UPSC Mains – How to Prepare for Economics Optional

Economics syllabus for UPSC optional/IAS Economics Optional Syllabus

The optional subject chosen by a candidate has a significant impact on the overall score in UPSC CSE Mains and hence cannot be treated as a mere option. The main criteria for choosing any optional subject should be interest in the subject and material availability. An optional must be chosen out of one’s personal strength. Optional preparation demands in-depth study as well as a wide coverage of the syllabus and this indeed is possible only when the subject is our strength.

Economics is a very interesting optional and over the past few years, it has gained a lot of popularity mainly owing to the fact that many toppers had chosen this optional and it has been a scoring subject all along. The subject is technical and at the same time it is equally relevant in current times.

As mentioned above, the success rate has been good for aspirants who have chosen economics optional. Candidates who have a previous background in this subject definitely have an added advantage and can easily complete the syllabus in lesser span of time due to the familiarity of concepts.  In case of an aspirant being a complete novice to the subject, it might take a considerate time to complete the syllabus. The preparation time caries from individual to individual. The first step towards effective optional preparation is to go through the entire syllabus and keep the syllabus handy.

PROS:

  • A logical and rational subject and one can easily understand the subject.
  • As mentioned earlier, compared to other mainstream optional, economics is technical and also equally relevant in the current times.
  • Overlaps and covers almost 50-60% syllabus of GS Paper 3.
  • Covers around 20-30 marks in GS Paper 1 in UPSC prelims.
  • Study material is readily available in the market for reference.

CONS:

  • Without much of economics background, it can be a little tricky to complete the entire syllabus and have a comprehensive understanding.
  • One needs to be good with graphs as one can encounter a lot of them during the preparation. But once a student has a good hang of it, he/she can score marks easily.
  • Having a good hold of Mathematics can prove to be very useful. Hence this acts as a point of caution.
  • Though a lot of study material is readily available in the market for reference, one should be prepared for self study through multiple books.

SYLLABUS: Syllabus of Economics optional for UPSC

Economics Optional Syllabus for Paper – 1

Advanced Micro Economics

  • Marshallian and Walrasiam Approaches to Price determination.
  • Alternative Distribution TheoriesRicardo, Kaldor, Kaleeki.
  • Markets Structure Monopolistic Competition, Duopoly, Oligopoly.
  • Modern Welfare CriteriaPareto Hicks & Scitovsky, Arrow’s Impossibility Theorem, A.K. Sen’s Social Welfare Function.

Advanced Macro Economics

  • Approaches to Employment Income and Interest Rate determination
  • Classical, Keynes (IS-LM) curve
  • Neo classical synthesis and New classical
  • Theories of Interest Rate determination and Interest Rate Structure.

Money – Banking and Finance

  • Demand for and Supply of Money
  • Money Multiplier Quantity Theory of Money (Fisher, Pique and Friedman)
  • Keyne’s Theory on Demand for Money
  • Goals and Instruments of Monetary Management in Closed and Open Economies
  • Relation between the Central Bank and the Treasury
  • Proposal for ceiling on growth rate of money
  • Public Finance and its Role in Market Economy
  • In stabilization of supply, allocation of resources and in distribution and development
  • Sources of Govt. revenue, forms of Taxes and Subsidies, their incidence and effects
  • Limits to taxation, loans, crowding-out effects and limits to borrowings. Public Expenditure and its effects

International Economics

  • Old and New Theories of International Trade
  • Comparative Advantage
  • Terms of Trade and Offer Curve
  • Product Cycle and Strategic Trade Theories
  • Trade as an engine of growth and theories of under development in an open economy
  • Forms of ProtectionTariff and quota
  • Balance of Payments AdjustmentsAlternative Approaches.
  • Price versus income, income adjustments under fixed exchange rates
  • Theories of Policy Mix
  • Exchange rate adjustments under capital mobility
  • Floating Rates and their Implications for Developing CountriesCurrency Boards
  • Trade Policy and Developing Countries
  • BOP, adjustments and Policy Coordination in open economy macro-model
  • Speculative attacks
  • Trade Blocks and Monetary Unions
  • WTOTRIMS, TRIPS, Domestic Measures, Different Rounds of WTO talks

Growth and Development

  • Theories of growth
  • Harrod’s model,
  • Lewis model of development with surplus labour
  • Balanced and Unbalanced growth,
  • Human Capital and Economic Growth.
  • Research and Development and Economic Growth
  • 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.
  • Economic development and International Trade and Investment, Role of Multinationals
  • Planning and Economic Developmentchanging role of Markets and Planning, Private- Public Partnership.
  • Welfare indicators and measures of growth – Human Development Indices. The basic needs approach.
  • Development and Environmental Sustainability – Renewable and Non Renewable Resources, Environmental Degradation, Intergenerational equity development.

Economics Optional Syllabus for Paper – 2

Indian Economy in Pre-Independence Era

  • Land System and its changes, Commercialization of agriculture, Drain theory,  Laissez faire theory and critique
  • Manufacture and TransportJute, Cotton, Railways, Money and Credit

Indian Economy after Independence

  • The Pre Liberalization Era
  • Contribution of Vakil, Gadgil and V.K.R.V. Rao
  • AgricultureLand Reforms and land tenure system, Green Revolution and capital formation in agriculture
  • Industry Trends in composition and growth, Role of public and private sector, Small scale and cottage industries
  • National and Per capita incomepatterns, trends, aggregate and Sectoral composition and changes there in
  • Broad factors determining National Income and distribution, Measures of poverty, Trends in poverty and inequality
  • The Post Liberalization Era
  • New Economic Reform and AgricultureAgriculture and WTO, Food processing, Subsidies, Agricultural prices and public distribution system, Impact of public expenditure on agricultural growth
  • New Economic Policy and IndustryStrategy of industrialization, Privatization, Disinvestments, Role of foreign direct investment and multinationals.
  • New Economic Policy and TradeIntellectual property rightsImplications of TRIPS, TRIMS, GATS and new EXIM policy
  • New Exchange Rate RegimePartial and full convertibility, Capital account convertibility
  • New Economic Policy and Public Finance Fiscal Responsibility Act, Twelfth Finance Commission and Fiscal Federalism and Fiscal Consolidation
  • New Economic Policy and Monetary system
  • Role of RBI under the new regime
  • Planningfrom central Planning to indicative planning, Relation between planning and markets for growth and decentralized planning73rd and 74th Constitutional amendments.
  • New Economic Policy and EmploymentEmployment and poverty, rural wages, Employment Generation, Poverty alleviation schemes, New Rural, Employment Guarantee Scheme.

Download UPSC Economics optional syllabus PDF

Booklist and Sources to refer:

Paper 1 primarily deals with the theoretical aspects of economics. One can expect questions in this section which are not straight forward and hence requires a lot of analytical thinking. Application becomes pretty much simpler, once a person is thorough with the theory. It is a must to have a clear understanding of the concepts. Paper 1 of economics optional covers a wide range of topics related to world economics.

Advanced Microeconomics:

  • Advanced microeconomics theory – Ahuja
  • Intermediate Micro Economics – Varian
  • Microeconomics – Robert Pindyck and Daniel Rubinfield

Advanced Macroeconomics:

  • Modern Economics – H.L Ahuja
  • Macroeconomics – Richard Froyen
  • Macroeconomics – Gregory Mankiw
  • Macroeconomics reader – Snowdon and Vane

Money – Banking & Finance:

  • Modern Economics – H.L Ahuja
  • Money & Banking – N.K. Sinha
  • Public Finance in Theory and in Practice – Musgrave and Musgrave

International Economics:

  • International Economics – Dominick Salvatore

Economic Growth and Development:

  • Development Economics – Debraj Ray and Thirlwall
  • Economic Theory and Underdeveloped Regions – Mrydal

Paper 2 deals with topics related to Indian Economy. NCERT books are extremely important to have a good clarity in concepts. The questions in this paper are relatively simple and require some form of critical thinking. It is a must to be able to back arguments with relevant data. One needs to refer to various sources to get a hang of all the happenings in the economy.

  • Indian Economy Since Independence – Uma Kapila
  • Indian Economy – Performance and Policies – Uma Kapila
  • Indian Economy – Dutt and Sundaram
  • Hindu and EPW for a critical perspective
  • Economic Survey
  • India Year Book

Although paper 2 seems to be lot simpler than paper 1, paper 1 seems to be more scoring in comparison to paper 2. While paper 1 requires intensive preparation and to be done separately, Paper 2 can be done simultaneously along with India after Independence and GS Paper 2 & 3.

Strategy:

Economics Optional requires an aspirant to have a certain aptitude in mathematics. Even when aspirants are well arrayed with the syllabus, they usually fall short of the merit list due to lack of practice. Below are various tips and tricks that can assist one in economics optional preparation:

  • Solve previous years’ question papers as this habit proves to be beneficial for all of the competitive exams.
  • Making notes makes it easier to revise before the exam.
  • Multiple revisions ensure that the concepts are entrenched in one’s memory.
  • Practice diagrams and have conceptual clarity.
  • The most crucial fact which one should keep in mind is time management. Practice many mock tests and question banks and also set a timer. This will increase your speed as well as accuracy.

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