Question

the concept of economic transition has been much debated. Discuss three measures necssary for an economy to successfully transition from one stage to the next.

Answer 1

A transitional economy is defined as one where the economy is changing from a planned , centrally controlled economy to market economy . The transition occurs mainly due to privatization , change of role of the government in the economy , liberalization etc . Three most important measures necessary for successful transition of economy from one stage to the next are as follows :

a) Legal , institutional reforms : Cnferring of property rights , laws to implement fair competition , minimalizaing role of state in the economy .

b) Liberalization and privatization : Establishment of more private units , free trade , lesser government intervention in prduction and market .

c) Economic stability : Sudden economic turmoil like inflation might occur due to privatization . In such cases role of government budget and sound monetary policy is necessary .