BRICS+ to pave the way for a multipolar currency era

BRICS+ is reshaping global trade dynamics and challenging G7 dominance, paving the way for a multipolar system.

In brief

• Currently, BRICS+ accounts for 36.7% share in global GDP in PPP terms, 23.3% share in global merchandise trade and 45.2% share in global population.
• The BRICS+ group is establishing a platform for conducting international trade and investment transactions, which could become a low-cost alternative to the existing SWIFT platform. The group is also developing a trade and reserve currency, backed by gold and other select commodities.
• With a strong likelihood of several new members joining the BRICS+ group, its share in global merchandise exports can overtake that of the G7 group by 2026. 

Two major economic blocs are emerging in the global landscape: the BRICS+ group¹ and the G7. These groups are positioned to compete for greater shares in the global economy, global merchandise trade, and capital. In the September 2024 issue of the EY Economy Watch, we highlighted the growing significance of BRICS+, not only in global GDP and population share but also in terms of fiscal space to undertake a stimulus for combating a recession. 

This month’s edition examines the key features of their respective evolving roles in global trade, focusing on export and import dynamics, and highlighting the implications of the growing role of BRICS+ in the global trade framework. We obtained the relevant data for this analysis from the International Monetary Fund (IMF) and the World Trade Organization (WTO).

BRICS+ vs. G7: rising share of BRICS+ in global merchandise trade

The share of BRICS+ group in global merchandise exports increased from 10.7% in 2000 to 23.3% in 2023, an increase of 12.6% points (Chart 1). On the other hand, the share of G7 group in global exports fell by a margin of 16.2% points from 45.1% to 28.9% over the same period. The share of the rest of the world in global merchandise exports remained stable, increasing only marginally from 44.2% to 47.9% during this period. Thus, it is the BRICS+ group, which has replaced the G7 group in terms of their respective shares in global merchandise exports. Chart 2 shows similar trends with respect to their shares in global imports. 

Global trade trends: the evolving roles of India and China

India and China are two prominent members of the BRICS+ group. In the global ranking in purchasing power parity (PPP) terms as per the IMF’s latest issue of World Economic Outlook, they ranked third and first in 2023² in terms of size of economy. In market exchange rate (MX) terms, they ranked respectively fifth and second in 2023. However, by 2028, India is expected to rank third both in PPP and MX terms while China is projected to continue to rank first and second respectively. Within the BRICS+ group in terms of size of the economy, they ranked second and first both in PPP and MX terms. 

India and China are likely to play relatively important roles in determining the dynamics of global trade through their participation in the BRICS+ group. As far as exports are concerned, China’s contribution increased from 36.1% in 2000 to 62.5% in 2023, an increase of 26.4% points (Chart 3). Next in importance is India, whose share was 7.9% in the group’s exports in 2023. Progressively, the roles of India, Russia, UAE, Brazil and Saudi Arabia are increasing in both exports and imports emanating out of the BRICS+ group. Going forward, India and China are likely to be two major players in the global economy, both in terms of exports and imports.

BRICS+ countries' role in global trade: growing importance of high technology exports

It is also useful to look at the commodity composition of exports of countries of the BRICS+ group. The relevant data for this purpose is sourced from the WTO. As shown by Chart 4, the highest share in global exports by BRICS+ group in 2022 was textiles at 49.6%, followed by telecommunications equipment at 41.3%, clothing at 36%, electronic data processing and office equipment at 35.7% and fuels at 30.3%. The share of high technology exports from BRICS+ group comprising electronic data processing and office equipment, telecommunications equipment, and integrated circuits and electronic components together, in corresponding global exports, showed a substantial increase from 5.0% in 2000 to 32.8% in 2022 reflecting the group’s shift towards high technology-intensive products.

In the case of imports by the BRICS+ group from the world, the aggregate share in terms of all commodities is lower than their share in exports. In other words, the BRICS+ group are net exporters to the world.

Appreciating Yuan and depreciating Rupee
Because of the significant economic role of some of the countries in the BRICS+ group, including China, India, Russia, Brazil and Saudi Arabia, their currencies are likely to have a progressively increasing role in a multicurrency framework of transactions in global trade. From Charts 5 and 6, it can be seen that Yuan remained largely stable with marginal appreciation in recent years.  At the same time, the INR has depreciated in recent years, particularly 2018 onwards.