Internationalize the rupee while a BRICS currency loses traction
Earlier this month the Reserve Bank of India (RBI) released a report on the rupee’s internationalization. If our currency is used to settle our export/import transactions, it shifts exchange-rate risk to our counterparts, which is a big plus for our firms. In parallel, there has also been talk about a BRICS (Brazil, Russia, India, China and South Africa) currency along special-drawing-rights lines.
We should focus on popularizing the rupee as a means of bilateral exchange ahead of a BRICS currency. For the latter to succeed, the national currencies of all members must first have mutual acceptance within the group and also internationally. Why is there so much discussion about moving away from the US dollar’s hegemony in international transactions? The USD has been the world’s de facto reserve currency since 1944, first under its gold-exchange standard and since 1971 in the era of the floating exchange rates.
Recent data released by the International Monetary Fund shows that the USD’s share of world reserves was 59.0% during January-March 2023, up slightly from the previous quarter. For BRICS countries, the de-dollarization of world financial markets is a means to enhance economic autonomy and reduce exposure to external economic shocks. The US’s recent use of economic sanctions as a foreign policy tool against Russia has upped its appeal.
For over a decade, BRICS have mulled a currency styled on the International Monetary Fund’s SDRs, which are allotted to its member countries to help cope with emergency requirements. SDR’s value is based on a basket of five currencies: the US dollar, euro, Chinese renminbi, Japanese yen and the UK’s pound sterling. An SDR-style reserve with BRICS currencies managed by themselves would
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