Economics Optional Strategy & Syllabus

Economics Optional Syllabus – Paper 1

Advanced Micro Economics

• Marshallian and Walrasiam Approaches 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 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 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 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 Development → changing 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 – Paper 2

The UPSC Economics syllabus for Paper 2 focuses on the Indian economy, encompassing various reforms and policies introduced since independence. Staying updated on economic developments through newspapers and magazines is crucial for students.

Indian Economics in the Pre-Independence Era:

• Land System and Changes: Commercialization of agriculture, Drain theory, Laissez-faire theory and its critique.
• Manufacture and Transport: Jute, Cotton, Railways, Money, and Credit.

Indian Economy after Independence:

The Pre-Liberalization Era:

• Contributions: Vakil, Gadgil, and V.K.R.V. Rao.
• Agriculture: Land reforms and tenure system, Green Revolution, capital formation in agriculture.
• Industry: Trends in composition and growth, roles of public and private sectors, small-scale and cottage industries.
• National and Per Capita Income: Patterns, trends, aggregate and sectoral composition, and changes.
• Determinants of National Income: Distribution, poverty measures, trends in poverty and inequality.

The Post-Liberalization Era:

• Agriculture and Reforms: Agriculture and WTO, food processing, subsidies, agricultural prices, public distribution system, impact of public expenditure on agricultural growth.
• Industry and New Economic Policy: Industrialization strategy, privatization, disinvestment, role of foreign direct investment and multinationals.
• Trade and New Economic Policy: Intellectual property rights, implications of TRIPS, TRIMS, GATS, new EXIM policy.
• Exchange Rate Regime: Partial and full convertibility, capital account convertibility.
• Public Finance and New Economic Policy: Fiscal Responsibility Act, Twelfth Finance Commission, fiscal federalism, fiscal consolidation.
• Monetary System: Role of RBI under the new regime.
• Planning: Transition from central to indicative planning, relation between planning and markets for growth, decentralized planning through the 73rd and 74th Constitutional amendments.
• Employment and New Economic Policy: Employment, poverty, rural wages, employment generation, poverty alleviation schemes, New Rural Employment Guarantee Scheme.

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