BRICS’ idea of ‘common currency’, potential expansion creates jitters in the West

The economist who coined the BRICS acronym during his time at Goldman Sachs has derided the idea of the group of emerging nations developing their own currency ‘ridiculous’, as Brazil, Russia, India, China, and South Africa contemplate expanding the bloc. 

Lord Jim O’Neill, who introduced the term BRICS in a 2001 research note as chief economist at Goldman Sachs, claimed in an interview with Financial Times that beyond geopolitical symbolism, BRICS have not achieved anything substantial since their inception.

The current BRICS five contribute 31.5 per cent of global GDP overtaking the cumulative financial strength of Group of Seven (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, as well as the European Union) nations who contribute 30 per cent of global GDP.

The BRICS is expected to contribute over 50 per cent of global GDP by 2030, with the proposed enlargement almost certainly bringing that forward.

BRICS expansion: Discourse over common currency and countering dollar’s dominance

The BRICS nations are contemplating a definite expansion during the upcoming summit in South Africa next week. At the same time, Brazil’s President Lula has staunchly called for countering dollar’s dominance, an assertion which has found support from host South Africa’s President Cyril Ramaphosa. 

Russia and China, too, have called for challenging the US dollar’s global reserve currency status.

O’Neill also slammed the proposition of a BRICS central bank, saying it will be difficult to implement.

Is a potential expansion of BRICS creating jitters in the West?

Yes, it is. This is because an expansion of BRICS on the lines of economic cooperation would seek alternative financial pathways for international trade against US-dominated SWIFT and dollar as default currency for the market.

Also watch | Is BRICS raging against the US Dollar an exercise in futility?

At the same time, New Delhi would seek assurances from China to not oppose its bid for a permanent membership at the UN Security Council as many nations who constitute ‘Friends of BRICS’ (the supposed members who could become part of the bloc upon successful expansion) support reforms at the UN Security Council.

Is India opposing expansion of BRICS?

Reports in the Western media that India opposes the proposition of expansion of BRICS with inclusion of other countries of the Global South are imprecise.

New Delhi has sought wider consultation on BRICS expansion but at the same time has expressed positive support for China’s proposal to expand the bloc despite the bilateral divergences between Beijing and New Delhi. 

India’s foreign minister Dr S Jaishankar has asserted BRICS as “an established feature of the global landscape”.

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