Covid affected everyone in India. Since March 2020, due to periodic lockdown, many sectors have suffered a lot. After the passing of the first wave of Covid, the situation seems to have improved somewhat but the second wave of Covid 19 gave another setback. Meanwhile, there is growing demand for big financial incentives from various sectors, including ‘money printing’. This is so that the health of the economy can be improved and the areas badly affected by the plague can get relief. Tell us what is money printing?
How can the government raise money through printing?
Monetization is the third unconventional option for the government to raise funds. Apart from this, two other options are loan and raising tax revenue and investment. Monetization occurs when the central bank buys bonds directly from the government. This is called ‘printing money’ because new money (not necessarily banknotes) is created without an increase in nominal GDP.
Why is the demand for ‘money printing’ rising?
There is a need for a massive financial package and aid program to make up for the losses caused by Covid 19. Since there has been a very severe crisis in terms of demand, distribution of funds may ease the trouble. Monetization is favored because only the government can provide relief to distressed citizens and small businesses but there is no room to raise funds.
who is supporting Money printing ?
The monetization of the DA has grown on this day? Modern monetary theory (MMT) has been widely discussed even before the arrival of the corona virus, especially in the US where it is backed by left-wing leaders.
What are the risks?
Deficit financing leads to increased inflation and there is a risk of losing confidence in foreign investors. In addition to providing temporary relief, deficit financing is also funded to allow families and businesses to emerge from the crisis. But if deficit financing gets out of hand, it can lead to financial instability.