The upcoming BRICS (Brazil, Russia, India, China, South Africa and new members) summit in Delhi will not only discuss trade and investment figures, but major decisions may be taken to fundamentally change the current system of payments in the global economy. The BRICS countries are looking for a strong and practical way to break the monopoly of the US dollar in international trade for years. For this, cross-border digital payments and interoperability of Central Bank Digital Currencies (CBDC) are being emphasized now.
India’s UPI model will be the focal point
India’s Unified Payments Interface (UPI) model can play a very important role in this campaign to bypass the dollar. India’s proposal is to link the different fast payment systems of the BRICS member countries to each other, just as UPI has enabled instant, secure and free digital payments between bank accounts within the country. The Reserve Bank of India (RBI) has also confirmed that there are serious discussions going on among member countries regarding the integration of fast payment systems and the use of CBDC. Implementation of this system will almost eliminate the need for the dollar as an intermediary for transactions between the two countries.
No new BRICS currencies, focus on local currencies
Earlier there were speculations that the BRICS countries may launch their own joint ‘BRICS currency’ to compete against the dollar. But according to experts and current movements, the current target is not to create any new currency. Instead, countries’ existing national currencies and digital payment systems are to be tightly integrated. For example, if India wants to trade with Russia or Brazil, it can make a payment in rupees and the other country receives its own currency (such as the ruble) directly in digital form. A sophisticated digital infrastructure is being prepared for this.
Golden opportunity for India and local traders
If this system is implemented, it will prove to be the biggest boon for the Indian economy and the import-export businessmen. The current dollar-based system incurs currency conversion charges and is a huge waste of time. The new system will make this process much faster and cheaper. Besides, this will accelerate the process of internationalization of Indian rupee. India has already worked on UPI integration with countries like France, UAE and Singapore. Now the BRICS platform provides a historic opportunity for India to showcase the strength of its ‘Digital Public Infrastructure’ (DPI) to the entire world.
The way forward and the challenges
However, this dream of eliminating the dollar is not that simple. All BRICS countries have different banking systems, economic policies, currency values and digital security regulations. All countries have to come to a common platform on legal issues like currency risk, cyber security and prevention of money laundering. Especially since a country like China has its own vast financial network, it is natural to raise questions of data privacy and security. However, a positive step in this direction at the Delhi Summit could lay the foundation for a major shift in the global economy.