New Delhi, Sep 14: The 18th BRICS Summit in New Delhi has renewed discussions over reducing dependence on the US dollar, with member countries backing greater use of national currencies and stronger cross-border payment links, but stopping short of proposing a common BRICS currency.
The summit, held on September 12 and 13, focused on strengthening financial cooperation among member countries and creating additional options for international trade and payments.The New Delhi Declaration supported efforts to expand transactions in national currencies and promote interoperable payment systems, including initiatives such as BRICS Pay.
However, the grouping did not announce plans for a single currency to replace the US dollar.The push for greater financial diversification has gained momentum following the financial restrictions imposed on Russia after the outbreak of the Ukraine conflict in 2022. The freezing of Russian sovereign reserves and restrictions on Russian financial institutions highlighted the extent to which access to the international financial system can become affected by geopolitical tensions.
For BRICS countries, this has strengthened the argument for developing payment channels that can reduce exposure to such risks. However, experts caution that reducing dollar use in individual transactions is different from creating an alternative global reserve currency.A currency used widely for international payments requires more than a payment network.
A potential reserve currency needs deep and liquid financial markets, broad convertibility, investor confidence and a large supply of safe assets that central banks can hold.The experience of India-Russia trade illustrates some of these challenges. As bilateral trade expanded and transactions increasingly moved away from the dollar, Russian exporters accumulated substantial rupee balances.
The difficulty of using or converting those balances highlighted the problems created by trade imbalances and restrictions on the movement of capital.Alternative payment platforms can facilitate transactions, but they cannot independently solve issues involving currency convertibility, trade deficits or investment opportunities.
The New Development Bank, established by BRICS countries to support infrastructure and development projects, also demonstrates the limits of financial independence. Although the institution was created as an alternative source of development finance, it continues to rely on access to international capital markets.
Its decision to suspend new transactions in Russia following the 2022 geopolitical crisis showed how global financial conditions can affect even institutions created outside the traditional Western financial architecture.India has adopted a cautious approach to the debate. New Delhi has supported greater international use of the rupee, bilateral payment arrangements and digital payment connectivity while maintaining that there is no immediate proposal for a common BRICS currency.India’s position reflects its broader economic interests.
The country has extensive trade and investment relationships with the US, Europe and Gulf economies, while its economic relationship with China remains complex.
BRICS members themselves also have widely different economic structures, financial regulations and currency regimes. The grouping includes major manufacturing economies, energy exporters, commodity producers and service-driven economies, making a single monetary framework difficult to establish.
The latest summit therefore appears to have favoured an incremental approach rather than a direct challenge to the dollar.Greater use of national currencies, diversified reserves and alternative payment platforms could gradually reduce the number of international transactions that require the US currency. However, such developments are unlikely to displace the dollar in the near term.
The broader significance of the BRICS financial agenda may consequently lie not in replacing the dollar but in creating more alternatives to it.For India and other emerging economies, the objective is increasingly to have greater flexibility in international payments while avoiding excessive dependence on any single financial system.
The New Delhi summit has thus reinforced the debate over a more diversified global monetary system, even as the US dollar continues to occupy the central position in international finance.
