BRICS CURRENCY AND INTERNATIONALISATION OF RUPEE.

 The idea of BRIC (Brazil Russia India China) forming a s a group to promote cooperation in trade,finance, economy and development was originally mooted by British economist Jim O Neil of Goldman Sachs in his paper published in Global policy Journal in 2001.Not only the idea became a reality in 2009 but also South Africa became the sixth member in 2010 and the organization became BRICS.B RICS currently account for mote than 40% of world population and about 26% of global economy.aThe relevance of this organization has been increasing particularly in recent times attracting many countries to seek membership in the light of the geo political conflicts comprising of US China trade tensions, Russia Ukraine war and consequent supply chain disruptions and stoppage of SWIFT message facility to Russia and other sanctions imposed by US and Western allies towards Russia and to some extent Iran. Major Two initiatives undertaken by BRICS  for  fostering economic growth were 1.the establishment of BRICS Bank popularly known as New Development Bank in 2014 to provide finance for the period of infrastructure and sustainable development.BRICS payment system is like an alternative to SWIFT payment system.Secondly Contingent Reserve Arrangement framework  was providing additional liquidity and other means of support at a time of economic crisis in response to actual, potential or short-term balance of Payments disequilibrium in member countries. 

The 15th BRICS summit 2023 is scheduled to take place in Durban to be chaired by South Africa in August with the theme "BRICS and Africa partnership for mutually accelerated growth, sustainable development and inclusive multilateralism ".The theme focus Chair's five priorities for 2023:1.Developing a partnership towards an equitable just transition 2.Transforming education and skills development for the future 3.Unlocking opportunities through the African Continental Free Trade Area 4.Strengthening post pandemic socio-economic recovery and the attainment of the 2030 Agenda on sustainable development.5.Strengthening multilateralism, including working towards real reform of global governance institutions and strengthening the meaningful participation of women in peace processes..Recently BRICS New Development Bank (NDB) chief observed that 'NDB has successfully navigated all geo political issues. NDB is focusing on scaling up the bank prospects by deepening its sustainable credentials and local currency cooperation, It also increases it's focus on private sector operations and strengthening  its operations with all financial agencies.Apart from BRICS members, UAE,Egypt and Bangladesh already joined NDB.While Saudi Arabia have expressed it's  interest to join NDB and provide fresh funds, Uruguay is in the final stage of NDB membership. According to NDB chief Maasdrop "developing countries experienced rapid growth in the last two decades but the narrative is controlled by Western powers.41 countries are ready to accept the BRICS currency,and in the forthcoming BRICS summit South Africa has invited 69 global leaders to attend it.

Except India all other existing BRICS members namely Brazil, Russia, China and South Africa are set to make preparations for the launch of a common BRICS currency on the lines IMF's SDR.According to Reseve Bank of India in the background of attempting to develop a IMF Special Drawing pattern of BRICS currency,the basket of currencies that included in the IMF SDR basket with updated weight as on August 2022 are US$ 43.38,Euro 29.31, Chinese reminbi 12.28 ,Japanese yen 7.59 and pound sterling 7.44 weightage.RBI team already suggested that we should popularize the rupee as a means of bilateral exchange ahead of BRICS currency. For the BRICS currency to succeed the national currencies of all members must have mutual acceptance within the group and across all other countries. BRICS attempts to dedollarise world's financial markets is a measure to increase economic autonomy and reduce exposure to external economic shocks.Impact of recent economic sanctions imposed by US and Western Countries have prompted the idea of BRICS currency especially by the victim countries of sanctions. The potential benefits listed include reduced  dependence on US Dollar as a reserve currency and minimising exposure to US dollar related risks  including change in US monetary policy , trade sanctions and geopolitical risks. By promoting economic integration BRICS currency would facilitate trade and investment devoid of costs of currency conversion or exchange rate risks with free cross border capital flows.

For a currency to achieve global acceptability not only it's operation must be large across countries but also must be open to free trade in goods, services, capital and financial  flows.For this adequate number of banking network and a deep financial market world wide is required.Moreover each member country should have low and stable price level,a credible fiscal policy, stable fiscal deficit and stable value of currency. Unfortunately many of the members of BRICS are not fulfilling these criteria . For instance full capital account convertibility is not there even among the three big partners like China, India and Russia.There is also wild fluctuations in inflation, interest rate, fiscal deficit, trade deficit etc among the BRICS member countries which might adversely impinge the journey towards a common currency.While Chinese interest rate is the lowest at 3.65%, at the other extreme South African interest rate is  the highest at 13.75%.

Internationalisation of rupee  refers to  the. Process of accelerating cross border transactions in rupee.While reducing the cost of holding reserves there is a possibility of causing excess exchange rate volatility especially in the initial stages.It can also accentuate an external shock, give  open channel get of the flow of funds into and out of the country from one currency to other .RBI issued a circular on international trade settlement in Indian rupee in July 2022 and enabled external commercial borrowing particularly in Masala bonds.In March 2023 the mechanism of rupee trade settlement started it's operation with as many 18 countries and banks from these countries started to operate Special Vostro Rupee Accounts (SVRAs) for settling payments in Indian rupees..it has been observed that internationalisation of a currency is a possibility of continuous process involving continuous change and incremental progress.The main advantages expected from internationalisation of rupee are-minimising exchange rate risk, reduction in currency volatility risk, competitive exports, reduced need for foreign exchange reserves and increased financial integration which could lead to increased investment and growth.On the other hand challenges pertaining to internationalisation of rupee generally listed are- loss of monetary policy autonomy,  threat of high trade deficit,lack of liquidity, higher exposure to external shocks, speculative capital flows,comparatively limited international demand and challenges in trade settlement. 

Launching of an SDR type BRICS currency with adequate gold backing require meticulous planning including pilot project in a heterogeneous group of members, which necessitates full trust among the countries especially between India and China.Till recently New Delhi refused to settle trade with Russia in Chinese Yuan.Russia recently suspended talks on settling their bilateral trade in rupees.On the other hand India did not, join the Regional Comprehensive Economic Partnership.(RCEP), fearing increasing trade imbalance with China.

Even the Central Bank Governor of Russia Elvira Nabiullina has expressed her reservations that BRICS currency needs the consent of many stake holders to move forward the currency 'deserves attention'.It also requires the 'consent of many parties'.Creating a new currency for international transactions is not a simple project at all .Not just launching the currency, the basic payment infrastructure to support global transactions is yet to be put in place".For rupee internationalisation India can continue to utilise digital methods including UPI transactions already launched with countries like Singapore and UAE.While we are the largest recipient of inward foreign remittances and moderate recipient of foreign investments (FDI and FPI)the share of global trade continues to remain marginal hence the question crops up whether it is desirable to achieve rupee internationalisation without sacrificing capital controls. In any case UPI and other fintech means along with internationalisation of rupee can go together.Eventhough Russia backtracked from accepting rupee payment now,countries like Srilanka, Bangladesh Nepal is finding that rupee transaction is beneficial for  them especially in the absence of adequate reserves in their external account.Infact our strategy to internationalise  rupee to succeed require more focus particularly on trade front followed by investment and financial flows.As far as proposed BRICS currency is concerned instead of outright rejection of  country's participation it is desirable to  contribute for adopting a more viable, efficient sustainable,democratic method of developing the proposed BRICS currency so as to check undue advantage to any particular country .