Syllabus: GS3/Economy
Context
- India has urged BRICS members and partner countries to deepen economic integration through local-currency trade, linked payment systems and easier market access ahead of the 18th BRICS Summit in New Delhi.
About Trade in Local Currencies & De-Dollarisation
- Trade in local currencies means settling cross-border transactions directly in the currencies of trading countries rather than converting them into a vehicle currency such as the US dollar.
- De-dollarisation refers to reducing excessive dependence on the US dollar in trade invoicing, payments, reserves and international finance.
- BRICS’ approach to create greater currency diversification and payment-system autonomy.
Significance of Local-Currency Trade
- Lower Transaction Costs: Reduces repeated currency conversions and dependence on intermediary currencies.
- Greater Resilience: Alternative payment channels can reduce vulnerability to external financial disruptions.
- Boost to Intra-BRICS Trade: Easier settlements can convert economic complementarities into commercial partnerships.
- Financial Autonomy: Provides emerging economies greater policy space amid geopolitical and sanctions-related uncertainties.
- Digital Integration: Linking UPI and other payment systems can promote faster, cheaper and more inclusive cross-border transactions.
- Supply-chain Diversification: Facilitates trade in critical minerals, raw materials and manufactured goods.
Concerns and Challenges
- Exchange-rate volatility can create risks for exporters and importers.
- Local currencies may have limited convertibility and liquidity.
- Persistent trade imbalances can make accumulation of partner currencies difficult.
- Differences in financial regulations, data standards and payment infrastructure hinder interoperability.
- Dollar-based markets retain advantages in depth, liquidity and global acceptability.
- Greater digital connectivity raises concerns over cybersecurity, data protection and financial stability.
- Excessive financial fragmentation could increase transaction complexity instead of reducing it.
Way Forward: Strengthening Measures
- BRICS should pursue interoperable payment systems, currency-swap arrangements, transparent settlement mechanisms and common digital standards, while strengthening financial regulation and cybersecurity.
- The BRICS Economic Partnership Strategy 2030, BRICS Connect, the BRICS incubator network and BRICS Startup Innovation Fund can support deeper integration.
- Cooperation should preserve the WTO at the core of the multilateral trading system, while improving logistics, affordable MSME finance, trade facilitation and mutual recognition of standards.
Conclusion
- India’s 2026 BRICS Chairship theme ‘Building for Resilience, Innovation, Cooperation and Sustainability’ provides an opportunity to build a more diversified.
About BRICS
- BRICS is a major platform of emerging economies and the Global South, initially comprising Brazil, Russia, India and China, with South Africa joining in 2010.
- Its expansion has substantially increased its demographic, economic and geopolitical weight.
- BRICS seeks greater cooperation in areas such as economy, finance, trade, technology, development and global governance, while advocating a more representative and multipolar international order.
Historical Evolution: From BRIC to BRICS+
- BRICS has evolved from an economic grouping into a broader platform for strategic autonomy, development cooperation and reform of global governance.
- 2001: Economist Jim O’Neill coined the term BRIC for Brazil, Russia, India and China.
- 2009: First BRIC Summit was held at Yekaterinburg, Russia.
- 2010: South Africa joined, creating BRICS.
- 2024: Egypt, Ethiopia, Iran, Saudi Arabia and UAE became full members.
- 2025:Indonesia joined BRICS as a full member, further widening its Global South representation.
- Also, Belarus, Bolivia, Kazakhstan, Cuba, Malaysia, Nigeria, Thailand, Uganda, Uzbekistan and Vietnam joined BRICS as Partner Countries.
- 2026: India assumes the chairship and hosts the 18th Summit in New Delhi.
Key Proposals at BRICS Business Forum 2026
- At the BRICS Business Forum, India’s Commerce and Industry Minister called for:
- Opening markets to each other’s products, particularly raw materials and critical minerals, with resilient supply chains that ‘run both ways’.
- Reducing non-tariff measures (NTMs), which impose higher export costs than tariffs for 88% of countries.
- Linking payment systems and expanding trade in local currencies.
- Leveraging India’s UPI, now accepted in 11 countries, for wider digital trade.
- Greater cooperation in agriculture, agri-tech, pharmaceuticals, engineering goods, electronics, automobiles, auto components and services.
- Increasing participation of women-led enterprises in BRICS exhibitions and trade fairs. Over 45% of India’s 250,000 recognised startups have at least one woman partner/director.
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