What is helicopter money ?

A new term recently coined in this sluggish economy “Helicopter Money”, what is helicopter money and why is it in news now ?

This is an unconventional monetary policy tool. It involves printing money and distributing it to the public. Milton Friedman coined this term. It basically denotes a helicopter dropping money from the sky. Friedman used the term to signify “unexpectedly dumping money onto a struggling economy with the intention to shock it out of a deep slump.

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It basically means non-repayable money transfer from the central bank to the government. It seeks to goad people into spending more and thereby boost the sagging economy.

Why is helicopter money in news now?

Recently on the verge of coronavirus-hit economy falling deeper and deeper into a chasm with each passing day. As per the ET, Telangana chief minister KC Rao coined this term in recent meeting where he said that helicopter money can help states comes out of this morass. He asked for the release of 5% funds from GDP by way of quantitative easing (QE).

QE, a policy followed all over the world, is the only way to deal with the situation.

Rao said. “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 percent of funds from the GDP through Quantitative Easing Policy,” he suggested.