Brics Common Currency: A New Era for Global Trade

The Brics common currency is a game-changer for global trade. It's a single currency that will be used by the five Brics member countries - Brazil, Russia, India, China, and South Africa.

The idea of a Brics common currency has been discussed for years, and it's finally becoming a reality. This will make trade between these countries much easier and less expensive.

With a common currency, businesses will no longer have to worry about exchange rates and currency fluctuations. This will boost trade and investment between Brics countries, creating new opportunities for economic growth.

The Brics common currency is expected to be launched in the near future, and it will be a significant step towards a more integrated global economy.

BRICS countries are actively considering internal trading in domestic currencies, with India and China leading the way in exploring mutual trade settlements in national currencies. This move is a step towards introducing a common currency.

A 2019 study by Global Business Review found that the inclusion of a stronger policy interaction in the region, especially in monetary management, unveils the chance of a strong currency union amongst BRICS members. This is a promising development for the bloc.

Each BRICS country has its own reasons for supporting the move towards a common currency. Russia and China are driven by political interests, while India, South Africa, and Brazil have more pragmatic reasons.

The BRICS bloc has a combined GDP of over $32.72 trillion, which is 31.59 percent of the world's GDP. This is a significant economic heft size, surpassing the US's GDP of around $25.46 trillion.

The BRICS countries have a strong military presence, with Russia ranking second, China third, and India fourth in the Global Firepower Index. However, the possibility of a military alliance was ruled out in 2018.

The BRICS New Development Bank (NDB) has established a Contingent Reserve Arrangement (CRA) liquidity mechanism, which has attracted many developing countries to join the bloc. This indicates BRICS' growing financial outreach.

A comparison of the regime-switching behaviour of the real exchange rates of the five BRICS nations before and after the group's formation shows that the inclusion of a stronger policy interaction in the region has a positive impact on the bloc's economic stability.

Note: The table above highlights the key criteria for building a global currency, as discussed in the article section.

India's Approach to a BRICS Common Currency is still in its infancy, with the country's central bank, the Reserve Bank of India, yet to make a formal announcement on its intentions.

India has been a strong advocate for a BRICS common currency, with the country's finance minister, Nirmala Sitharaman, stating that it would be a "game-changer" for the region.

The Indian government has been exploring the feasibility of a BRICS currency, with a focus on reducing transaction costs and increasing economic integration among member countries.

India's challenges in adopting the new BRICS currency are multifaceted. The foremost challenge is of political intentions behind de-dollarisation trumping the practical reasons for the same, which could lead to a clash of interests and disputes within the bloc.

One of the key issues is that Russia may have a greater preference for transacting in the Renminbi over the Rupee, despite the Rupee-Rouble arrangement between India and Russia. This would create tension within the bloc and hinder the transition to national currencies.

Increased dependence on China is another significant challenge, as China occupies a major share of the BRICS GDP. This could lead to a rise in the bilateral trade deficit, especially with China, and give China a more significant say in setting the bloc's trade rules.

The risk of exchange rate volatilities in a member nation is also a concern, as seen with the steep decline in the value of the South African Rand. It becomes essential to set a band within which a BRICS member currency like the rand ought to fluctuate, but determining such a fluctuation band is challenging due to the lack of a defined set of convergence criteria.

India's Strategic Approach to BRICS must navigate the challenges of de-dollarisation, where Russia's preference for the Renminbi over the Rupee could lead to a clash of interests within the bloc.

To overcome this challenge, India needs to establish clear communication with Russia to ensure that their Rupee-Rouble arrangement is prioritized. The practical reasons for de-dollarisation should take precedence over political intentions.

India's increased dependence on China is another challenge, as the intra-BRICS trade might get liberalised, leading to a rise in the bilateral trade deficit, especially with China. This could result in China having more influence over the bloc's trade rules.

To mitigate this risk, India should focus on diversifying its trade relationships within the BRICS bloc and setting clear trade rules to prevent Chinese dominance.