‘Helicopter Drop’: Time right to implement fiscal support measure: Experts

By Rohit Vaid

New Delhi, March 20 (SocialNews.XYZ) Time is ripe to implement India's version of 'Helicopter Drop' fiscal support scheme to avert an impending economic disaster due to the outbreak of Covid-19, economy and industry insiders said.

They contend that such a move will alleviate the economic challenges being faced by the unorganised sectors' workforce during such grave times.

Though an old concept, it was widely used in the 2008-09 economic crisis in the US. It entails providing a direct financial support to the public which can kick-start economic activity.

Currently, fears of massive unemployment have become clear and present due to the personal movement restrictions placed to decelerate the spread of Covid-19. This has led to closure of dine-in restaurants, grounding of aircraft, closure of factories and deserted market places.

US and European policy makers have again turned towards the concept to deal with the latest economic crisis triggered by Covid-19.

Lately, the US Federal government has come out with a plan to provide immediate direct financial support of $1,000 to protect its consumers.

In India's case, the time is ripe to implement the scheme, said experts, citing that funding requirements can be taken care via the savings accrued due to the massive drop in crude oil prices.

Furthermore, they pointed out that there might not be any adverse economic reaction as inflation is currently under control.

Incidentally, crude oil prices play a crucial role here. A continuous drop in global oil prices has big implications on bringing down the country's import bill.

Recently, a research report by lending major SBI has suggested that the Centre should use the extra funds for a scheme to alleviate the economic challenges being faced by the unorganised sector workforce during such grave times.

"We have recommended that the government should use the extra revenue coming from higher excise duty on petrol and diesel for a scheme to aide the unorganised workforce which will suffer due to the Covid-19 outbreak," Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, told IANS.

"The idea is to provide monetary aid to these work force either by direct cash transfer or any other means."

Besides, a decelerating inflationary trend gives space to the Centre to implement such a scheme.

"While the modalities of the cash infusion has to be well thought out, it can pull up private consumption and can give relief to micro and small enterprises in the short run. If the RBI expands its asset side through bond purchases, it may adjust its liability side by increasing currency in circulation by simply printing more money," sid Karan Mehrishi, Lead Economist at Acuite Ratings & Research.

"This additional cash can then be distributed to small businesses or even vulnerable individuals like daily wage earners as a one time exercise. This however, is inflationary and needs to be calibrated well."

According to Aditi Nayar, Principal Economist, ICRA: "Given the unprecedented situation which is unfolding, the outlook for consumption and growth is difficult to assess, and will hinge on how long the social distancing needs to be continued."

"A mix of conventional and unconventional fiscal and monetary policies would be required to prevent a sharper plunge in economic activity."

However, M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings, told IANS: "At present it is premature for 'Helicopter Drop' fiscal support, as there already exists schemes such as MGNREGS, PM Kisan and Jan Dhan, government can easily enhance these schemes to reach out to the lower income groups, who might be impacted by the economic slowdown unleashed by Covid-19."

"However, the government might come out with sector specific relief measures for industries such as tourism, hospitality and travel."

(Rohit Vaid can be contacted rohit.v@ians.in)

Source: IANS