India folds on the de-dollarization agenda and could fail the BRICS currency

Reserve Bank of India (RBI) Governor Shaktikanta Das has announced that India is not pursuing a de-dollarization policy. He also emphasized that no concrete decisions have been made regarding the creation of a common BRICS currency. 

As Forbes reported, India’s central bank head has confirmed that de-dollarization is not part of the country’s objectives under the BRICS group.

Das’ remarks come in the wake of sharp criticism from former U.S. President Donald Trump, who threatened to impose a 100% tariff on BRICS nations if they attempt to replace the dollar in international trade.

India’s approach to currency use

During a press briefing, Das addressed questions on India’s stance, clarifying that the country has only sought local currency trade agreements to mitigate risks associated with reliance on a single currency. 

“Dependence on one currency can be problematic at times because of appreciation or depreciation,” Das explained but stressed that India’s actions are aimed at diversification rather than outright de-dollarization.

He noted that one of the group’s members introduced the concept of a BRICS currency, but no progress has been made. 

“The geographical spread of the countries has also to be kept in mind, unlike the eurozone which has geographical contiguity,” he added. 

India’s cautious stance on de-dollarization and the BRICS currency initiative raises questions about the bloc’s long-term unity and vision. 

The country’s cooperation is especially pivotal to the BRICS framework, particularly for Russia and China, as it serves as a bridge between diverse geopolitical and economic interests. 

India and Russia have formed strong ties in sectors like energy and defense, with $68 billion in bilateral commerce, mostly from cheaper imports of Russian petroleum. The potential for economic cooperation is evident in strategic initiatives like the Chennai-Vladivostok maritime corridor and the International North-South Transport Corridor.

However, India’s pragmatic approach, balancing relationships with both the West and Russia, adds complexity, especially amid ongoing global tensions such as the Ukraine conflict.

China and India, as the largest BRICS economies, also stand to benefit from their cooperation within the bloc. However, their partnership is nuanced by tension from underlying geopolitical challenges that led the countries to war in 2020 in the Ladakh region. 

BRICS expansion and currency debate

BRICS, originally comprising Brazil, Russia, India, China, and South Africa, expanded last year to include Egypt, Ethiopia, Iran, and the UAE. The move was not supported by India, which believes the bloc needs time to “adjust to new members.” 

At its most recent summit in Kazan, Russia, BRICS leaders unveiled a symbolic banknote, signaling support for the use of local currencies in bilateral trade agreements. Still, the notion of a common trade currency remains highly contentious.

Earlier this year, Brazilian President Luiz Inácio Lula da Silva advocated for a BRICS currency to challenge the dollar’s dominance. However, critics, including RBI governor Das, have pointed to the complexity of creating such a currency across a geographically and economically diverse bloc.

The debate intensified after Trump, via his Truth Social platform, warned that any move by BRICS nations to establish a common trade currency or undermine the dollar would trigger severe economic repercussions.

“There is no chance that the BRICS will replace the U.S. Dollar in international trade, and any country that tries should wave goodbye to America,” Trump wrote. Governor Das declined to comment on Trump’s remarks directly, stating, “Let the policy come first.”

Economist says BRICS has a common currency in Gold

While the BRICS bloc is not currently planning a common currency, economist and author Jim Rickards argued that they already share a de facto currency: gold. According to Rickards, BRICS countries rely on national currencies like the yuan and ruble for trade but use gold for periodic settlements to balance accounts.

Rickards described Trump’s tariff threats as more of a warning than a reaction to an immediate threat. He suggested that if he were in charge of the U.S. Treasury, he would prioritize purchasing gold to complicate the efforts of BRICS nations, effectively preempting their chances of relying on a gold-based trade system.

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