BRICS nations bypassing dollar & Euro, US sanctions on India-Iran trade | Bidishanomics Ep 24

Key takeaways

US sanctions and India–Iran trade

• Primary sanctions bar US companies and individuals from dealing with Iran. Secondary sanctions threaten penalties against foreign companies or banks that trade with Iran, potentially cutting them off from US financial channels, dollar payments, or the SWIFT messaging network.
• Examples discussed:
  • In March 2025, the US targeted five small “teapot” refineries in China’s Shandong province that were buying Iranian crude and reportedly froze assets connected to the US financial system.
  • In 2012, the US acted against China’s Bank of Kunlun over transactions linked to Iran.
• India’s Chabahar port exemption, granted in 2018 and renewed periodically, was not renewed in September 2025. The six-month wind-down period ended in April 2026. India withdrew staff, paid its $120 million project commitment, and was looking to hand over its part of the project to an Iranian company. The speaker also cited a zero allocation to the project in the latest Union Budget.
• India–Iran trade reportedly fell from $17 billion in 2018–19 to $1.6 billion in 2025–26, a decline of about 90%. The speaker said India had diversified its sources of supply, reducing its exposure to sanctions and potential disruptions, including around the Strait of Hormuz.
• India’s FTAs—with the UAE, Australia, the UK, and the EU—were described as tools for reducing tariffs and widening market access, not as alternative currency-payment systems. The speaker distinguished this from China–Iran trade channels using the yuan and intermediaries.
• The speaker cited India’s 88–90% dependence on imports for a critical input when discussing the need to diversify supply. The subtitle does not clearly identify that input.

BRICS trade and alternatives to the dollar

• Local-currency settlement can be difficult when trade is unbalanced: a country running a surplus may accumulate large amounts of its trading partner’s currency without enough opportunities to use or invest it.
• The figures cited for India’s trade with BRICS:
  • Trade rose from $203 billion in 2020–21 to about $417.5 billion.
  • The trade gap increased from $74.5 billion to $226.6 billion.
  • Exports to BRICS grew 49%, while imports grew 132%.
  • BRICS accounts for about 4–5% of global trade, according to the discussion.
• Three approaches under discussion—not a single shared BRICS currency—were:
  1. Direct bilateral payments in local currencies. The speaker said such payments accounted for 1% of India’s total trade in 2022, rising to 3.5% by mid-2026.
  2. Central-bank currency swaps to manage imbalances and prevent surplus countries from accumulating unwanted currency.
  3. Links between central bank digital currencies (CBDCs), such as the digital rupee, China’s digital yuan, and Brazil’s digital real. The speaker cited 7 million digital-rupee users as of January 2026.
• A broader clearing-house concept resembles John Maynard Keynes’s International Clearing Union, proposed at the 1944 Bretton Woods conference. It would track cross-border balances and settle them through a neutral mechanism, potentially involving gold. The proposal was not adopted; the dollar became the system’s anchor currency.
• The speaker said no concrete BRICS clearing house or automatic gold-settlement system had emerged, citing trade imbalances and the relatively small BRICS share of global trade.

US deficits, bond yields, and debt sustainability

• A government bond was explained as an IOU: investors lend to the government in return for repayment with interest. Bond prices and yields move in opposite directions—selling pressure lowers prices and raises yields.
• In August 2026, US Treasury Secretary Scott Bessent announced that the Treasury would double its buybacks of its own debt from $2 billion to $4 billion, focusing on longer-term bonds. The stated aim was to support demand and ease longer-term borrowing costs.
• The speaker compared this with Operation Twist, used under the Kennedy administration in 1961, and noted a similar approach in 2011. In 2026, the effect was brief: long-term yields reportedly fell by less than 0.1 percentage point, then the gains disappeared by the next day.
• Fiscal and growth figures cited:
  • The Congressional Budget Office estimate for the US deficit was about 5.8% of GDP—roughly 6%—versus a historical average of about 3.8%.
  • Near-term growth estimates were around 2%, with longer-range forecasts slowing toward 1.5% later in the decade.
  • Federal interest payments were projected to rise from 3.3% of GDP in 2026 to 4.6% in 2036.
• The discussion used the R versus G framework: compare the government’s interest rate on debt (R) with the economy’s growth rate (G). If R exceeds G, debt becomes harder to sustain. Persistently rising interest costs can raise borrowing costs further, weaken growth, and create a debt spiral.
• The speaker’s caution was that bond buybacks may address market symptoms but cannot resolve underlying fiscal and growth concerns.

India’s revenue options

• The speaker said India collects about 11.7–12% of GDP in taxes, compared with roughly 21% in developing economies and 34% in higher-income developed economies.
• A 1% annual wealth tax existed in India until it was scrapped in the 2015 Budget. It reportedly raised only 0.007% of GDP in 2014–15. The speaker contrasted this with 0.89% of GDP cited for France and pointed to the difficulty and expense of valuing land, jewellery, and private-company shares.
• A proposal from the Wealth Inequality Lab, associated in the discussion with Thomas Piketty, was described as:
  • A 2% tax on wealth above ₹10 crore.
  • A 33% inheritance tax on inheritances above ₹10 crore.
  • Estimated revenue of 2.7% of GDP, affecting at most the wealthiest 0.04% of adults, according to the estimate cited.
• The speaker cautioned that wealth and inheritance taxes can prompt wealthy people to relocate or move assets abroad. Some European countries reportedly rolled back such taxes after experiencing these effects.
• The speaker’s preferred revenue priorities were:
  1. Improve property-tax collection by updating property records and local-government administration, rather than simply raising rates. Property-tax revenue was cited at 0.48% of GDP in India, compared with 4.21% in the UK, 4.3% in France, and 1.7% in China.
  2. Lease public assets rather than sell them, including mines, power lines, and highways. The speaker referred to the National Monetisation Pipeline, said to have been implemented in February 2026.
  3. Bring unreported income into the tax net through formalization and better reporting. The discussion used the Laffer curve to caution that excessively high tax rates can push activity into the informal or black market; gold smuggling was cited in connection with a 15% gold import duty.
  4. Avoid further increases in capital-gains tax that could discourage investment, while continuing to regulate the system. Rates cited were 12.5% for long-term and 20% for short-term capital gains.
• The speaker said tax collections more than doubled from 2022 to 2024, and the number of people filing tax returns rose from 6.9 crore in 2022 to 9.2 crore in 2025. Aadhaar–tax ID links and GST data cross-checks were cited as tools supporting formalization.

Assets, instruments, and sectors mentioned

• Currencies: US dollar, euro, Indian rupee, Russian ruble, Chinese yuan, Brazilian real, digital rupee, and other CBDCs.
• Other instruments and assets: Government bonds, gold, Iranian crude oil, foreign-exchange reserves, public infrastructure assets, and property.
• Sectors and infrastructure: Oil refining, banking, ports and shipping, mining, electricity transmission, highways, and property taxation.
• Tickers: No individual stock tickers or named public-company securities were mentioned.

Disclaimers

The opening includes the standard mutual-fund warning: “Investments are subject to market risks. Read all scheme-related documents carefully.”

No explicit “not financial advice” disclaimer was included. The episode focused on economic policy and macroeconomic analysis rather than individualized investment advice.

Presenters and sources mentioned

• Presenters: Apoorva Mandhani and Bidisha Bhattacharya, identified in the introduction as an in-house economics expert.
• Sources and figures cited: US Congressional Budget Office; Global Trade Research Initiative (GTRI); RBI; Wealth Inequality Lab; Thomas Piketty’s R-versus-G framework; and John Maynard Keynes’s 1944 International Clearing Union proposal.
• Books and films recommended or referenced: Economic Sanctions Reconsidered (the author’s name is unclear in the subtitles), Argo, The Big Short, Exorbitant Privilege by Barry Eichengreen, This Time Is Different by Carmen Reinhart and Kenneth Rogoff, In Service of the Republic by Vijay Kelkar and Ajay Shah, Margin Call, and The China Hustle.