At the 2024 BRICS Summit in Kazan, Russia in October, discussions about a shared BRICS currency and reducing reliance on the US dollar gained significant attention, but behind the scenes, Indian businesses have been cautious in embracing the bloc’s evolving framework.
While the Indian government sees BRICS as a key strategic platform, the formal business community, often referred to as India Inc., remains cautious due to its strong global market ties. It questions the practicality and risks of deeper engagement with an organization that could disrupt current global economic systems.
This pragmatic caution reflects India Inc.’s focus on maintaining stability and minimizing disruption to established trade relationships.
For Indian businesses, especially those with strong ties to the United States and the European Union, the prospect of aligning with a bloc that seeks to position itself as an alternative to Western-led economic structures is a difficult proposition.
India’s business landscape has long thrived on global integration and market diversification, with companies heavily reliant on Western markets for both exports and investments.
Even Indian start-ups are cautious about shifting away from established global networks that have supported their growth and access to venture capital.
Together, the larger business community in the country sees the idea of reducing reliance on the US dollar or adopting a shared BRICS currency as both risky and unfeasible, due to both logistical challenges and the potential disruption to established trade relationships.
India's reliance on the US Dollar
Ajai Sahai, director general of the Federation of Indian Export Organizations, expressed concerns about the feasibility of BRICS’ currency-related proposals, highlighting that while local currency cooperation may mitigate some trade risks, it does not provide the stability and universality that the US dollar offers.
Indian corporations depend on the dollar’s widespread acceptance, and any sudden shift toward a new currency would create unnecessary turbulence, especially as businesses already grapple with exchange rate volatility and geopolitical uncertainty.
The idea of a shared BRICS currency is particularly contentious. As former governor of the Reserve Bank of India Shaktikanta Das pointed out, BRICS countries lack the policy coherence and geographical unity seen in successful blocs like the Eurozone.
The proposed currency is viewed more as a symbolic gesture than a practical economic tool, and companies are concerned about the implications of operating in a global landscape fractured by competing currencies.
The potential for retaliatory measures, particularly from the United States – especially with President-elect Donald Trump’s call for a 100% tariff on BRICS nations advocating for a shared currency or challenging the dominance of the dollar – has only heightened skepticism.
Another source of unease for Indian businesses lies in the intra-BRICS dynamics, particularly the dominant influence of China within the group.
The New Development Bank
The New Development Bank, which plays a key role in BRICS’ financial architecture, is often seen as being heavily shaped by Beijing, prompting concerns about unequal resource allocation and Chinese hegemony.
Tensions between India and China have cast a shadow over the BRICS bloc, with Indian firms wary of the political implications that might hinder their interests.
Instances such as China blocking India’s efforts to raise concerns about Pakistan’s support for terrorism within BRICS have only deepened these suspicions, creating a level of mistrust that extends to corporate decision-making.
Moreover, India’s business community remains focused on the “ease of doing business” factor. For Indian companies, regions with efficient legal systems, minimal bureaucracy, and reliable dispute-resolution mechanisms are key to successful operations.
Unfortunately, the diverse and often conflicting policy environments within BRICS countries present challenges in this regard, reducing the appeal of deeper economic integration within the bloc.
Despite these challenges, the evolving BRICS framework does offer opportunities for India, especially in sectors such as energy, infrastructure, and technology. With the inclusion of new members such as Saudi Arabia, UAE, and Egypt, India gains deeper access to strategically important regions for energy security and market expansion.
However, for these opportunities to be realized, BRICS must focus on non-controversial, practical initiatives – such as infrastructure development and technology exchange – rather than pushing forward with lofty, idealistic policies like a shared currency.
Indian businesses will need to continue engaging with BRICS carefully, ensuring alignment with their global operations while advocating for fair and feasible policies within the bloc.
Simultaneously, Indian policymakers must pursue a dual-track strategy, actively participating in BRICS to shape its direction while maintaining strong partnerships with Western markets. This will allow India to manage its economic interests effectively without disrupting existing global frameworks.
The writer is an India-based lawyer specializing in cross-border trade and investments and a fellow with the South Asia Democratic Forum in Brussels.