The expansion of BRICS, India, and the implications for the dollar-based economy

The recent BRICS summit saw the surprise announcement of six new members of the group. With more than 50 Global South nations having also expressed an interest in joining, this could have long-term implications for the dollar-based economy. However, India is playing a vital ‘buffering’ role between the G7 and China’s intention to use BRICS to push its Belt and Road Initiative.

“[India] is becoming the voice of the Global South”, said Narendra Modi at the 2023 BRICS summit, adding that this voice would be heard at the G20 meeting, which was held in New Delhi between 9–10 September. The BRICS — Brazil, Russia, India, China, and South Africa — convened their 15th Summit on 22-24 August and published a 94-article joint communiqué that covered global and regional security challenges, financial risks, debt relief, climate change, pandemics, technology advancement and promoted education, poverty relief, and women and children’s issues.

Notably, the summit agreed to accept six new members – Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE, effective 1 January 2024, to continue BRICS expansion. It also offered an opportunity for India to flex its new-found muscles, following recent business, military, and economic deals with the United States during President Modi’s June visit to Washington.

India is playing a key role in buffering China and BRICS

While China intends to use BRICS to promote its own agenda, and Beijing perceives BRICS expansion as a major diplomatic victory for China, India is pursuing a balancing role in the group, effectively acting as a ‘buffer zone’ between BRICS and the G7 group of nations.

India, Brazil, and South Africa reportedly had reservations on BRICS expansion. But, President Xi Jinping’s personal diplomacy, including a sideline meeting with Indian Prime Minister Narendra Modi to discuss the China-India border dispute, helped facilitate the breakthrough.

China’s plan for BRICS expansion goes beyond competition with G7 countries. As President Xi told the summit, China sees BRICS as “an important force in shaping the international landscape.” Chinese media reported on 26 August that more than 50 countries have formally expressed interest in joining BRICS – including Algeria, Egypt, Thailand, and the United Arab Emirates, as well as key G20 countries such as Argentina, Indonesia, Mexico, and Saudi Arabia – while 30 have filed applications.

Global South countries want to reduce reliance on the US dollar

The Global South is an undefined region, which most cite as the Brandt Line – a meandering line that crosses the north of Mexico, Africa, and the Middle East and then loops down around India and China and encompasses East Asia (while avoiding Japan, Australia, and New Zealand). It was defined by then-German Chancellor Willy Brandt in a report for the Independent Commission for International Development Issues in the 1980s as a visual depiction of the north-south divide based upon per-capita GDP.

Global South countries have increasingly voiced concern that the West and West-led international institutions failed them in many areas, such as economic support, climate change management, and pandemic aid, while favoring a more transatlantic agenda, such as aid to Ukraine.

To attract more support from the Global South, Xi announced at the summit that China will create a $10 billion fund to help developing countries.

China perceives BRICS, and the broader Global South, as a platform for promoting its own agenda, which is based on its massive infrastructure-based Belt and Road Initiative (BRI), which itself encompasses China’s technological roadmap, referred to as the Digital Silk Road. BRI has seen massive Chinese investment and infrastructure aid throughout the Global South, but an increasing number of countries are concerned that the BRI is creating a huge debt trap problem.

Rather than joining BRICS in support of China’s agenda most countries who have filed for membership view it as a platform for supporting their own local economic and technological agendas. That’s why India is seen by the West as an essential diplomatic buffer within BRICS to help moderate China’s determination to push Beijing’s own BRI agenda.

The growing influence of BRICS

The group of BRICS countries now account for more global GDP than the G7 countries, and represents one-third of worldwide economic activity. This also has implications for trade and economic restrictions placed on Russia – since 2014 trade between Russia and the G7 has fallen by more than one-third, while it has more than doubled between Russia and BRICS nations – which has weakened the impact of Western sanctions on Russia over its invasion of Ukraine.

A further implication of the rise of BRICS is the mooted creation of a non-dollar-based currency – one of the main reasons nations in the Global South are interested in joining BRICS is to reduce their reliance on the dollar-based economy, which could have serious implications for US companies looking to trade and do business with a growing number of BRICS nations.

Pamir considers that, while BRICS exhibits significant differences and tensions between some of its members – particularly China and India – an expanded BRICS could have huge consequences for US businesses and the dollar-based economy, which are likely to be revealed over the foreseeable future.