What is Economics
Economics is what every country, irrespective of their socio-political scenario, is based on. To be a civil servant, knowing the basic concepts and theories of economics, the nuances of Indian economics and where it stands in respect to the economics of the world is very important. UPSC Economics Optional subject is very crucial for General Studies syllabus also.
Thus Economics is an essential optional subject in UPSC mains that the aspirants can opt for. Although not as popular as Public Administration or Geography, Economics Optional has a good success rate among top AIR holders. Gaurav Agarwal, a top-ranker in 2013, had Economics as his optional paper.
Who should take Economics Optional for UPSC Mains?
There is no such rule that only Economics graduates can take this subject as an optional. The syllabus of UPSC Economics Optional is such that an aspirant even without any prior academic experience with the subject can go for it and score well. However, before choosing Economics, the candidates must be sure that they actually like the subject and should not go for it only because they heard that it was easy to study and score or because the topper of the previous year had Economics as his or her optional.
If an aspirant is from Economics background and has a strong foothold on the subject, he or she should absolutely go for it. But in case a candidate is from a different field and finds Economics an interesting subject that they can understand and explore, then they should take a week or two studying the basics of Economics. If it is something they think they can take an interest in, prepare over the months and take the examination, then there is no reason for not choosing Economics Optional for UPSC.
Economics Optional Syllabus for UPSC Mains
Syllabus plays a very important role in Economics Optional for IAS, because more often than not, many questions come directly from the phrases used in the syllabus by the Civil Services Website. Here is the complete UPSC Economics Optional Syllabus for the candidates to refer to.
1 Advanced Micro-Economics:
(a) Marshallian and Walrasian Approaches to Price Determination.
(b) Alternative Distribution Theories: Ricardo, Kaldor, Kaleeki.
(c) Markets Structure: Monopolistic Competition, Duopoly, Oligopoly.
(d) Modern Welfare Criteria: Pareto Hicks & Scitovsky, Arrow’s Impossibility Theorem, A.K. Sen’s Social Welfare Function.
2 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.
3 Money – Banking and Finance:
(a) Demand for and Supply of Money: Money Multiplier Quantity Theory of Money (Fisher, Pique and Friedman) and Keynes’s Theory on Demand for Money, Goals and Instruments of Monetary Management in Closed and Open Economies; Relation between Central Bank and the Treasury; Proposal for a ceiling on the growth rate of money.
(b) 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.
4 International Economics:
(a) Old and New Theories of International Trade
(i) Comparative Advantage
(ii) Terms of Trade and Offer Curve.
(iii) Product Cycle and Strategic Trade Theories.
(iv) Trade as an engine of growth and theories of under development in an open economy.
(b) Forms of Protection: Tariff and Quota.
(c) Balance of Payments Adjustments: Alternative Approaches.
(i) Price versus Income, Income Adjustments under Fixed Exchange Rates,
(ii) Theories of Policy Mix
(iii) Exchange Rate Adjustments under Capital Mobility
(iv) Floating Rates and their Implications for Developing Countries: Currency Boards.
(v) Trade Policy and Developing Countries.
(vi) BOP, Adjustments and Policy Coordination in Open-Economy Macro-Model.
(vii) Speculative attacks
(viii) Trade Blocks and Monetary Unions.
(ix) WTO: TRIMS, TRIPS, Domestic Measures, Different Rounds of WTO talks.
5 Growth and Development:
(a) Theories of Growth:
(i) Harrod’s Model
(ii) Lewis Model of Development with Surplus Labour
(iii) Balanced and Unbalanced Growth
(iv) Human Capital and Economic Growth
(v) Research & Development and Economic Growth
(b) Process of Economic Development of Less-developed Countries: Myrdal and Kuzments on economic development and structural change
(i) Role of Agriculture in Economics
(ii) Development of less developed countries.
(c) Economic Development and International Trade and Investment, Role of Multinationals.
(d) Planning and Economic Development: The changing role of Markets and Planning, Private-Public Partnership.
(e) Welfare indicators and measures of growth – Human Development Indices. The basic needs approach.
(f) Development and Environmental Sustainability – Renewable and Non-Renewable Resources, Environmental Degradation, Intergenerational equity development.
- Indian Economy in Pre-Independence Era: Land System and its changes, Commercialization of agriculture, Drain theory, Laissez-faire theory and critique. Manufacture and Transport: Jute, Cotton, Railways, Money and Credit.
- Indian Economy after Independence:
- The Pre Liberalization Era:
- Contribution of Vakil, Gadgil and V.K.R.V. Rao.
- Agriculture: Land 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 Income: Patterns, Trends, Aggregate and Sectoral Composition and changes therein.
- Broad factors determining National Income and distribution, Measures of poverty, Trends in poverty and inequality.
B. The Post Liberalization Era:
- New Economic Reform and Agriculture: Agriculture and WTO, Food Processing, Subsidies, Agricultural Prices and Public Distribution System, Impact of Public Expenditure on agricultural growth.
- New Economic Policy and Industry: Strategy of Industrialization, Privatization, Disinvestments, Role of Foreign Direct Investment and Multinationals.
- New Economic Policy and Trade: Intellectual Property Rights: Implications of TRIPS, TRIMS, GATS and new EXIM policy.
- New Exchange Rate Regime: Partial 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.
- Planning: From Central Planning to Indicative Planning, Relation between planning and markets for growth and decentralized planning: 73rd and 74th Constitutional amendments.
- New Economic Policy and Employment: Employment and Poverty, Rural Wages, Employment Generation, Poverty Alleviation Schemes, New Rural Employment Guarantee Scheme.
Pros and Cons of Economics Optional
No UPSC Optional paper is smooth and easy to prepare for. Regardless of the educational background, a lot of work needs to go into the complete preparation of an optional paper. Economics Optional has its fair share of advantages and disadvantages as well, which are listed below.
Pros of Economic Optional
- The subject is based on rational, practical and logical ideas and concepts, which are comparatively easier to grasp than abstract ones.
- Though not the most popular optional paper on the block, Economics is a fairly scoring paper.
- Economics Optional significantly overlap General Studies paper III as it covers around 60% of it.
- The paper also covers around 30 marks in the UPSC Prelims paper as well, so it is like killing multiple birds with one stone.
- Economics Optional books and study materials are available in plenty.
- Because of the numerical problems and graph equations, making the paper more accurate and to the point and consequently impressing the examiner is easier than other papers.
Cons of Economics Optional
- Unless someone has a real love and understanding of the subject, it can be hard to pursue. Someone without an academic qualification in Economics can always choose the subject as an optional, but not someone who is disinterested in it.
- Some candidates find Economics too dry for their choice, especially students from Science background.
- Economics requires the candidates to be fairly decent in graphical equations. Graphs and charts are an intrinsic part of Economics, which is not the case with other papers like Public Administration or Sociology.
- There are no ways of avoiding numbers either, for those who are not very comfortable with mathematics. Although UPSC Economics optional does not have any separate numerical section, an understanding of it is certainly necessary.
- The answers of Economics can under no circumstance be vague or generic. They are almost always technical and precise, which can be a problem sometimes.