With most BRICS countries strongly pushing for use of national currencies for trade and financial transactions within the bloc in an attempt to ‘de-dollarise’ their economies, India may consider the proposal favourably provided the decision is non-binding and it is free to choose the members with which it wants to do currency settlement with while ignoring some others such as China, sources have said.
The BRICS grouping, which includes Brazil, Russia, India, China and South Africa, will hold its next summit level meeting on October 21-22 in Kazan, Russia, where the proposals for use of local currencies and creation of a common BRICS currency are likely to prominently feature in the agenda, an official tracking the matter told businessline.
“New Delhi is examining an appropriate response based on the extent to which it would benefit economically and diplomatically from the proposals without increasing its vulnerabilities vis-a-vis China,” the source said.
South Africa is likely to soon host a meeting of Finance Ministers and Central Bank officials of member countries to deliberate further on the matter so that they could give their inputs to BRICS leaders at the October summit, the source added.
At the last BRICS summit meeting in Johannesburg in August 2023, Finance Ministers and/or central bank governors were asked to consider the issue of local currencies, payment instruments and platforms and report back at the next summit.
Initially, India was not keen on use of national currencies for trading with BRICS partners because of the China factor. But as the idea took shape within the BRICS, it now appears that the decision will be non-binding, the official said. This means that India and other members may pick and choose.
Currency settlement
“It is each according to its comfort level. Within BRICS if you agree for currency settlement, you may choose not to do with x country, while doing with others. If India chooses not to do with China in yuan and rupee, it is okay. But it may do with other countries, for instance the rouble or rand,” the official said.
Currency settlement within the BRICS bloc will give members the flexibility of using a particular currency accumulated in one country to trade with another. “For instance, Russia can ship out the surplus rupee that is collected in its vostro accounts in India, convert it into Brazilian pesos to pay Brazil for some transaction. Or it can convert it into South African rand to make payment to South Africa,” the official explained.
Russia and China are also pushing for creation of a BRICS common currency which will be taken up at the summit.
“The BRICS currency will be a notional currency and not a currency in physical form. The issue is how does one peg the value for it. Naturally, the value will derive from the value of all the currencies in the basket put together. Notionally, one gets the impression that yuan is a dominant currency. So, it will have a greater weightage. India has to see whether that will be acceptable to it,” the official said.