By Kalpesh Ramoliya
The concept of a BRICS currency, a topic of frequent debate in policy circles, has picked up speed as emerging economies seek to reduce their dependence on the US dollar. While the conversation regarding one currency is largely inspirational, concrete efforts are being made, like local-currency settlement of trade and BRICS Pay, a cross-border payments platform in digital format.
For India, which has micro, small, and medium enterprises (MSMEs) as the mainstay of both exports and employment, the development raises an important question: Can a BRICS currency or its related mechanisms be capable of reducing trade barriers and creating new opportunities for MSMEs?
Why MSMEs Matter in the Debate
MSMEs contribute to nearly 45 per cent of India’s exports and employ over 110 million people, making them a significant pillar of the economy. Even though they play a pivotal role, they continue to face repeated difficulties in entering foreign markets.
Among its biggest challenges is the high cost of foreign exchange conversion on dealing in US dollars, which keeps affecting its thin margins. Added to this is the reliance on intermediaries for compliance and settlement that raises costs and takes away from operational efficiency. Their weak bargaining position against currency fluctuations puts them in a particularly risky situation against unforeseen financial shocks. Also, delayed payment puts extra pressure on cash flows, which frequently affects growth.
For micro and small businesses with thin margins and limited treasury functions, these bottlenecks are especially exhausting. Any system that makes it easier to use currencies and lowers the cost of transactions can provide substantial relief to make them more competitive and unleash more opportunities in international trade.
What a BRICS Currency Promises
On paper, a BRICS currency or a single digital settlement system might:
- Decrease dollar dependence, which reduces the exposure to its volatility and sanctions risks.
- Lower costs of transactions by eliminating double conversion (dollar to rupee, dollar to yuan/ruble/real).
- Simplify cross-border transactions, improving cash flows of MSMEs based on timely settlements.
- Increase intra-BRICS trade, enabling small exporters to reach new markets in Brazil, Russia, China, and South Africa without forbidding forex hurdles.
For example, an MSME in Ludhiana exporting textiles to South Africa may invoice directly in a BRICS currency or through BRICS Pay, without going through several banking intermediaries.
The Ground Reality
As great as the vision is, there is much to be done, like
One-size-fits-all policy framework: BRICS economies diverged significantly in terms of inflation, monetary policy, and government. Having one common currency might encroach on sovereignty, particularly for nations such as India.
International acceptability limitations: Even if accepted, a BRICS currency would not be accessible beyond the bloc, which limits MSMEs operating in Europe, North America, or Southeast Asia.
Infrastructural gap: MSMEs, especially micro units, tend to fall behind in technology adoption. The new payment system entails heavy training and support to bring it within reach.
Structural imbalance: The medium enterprises, only 0.3 per cent of India’s MSMEs, generate 40 per cent of exports. Without thoughtful design, the advantages of an emerging currency might go to bigger players at the expense of micro and small units.
The Near-Term Alternative: Local Currencies & BRICS Pay
Rather than a full-fledged common currency, BRICS nations are focusing on trading among themselves in local currencies. For Indian MSMEs, this implies more scope to settle directly in rupees. Such arrangements already exist with a few trading partners, and their expansion could protect small exporters from international currency shocks, enhance price and invoice predictability, and strengthen regional trade alliances within BRICS.
The BRICS Pay mechanism, a digital platform that facilitates local-currency settlements, has the potential to be a game-changer if it’s launched with MSMEs in mind. By offering an economical, decentralized alternative, it can ease cross-border transactions, as long as access is easy and cheap.
What Needs to Happen
Three steps are essential for MSMEs to really benefit:
Policy Support – Clarity of guidelines, publicity campaigns, and easy compliance processes for making local-currency trade viable for small firms.
Digital Infrastructure – Training modules and cost-effective fintech solutions to onboard MSMEs onto BRICS Pay and comparable platforms.
Financial Inclusion – Special credit lines and hedging solutions against MSME exports under new currency regimes.
A pure BRICS currency is also still far away and may not be practical in the short term. But schemes such as local-currency settlements and BRICS Pay can significantly reduce trade barriers for MSMEs if taken inclusively. By saving on forex expenses, enhancing payment speed, and accessing new markets within the bloc, these measures can make MSMEs more competitive globally.
(The author is Founder And Chairman, Raj Cooling Systems)
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