What Cements the BRICS?

Eye on China | Amit Kumar

India recently hosted the 18th BRICS summit as renewed issue about de-dollarisation arise; the existing trade imbalances come to make local currencies a route to Chinese renminbi dominance. Because it imports 88% of its crude oil, New Delhi faces significant economic exposure, and its financial system is therefore susceptible to sudden price spikes tied to the dollar.

In order to overcome these weaknesses, the member states have suggested settling trade using local currencies, a common currency basket, or Central Bank Digital Currencies. Yet India had a trade deficit of $226 billion with its BRICS partners in fiscal year 2026. Such trade deficits benefit Beijing. Moreover, China's use of trade as a tool—for example, imposing discriminatory export controls on rare earths and semiconductor equipment—demonstrates the group's inability to reform the existing global geoeconomic order. In the end, India's effort to achieve strategic autonomy within BRICS is still limited by its security ties to the Quad.

Comment

The fact that New Delhi is taking part in the Reserve Bank of India's vostro account system shows that there are structural difficulties involved in multi-alignment. Although arrangements for bilateral trade with Moscow are intended to avoid Western sanctions, they leave India vulnerable to asymmetric economic pressure from Beijing. This vulnerability arises because of the ongoing trade deficits, which mean that the renminbi must be used for final settlements. As a result, China's preeminent position in the settlement system undermines the strategic value of BRICS as a hedging mechanism.

The fact that the imbalance is evident in the way the amount of non-convertible currencies held in special vostro accounts limits liquidity is that, in the absence of deep and liquid financial markets to back alternative clearing systems, any settlement system other than in US dollars ends up using the renminbi. This fundamental situation means that the Reserve Bank of India's defensive actions end up speeding up the international use of the renminbi.

Strategic Question for Discussion

If the Reserve Bank of India's Vostro account framework continues to accumulate unconvertible balances, does New Delhi's multi-alignment strategy remain viable, or does the clearing mechanism structurally force a default to Chinese financial hegemony?

The fact that persistent trade imbalances will ultimately reduce the strategic value of the Vostro account system means that, in the absence of structural reforms in India's manufacturing sector, the bilateral clearing arrangements will have to turn to third-party currencies such as the renminbi. This change weakens New Delhi's ability to preserve its financial independence while attempting to avoid the Western-dominated networks.

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