While Brazil spearheads discussions on de-dollarization within the BRICS economic bloc, India has reaffirmed that abandoning the U.S. dollar is not on its agenda. This divergence highlights the complex and varied economic strategies within the group, even as they explore alternatives to strengthen their economic cooperation.

India's Stance on De-Dollarization

India has consistently maintained a cautious approach towards de-dollarization, with officials stating that it is not part of the country's economic policy or strategy. External Affairs Minister S Jaishankar has previously clarified that India is not actively targeting the dollar. Reserve Bank of India (RBI) governor Shaktikanta Das has also stated that de-dollarization is not India's objective.

Instead, India is focused on promoting the use of the Indian rupee in bilateral and multilateral trade agreements. This includes encouraging the opening of Vostro accounts in local currency and entering into agreements with other countries for local currency-denominated trade. For instance, India has been trading with Russia in rupees for oil imports. These measures aim to de-risk Indian trade by reducing dependence on a single currency, which can be problematic due to exchange rate fluctuations.

Benefits of India's Approach

• Promotion of the Indian Rupee: Encourages the use of the rupee in trade agreements.
• Monetary Policy Autonomy: Reduces reliance on the dollar, giving India more control over its monetary policy to manage inflation and interest rates.
• Diversification of Reserves: Helps diversify reserves into other currencies or gold, reducing risks associated with dollar devaluation.
• Greater Economic Independence: Reduces vulnerability to U.S.-led sanctions or economic pressure.

However, India is also aware of the potential concerns and challenges associated with de-dollarization.

Concerns and Challenges

• Impact on Foreign Investment: Moving away from the dollar could deter foreign investors who prefer the stability of dollar-denominated assets.
• Challenges in Diversifying Reserves: Alternative currencies or assets like gold may expose India to new risks, such as currency depreciation or price fluctuations.
• Impact on Remittances: De-dollarization may disrupt India’s dollar-denominated remittances.
• Risk of Over-Reliance on the Yuan: India risks over-reliance on the Chinese yuan, bringing geopolitical and economic challenges.

Brazil's Push for a BRICS Currency

In contrast to India's cautious stance, Brazil has been a vocal proponent of de-dollarization and the creation of a BRICS currency. President Luiz Inácio Lula da Silva has consistently criticized the dominance of the U.S. dollar and has called for alternative currencies for trade among BRICS nations. Brazil, which holds the rotating presidency of the BRICS group for 2025, has emphasized the need to reduce reliance on the U.S. dollar. Measures to achieve this, including cross-border payment systems and exploring blockchain technology, are major themes at the 2025 BRICS summit. Lula has also expressed that Brazil "cannot depend on the dollar" and must test alternatives for trade among BRICS nations.

BRICS and De-Dollarization

The BRICS nations have been discussing the possibility of creating a new reserve currency backed by a basket of their respective currencies. This has led to discussions about establishing an alternative to SWIFT, the international payment system. However, the feasibility of implementing these ideas in the near future remains questionable. Despite discussions about a BRICS currency, it remains far from realization due to the lack of a common market or unified trade policy among member countries.

Impact of U.S. Pressure

The U.S. government, under President Trump, has expressed concerns about the de-dollarization efforts of BRICS nations. Trump has warned against replacing the U.S. dollar as a reserve currency, threatening tariffs on countries that do so. This pressure from the U.S. has placed India in a complex position, given its strategic partnership with the U.S. and its membership in BRICS.

Despite the differing approaches to de-dollarization, India remains engaged with BRICS. India is participating in discussions about cross-border payments in local currencies and is working with other member countries to strengthen the BRICS platform. This reflects India's commitment to diversifying its economic relationships and promoting multilateralism.