ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Reinterpreting Retreat of the State in a Second Best Environment

in a Second Best Environment Arun Kumar The path from the Second Best to the First Best based on reduced government intervention in the economy, with a major component of it based on opening up of the economy, faces instability on several counts inadequate resource mobilisation (public and private), budgetary imbalance and growing debt and interest burden, inability to control inflation and growing disparities (regional and amongst income classes). Thus, any path charted out with reduced government intervention (assuming that policy failure is eliminated) may not only not lead the economy to the socially optimum point but not even to the First Best frontier.

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