Chief Minister KCR, has suggested few new economic policies to refurbish the on going economic crisis in India due to COVID-19. Policies like helicopter money and Quantitative Easying were proposed by our Chief Minister to deal with the economic crisis. What is Helicopter money and Quantitative Easying?
Lock down due to COVID-19 has brought the industries to a standstill, which has impacted the economy very badly. Production of goods and services has stopped. The World Bank has predicted that the GDP growth rate for the fiscal year 2020-21 would be 1.5 % to 2.8 %.
These details have come to light when the Telangana Chief Minister KCR proposed policies to repair the economic crisis through the helicopter money and QE.
Helicopter money is something similar to the imagination many of us have in our childhood. That money would fall from sky and we would become rich overnight. Helicopter money is the money which is given to people for free. This policy was proposed by the famous economist Fredman in 1969. This policy was brought into practice by the Federal Reserve Chairman, Bern Bernanke in 2002.
The purpose of this is that the printing of money should be increased by the RBI and thus bring in large amounts of cash into the economy. The motive behind this is to build the purchasing power of the people. This approach would help to increase the supply and demand by influencing them with money. QE also is similar to this but it can buy RBI bonds from the government.
This policy has been adopted by countries like US, Japan previously. To fight the recession which occurred in US in 2008, it brought the helicopter policy into use. Japan too, used this helicopter policy in 2016.
New question may arise as to why shouldn’t we print more notes all the time? RBI prints the money according to the production of the goods and services. If the RBI prints more money and leverage the money to the people then there is high risk of fall in the value of rupee after few years.
Inflation is on the rise, hence such measures have to adopted to bring it back to normal.
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