Are BRICS and India trying to replace the dollar as the main global trade currency? | Explained News

Earlier, delivering his inaugural speech after taking oath in the Capitol Rotunda, he had said his administration would establish an “External Revenue Service to collect all tariffs, duties and revenues” in order to “tariff and tax foreign countries to enrich our citizens”.

In December 2024, then President-elect Trump had posted on social media that “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 US dollar, or they will face 100 per cent tariffs and should expect to say goodbye to selling into the wonderful US economy”.

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

Countries around the world have indeed been looking to reduce dependence on the US dollar, as well as on the US-led global financial system.

There has been renewed urgency about this after the US threw Russia out of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which is key to international financial transactions.

Iran had been cut off from SWIFT in 2012, a step that was seen as having played a part in bringing 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 banks in that country.

At the 2023 BRICS summit in Johannesburg, President Luiz Inacio Lula da Silva of Brazil had said the “creation of a new [BRICS] currency…increases our payment options and reduces our vulnerabilities”.

And at the BRICS summit in Kazan in October 2024, Russian President Vladimir Putin said: “The dollar is being used as a weapon. We really see that this is so. I think that this is a big mistake by those who do this.”

Has India too taken steps to reduce reliance on the US dollar?

Yes. In an attempt to reduce reliance on the US dollar and to internationalise the Indian rupee, the Reserve Bank of India (RBI) allowed invoicing and payments for international trade in Indian rupees in 2022, after sanctions were imposed on Russia amid the war in Ukraine.

In his remarks at Kazan, Prime Minister Narendra Modi said India “welcome[d] efforts to increase financial integration among BRICS countries”, and “trade in local currencies and smooth cross-border payments will strengthen our economic cooperation”.

In November 2024, External Affairs Minister S Jaishankar told the India-Russia Intergovernmental Commission meeting in Mumbai that “mutual settlement of trade in national currencies is of great importance, especially in the current circumstances”.

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

No, at least not “actively” or with “malicious intent”. However, India has expressed a “natural concern” over the issue.

In October 2024, Jaishankar had clarified that while US policies often complicate trade with certain countries, and India sought “workarounds” in pursuit of its trade interests, it did not “target” the dollar or seek to move away from it.

“We have never actively targeted the dollar. That’s not part of our economic, political, or strategic policy. Some others may have done so. What I will say is that we have a natural concern. We often have trade partners who lack dollars for transactions. So, we must decide whether to forgo dealings with them or find alternative settlements that work. There’s no malicious intent towards the dollar,” Jaishankar said in response to a question at the Carnegie Endowment for International Peace, an American think tank in Washington DC.

What is the RBI’s position on the so-called “de-dollarisation”?

In December 2024, then RBI Governor Shaktikanta Das had said India was not pursuing “de-dollarisation”, and that recent measures such as allowing Vostro accounts and entering local currency trade agreements were intended to only “de-risk” Indian trade.

While BRICS nations have discussed the possibility of a shared currency, they have reached no decision, Das said.

“This is not about de-dollarisation; it is about de-risking our trade,” Das said. “The geographical spread of BRICS nations is a factor to consider. Unlike the Eurozone, with its geographical contiguity enabling a single currency, BRICS countries are spread across diverse regions, posing unique challenges,” he said.

So what is the upshot of all of this?

India is treading cautiously.

A key reason why India is not backing de-dollarisation is the rise of the Chinese yuan as a challenger to the US dollar. India has resisted using the yuan for Russian oil imports, even as the acceptance of the currency is growing in Russia.

Following the Western sanctions on Russia, including freezing $300 billion in Russian foreign holdings, the yuan has become Russia’s most traded currency. According to the Russian government, more than 90% of trade settlement between the two countries is now done in rubles.

At the same time, India is wary of over-dependence on the dollar. The RBI has increased gold purchases, and has begun moving its gold, held abroad, back into the country.

While this is in part due to increased uncertainties after the war in Ukraine, it is in line with the buying of gold by global central banks fearing secondary sanctions.

Ajay Sahai, Director General & CEO of the Federation of Indian Export Organisations (FIEO), the country’s top trade promotion organisation, had told The Indian Express earlier that while supporting local currency initiatives, India should ensure the framework does not disproportionately favour China, given the asymmetry in economic power among BRICS nations.

“China is very keen to assume a dominant role to use the bloc against the US, though India, Brazil, and South Africa are more keen to work with the US and settle the differences amicably through negotiations,” Sahai had said.

India should engage diplomatically with the US to explain its position, emphasising that diversifying trade mechanisms is not anti-American but a move towards multipolarity and financial stability, he said.

Ajay Srivastava, head of the think tank Global Trade Research Initiative, and a former Indian government trade official, had told The Indian Express earlier: “It is the actions of the United States that have pushed many countries to seek alternatives to the US dollar. The US has a history of leveraging its influence over global financial systems, such as the SWIFT network, to impose unilateral sanctions… By blocking countries like Russia and Iran from accessing SWIFT, the US has effectively weaponised the global financial infrastructure, forcing other nations to find alternative payment mechanisms to continue legitimate trade.”

This explainer draws on two earlier explainers published on December 3 and December 9