What is helicopter money and can it help economy during COVID-19 crisis? Who may gain? Find out

The world economy has taken a major hit due to the COVID-19 crisis and India is no exception. The Reserve Bank of India and Finance Minister Nirmala Sitharaman have provided several relief measures for the common man and corporates but Telangana chief minister K Chandrashekhar Rao has another suggestion for them. The Telangana CM has suggested RBI to implement a 'Helicopter Money' scheme.

"To counter (economic crisis) this we need a strategic economic policy. RBI should implement quantitative easing policy. This is called Helicopter Money. This will facilitate the states and financial institutions to accrue funds. We can come out of the financial crisis. Release 5 per cent of funds from the GDP through Quantitative Easing Policy," he said.

But, do you know what it is and if it can really help fight the crisis?

What is helicopter money?

Helicopter money refers to a last resort type of monetary stimulus strategy used to spur inflation and output to boost the economy. Under this, the Central Bank hands out money through direct transfers with the objective of raising inflation and output in an economy which is running substantially below potential. It allows everyone to spend more freely, pushing inflation back to central bank’s target.

Who may gain?

K Chandrashekhar Rao is not the only one to believe it. Industry body CII suggested direct cash transfer of Rs 5,000 into the accounts of all adults with an annual income of less than Rs 5 lakh per annum. It said that for more vulnerable persons above 60, the cash transfers could be raised to Rs 10,000.

"This would be a temporary one-time measure to boost consumer demand," the industry chamber said in an action note on COVID-19 and its impact, industry and economy submitted to the PMO.