BRICS and De‑dollarisation
Global Shift Away from the Dollar with BRICS
Context: The global push to reduce dependence on the U.S. dollar gained fresh urgency after Western nations barred Iran and Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT). As a result, countries like India are exploring alternatives to the dollar-centric financial order.
What Is De‑dollarisation?
De‑dollarisation, defined as reducing reliance on the U.S. dollar for international trade, reserves, and financial messaging, has become a hot topic in global economics. BRICS nations are actively exploring currency diversification by increasing trade in local currencies and creating new settlement systems to lower exposure to Western financial systems.
BRICS Currency Debates
At the Kazan Summit, Vladimir Putin criticized the weaponization of the dollar, calling it a strategic error. The proposal to create a BRICS currency—potentially blockchain-based or backed by gold—surfaced again. However, India’s External Affairs Minister S. Jaishankar clarified that “India has never been for de-dollarisation” and that there is no current proposal for a unified BRICS currency. Ahead of the Rio summit in July 2025, BRICS nations confirmed their intent to boost trade in national currencies, but discussions about a shared currency remain in early stages.
India’s Bold Moves in Currency Strategy
Internationalising the rupee has become an RBI focus. In 2022, the RBI allowed trade settlements in rupees with Russia; in 2023–24, India–Russia trade reached approximately $65 billion, mainly in oil imports, with aims to hit $100 billion by 2030. India has also initiated trade in rupees with the UAE and several ASEAN nations, reducing reliance on dollar-based trade.
To combat volatility, in April 2025 the RBI sold $3.6 billion from reserves to stabilize the rupee amid global uncertainty. Meanwhile, the Digital Rupee (CBDC) pilot is expanding and holds potential as a cheaper, faster alternative for cross-border settlements—possibly even substituting parts of SWIFT.
SWIFT & New Settlement Systems
As Western sanctions spotlight SWIFT’s geopolitical risks, countries like Russia and India are keen to develop alternatives.
- BRICS Pay: Launched in 2018 and backed by China and Russia, this messaging system aims to enable direct settlements in local currencies, reducing costs and improving transparency.
- Structured Financial Messaging System (SFMS): India’s domestic messaging infrastructure already supports secure interbank transactions and could scale into the international domain.
Dollar’s Waning Influence & Global Reserve Shifts
IMF data shows the U.S. dollar’s share in global foreign exchange reserves has declined as currencies like the Canadian dollar, Australian dollar, Chinese renminbi, and South Korean won gain ground. Within BRICS+, they control around 42–46% of global FX reserves, reinforcing collective influence on financial stability and the narrative of de‑dollarisation.
Implications for UPSC Aspirants
Given the rise of keywords like “UPSC economy”, “UPSC economy notes”, and “UPSC economy syllabus,” your understanding of this global shift is highly relevant. The de‑dollarisation narrative directly intersects with multiple UPSC syllabus topics:
- International Relations: Currency diplomacy, BRICS cohesion, and strategic alliances.
- Economic Development: Global trade patterns, currency policy, and impact on Indian exports.
- Monetary Management: RBI interventions, digital currencies, and balance of payments.
UPSC Economy – Key Points to Note
- Expand the rupee’s role through cross-border trade in rupees and RBI’s liberalised remittance scheme ($30 billion outflow in FY25).
- Monitor the Digital Rupee CBDC rollout: e₹-W and e₹-R pilots have already surpassed ₹2.34 billion in circulation by FY23–24.
- The role of BRICS Pay and SFMS in shaping future currency market structure and de-dollarisation strategy.
Balanced Conclusion: Reform with Diplomacy
While BRICS continues pushing for currency de‑dollarisation, India maintains a calibrated, balanced strategy:
- Support financial integration and safeguards like rupee settlements.
- Avoid overt confrontation with the U.S. dollar system.
- Strengthen alternative infrastructures like Digital Rupee, SFMS, and BRICS Pay.
This dual-track policy provides resilience against external pressure while keeping India’s global financial ties intact.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
