Source: The post BRICS quietly builds currency alternatives while avoiding dollar confrontation has been created, based on the article “From BRICS currency to BRICS Pay” published in “Businessline” on 8th July 2025
UPSC Syllabus Topic: GS Paper2-Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
Context: The 2025 BRICS summit reignited the debate on ‘de-dollarisation’ amid global tensions. Although India clarified the bloc is not challenging the US dollar, actions like BRICS Pay and local currency trade reflect a deliberate move to reduce dependence on dollar-based systems.
Cautious but Calculated Shift from the Dollar
- Indian Clarification Amid US Pressure: Before the summit, India clarified that BRICS is not aiming to replace the dollar. The bloc is exploring national currency trade to reduce geopolitical exposure, not to undermine the dollar.
- Trump’s Warning and India’s Balancing Act: US President Trump warned BRICS nations in January 2025 to avoid launching a rival currency or risk 100% tariffs. With trade talks ongoing, India is careful not to appear aligned with China and Russia on this issue.
- Subtle Strategy over Open Defiance: Despite US pressure, BRICS continues quietly reducing dollar dependence. Though a BRICS currency may take years, local currency trade settlements and BRICS Pay show early signs of transition.
BRICS’ Rising Global Influence
- Expansion Beyond Initial Vision: Initially united by a Goldman Sachs report in 2001, BRICS has evolved significantly, especially after the 2022 Russia–Ukraine war and the 2024–25 inclusion of six new members—Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia, and the UAE.
- Economic and Demographic Strength: BRICS nations, though developing, now contribute 29% of global GDP (PPP) and house 48.5% of the world’s population, forming a strong production and consumer base.
- Control Over Resources and Land: Together, they hold 36% of global landmass. They also possess 72% of the world’s rare earth minerals, vital for emerging technologies, along with 43.6% of global oil and 36% of natural gas production.
- Global South Representation and Outreach: The bloc’s mission to enhance legitimacy and equity in institutions like the UN, IMF, World Bank, and WTO is gaining traction. Ten nations, including Belarus, Nigeria, Cuba, and Vietnam, joined as BRICS partner countriesunder the 2024 Johannesburg Declaration.
BRICS Pay: Laying the Infrastructure
- Shift Toward Local Currency Trade: A common currency remains unlikely. However, bilateral trade in local currencies is rising. India trades with Russia, UAE, Sri Lanka, Nepal, Bhutan, and Iran in rupees. China conducts 30% of trade in yuan.
- China and Russia Leading the Way: Russia and China launched BRICS Pay, a payment platform linked to 75 countries, offering a viable alternative to SWIFT.
- Functionality and Currency Coverage: BRICS Pay supports 23 currencies, including dollar, yuan, rupee, and other member currencies. It uses domestic banking systems, enabling faster settlements.
- Institutional Backing and Future Plans: The 2025 summit declaration tasked finance ministers and central banks to expand BRICS payment system interoperability. The BRICS Payment Task Force was acknowledged for progress on the Cross-Border Payments Initiative.
Conclusion
BRICS avoids directly confronting the dollar but is quietly building parallel systems. The full impact remains to be seen, but the shift is already underway—brick by brick.
Question for practice:
Examine how BRICS is gradually reducing its dependence on the US dollar without directly challenging its dominance.
