Op Salvage, or US Plus One: Why India must take the lead now to rescue globalisation

The article contends that former US President Trump's actions have destabilized globalized growth and the dollar's role as the world's anchor currency, necessitating a counter-response. It advocates for India to lead an initiative through BRICS to salvage globalization, proposing the creation of an alternative WTO-like body (potentially via CPTPP), new BRICS financial mechanisms like a reinsurance arm and clearing facility, and critically, a BRICS stablecoin benchmarked against SDR to facilitate non-USD cross-border transactions and bypass SWIFT. This ambitious shift in global economic governance, however, hinges on India undertaking significant internal economic and political reforms to establish its credibility for leadership.

Analysis

The article posits that the policies of the Trump administration have systematically dismantled the institutional framework of the post-war global order, specifically targeting trade, international cooperation, and the US dollar's role as the anchor currency. This has created a strategic imperative for other nations to counteract the disruption to globalized growth. The author proposes that the BRICS nations, led by India, should spearhead the creation of an alternative economic architecture. Key proposals include establishing a new global trade body excluding the US, potentially by expanding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and developing independent financial infrastructure such as a BRICS reinsurance arm and a clearing facility for cross-border transactions. The most disruptive proposal is the launch of a BRICS stablecoin benchmarked against the IMF's Special Drawing Rights (SDR) to facilitate non-USD trade and bypass the SWIFT messaging system. However, the analysis tempers this ambition by highlighting India's internal challenges, noting that domestic policy issues have depressed its gross fixed capital formation below the 30% level and reduced its aspirational growth rate to 7%. Consequently, India's ability to lead such a global initiative is contingent upon implementing significant domestic reforms to restore its economic credibility.

Key Decisions for Investors

• Investors should monitor geopolitical developments within the BRICS bloc for any concrete steps toward creating alternative trade and financial systems, as these represent a long-term structural risk to the US dollar's hegemony and existing global supply chains.
• When evaluating India-focused investments, it is crucial to assess the country's progress on internal economic reforms, particularly those affecting capital formation and trade policy, as these are identified as critical preconditions for achieving its 7% aspirational growth rate and asserting global leadership.
• The proposal for a BRICS-backed, SDR-pegged stablecoin, while currently speculative, signals a growing interest in non-dollar, blockchain-based settlement systems; investors in financial technology and digital assets should watch for any pilot programs or formal agreements in this area as they could disrupt incumbent payment networks like SWIFT.