India initiative on Rupee convertibility
Alternative to Dollar is a thought in the third world
Dollar being a dominant currency increases import costs, particularly for critical commodities like oil 80% of which is imported by India. Besides it suffers losses due to exchange rate fluctuations and multiple exchange transactions. It increases transaction costs; and larger foreign exchange outflows. An important factor is that Indian rupee has been continuously on a downward swing for the past decade tumbling to close to 90 to a dollar.
By settling trade in rupees, India can reduce costs and risks, offering predictability for exporters, importers and international trade. Towards facilitating huge volumes of transactions India has developed largest payment systems i.e. UPI, FINTECH, NBFCs and banking reforms, digitalisation and high degree of technology adoption which further supports the initiative.
What the initiative means
While not explicitly aimed at de-dollarisation, it reflects India’s strategic intent to bolster its currency, the economic sovereignty; mitigate currency volatility versus dollar and reshape the dynamics of global trade.This is signalling a pragmatic approach to reducing reliance on the U.S. dollar in the long run.
By promoting rupee-based trade, India is positioning itself as a key player in the evolving financial landscape. BRICS nations are looking for an alternative financial platform to mitigate harsh effects of US currency. This initiative will help in consolidating its trade and commerce using rupee for settlements, within BRICS nations to begin with. It does have its potential to reshape global trade.
What significance BRICS has to this initiative
The expanded BRICS bloc now consists of nearly 19 member states. An association of major emerging economies, currently comprises Brazil, Russia, India, China, South Africa, Iran, the United Arab Emirates (UAE), Ethiopia, Egypt, Indonesia and Nigeria. This group represents a approximately 54% of the global population represents approximately 35-40% of global GDP (approx 26 trillion dollars) which exceeds total GDP of G7-8. Further; about 25% of global merchandise exports come from this group. Besides, the economies are growing on average of 4-5% p.a. All this makes it a formidable force in charting towards a new multipolar economic order.
While the BRICS as a whole, has been deliberating reducing dependence on the U.S. dollar as currency of exchange for a long time, ongoing geopolitical tensions, wars, punitive U.S. tariffs and sanctions have given it a further impetus to settle cross border trade in bilateral currency.
Indian Central Bank Facilitates Rupee transactions
During August, 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 for intra BRICS trade and co-operation. India’s rupee trade initiative is driven by both economic and emerging geopolitical imperatives.
Besides, India’s initiative is more inclusive as it encourages non-member countries as well, to settle trade in rupees under bilateral agreements. While US sanctions have worked in reducing trade with Russia, recently, Indonesia, a new BRICS member, has embraced rupee-rupiah trade settlements increasing its reach. This considerably reduces transaction costs and exposure to exchange rate volatility of developing economies. This partly is also seen a response to U.S. imposing high tariffs as well as exerting geopolitical pressures.
Impact of the Initiative
Trade settlements within BRICS nations in bilateral currencies has significantly increased. It has leveraged reduced Transaction Costs; increased trade efficiency; reduced currency barriers or intermediaries; lesser foreign currency exchange risks; increased intra BRICS trade volumes; strengthen trade and economic ties; helping member countries in sourcing essential raw materials, increased R&D co-operation and technology sharing. Increased financial infrastructure, alternate payment systems like BRICS Pay are built for cross border trade settlement in mutual currencies enhancing financial stability and sovereignty for member states.
Is it an Utopia
May not be! Since Bretton Woods Conference in 1944, World’s financial system has evolved and undergone a number of turns and reforms. Beyond its utility, no system can sustain, especially in view of the threats and pressures on a large chunk of developing world that actually supports the advanced economies. Aware of the potential impact US has concerns but it must understand needs of emerging and developing world’s right to equality and progress of their people.
