Local currency trade sounds good, but execution is hard
RBI Governor Sanjay Malhotra has confirmed talks with BRICS countries to link payment systems and promote trade in local currencies. The aim: faster, cheaper cross-border transactions and less dependence on the dollar.
It’s not new. India already has rupee trade arrangements with UAE, Mauritius, Maldives, and Indonesia. UPI is being pitched as a model. The logic is simple — if Indian exporters can be paid in rupees, and importers can pay in rubles or yuan, we bypass dollar volatility and SWIFT delays.
But ambition and reality are different.
First, trust. A payments link only works if banks in all countries accept each other’s systems, settle in real time, and agree on exchange rates. UPI works domestically because RBI controls it. BRICS doesn’t have that central authority.
Second, convertibility. The rupee is not fully convertible. Most BRICS trade is still invoiced in dollars because it’s liquid and accepted. No exporter wants to be stuck with currency they can’t use globally.
Third, politics. BRICS includes China, with whom India has a trade deficit and border tensions. Will Indian businesses route payments through a system where China has influence?
None of this means the idea should be dropped. De-dollarization is happening in parts of the world. For India, reducing forex risk and transaction costs is real. CBDCs could help — RBI is already piloting the digital rupee.
But the pitch must be practical. Start with corridors that already have trust: UAE, ASEAN, Africa. Build bilateral links first, then multilateral. And don’t sell it as “anti-dollar.” Sell it as “pro-efficiency.”
If done right, this could cut costs for MSME exporters. If done wrong, it will be another announcement file. The RBI has the credibility. Now it needs partners willing to move.