The world truly became a global village after the establishment of the World Trade Organization (WTO) and the expansion of global trade. However, the present tariff wars, geopolitical tensions and volatile economic conditions are placing increasing pressure on the global economic system. Against this backdrop, BRICS countries are exploring alternative economic arrangements that could strengthen the position of the Global South.
The US dollar continues to dominate international trade, finance and payments. Its strength has increased in recent years, while many other currencies have faced pressure. At successive BRICS discussions, the issue of de-dollarisation has attracted considerable attention. However, the idea of replacing the dollar with a BRICS currency remains far from becoming a practical reality.
Myth and Reality
De-dollarisation has been discussed within BRICS for years, but it is important to distinguish between reducing dependence on the dollar and replacing it altogether.
The question of whether BRICS can create an alternative global currency remains unresolved. Developing a currency capable of competing with the dollar would require enormous economic coordination, political consensus, financial integration and institutional arrangements among member countries.
At present, BRICS countries have different economic structures, monetary policies and strategic interests. There are also differences among members on several geopolitical and economic issues. Consequently, establishing a common currency would be extremely complicated.
The reality is that BRICS is currently focusing more on increasing the use of existing national currencies than on creating a single common currency. The objective is to make the dollar less essential for trade and financial transactions rather than to eliminate it immediately.
What Is Ailing the System?
One of the major obstacles to creating a common BRICS currency is the economic diversity of its members. The BRICS grouping has expanded to 11 members, whose economies differ considerably in terms of inflation, interest rates, exchange-rate regimes, fiscal policies and financial systems.
Unlike the euro area, BRICS does not have a common central bank, a unified monetary policy or an integrated financial system. The New Development Bank provides financial assistance for development projects, but it does not function as a common monetary authority.
There is also no established framework for launching a BRICS common currency that could immediately serve as a global alternative to the dollar.
Reducing Dollar Dependence
Under present conditions, reducing dependence on the dollar appears to be a more realistic objective for BRICS members than replacing it.
Member countries have increasingly promoted bilateral trade using their own currencies. The Indian rupee, Chinese yuan and other national currencies can play a greater role in cross-border trade where economic conditions permit.
BRICS countries are also discussing mechanisms to improve cross-border payments and reduce transaction costs. Greater connectivity among national payment systems could provide alternatives to traditional international payment channels and make trade in local currencies easier.
This approach represents a gradual attempt to reduce the dollar's dominance rather than an immediate effort to remove it from the international financial system.
Critical Analysis
BRICS countries face a fundamental challenge: reducing dollar dependence is considerably easier than replacing the dollar.
The dollar's international role is supported by the size of the US economy, deep financial markets, global trade networks and its established position in international payments and reserves. Replacing such a system would require a credible alternative with comparable liquidity, stability and international acceptance.
At the same time, greater use of local currencies could produce different outcomes for individual BRICS members. The Chinese yuan, given the size of China's economy and its extensive trade relationships, could potentially acquire a larger role in intra-BRICS transactions. This is an important consideration for India.
For India, strengthening the rupee and expanding its international use may therefore be more practical than seeking an immediate end to the dollar's role. The dollar is likely to remain an important part of the global economy for the foreseeable future.
The gradual development of alternative payment networks and greater use of local currencies may nevertheless reshape the international monetary system over the coming decades.
The Way Forward
The global economic system is undergoing significant transformation. Geopolitical competition, changing trade patterns and regional economic realignments are reshaping international relations. Smaller and developing countries are increasingly concerned about economic vulnerabilities arising from global instability.
In this changing environment, BRICS members need to concentrate first on building stronger economic cooperation, improving payment mechanisms and developing greater financial connectivity. A common currency, if it is ever considered seriously, would require substantial institutional preparation and a high degree of economic coordination.
India must also give greater attention to strengthening the rupee, improving productivity, expanding exports and increasing the competitiveness of its economy. Addressing the structural challenges facing the rupee is more immediately important than simply seeking to replace the dollar.
China's growing economic influence within BRICS also requires careful consideration. Differences in trade structures and national interests mean that greater cooperation must be accompanied by safeguards to ensure that the interests of individual member countries are protected.
Ultimately, the objective should not simply be to replace one dominant currency with another. BRICS should work towards a more diversified, stable and inclusive international financial system in which multiple currencies and payment mechanisms can coexist.
Conclusion
The global economy is changing, but the replacement of the dollar by a BRICS currency is not an immediate prospect. The more realistic path is gradual de-dollarisation through greater use of national currencies, improved cross-border payment systems and deeper financial cooperation.
The success of this approach will depend on trust, institutional coordination and the ability of BRICS members to reconcile their diverse economic and strategic interests.
At the same time, meaningful reform of the global economic and financial system remains essential. Greater representation for developing countries in international financial institutions, reduction of economic imbalances and fairer access to global markets can contribute to a more equitable international economic order.
For India, strengthening the rupee, improving domestic economic fundamentals and expanding international trade should remain key priorities. The future of the global monetary system is likely to be evolutionary rather than revolutionary, with the dollar remaining important while alternative currencies and payment networks gradually gain greater space.
