In a bold and calculated step, India has intensified efforts to internationalize the Indian Rupee (INR) as a medium for trade settlements, particularly within the BRICS alliance, signaling a pragmatic approach to reducing reliance on the U.S. dollar. This move, while not explicitly aimed at de-dollarization, reflects India’s strategic intent to bolster its economic sovereignty, mitigate currency volatility, and reshape the dynamics of global trade. By promoting rupee-based trade, India is positioning itself as a key player in the evolving financial landscape, leveraging the BRICS platform to challenge the long-standing dominance of the U.S. dollar. This article explores India’s rupee trade initiative, its implications for BRICS nations, and its potential to reshape global trade.

The BRICS Alliance: Composition and Context

The BRICS bloc, an association of major emerging economies, currently comprises Brazil, Russia, India, China, South Africa, Iran, the United Arab Emirates (UAE), Ethiopia, Egypt, and Indonesia (the latter joined in January 2025). This group represents a significant portion of the global population, GDP, and trade volume, making it a formidable force in advocating for a multipolar economic order. The BRICS nations have long discussed reducing dependence on the U.S. dollar, a currency that dominates approximately 60% of global reserves and the majority of international trade invoicing. Geopolitical tensions, including U.S. sanctions and tariffs, have accelerated these discussions, prompting initiatives like India’s rupee trade push.

India’s Rupee Trade Initiative: A Strategic Framework

On August 5, 2025, the Reserve Bank of India (RBI) issued a circular easing regulations for opening Special Rupee Vostro Accounts (SRVAs), allowing banks to facilitate these accounts without prior RBI approval. SRVAs enable foreign entities to hold Indian rupees in Indian banks, streamlining cross-border trade settlements in INR. This policy eliminates the need for dollar conversions, reducing transaction costs and exposure to exchange rate volatility. The move was partly a response to U.S. tariffs, including a 50% import duty imposed on India, as well as broader geopolitical pressures, such as threats from former U.S. President Donald Trump to impose higher tariffs on BRICS nations attempting to weaken the dollar’s global reserve status.

India’s initiative extends beyond BRICS, with invitations sent to countries like Russia, the UAE, Sri Lanka, and the Maldives to settle trade in rupees. Bilateral agreements with these nations have already widened rupee settlement corridors, with Russia and the UAE actively participating. For instance, India’s trade with Russia, particularly in oil imports, has increasingly shifted to rupee-based settlements, bypassing U.S. sanctions and dollar dependency. Similarly, Indonesia, a new BRICS member, has embraced rupee-rupiah trade settlements, further amplifying the initiative’s reach.

Economic and Strategic Rationale

India’s push for rupee trade is driven by both economic and geopolitical imperatives:

Mitigating Currency Volatility: The rupee has depreciated by over 3.5% against the U.S. dollar in the past year, reaching a record low of 86.65 in early 2025. A stronger dollar increases import costs, particularly for critical commodities like oil, and exposes Indian businesses to Federal Reserve-driven currency swings. By settling trade in rupees, India reduces these risks, offering predictability for exporters and importers alike.

Response to U.S. Tariffs and Sanctions: The imposition of U.S. tariffs and sanctions, such as those on Russia and threats against BRICS nations, underscores the vulnerability of dollar-dependent economies. India’s rupee trade initiative serves as a shield, insulating its economy from external pressures and enhancing financial sovereignty.

Strengthening Economic Resilience: By internationalizing the rupee, India aims to build gradual global acceptance of its currency. This reduces reliance on the dollar for bilateral trade, particularly with BRICS nations and Global South partners, fostering a more diversified and resilient trade ecosystem.

Strategic Autonomy: India’s approach reflects its doctrine of strategic autonomy, avoiding alignment with any single currency bloc while deepening ties with both Western and non-Western partners. This balanced diplomacy allows India to promote the rupee without antagonizing the U.S. outright, as evidenced by the Ministry of External Affairs’ (MEA) clear stance that de-dollarization is not part of India’s financial agenda.

Impact on BRICS Trade

The adoption of rupee-based trade within BRICS has significant implications for intra-bloc commerce, which accounts for a growing share of global trade. Approximately 90% of intra-BRICS trade is already settled in non-dollar currencies, a trend bolstered by India’s initiative. The key impacts include:

Reduced Transaction Costs: By bypassing dollar conversions, BRICS nations can lower transaction costs, making trade more efficient. For example, when India imports oil from Russia or exports goods to Brazil, payments in rupees eliminate the need for intermediaries and reduce foreign exchange risks.

Enhanced Trade Volumes: The rupee trade framework encourages BRICS nations to deepen economic ties. For instance, Russia and India are targeting $100 billion in annual trade, driven by rupee-based oil transactions. Similarly, China’s lifting of export restrictions on rare earth minerals and fertilizers to India signals strengthening trade relations, potentially facilitated by local currency settlements.

Diversification of Payment Systems: India’s initiative aligns with BRICS’ broader efforts to develop alternative financial mechanisms, such as the BRICS Pay cross-border payment system and discussions around a blockchain-based “Unit” currency. While a common BRICS currency remains a distant prospect due to economic disparities and political differences, rupee trade serves as a practical step toward reducing dollar dependency.

Challenges and Limitations: Despite its potential, rupee trade faces hurdles. Many nations still require dollars for third-party trade, and the rupee’s limited convertibility poses challenges. Additionally, the economic heterogeneity among BRICS members—India’s high growth rate contrasts with slower progress in Brazil or South Africa—complicates efforts to harmonize financial systems. Trust and acceptance of the rupee as a reliable trade currency will take time to build.

Reshaping Global Trade and Dollar Dominance

India’s rupee trade push, while not aiming to dethrone the dollar, contributes to a gradual erosion of its global dominance. The U.S. dollar’s entrenched position—rooted in the 1944 Bretton Woods system—stems from its role as the primary currency for global trade, reserves, and pricing of commodities like oil and gold. However, BRICS initiatives, including India’s rupee trade, challenge this hegemony in several ways:

Incremental De-Dollarization: By promoting local currency trade, BRICS nations reduce the demand for dollars in bilateral transactions. If even a fraction of global trade shifts to currencies like the rupee, yuan, or rubles, it diminishes the dollar’s monopoly. For instance, Russia and China already conduct significant trade in their respective currencies, and India’s agreements with Russia, the UAE, and Indonesia expand this trend.

Geopolitical Implications: The push for local currency trade is partly a response to U.S. sanctions, such as Russia’s exclusion from the SWIFT system. By developing alternative payment systems like BRICS Pay, the bloc aims to bypass Western-dominated financial infrastructure, enhancing financial sovereignty for member states.

Global South Empowerment: BRICS nations, representing the Global South, account for a growing share of global GDP and trade. India’s rupee trade initiative, combined with similar efforts by China and Russia, strengthens the economic clout of these nations, offering a counterbalance to the Global North’s financial dominance. As more countries adopt local currency trade, the dollar’s role as the default currency could weaken.

Long-Term Challenges to the Dollar: While the dollar’s dominance is unlikely to collapse overnight, India’s initiative contributes to a slow but steady shift. Analysts note that de-dollarization has been ongoing for decades, with no single currency yet poised to replace the dollar. However, the cumulative effect of BRICS’ efforts—combined with global trends toward economic diversification—could erode the dollar’s share in reserves and trade invoicing over time.

Potential Risks and Diplomatic Tensions

India’s rupee trade push, while pragmatic, is not without risks. The U.S. has expressed concerns over BRICS’ monetary cooperation, with President Trump threatening 100% tariffs on nations challenging the dollar’s reserve status. Such measures could escalate trade tensions, particularly for India, where 55% of exports to the U.S. face tariffs. Additionally, geopolitical rivalries within BRICS—particularly between India and China—could hinder cohesive efforts toward a unified financial strategy. India’s rejection of a common BRICS currency underscores these tensions, favoring bilateral agreements over a collective monetary framework.

Moreover, the rupee’s volatility and capital controls limit its appeal as a global currency. Unlike the euro or pound, the rupee lacks the infrastructure to challenge the dollar’s role in pricing commodities or serving as a reserve currency. Building global trust in the rupee will require sustained economic reforms and wider acceptance among trading partners.

Conclusion

India’s push to internationalize the rupee through BRICS is a strategic maneuver to enhance economic resilience, reduce dollar dependency, and assert financial sovereignty. By leveraging SRVAs and bilateral agreements, India is fostering a trade ecosystem that prioritizes local currencies, benefiting BRICS nations like Brazil, Russia, China, South Africa, Iran, the UAE, Ethiopia, Egypt, and Indonesia. While the initiative is not aimed at dismantling the dollar’s dominance, it contributes to a broader BRICS agenda of de-dollarization, challenging the U.S.-centric financial order.

The impact on global trade could be profound, with reduced transaction costs, increased intra-BRICS trade, and a gradual shift toward multipolar financial systems. However, challenges such as rupee convertibility, economic disparities, and geopolitical tensions must be addressed to sustain this momentum. India’s balanced approach—promoting the rupee while maintaining diplomatic neutrality—positions it as a key player in reshaping global trade dynamics. As BRICS nations continue to explore alternatives like BRICS Pay, the world may witness a slow but significant transformation in the global financial landscape, with the rupee playing a pivotal role.