Critically evaluate India's proposal to link central bank digital currencies of BRICS nations.

As BRICS Chair in 2026, guided by the theme "Building for Resilience, Innovation, Cooperation and Sustainability" [4], India has proposed a technical framework to link members' central bank digital currencies (CBDCs) so that intra-bloc trade settles directly in national currencies. With the US dollar still holding about 57% of global foreign exchange reserves [3], the proposal is strategically sound but operationally demanding.

Merits of the proposal

• Efficiency gains: the BIS-anchored Project mBridge, which reached minimum viable product stage in 2024, settled real-value cross-border transactions in seconds instead of days and cut costs by up to half [2] — proof that multi-CBDC linkage works.
• Lower dollar dependence: direct rupee–real or rupee–dirham conversion removes the intermediary currency, saving forex spreads and correspondent-banking fees, and insulates trade from third-country sanctions.
• India's first-mover credibility: the RBI's e₹ retail and wholesale pilots [1], plus UPI's proven digital public infrastructure, give India genuine agenda-setting authority as Chair.
• Trade base: rising intra-BRICS trade and a growing share of world merchandise exports make the volumes commercially meaningful [4].

Limitations and risks

• Asymmetry of currencies: the renminbi is under 2% of global reserves [3]; without safeguards, linkage may deliver yuan-isation rather than genuine multipolarity.
• Interoperability gaps: divergent CBDC designs, AML/CFT standards, data-localisation rules and the absence of common settlement finality law remain unresolved [5].
• Convertibility constraint: the rupee is not fully convertible, and persistent bilateral trade imbalances leave partners holding balances they cannot easily deploy.
• Diplomatic cost: a ten-member bloc with divergent interests, and the risk of Western retaliatory measures against overt de-dollarisation.

The proposal is therefore best read not as a challenge to the dollar but as a pragmatic payments-efficiency reform. India should pursue phased, mBridge-style pilots on selected corridors, anchored in agreed legal and AML standards, keeping the initiative technical rather than confrontational — consistent with its stated goal of resilient, inclusive cooperation and with the G20 objective of cheaper, faster cross-border payments.