India (Commonwealth Union)_ The global financial landscape is witnessing a profound shift, with discussions around de-dollarization gaining momentum. The United States dollar has long been the dominant currency in international trade, but recent efforts by countries such as China, Russia, and Brazil to explore alternatives have ignited a debate about the future of global currency systems. One of the more significant proposals comes from the BRICS group, an alliance consisting of Brazil, Russia, India, China, and South Africa, that has explored the possibility of creating a new currency to facilitate trade among its members. Despite these efforts, India’s position remains skeptical, particularly when it comes to replacing the US dollar, and experts suggest that leading the Commonwealth might present a better path forward for India.
BRICS currency: A shift from the dollar
The BRICS countries, which together account for a substantial portion of the global economy, have long been at the forefront of advocating for a shift away from the US dollar. In line with this, Brazil has already begun accepting trade settlements and investments in the Chinese yuan, while India and Russia have implemented the Rupee-Rouble mechanism, allowing for trade in rupees instead of US dollars or euros. These developments highlight the growing intent among BRICS members to reduce dependence on the US dollar and create a new currency for trade within the bloc. Proponents argue that such a currency would stabilize economies, enhance consumer confidence, and boost trade and investment within the group. However, India, despite being a core member of BRICS, has expressed caution. The country’s skepticism stems from its close economic ties with the United States, a partnership that is crucial for India’s trade and growth.
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Trump’s threat to BRICS currency
The proposed BRICS currency has drawn sharp opposition from the United States. In a bold move, US President-elect Donald Trump issued a stern warning to BRICS member countries, including those from newer members such as Iran, Ethiopia, Egypt, and the UAE, cautioning them against creating or supporting a new currency to replace the US dollar. Speaking through his social media platform, Truth Social, Trump threatened to impose 100% tariffs on any country that attempts to undermine the dominance of the US dollar. Trump’s remarks are a reflection of the US’s power in maintaining its economic supremacy, with the dollar at the center of global trade. According to Trump, any move by BRICS to challenge the dollar would result in these nations losing access to the US economy, a potential blow to their trade relationships. His comments underscore the difficulty that any alternative currency would face in replacing the dollar, which has been the global reserve currency since the Bretton Woods Agreement in 1944.
India’s stance on the BRICS currency
India’s foreign policy on the matter is clear. The Indian government, led by Foreign Minister S. Jaishankar, has consistently emphasized that India is not opposed to the US dollar. Instead, India’s strategy focuses on maintaining strong relations with the United States while pursuing its economic interests. Jaishankar has reiterated that India does not have an interest in de-dollarization, highlighting the importance of maintaining economic stability in its dealings with the US. Jaishankar’s statement comes in response to President-elect Trump’s warning, where he clarified that India has no interest in weakening the US dollar. India’s growing ties with the United States, particularly in the fields of information technology, banking, and trade, make the dollar an essential part of India’s economic framework. Consequently, India is likely to oppose any BRICS initiative aimed at creating a new common currency.
Potential threat of a BRICS currency to India
While the concept of a BRICS currency may offer potential benefits such as increased trade and economic growth within the bloc, India’s participation in this new currency could carry significant risks. The push for a common BRICS currency is spearheaded by China and Russia, both of whom have their own geopolitical agendas. For India, a BRICS currency could disproportionately empower China, which is already leveraging the bloc for its broader global ambitions. Indian businesses, particularly those with ties to the US, rely heavily on the US dollar for stability during periods of economic uncertainty. With the Indian rupee under pressure and fluctuating against the dollar, any movement towards a BRICS currency could jeopardize India’s economic growth and its ambitions to become the world’s third-largest economy. Furthermore, the growing influence of China within BRICS could further complicate India’s position, given the ongoing tensions between the two nations, particularly regarding border disputes.
Growing BRICS alliance Vs. dollar supremacy
The BRICS alliance is expanding rapidly, with over 20 countries expressing interest in joining by 2025. These countries include Azerbaijan, Bahrain, Bangladesh, Burkina Faso, Cambodia, Chad, Colombia, the Republic of the Congo, Equatorial Guinea, Honduras, Laos, Kuwait, Morocco, Myanmar, Nicaragua, Pakistan, Palestine, Senegal, South Sudan, Sri Lanka, Syria, Venezuela, and Zimbabwe from regions like Africa, Latin America, and the Middle East. This growing coalition reflects the bloc’s ambition to establish a financial system independent of the US dollar. The push for de-dollarization, replacing the US dollar as the primary currency for global trade, has become a core goal of the alliance. For the United States, the dollar’s dominance has afforded it significant economic leverage over other countries, particularly through sanctions. The emergence of an alternative to the dollar could undermine this power, prompting a shift in global trade dynamics. While China and Russia are eager to challenge the dollar’s supremacy, the process of de-dollarization is fraught with obstacles. The US dollar remains deeply embedded in global markets, particularly in trade, investment, and commodity pricing.
Commonwealth leadership as an alternative for BRICS
While BRICS grapples with internal divisions and external pressure, India could find greater benefits in leading the Commonwealth of Nations, a group that includes 56 countries, many of which are from the Global South. The Commonwealth offers a unique platform for India to exercise leadership and promote its economic and geopolitical interests. Several factors make the Commonwealth a more favorable option for India compared to BRICS.
- Cultural and Historical Connections: India shares deep historical and cultural ties with many Commonwealth nations, particularly those that were once part of the British Empire. These shared values in governance, democracy, and the rule of law create a natural alignment, making India a logical leader within the group.
- Established Institutional Systems: The Commonwealth is built on shared principles of democratic governance and economic cooperation. India’s robust democratic institutions, legal frameworks, and economic policies align closely with many other Commonwealth nations, creating a stable and predictable environment for collaboration.
- Trade and Economic Cooperation: The Commonwealth group enjoys a significant trade advantage, with 21% lower trade costs between member countries compared to other regions. This provides India with an opportunity to expand its economic influence by facilitating intra-Commonwealth trade. With trade expected to surpass $1 trillion by 2026, India’s leadership within the Commonwealth could contribute significantly to its economic strength.
- Geopolitical Alignment and Strategic Importance: India’s position as a rising power in Asia gives it a strategic advantage within the Commonwealth. By leading this group, India can shape policies related to trade, security, and sustainable development in ways that align with its interests and those of the other member nations.
- Investment and Infrastructure Development: The Commonwealth has attracted substantial foreign direct investment (FDI), particularly in agriculture, food trade, and infrastructure. As India continues to invest in infrastructure development and digital transformation, its leadership within the Commonwealth can help foster further investments and growth.
- Economic Potential of the Commonwealth: With a combined GDP of $14.2 trillion in 2022, projected to reach $20 trillion by 2029, the Commonwealth represents a significant economic force. India, with its rapidly growing economy, stands to benefit from its leadership role in shaping the future of the Commonwealth’s economic landscape.
Comparison of GDPs: BRICS Vs. Commonwealth
- BRICS Group: Estimated combined GDP in 2024 is $65 trillion (35% of the global GDP). BRICS includes some of the largest emerging economies, with significant trade influence and over 40% of the world’s population.
- Commonwealth Group: Combined GDP as of 2022 is $14.2 trillion, projected to reach $20 trillion by 2029. The Commonwealth has a growing trade network, with intra-Commonwealth trade set to exceed $1 trillion by 2026.
India – A strong voice across the commonwealth and global south
India’s established political and economic systems, its strong historical ties with Commonwealth nations, and its growing influence in global affairs position it as a natural leader within the Commonwealth. Compared to the more fragmented and geopolitically diverse BRICS, the Commonwealth provides a more cohesive and strategic platform for India to assert its influence as well as provides access to the Commonwealth’s lower trade costs, projected GDP growth, and increasing foreign investments. By prioritizing its leadership role in the Commonwealth, India can strengthen its position on the global stage, promote regional economic cooperation, maintain better relationship with 56 countries, which in turn will boost india’s foreign policy as well as its voice across the commonwealth and global south as 48 commonwealth nations are in global south, and bolster its standing in the Global South. As the Commonwealth continues to expand and prosper, India’s leadership could usher in a new era of global economic and political cooperation.
