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0 An interesting innovation in economic solutions has been the term “helicopter money.” It is one of the very recent bold and atypical steps taken toward financial slowdowns. It involves direct cash transfer to citizens to stimulate spending, and it has its proponents and critics. A ready panacea, instant relief does promise, but its long-term implications are grave concerning its viability, considering the economy of India as it’s one of diversity and complexity.
What is Helicopter Money?
Helicopter money, as the name aptly suggests, gets its nomenclature from the manner in which the concept was first conceptualized by economist Milton Friedman. In this regard, helicopter money refers to the delivery of one-time, non-repayable money to the public in a manner analogous to dropping cash from a helicopter. It circumvents traditional fiscal and monetary policies by effectuating the direct delivery of money to people in an effort to stimulate demand and, therefore, economic activity.
The Case for Helicopter Money
Helicopter money is supposed to provide an instant economic stimulus, especially in distress. For example, direct cash transfers would have helped millions of Indians sustain basic consumption, especially in the unorganized sector, which was worst affected by the lockdown-induced loss of jobs.
Critical Perspective on Helicopter Money
- Inflationary Risks
One of the important concerns with helicopter money is that it would cause inflation. As money supply increases without a corresponding increase in production, price goes through the roof, which again means eroding the purchasing power of the people it aims to help. In a country like India where the poor suffer the most due to inflation, this risk cannot be treated lightly.
- Short-Term Gains, Long-Term Pain
While helicopter money may boost the economy to a temporary degree, it will probably impact the economy only for the short term. Once the people are spending the distributed cash, the economy might fall back to stalemate unless the structural problems, such as unemployment and bottlenecks in production, are addressed.
- Fiscal Discipline at Stake
While India already has a large fiscal deficit, the resourcing of such an enormous helicopter money scheme would increase the burden on public funds. Money in circulation or money taken from other critical sectors like health and education would result in unsustainable levels of debt and compromise future growth.
- Poor Targeting and Leakages
Another problem is ensuring that it reaches the intended beneficiaries. Indian heterogeneity, and varying levels of digital literacy, mean that most of it will be misused or lost to corruption unless infrastructure in the form of direct benefit transfer DBT systems exists.
Global Examples and Lessons
Countries like the US tried its stimulus checks-the antithesis of helicopter money-during the pandemic to increase spending of consumers. But, in so doing, those stimulus checks did indeed stir up debates about inflation and wealth disparity. More importantly, without addressing India’s very own specific challenges, it can hardly find ways to correct the possible disastrous consequences.
The Way Ahead
They once again reaffirm that helicopter money is not the alternative for India and work towards long-term sustainable economics. High investment in the infrastructure sector, education, and skill development will play a big role in job markets. Enhancing social safety nets and financial inclusion with incentives to the industries to upgrade their productions would strike a better balance for the stimulus.
The financial case, however promising of a quick fix, is far too dicey for a country like India. It is all but likely to create an inflationary spiral, fiscal instability, and the illusion of the economy picking up. The only other alternative policymakers may resort to under duress would be to undertake radical measures- under which structural reforms and targeted interventions must take a backseat.
So, in a nutshell, the question is whether India could afford the gamble of helicopter money or whether it should instead build a resilient economy through sustainable growth strategies. This answer will lie not in short-term fixes but long-term vision.
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