India Clarifies BRICS Currency Proposal
India has officially downplayed the recent discussions surrounding a potential single currency for BRICS nations, with Reserve Bank of India (RBI) Governor Shaktikanta Das stating that the idea was merely a suggestion from one member and not a formal decision. In a news conference following a policy meeting, Das emphasized that the geographical diversity of BRICS countries makes the implementation of a single currency, akin to the eurozone, impractical.
This clarification comes in the wake of warnings from US President-elect Donald Trump, who cautioned BRICS nations against pursuing a new currency to replace the dollar in international trade, threatening tariffs of up to 100%. Despite the discussions at the 2023 BRICS summit focusing on 'de-dollarization,' Das reiterated that India has not taken any steps towards this goal. Instead, the country aims to promote the use of the Indian rupee in cross-border transactions to mitigate risks associated with dollar dependence.
Economic Context and Interest Rates
In addition to addressing the currency proposal, the RBI announced its decision to maintain the benchmark repo rate at 6.50%, unchanged since February 2023. This decision reflects the central bank's assessment that inflation risks currently outweigh concerns regarding economic growth. Retail inflation in India has recently surged to a 14-month high of 6.21%, exceeding the policymakers' target of 4%.
India's GDP growth for the September quarter was recorded at 5.4%, marking the slowest pace in seven quarters and falling short of analysts' expectations of 6.5%. The RBI has now revised its growth forecast for the current fiscal year down to 6.6%, a decrease from the previous estimate of 7.2%. Despite these challenges, India continues to position itself as a significant player on the global stage, particularly in competition with China post-pandemic.
