Washington Consensus and the Bretton wood Institutions:

The Bretton Woods System was instituted in the aftermath of World War II, which pegged the fixed exchange rates backed by USD or the US gold reserves (22,000 tons).

This enabled the US government to convert USD into gold reserves when requested by foreign central banks. This arrangement allowed the US Central Bank to print US dollars depending on the world’s demand without bothering about the inflationary consequences. Soon, growing imbalances in the US economy eroded confidence in the dollar’s stability. Unable to withstand the US inflationary pressures, the Bretton Woods System collapsed and in 1971, then US President Nixon suspended the convertibility of the USD into gold. Ever since, the USD has continued to remain as the global reserve currency, though it wasn’t backed by any formal treaty. There is no international treaty obligating nations to use USD as the so-called Washington consensus has withered away.

To reduce reliance on the USD, the IMF has introduced Special Drawing Rights (SDR) as a supplementary reserve asset. However, following the sudden escalation of prices following the Yom-Kippur war in 1973, SDRs failed to finance global trade. Economists attribute various reasons for the USD’s dominance. Prominent among them are the size of the US economy, full convertibility, a full-fledged financial system to back it, capital mobility, a strong banking system and an independent central bank. Although China has a large economy, it falls short of other requirements. In the case of the Euro, the monetary union is not backed by a fiscal union. For any currency to have wider acceptance, it must have the above-mentioned factors.

The emerging global economic trendlines are accompanied by a swift decline in the share of the US dollar as the international currency for global trade from 71.5% in 2000 to 58.2% in 2024 2 . Given the increasing share of the BRICS countries, the economic policies of individual countries and the group collectively are going to have an impactful influence on the global economic landscape. It is notable that despite the uncertain US economic policy and dollar weaponization post Russian invasion of Ukraine, the dollar share has remained unchanged.

US Unilateral Measures:
However, driven by geopolitical factors, Trump’s trade tariff war, to insulate their economies, BRICS+ is attempting to coordinate their policies. A coherent approach would eventually translate into downsizing the dominance of the US dollar as the choice of global payments and transactions. Pertinently, BRICS might even want to circumvent the SWIFT trading helmed by clearance from US Bank and might be interested in creating new financial instruments.

After Trump unilaterally withdrew from Iran’s nuclear peace plan, JCPOA (Joint Comprehensive Plan of Action) and reimposed punitive sanctions on Iran, they proved to be very effective as Iran was shunted out from the SWIFT system. The other European countries that wanted to still honor the agreement announced plans to create an alternate system to continue payments. However, they couldn’t get far ahead with their efforts for fear of America’s weaponization of the dollar. This decline in usage of the dollar, increasingly seen as de-dollarization, has triggered fears of a shift in the balance of power, eventually reshaping the global economy and markets. Luis Oganes at J.P. Morgan said, “The concept of de-dollarization relates to changes in the structural demand for the dollar that would relate to its status as a reserve currency. This encompasses areas that relate to the longer-term use of the dollar, such as transactional dominance in FX volumes or commodities trade, denomination of liabilities and share in central bank FX reserves,” 4 . But as of now, the US dollar makes up for 88% of global traded forex volumes as opposed to 7% of the Chinese yuan.

Though China has unseated the US as the topmost global exporter, the US dollar continues to maintain its overall dominance. Its share in global markets is five times the United States’ share of global imports. Indeed, owing to its extensive use, emerging economies, which by far have increased global activity, are currently subjected to the turbulence stemming from the volatile US markets.

Alluding to the US dollar’s entitled status that can create a ripple effect across the globe, French Finance Minister, Valery Giscard d’Estaing, in the 1960s termed it as an “exorbitant privilege” and it continues to wield a disproportionate control over global trade. Mark Carney, currently the Prime Minister of Canada, in his role as the governor of Bank of England, in 2019, suggested that emerging countries must join to create their own replacement reserve currency to circumvent the ‘destabilizing role” of US dollar 5 .

Indeed, leveraging this ‘exorbitant privilege’ US trade advisor to Trump, Peter Navarro issued summary threats to India and warned it to “act like strategic partner of the US” 6 .

BRICS Currency: To be or not to be!
Except for sizeable combined economic activity, BRICS+ doesn’t have anything in its favor to launch a common currency. Geographically flung apart, with dissimilar economic sizes and monetary policies, achieving fiscal and monetary integration of BRICS nations is extremely difficult. The EU is a striking example of issues that countries must face when the economies are not equal and comparable. Absence of ideological coherence, strong political institutions and different levels of development and their capacity to take on debt further render unrealism to the idea of a common currency. A single currency needs a common interest rate. Given the existence of different price levels in BRICS currencies, stitching a cohesive monetary policy is very difficult. For the first time at the 14 th BRICS Summit, in the shadow of the Ukraine war, Russian President Putin announced the BRICS plan to issue a “new global reserve currency” 7 .

BRICS New Development Bank (NDB) President Dilma Rousseff indicated that there is an agreement in principle to use a new settlement currency called the Unit, which will be backed 40 per cent by gold and 60 per cent by local currencies in the BRICS bloc. The idea initially received some traction at the 2023 Johannesburg Summit. Ahead of the summit, Brazilian President Lula, expressing support, queried, “Who decided that the dollar was the (trade) currency after the end of gold parity?” 8 .

Drawing wisdom perhaps from the struggles faced by the European Union countries post-2008 financial crisis to maintain fiscal balance, BRICS has junked the idea of a common currency. Setting the record clear, Yury Ushakov, adviser to Putin, stated that BRICS countries are focusing on increasing cross-border trade and settlements in local currencies and indicated Russia’s intention to create an independent BRICS payment system based on digital technologies and blockchain 9 . Subsequently, at the 2024 Kazan BRICS Summit, Putin clarified that they are not fighting the dollar but deterring the weaponization of the SWIFT platform 9 .

Indian Response to the Idea of BRICS Currency:
From the beginning, India has consistently stayed away from the idea of BRICS currency. Reiterating India’s stand, EAM Jaishankar has clarified that India would back out of creating a new currency. The root of BRICS' frustration with the dollar is the loss of autonomy over economic policy. The euro was launched 50 years after France and Germany set aside their hostilities. Unfortunately, old and new members of BRICS have long-standing rivalries, viz, India Vs China, UAE Vs Iran, which will preclude the idea of fiscal convergence. But the idea of BRICS currency can potentially unsettle the US as the BRICS nations are part of large trade blocs, and together these trade blocs include 64 countries. Though the concept is a non-starter, any alternate payment mechanism adopted by BRICS can have an impact on the dominance of the US dollar.

Trump’s America First Policy, driven by the discriminatory tariff war and secondary sanctions, has substantially increased the financial volatility. Amid heightened fears of weaponization of dollar as a geopolitical tool, to mitigate vulnerabilities of dollar exposure and US monetary policy, BRICS countries are rapidly increasing trade in local currencies, which has surged to 90% from 65% two years ago11.

At the heart of India’s approach to BRICS currency is to uphold economic sovereignty, which aligns with its quintessential policy of strategic autonomy. Central to its foreign policy is the advocacy of a multipolar, inclusive and equitable world. A world where power is diffused among several power centers and not concentrated in one or two powerful states, with a range of middle powers contesting for influence. Such a diverse world comprising nations with greater autonomy would foster greater international stability, security and prosperity. Centered on this principle, India promotes ‘multi-alignment’, stitching diversified partnerships with different countries. India believes that a critical rebalance of power would prevent a unipolar or bipolar world.

Given its principled approach for a multipolar world order, India firmly stands with the BRICS countries, which is a diverse group of countries with common interests seeking to navigate the global challenges through collaboration and cooperation. This is also reflected in its committed stand to develop an alternate financial system that is more inclusive and less vulnerable to geopolitical coercions. India is not interested in replacing the US dollar and its dominance. For that matter, India is not in favor of a common BRICS currency. However, it is keen on exploring parallel mechanisms where countries are sufficiently insulated from the looming threats of ‘economic warfare’. Diversification is the mantra that India seeks to strongly promote to evade the wanton weaponization of trade and financial structures by powerful nations.

India and China are the powerful economic weights within BRICS+. Making 60% of BRICS GDP and as a major trade partner of all BRICS nations, they wield immense heft. Beijing has markedly benefited from the surge in the intra-BRICS trade in recent years. The expansion of BRICS has augured well for its trading prowess, with the balance within BRICS increasingly shifting towards Beijing. An increase in intra-BRICS trade is helping China to counterbalance the impact of the trade war with the US. Steadily buttressing its economic position, Beijing is evolving as a dominant player and might gain more mileage with a common BRICS currency.

Dollar Hegemony versus Yuan Hegemony:
China would use the proposed BRICS currency to gain financial hegemony. As the Euro experience suggests, Germany, which has been the economic heavyweight in the European Union, has driven the entire exercise of creating the new currency and made it the intervening currency. Being a dominant economy, China would, likely, emulate the same and call the shots12. All other nations would have to oblige to Chinese dictates’. Yuan is a minor international currency and part of the SDR currency basket, a common BRICS currency will boost its dreams of internationalizing the yuan and even challenge the hegemony of the US Dollar. Though China is the largest exporting market and an economic superpower, the dream of making Renminbi a global reserve currency has been rather wishful despite efforts by China since 2009 onwards. A BRICS currency can lead to the dominance of Yuan and China’s monetary policies.

Central to the idea of BRICS currency is to reduce dependence on the US dollar and bestow economic policy autonomy for countries. But by effectively integrating the monetary policies under China’s overbearing influence in BRICS would replicate the same process that BRICS countries want to avoid.

BRICS currency would, in fact, make China more powerful, lending it the power to veto to stall or allow plans to suit its economic interests. BRICS has been formed to reduce reliance on any powerful bloc and attempts to change the western-led world order into a multipolar system where developing countries can wield a proportional influence commensurate with their global economic activity.

China’s Geoeconomic Trap:
India and China have contrasting visions for BRICS, which is evident from Beijing’s enthusiasm for expanding the group to turn into a support organization for its geopolitical agenda including promoting its Belt and Road Initiative and Global Development Initiative. It was an attempt to strengthen its influence among the developed countries. Nations seeking an opportunity to get economically closer with China reposed great interest in joining BRICS. Watchful of Beijing’s geopolitical agenda for BRICS, India has been cautiously supportive of the process. China silently harbored the ambitions of turning BRICS into a China-centric group and inclined to position BRICS as another venue for “anti-US political activism”13.

Beijing harbors a vision to dethrone the US as the sole hegemon, while India is desirous of a world order where a wider range of voices, particularly from the developed world and the Global South, are objectively considered for decision-making processes.

In fact, India’s discussions at BRICS have been development-oriented with a focus on South-South economic and financial cooperation. With an economic potential to evolve into a counterpart of G7 countries, India wanted to promote engagement between both the groups. The 2025 Rio Declaration explicitly called for a comprehensive reform of multilateral institutions such as the International Monetary Fund (IMF), World Bank, World Trade Organization (WTO) and the UNSC to make it more inclusive, credible and representative of contemporary global realities14. India’s approach underscores a more equitable participation, advocating for the right of development within the global system.

China nurtures an ambition of unipolar Asia and a bipolar world. Being a revisionist power, China is inherently hegemonistic with a tendency to utilize every intergovernmental organization to promote its initiatives.

Historically and culturally, India is hard-wired to strategic autonomy and resists a subservient relationship. It refuses monopolization of organizations or institutions and believes in building partnerships and fostering cooperation for shared developmental goals. India’s solutions for reducing reliance on US-dollar emanates from domestic success of the digital payment infrastructure, Unified Payment Interface (UPI), that revolutionized India’s efforts towards financial inclusion and seamless financial integration.

Having firmly rejected the idea of a common BRICS currency, with tech-driven innovation, India is now working on an alternative to the SWIFT system through UPI. India is exploring to connect with other alternative payment mechanisms like BRICS Pay System and others. India is prioritizing internationalization of rupees by bringing through transformative cross-border payments with UPI and making it globally interoperable. Bolstering BRICS call for trade in national currencies, RBI is now allowing foreign banks to open Special Rupee Vostro Accounts (SRVAs) to facilitate trade settlements in rupees. As of now, India is expanding rupee trade with 18 countries. Alongside, RBI is piloting a digital rupee to eventually use for cross-border projects like mBridge, a multilateral central bank digital currency initiative (CBDC)15.

In the process of reducing dollar dependence, India has never sought to replace it with any other currency. On the contrary, it is actively pursuing alternative globally operable payment mechanisms for trade and financial transactions. In other words, “India is not anti-dollar. It is anti-weaponization of the dollar”.

Trump’s aggressive sanctions, tariffs and penalties has sparked a reassessment among nations and galvanized their efforts to reduce reliance on the US dollar. The double whammy of being subjected to the vulnerability of the US dollar and a systemic risk of sanctions is pushing nations to explore alternatives. As a dominating trading partner within BRICS, any common currency arrangement will be dominated by Beijing. Being an authoritarian state with questionable transparency, weak institutional checks and limited commitment to the rule of law, India will never agree to common BRICS currency.

With a comparable demographic and diplomatic heft, ordaining consensus-based functioning, India pushed back calls for common BRICS currency. The overarching goal of Chinese foreign policy is to turn BRICS as a counterbalance to the US. Besides, China’s plot of keeping the border issue alive and its efforts to encircle India and its strategy to challenge India’s status as the regional security power have brought things to a nought. Beijing’s constant needling of India’s external security interests with a military and diplomatic support to Pakistan has constantly fed into New Delhi’s suspicions.

The festering, unsettled border dispute has for long foreclosed the chances of Sino-India entente. Additionally, China’s belligerent, muscular expansion has always been the constant source of instability and peace in the region. China’s utter disregard of India’s three Ms- mutual sensitivity, mutual respect and mutual interest has pushed India into circumspection. While the lack of trust and rivalry can be a source of dissension, this on long term would sufficiently safeguard the BRICS platform from turning into a Sino-centric organization and lay foundations for a pragmatic multipolar world order.

Conclusion
Trump’s economic coercion in his second term will further force nations to further diversify their relation undermining the organizational foundations of the Western-led world. Emerging countries are now increasingly coopting advanced technology to bolster give wings to their foreign policy to navigate through the geopolitical uncertainties. Blockchain backed bitcoins were used by countries in the aftermath of 2008 financial crisis to avoid central bank surveillance. In the face of burgeoning punitive sanctions, nations are taking a fresh recourse to technology for creating a new parallel financial architecture to carry out transactions without a hitch.

References

1.https://www.ey.com/en_in/insights/tax/economy-watch/brics-to-pave-the-way-for-a-multipolar-currency-era

2.https://www.federalreserve.gov/econres/notes/feds-notes/the-international-role-of-the-u-s-dollar-2025-edition-20250718.html

3.https://www.ambassadorllp.com/ap-insights/the-exorbitant-privilege-under-threat-will-the-us-dollar-remain-the-worlds-main-reserve-currency

4. https://www.jpmorgan.com/insights/global-research/currencies/de-dollarization

5.https://www.reuters.com/article/business/world-needs-to-end-risky-reliance-on-us-dollar-boes-carney-idUSKCN1VD28C/

6.https://www.deccanherald.com/opinion/navarro-reminds-modi-of-americas-exorbitant-privilege-3690500

7.https://economictimes.indiatimes.com/news/economy/policy/brics-explores-creating-new-reserve-currency/articleshow/94628034.cms?from=mdr

8. https://investingnews.com/brics-currency/

9.https://www.firstpost.com/world/dedollarisation-brics-independent-payment-system-digital-technologies-blockchain-13745631.html

10.https://indianexpress.com/article/news-today/putin-advocates-for-swift-like-system-to-counter-us-dollar-dominance-9628629/

11.https://www.ebc.com/forex/brics-currency-explained-benefits-risks-and-strategy#:~:text=Sanctions%20on%20Russia%2C%20Iran%2C%20and,65%25%20just%20two%20years%20prior.

12.https://www.thehindubusinessline.com/economy/brics-currency-india-unlikely-to-endorse-the-move-may-just-ignore/article67215868.ece

13.https://www.atlanticcouncil.org/blogs/new-atlanticist/china-and-india-are-at-odds-over-brics-expansion/

14.  https://www.pib.gov.in/PressReleasePage.aspx?PRID=2142786

15.https://www.indiatoday.in/india-today-insight/story/as-brics-debates-reducing-dollar-dependence-why-india-is-walking-a-fine-line-2753797-2025-07-10