During a video conference with the Prime Minister of
Telangana, Prime Minister Rajiv Gandhi demanded the adoption of quantitative
easing - helicopter money and funding through the Reserve Bank of India as the
state's financial situation has worsened. What are these two methods? Let us
know when and why they are used.
Quantitative Easing ..? It is a monetary policy.
Quantitative easing is the ability to sell bonds and other financial assets and
fill that deficit when the central or state government of any country exceeds
its revenues and its financial situation deteriorates. The Reserve Bank of
India needs to buy these bonds in this manner. The state will inject this
wealth into the economy, irrespective of the interest rate, and encourage the
purchasing power of the people. Thereby stabilizing the financial balance.
Usually this method is used to inflate the economy when inflation is severe.
Additionally, the influx of money into the marketplace will
increase liquidity. Availability of loans is much easier. With that, people
borrow large amounts and increase their purchasing power. The economy will
collapse again. The state government bonds here are their own financial assets.
These are also known as 'State Development Loans'. The method is to pay a pre-agreed
percentage and eventually pay the original amount over a period of time. For
example, suppose a state issues a bond worth 10 crores and the Reserve Bank
takes it for 10 years under a 10 percent annual payment clause. This means that
the state has to pay crores of rupees every year and then the full amount of
ten crores in ten years. This is Quantitative Easing.
Translated from whats app source
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