Why in News

• The BRICS New Delhi Declaration has renewed discussion on promoting trade in local currencies among BRICS countries, but does not provide a clear implementation plan and stresses national priorities, stating there is “no one-size-fits-all approach.” India’s rupee trade is currently limited mainly to Russia and the UAE, showing that progress remains slow and cautious.

Background: What Is BRICS Local Currency Trade

• Local currency trade means member countries settle trade in their own currencies instead of the US Dollar — for example, India paying Russia in rupees. The idea gained momentum after Western sanctions on Russia post the Ukraine war pushed Moscow toward de-dollarisation.
• BRICS has discussed local-currency trade for years through task forces and committees; the New Delhi Declaration reflects a cautious, gradual approach rather than a decisive shift.

Current Status of India’s Rupee Trade

• India’s rupee-based trade is active with only two BRICS partners — the UAE and Russia — and even this trade is relatively small in volume.
• Russia struggled to spend rupees accumulated from oil exports to India since it did not import enough goods in return; a partial solution emerged only because Russia was forced to import petroleum products from India (a side effect of Ukraine’s attacks on Russian refineries) — a small, situational trickle rather than a structural shift.
• India has also started using the UAE Dirham to pay for Russian oil — effectively treating another BRICS currency as “local” currency, a workaround rather than a solution.

1. The Exporter vs Importer Conflict

• As an exporter, India benefits from being paid in dollars, because a depreciating rupee means every dollar earned converts into more rupees — favouring exports.
• As a major importer (especially of oil), India would prefer to pay in cheaper local currencies to save on forex outgo. India cannot have both advantages at once — a genuine policy trade-off, not a simple yes-or-no decision.

2. The China Factor

• China alone accounts for nearly two-thirds of all BRICS exports — so BRICS local-currency trade would mostly translate into trade in the yuan. Despite some thawing in India-China relations, India remains deeply uncomfortable conducting a large share of trade in a currency controlled by a strategic rival — a geopolitical constraint, not just an economic one.

3. Local Currency Trade vs a Common BRICS Currency

4. The US Tariff Threat

• US President Donald Trump has threatened 100% tariffs on any country seen adopting or promoting a BRICS currency. Given India’s broader trade relationship with the US, India is unlikely to risk provoking such action, even indirectly.

5. Weak Motivation Compared to Russia and Iran

• Russia and Iran have urgent reasons to move away from the dollar — heavy Western sanctions and exclusion from the dollar-based financial system. India faces no similar sanctions, so lacks an equally compelling reason to rapidly shift away from dollar trade.

Significance of the Issue

• BRICS has discussed local-currency trade for years, with task forces examining ways to reduce dependence on major international currencies. The New Delhi Declaration reaffirmed the importance of national currencies but stressed “no one-size-fits-all approach,” allowing each country to decide its level of participation — so the move remains gradual, not an immediate shift in the international monetary system.

Challenges Going Forward