India, the “I” in the middle of BRICS, might also be said to occupy its middle ground. Having expanded beyond the five nations in the acronym – Brazil, Russia, India, China and South Africa – the bloc is seen as an economic counterweight to the West, a potential challenger to the U.S. dollar’s global dominance.
At the same time, India has surpassed China in population, sought to assert its own leadership among emerging-market economies, while trading actively with the U.S. and belonging to the Australia-India-Japan-U.S. security grouping known as The Quad.
India has staked out a position so that China “didn’t portray itself as the only voice of the Global South,” Tanvi Madan, Brookings Institution senior fellow – foreign policy, Center for Asia Policy Studies, explained in a Peterson Institute for International Economics webinar.
Far from being BRICS-exclusive, India maintains a “diversified portfolio of partners,” characterized in recent years by informal coalitions, or “issue-based groupings” called pluralaterals or minilaterals, Madan said.
Brookings’ Tanvi Madan
It is a “balancing act,” as Peterson Institute nonresident senior fellow Cecilia Malmström, moderator of the December event, put it. She noted that 10 current BRICS members account for 36% of global GDP and 45% of the global population.
“A major driver of global growth, the BRICS overtook the G7 in 2022 in terms of GDP. By 2026, the bloc is expected to have higher trade flows than the G7,” Sanjay Bhattacharyya, a former Indian diplomat who is a professor of diplomatic practice at Jindal Global University, wrote in The BRICS Nations Reach a Crossroads, an article published by Canada’s Centre for International Governance Innovation.
Not joining calls within BRICS to reduce dollar dependency, India has favored pragmatic local-currency mechanisms like rupee invoicing for trade. Analysts suggest this reflects internal BRICS dynamics, including mistrust between member states and the absence of a unified trade policy at a time when U.S. President Donald Trump has escalated tariff threats.
In December, India External Affairs Minister Subrahmanyam Jaishankar said at the Doha Forum, “India has never been for de-dollarization . . . The U.S. is our largest trade partner, and we have no interest in weakening the U.S. dollar at all.”
A January article in Foreign Policy argued, “Contrary to the conventional wisdom in Washington and New Delhi that predicts a potential downturn in the U.S.-India trade relationship during Trump’s second term, the reality is that the two countries have a significant opportunity to expand trade . . . While U.S.-India economic ties have steadily grown throughout the 21st century, this cooperation has fallen short compared to the extraordinary advances in other dimensions of the bilateral relationship. A well-crafted trade agreement could unlock the untapped potential of this economic partnership and deepen the broader strategic relationship between the two nations.”
Trade, tariff and immigration issues were on the table when India Prime Minister Narendra Modi visited the U.S. capital in February. India’s trade surplus with the U.S. is a Trump grievance.
“India’s commitment to active diplomatic engagement, along with the prime minister’s strong base of support at home, will put the country in a strong position to prioritize strengthening relations with the United States,” said an article by Srujan Palkar, the Global India fellow and an assistant director at the Atlantic Council’s Scowcroft Middle East Security Initiative.
For financial and risk managers, the geo-economic developments underscore the challenges of navigating a shifting global currency landscape.
Economists generally dismiss the likelihood of the dollar losing its primacy – it accounts for 58% of global foreign reserve holdings, with the euro ranking second at 20% – but the U.S. currency share is down from 70% in 2000. China has been expanding its CIPS payment system, now connecting more than 160 countries including a majority of BRICS members, while seeking to increase international usage of the renminbi, according to the Atlantic Council Dollar Dominance Monitor.
Part of India’s “balancing act” is wariness of BRICS-currency or non-dollar trade initiatives.
“India will not countenance a common currency that China could potentially dominate,” says former Reserve Bank of India (RBI) governor D. Subbarao. “In practical terms, if the global financial system cleaves into two, it will hurt all emerging economies, including India, which rely on trade and investment from America and Europe. Staying with the dollar is less costly for us than moving out of it.”
Former central bank governor Duvvuri Subbarao
Still, India leverages BRICS for political clout while maintaining economic ties with the West. Trade agreements with the likes of Russia and the United Arab Emirates generate rupee-based transactions, reducing exchange-rate risks and preserving foreign exchange reserves.
Nandan Unnikrishnan, distinguished fellow at the Observer Research Foundation, echoes this view, saying, “India will never want BRICS to become an anti-Western body. The West is crucial to our developmental needs.”
While there may be concerns about “weaponization” of the dollar, India’s preference for bilateral agreements in national currencies can lessen volatility without disrupting global trade, Unnikrishnan adds.
Buying discounted oil from Russia reflects India’s calculated approach. India refines Russian oil and sells it as petrol and diesel to Western countries, balancing economic interests and geopolitical considerations.
The key takeaway for those evaluating geopolitical and economic risks is clear: “India will pursue whatever benefits its national interest,” Unnikrishnan says.
India has taken steps to adjust to de-dollarization. It conducts trade with Russia in rubles and is exploring non-dollar settlement. However, “the BRICS initiative on de-dollarization has had no significant impact on India yet,” says Alicia Garcia Herrero, Natixis chief economist for Asia-Pacific. “There’s a long way to go.”
Herrero suggests that India could consider issuing dollar-denominated debt targeted at specific regions, such as the Middle East and Gulf, to compete with U.S. Treasury bonds. “Of course, India will have a harder time trying to do this compared to China,” she adds.
Meanwhile, Indian corporations have shown adaptability to global financial shifts. A senior executive at Tata Steel points out that navigating volatility has been crucial for sustaining operations during uncertain times.
“Volatility has become the norm, especially in the past three years. The key is not to be surprised by it, but to manage the parameters that trigger it,” says the executive, who requested anonymity due to the sensitive nature of discussing corporate financial strategies publicly, as well as compliance considerations at Tata Steel. For instance, crude oil’s deep global interlinkages require adaptive pricing and procurement strategies.
Indian companies have also embraced hedging strategies to manage external commercial borrowings. They may, for example, turn to interest rate swaps to mitigate the risks of currency fluctuations.
“De-dollarization could enhance corporate profitability by reducing dollar dependency and optimizing hedges,” the Tata executive says. As trade mechanisms evolve, strategies like these could provide a competitive edge.
Although de-dollarization could bring benefits, there are risks to consider.
“You can’t completely replace the dollar,” says former RBI deputy governor R. Gandhi. “Any transition would be a really, really long haul,” in view of the dollar’s ability to support trade and finance even with balance-of-payments deficits – a quality unmatched by other currencies.
R. Gandhi
Given India’s aim to keep the rupee competitive, “if exports are to grow, the currency must be depreciating,” Gandhi points out.
Regional trade blocs could offer alternatives, Gandhi suggests. “Under the Asian Clearing Union, countries settled trade in local currencies, but as economies globalized, settlements shifted to the dollar.”
This shift predominantly occurred from the 1970s onward, as globalization accelerated and the dollar became dominant in international trade and finance. However, a return to local currencies could work regionally but risks fostering economic isolation, Gandhi added.
Exporters like Tata Steel and Infosys have adapted to uncertainty by managing currency exposures and leveraging interest rate swaps – which can be a template for any multinational.
For U.S. and global risk managers, India’s measured approach highlights the complexities of aligning geopolitical objectives with economic priorities. Not denying dollar dominance, India has hedged against it in some instances. The RBI’s prioritizing of incremental measures instead of broad policy shifts reflects a desire to maintain stability amid changes in the global economic environment.
If successful at navigating the geopolitical undercurrents without jeopardizing its economic growth or global partnerships, India could represent a roadmap for much of the rest of the world.