our transactions,” Das said. “The geographical spread of the BRICS countries is a factor to consider. Unlike the euro area, which is geographically contiguous and therefore has a single currency, the BRICS countries are spread across diverse regions and pose unique challenges. We have it,” he said.

So what is the result of all this?

India is treading cautiously.

The main reason why India does not support de-dollarization is the appreciation of the Chinese yuan as a challenger to the US dollar. Despite Russia’s growing acceptance of the currency, India has resisted using it to import Russian oil.

The yuan has become Russia’s most traded currency following Western sanctions against Russia, including the freezing of $300 billion in Russian foreign holdings. According to the Russian government, more than 90% of trade payments between the two countries are currently made in rubles.

At the same time, India is wary of over-reliance on the dollar. The RBI has increased its gold purchases and has started bringing gold held overseas back into the country.

This is partly due to heightened uncertainty following the Ukraine war, but is also consistent with central banks around the world buying gold due to fears of secondary sanctions.

Ajay Sahay, secretary general and CEO of the Federation of Indian Export Organizations (FIEO), the country’s top trade promotion body, said that while India supports local currency initiatives, the framework is It should be ensured that there is no unfair advantage given to China, he previously told The Indian Express. Asymmetry of economic power among BRICS countries.

“China is very keen to assume a dominant role in order to leverage the bloc against the US, while India, Brazil and South Africa will work with the US to amicably resolve their differences through negotiations. They are more enthusiastic about this,” Sahai said.

He said India should engage diplomatically with the US and explain its position, stressing that the diversification of trade mechanisms is not anti-American, but a move towards multipolarity and financial stability.

Ajay Srivastava, director of the Global Trade Research Initiative think tank and a former Indian government trade official, previously told The Indian Express: The United States has a history of using its influence over the global financial system, such as the SWIFT network, to impose unilateral sanctions… By blocking countries such as Russia and Iran from accessing SWIFT, the United States It has effectively weaponized the world’s financial infrastructure and forcibly imposed sanctions on other countries. Find alternative payment mechanisms to continue legitimate transactions. ”

This description is based on two previous descriptions published on December 3rd and December 9th.