New Delhi. India is hosting the BRICS Summit this week. Top leaders of 11 countries will gather in this conference starting from Saturday in New Delhi. Meanwhile, now the debate has started once again on the plan of BRICS Nations to end their dependence on Dollar. In fact, BRICS led by India, China and Russia has been trying to find an alternative to the dollar for many years. In such a situation, this group has always been irritated with America. Now before the upcoming summit, India has prepared an important proposal to ease cross border payments. This may further increase America's anxiety.
Actually, BRICS has been working for some time on a digital payment system through which digital currencies of countries like India, China and Russia can be integrated. Now according to a Bloomberg report, India will advocate promoting the use of digital currency issued by central banks among the BRICS member countries.
However, India is not supporting any unified payment network that can be seen as an alternative to the US dollar or SWIFT. The reason for this is that India does not want the BRICS group to be seen as a block standing against America or Western countries. This is why India is emphasizing on bilateral digital currency connectivity instead of creating a common 'BRICS Payment System'.
Emphasis on digital and local currency
According to the report, India proposes that BRICS countries link the digital currencies of their respective central banks. This will reduce dependence on intermediary banks and drastically reduce transaction costs. In simple language, India is emphasizing on doing business in the own currency of the member countries instead of using the currency of any third country i.e. dollar.
What is India's plan?
According to the information, in this system, Central Bank digital currencies like India's e-Rupee, China's Digital Yuan and Russia's Digital Ruble will be connected to a common technical platform. In this, every country will maintain complete control over its currency. The only change will be that mutual transactions will become easier through these currencies. Through this system, BRICS countries will be able to make payments for trade among themselves directly in their digital currency. For this, neither dollars will be required nor will payment have to be done through dollar based system like SWIFT.
India is playing an important role in shaping this entire model. India has been continuously emphasizing that linking the systems together is a better way than mixing currencies. Its basis is India's own digital payment system UPI. UPI has made digital payments very easy within the country and the same model can be extended to other countries also.
How will BRICS payment system work?
BRICS will work on digital payment settlement cycle. This means that not every transaction will be paid immediately. The accounts of imports and exports will be added within a fixed period and at the end only the difference amount will be paid. For example, if India buys goods worth Rs 500 billion from China in a month and China takes goods worth Rs 450 billion from India, then India will have to pay only Rs 50 billion. This will also reduce transaction costs.