Donald Trump’s protectionist trade policies are already sending shockwaves through the global economy. His latest threat is a 100% tariff on BRICS countries, including India, should they move forward with plans to establish a new currency aimed at reducing the dominance of the US dollar. This warning follows discussions at a BRICS summit in Kazan, Russia, where the bloc explored ways to increase non-dollar transactions.
The primary motive behind BRICS's push for de-dollarisation is to reduce reliance on the US dollar in international trade and to establish greater financial independence for its members. The bloc seeks to diversify global trade and finance, creating an alternative to the dollar-dominated system that currently exists. While this is seen as a potential move towards a more multipolar global economy, India’s approach to this initiative is more cautious. India values its economic relationship with the West, particularly the US, and fears that embracing a common BRICS currency could undermine its ties with Western powers.
However, despite the seriousness of Trump’s threat, India remains cautious about the de-dollarisation agenda. While India has been exploring alternatives to reduce its reliance on the US dollar, its bilateral trade with the US has grown significantly, surpassing $120 billion in 2023-24. This makes India reluctant to embrace any move that could jeopardise its trade relationship with Washington.
In response to the growing conversation around a potential BRICS currency, India has expressed reservations. External Affairs Minister S. Jaishankar has made it clear that he does not foresee a BRICS common currency becoming a reality any time soon. In recent remarks, he highlighted the significant challenges in aligning the diverse economic, fiscal, and political policies of BRICS members. Jaishankar pointed out that the idea of a common currency is complicated by the geographical and economic differences among the bloc’s members, which span continents from South America to Asia and Africa.
Giving a similar vision, when asked about the BRICS currency at the Kochi International Foundation recently, Reserve Bank of India Governor said that nothing had been decided regarding the launch of such a currency. He continued, unlike the European Union, which is geographically contiguous, the BRICS members are spread across different continents, making the idea of a unified currency more complex. He advised against rushing to conclusions on the matter.
BRICS is an acronym for Brazil, Russia, India, China, and South Africa, representing a group of five major emerging economies that collectively account for a significant portion of the world’s population, land area, and economic activity. Over time, BRICS has expanded to include countries such as Egypt, Ethiopia, Iran, and the UAE. The group's main goals include fostering economic cooperation, reducing reliance on the US dollar by promoting the use of their own currencies in trade, and pushing for reforms in global governance structures like the IMF and World Bank to better represent emerging economies.
