Strategy for Economics Optional for UPSC

Economics is an optional subject that some candidates swear by and some others dare not touch. It is generally considered a difficult subject because it is pretty technical. In this article, we discuss all you need to know about the Economics optional from the perspective of – strategy, pros and cons, booklist, etc.

Aspirants would find this article very helpful while preparing for the IAS Exam.

How Many Candidates take Economics Optional?

In 2017, which is the latest data available from the UPSC, 233 candidates had taken economics as an optional. Out of this number, 16 cleared the exam giving the subject a success rate of 6.9% that year.

The table given below gives the success rates of economics optional from 2012 to 2017.

Toppers with Economics Optional

There have been many toppers with economics as their optional subject. The most famous with this optional is perhaps Gaurav Agrawal, the first ranker in the civil services 2013 exam. He scored 134 and 162 marks in the optional papers.

The next table gives the names of a few toppers who had taken economics as the optional subject.

Toppers with Economics Table

Economics Optional Pros and Cons

Like all other optional subjects, economics too has its share of advantages and disadvantages as an optional. Although nothing can be generalised and a lot depends on the individual candidate, a few pointers are worth mentioning as they may help you in deciding on an optional.

Economics Optional Pros

• Overlap with General Studies: Economics has a good overlap with the IAS syllabus of GS Paper III. The overlap is significant because the optional can cover close to 60% of the GS III syllabus. That makes it at least 30 marks of the GS mains paper.

Even in the UPSC Prelims, many questions are asked from economics. The following table gives the number of questions asked from this subject from 2011 to 2018 in the prelims exam:

As you can see from the table, between 15 and 20 questions can be answered with ease in the prelims if you take economics optional.

• No need of background: Economics can be studied by anyone with an interest in the subject. You don’t need an educational background in it. It can be understood by anyone. It is also recommended for candidates with a science or technical background as even though considered a social science, economics is quite logical and rational.
• Economics syllabus: The IAS syllabus for this optional is very clear-cut and specific.
• Scoring: Many toppers are of the opinion that conceptual clarity with good answer writing skills can fetch marks in this subject. Additionally, the subject requires the use of graphs and diagrams. These can also fetch good marks if done in a relevant and correct method.
• Study material: There is plenty of material available for economics optional.

Economics Optional Cons

• Technical subject: Being a technical subject, you need to write precise and accurate answers which are backed with facts and numbers. You cannot beat about the bush here. As mentioned before, conceptual clarity brings in marks. The lack of it can prove costly. Also, if you are not comfortable with graphs and huge figures, you might want to stay away from economics
• Genuine interest: Although true for all subjects, you need to have a real interest in this subject if you are to even understand it. If not, it is better to take another less technical optional.

Economics Optional Syllabus

Let us take a look at the syllabus for political science and international relations for the UPSC mains exam.

There are two optional papers in the UPSC scheme of things. Both the papers are for a total of 250 marks making the total optional marks to 500.

Download the UPSC Economics optional syllabus PDF.

Economics Optional Strategy

Economics is an interesting subject. But, you need to study with a plan if you wish to clear the IAS exam. There are certain points to remember while preparing for the economics optional. They are given below:

1. It is advisable to make notes while you prepare. This will help you in revision also.
2. Go for conceptual clarity first. This is the most important.
3. Go through the syllabus thoroughly. Divide it into sections and prepare your study plan accordingly.
4. Go through past UPSC question papers. Answer writing practise is very important.
5. Have diagrams, flowcharts, graphs, pie charts, etc. ready for most topics and subtopics. As mentioned before, they fetch more marks and certain answers are incomplete without them.
6. Include the names of certain important economists in your answers. So, during preparation, take care to study the names of some famous economists and their points of view or theories/models.
7. Have some numerical data ready for certain topics and subtopics. Such facts and figures help you write more complete answers and they also help you substantiate certain points. But make sure the data is current and relevant.
8. Try to interlink paper I and paper II. For instance, you can give real-life examples of the theories and models that come in paper I.
9. In Paper II, you have more freedom to express your own opinions. When you do take a stance, make sure you validate it with facts and numbers. Let your answers be substantiated by facts. And, do not take extreme positions on issues.
10. Be clear on economic terms. Do not replace a term like depreciation with say, devaluation. Economics is a precise science and you must use the accurate terms.

Strategy for Economics Paper I

Advanced Micro Economics

1. Marshallian and Walrasian Approaches to Price determination – you can cover this section from Advanced Economic Theory by HL Ahuja.
2. Alternative Distribution Theories: Ricardo, Kaldor, Kalecki – this can also be covered from Advanced Economic Theory by HL Ahuja.

Example Question from 2015 UPSC Economics Paper:

In what way Kaldor’s model of income distribution is basically a Keynesian theory? (20 marks)

Explain the backward sloping supply curve of labour as a choice between income and leisure. (10 marks)

1. Markets Structure: Monopolistic Competition, Duopoly, Oligopoly – you can commence the study of this from the Ahuja book and then move on to Varian’s Microeconomic Analysis.

Example Question from 2015 UPSC Economics Paper:

Under perfect competition, in the short run, find out graphically, without using average cost curve, the conditions in equilibrium for the existence of-    (10 marks)

(i) normal profit

(ii) supernormal profit

(iii) loss.

• Modern Welfare Criteria: Pareto Hicks & Scitovsky, Arrow’s Impossibility Theorem, A.K. Sen’s Social Welfare Function – this section can also be covered from the Ahuja book. As an additional read, you can refer to On Economic Inequality by Amartya Sen.

Example Question from 2015 UPSC Economics Paper:

How is Kaldor-Hicks compensation principle an improvement over Pareto optimality criterion? What are the Scitovsky views in this regard? (10 marks)

Advanced Macro Economics

This heading can be covered from Modern Economics by HL Ahuja or Macroeconomics by Gregory Mankiw. A good value addition would be a macroeconomics reader by Snowdon and Vane.

Example Question from 2015 UPSC Economics Paper:

“Under rational expectations hypothesis, systematic monetary policy will be ineffective.” Explain this statement using a suitable model. (20 marks)

Banking and Finance

• Section (a) can be covered from Modern Economics by Ahuja, Money and Banking by NK Sinha and Macroeconomics by Richard Froyen.

Explain repo rate and reverse repo rate. How do changes in the repo rate affect EMIs of borrowers? (10 marks)

Show that liquidity preference is neither necessary nor sufficient for the existence of involuntary unemployment in Keynesian system. (20 marks)

Derive money multiplier when a part of money supply is exogenous and the other part is endogenous. (10 marks)

• Section (b) can be covered comprehensively from Public Finance in Theory and Practice by Musgrave and Musgrave.

Example Question from 2015 UPSC Economics Paper:

“Subsidies have both positive and negative impacts on the economy.” Explain this statement and illustrate your answer with Indian experience. (20 marks)

International Economics

This whole section can be covered from International Economics by Dominick Salvatore.

Example Question from 2015 UPSC Economics Paper:

How do depreciation and appreciation in the external value of a currency impact a country’s balance of payments? (10 marks)

Growth and Development

• Theories of Growth can be read from Advanced Macroeconomics by David Romer, and Development Economics by Ray and Thirlwall.

Example Question from 2015 UPSC Economics Paper:

Do you think that the root of Harrod’s instability problem lies in the assumption of wage-price rigidity? Give arguments in favour of your answer. (10 marks)

“Balanced and unbalanced growth strategies are not substitutes but complementary to each other.” Explain this statement. (10 marks)

1. Process of Economic Development of Less developed countries: Myrdal and Kuzments on economic development and structural change: Role of Agriculture in Economic Development of less developed countries – for this section, you can use Economic Theory and Underdeveloped Regions by Myrdal.
2. The rest of the sections in this heading can be covered from Salvatore’s book. Modern Economics by Ahuja is also a good book for these sections.

Example question from 2015 UPSC Economics Paper:

What is indicative planning? In this context, explain how State and markets can play a synergetic role in economic development. (10 marks)

Strategy for Economics Paper II

1. For paper II, the standard books to refer are Indian Economy by Uma Kapila and Indian Economy by Dutt and Sundaram. They are very good books that cover all the topics.
2. You should also refer to The Hindu and Economic and Political Weekly (EPW) for a critical perspective of issues.
3. Another must-read is the Economic Survey which must be studied extensively.
4. An important source for Paper II is the NITI Aayog official website from where you can get first-hand information on the body, its schemes and latest data.
5. Current affairs are especially important for this paper. You must refer to the Hindu and also a business newspaper every day and take note of the important events and concerns given. At BYJU’S we cover weekly business news in a video lecture which is updated regularly on our Youtube channel. You can watch a video here:

Economics Optional Books

Booklist for Paper I

1. Advanced Economic Theory by HL Ahuja
2. Microeconomic Analysis by Hal Varian
3. On Economic Inequality by Amartya Sen
4. Macroeconomics by Gregory Mankiw
5. A good Macroeconomics reader by Snowdon and Vane
6. Modern Economics by HL Ahuja
7. Money and Banking by NK Sinha
8. Macroeconomics by Richard Froyen
9. Public Finance in Theory and Practice by Musgrave and Musgrave
10. International Economics by Dominick Salvatore
11. Advanced Macroeconomics by David Romer
12. Development Economics by Ray and Thirlwall
13. Economic Theory and Underdeveloped Regions by Myrdal

Booklist for Paper II

1. Indian Economy by Uma Kapila
2. Indian Economy by Dutt and Sundaram
3. Indian Economy by Misra and Puri

The above details would help candidates prepare for UPSC 2022.

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