UPSC Economics Optional Syllabus

Economics optional syllabus for upsc

In this article, we will delve into the UPSC Economics optional syllabus, offering you a comprehensive guide to help you navigate through this subject effectively.

Welcome to Rau’s IAS, your trusted companion on the path to success in the UPSC Civil Services Examination. Choosing the right optional subject is a pivotal decision in your journey towards becoming a civil servant. Economics, a subject at the intersection of policy, markets, and society, offers a dynamic and insightful perspective on societal issues.

Economics Syllabus for UPSC Optional (Paper-I)

Paper 1 – Economics
Micro Economics
– Marshallian and Walrasian Approach to Price determination.
– Alternative Distribution Theories: Ricardo, Kaldor, Kaleeki
– Markets Structure: Monopolistic Competition, Duopoly, Oligopoly.
– Modern Welfare Criteria: Pareto Hicks & Scitovsky, Arrow’s Impossibility Theorem, A.K. Sen’s Social Welfare Function
Advanced Macro EconomicsApproaches 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 FinanceDemand 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 the 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 EconomicsOld 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 underdevelopment in an open economy.

Forms of Protection: Tariff and quota.
Balance of Payments Adjustments: Alternative 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 Countries: Currency Boards.Trade Policy and Developing Countries.
– BOP, adjustments and Policy Coordination in open economy macro-model.
– Speculative attacks
– Trade Blocks and Monetary Unions.
WTO: TRIMS, TRIPS, Domestic Measures, Different Rounds of WTO talks.
Growth and DevelopmentTheories of growth:
– Harrod’s model,
– Lewis’s 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 Development: the changing role of Markets and Planning, PrivatePublic 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.

Paper I of the Economics optional syllabus focuses on Microeconomics, which is the study of individual economic units such as consumers, firms, and markets. It delves into the behavior and decision-making processes of these entities within the framework of economic principles.

  • Introduction to Microeconomics: This section provides a foundational understanding of microeconomics. It covers basic concepts and definitions that form the building blocks of economic analysis. Topics include factors like scarcity, choice, and the fundamental principles of demand and supply.
  • Theory of Consumer Behaviour: This topic explores how consumers make decisions regarding the allocation of their resources to maximize their utility. It delves into cardinal and ordinal utility, which are approaches used to measure consumer satisfaction. Additionally, it discusses the concept of consumer equilibrium, where a consumer reaches the optimal level of satisfaction given their budget constraints.
  • Theory of Production and Costs: Here, the focus shifts to the production process within a firm. It examines the relationship between inputs (like labor and capital) and outputs, presenting them in the form of production functions. Additionally, this section covers cost functions, which analyze the relationship between the costs of production and the level of output.
  • Market Structure and Pricing: This section deals with the different market structures that exist in an economy. It explores perfect competition, monopoly, oligopoly, and monopolistic competition. Each of these market structures has distinct characteristics, including the number of firms, the level of competition, and the degree of market power. Understanding these structures is crucial for analyzing pricing and output decisions made by firms.
  • Welfare Economics: Welfare economics examines how economic activities impact the overall well-being of society. It introduces the concept of Pareto Optimality, where no one can be made better off without making someone else worse off. This section also addresses market failures, situations where the free market may not efficiently allocate resources, and explores government interventions to correct these inefficiencies.

Economics Syllabus for UPSC Optional (Paper-II)

Paper 2 – Economics
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
A. 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 the 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.

Paper II of the Economics optional syllabus focuses on Macroeconomics, which is the study of the economy as a whole, including aggregate economic variables like national income, unemployment, inflation, and economic growth. It also delves into topics related to monetary and fiscal policy, international economics, and economic development.

  • National Income Accounting: This section introduces the measurement of a nation’s economic performance through concepts like Gross Domestic Product (GDP), Gross National Product (GNP), Net National Product (NNP), and various other income and expenditure measures. It provides a comprehensive understanding of how the economy’s overall output and income are calculated.
  • Theories of Employment, Inflation, and Business Cycles: This topic examines different economic theories regarding employment levels, inflation, and the fluctuations in economic activity known as business cycles. It covers classical, Keynesian, and monetarist perspectives, each offering distinct explanations and policy implications for managing these macroeconomic phenomena.
  • Determination of Income and Employment: This section focuses on the factors that influence the overall level of income and employment in an economy. It analyzes the aggregate demand and supply, consumption, savings, and investment functions, which play a crucial role in determining the equilibrium level of national income and employment.
  • Money and Banking: Money is a cornerstone of any modern economy, and this topic delves into its functions, characteristics, and different forms. It also covers the role of the central bank and monetary policy, which involves the management of money supply, interest rates, and credit conditions to achieve economic objectives.
  • International Economics: This section explores the interactions between different economies in the global context. It covers topics like the balance of payments, which tracks a nation’s economic transactions with the rest of the world, and exchange rates, which determine the value of one currency in terms of another. Additionally, it addresses open economy macroeconomics, which analyzes the impact of international trade and finance on a nation’s economy.
  • Economic Growth and Development: This crucial area of study focuses on the long-term trends in an economy’s performance, particularly in terms of increasing production and improving living standards. It delves into theories of economic growth and development, factors influencing growth, and various indicators of human development.

In conclusion, the UPSC Economics Optional Syllabus offers a comprehensive exploration of micro and macroeconomic principles, providing a nuanced understanding of individual economic behavior and the functioning of entire economies. Mastering the intricacies of consumer behavior, market structures, national income accounting, and monetary policy forms the foundation of this enriching subject.

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