The BRICS nations (Brazil, Russia, India, China and South Africa) have created the narrative for economic cooperation in the international arena, continuing to do so by making headlines for recent developments. The conference of BRICS in Johannesburg has blazed the path for the growing potential of the group, via the announcement of its second expansion after 2010. 6 new nations have been offered to participate in the group as members– Iran, Saudi Arabia, United Arab Emirates, Egypt, Ethiopia and Argentina– and are confirmed to join the organisation by 2024, as of August 24, 2023. BRICS already represents more than 25% of global GDP. It appears that its further expansion will allow India to captain a ship that is ready to stir away from the Dollar-centric game of trade and economic partnership.
In the same spirit, Prime Minister Narendra Modi said at the conference on August 24th, “I believe BRICS and friendly countries present here can work together to strengthen a multipolar world.” India has always supported dialogue to make the world agenda more focused on the Global South. Notwithstanding a holdback in consensus on every sub-discussion, this has been a sentiment echoed by all BRICS leaders. Starting diplomatic talk on the need for this transformation of the state of Global Governance is a crucial factor to consider when it comes to the goals of an inclusive Multipolar world. 40 nations have been voicing their interest in joining the group and 23 nations have formally applied as of today. India is in favour of making BRICS a non-exclusive forum– and a common BRICS currency may sideline this notion by complicating membership parameters.
A BRICS currency has been a part of the conversation for BRICS for a long time. However, there is generous debate on whether it is in the best interest of all of its nations for now. Disputes between nations and diverging goals also make it difficult to come to a consensus on the intricacies of this currency. In lieu of the expansion of BRICS, succeeding in bringing so many nations under one financial currency umbrella will only be more challenging. These are nations that, unlike the EU countries, face large-scale disparity in terms of geography, government structure and policy, and industrial organisational structure. Some BRICS countries have unertaken a strategy to push for a common currency in spite of these factors, in pursuit of selfish goals like combating international sanctions against them. India has maintained that it prefers an approach where we focus on building the strength of local currencies first. In combating the US Dollar, we must not create another version of it in the form of a BRICS currency.
Focusing on India’s perspective in particular, the nation’s push for “Rupee Trade” makes a BRICS common currency counter-productive; and it may not fit into our current trade strategy. This does not mean BRICS is not the way forward to strengthen the local currencies of member nations. It just implies that a common currency is not the way forward for now– as Indian leaders have rightly identified. In his statements, Indian Foreign Secretary Vinay Kwatra mentioned that the major part of BRICS trade and economic exchanges and conversations has presently concentrated on strategies to enhance trade in various national currencies, which is away from the concept of a common currency. He added, “The discussion framework in BRICS and the substance of that discussion framework in BRICS have focussed principally on trade within national currencies.” Recent developments in BRICS matters provide a positive approach to strengthening member currencies. The group has been focused on its support for local currencies via the New Development Bank (NDP) or the so-called “BRICS Bank”. This year’s summit has revealed that, following its release of the first rand Bond in South Africa, NDP is set to release its first rupee bond by October. This marks a move away from the Dollar.
In his statements, Vladimir Kazbekov spoke about using one member’s currency to finance projects in another’s. Financing projects in South Africa using the INR instead of the USD will be a welcome change for both South Africa and India and an important step in the direction away from outdated Neo-Colonial frameworks. However, how India will feel when the same is done in CNY is a question we may not have the luxury to postpone. Local currency lending from the bank has mainly been in the form of the yuan. Yet it should be recognised that this lending is focused on BRI projects. As the potential for foreign investment through India and Indian companies expands, so should lending projects in INR. What is of utmost importance is the amount of exchange BRICS nations do in INR, and their readiness to utilise the rupee is promising to put it modestly.
Whether BRICS pursues the approach to strengthen local currencies, be it INR or CNY, or to create a completely new currency, it is taking strong steps to move away from dollar trade. India is leading this conversation in a prominent manner. BRICS is yet another example of India stepping up in the international forum and making a cautious mark among its influential peers.