Civil Services Examination, CSE Mains, IAS, IPS, UPSC

ECONOMICS I

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The optional paper usually can make or break your chances of success in the exam. Choosing the right optional and preparing thoroughly for it is absolutely necessary if one wants to get a good rank in the exam.

Being a graduate, post graduate and MPhil in Economics, choosing Economics as my optional paper was almost natural for me. However, this also had a drawback. I did not prepare that well for it in my first two attempts under the faulty assumption that I was well versed with the subject. This year, I tried to prepare more comprehensively, especially Paper II.

The advantage of Economics as an optional is that it contains a mix of both technical and subjective components. Paper I is theory and model based which can fetch you more marks if you write the correct answer. Paper II deals with the Indian economy and is more subjective with GS 3 type of approach. People comfortable with writing such essay-based answers can surely fetch more marks here. So, if one prepares well, I feel that one can really get a good score in the paper.

Syllabus

1. Advanced Micro Economics:

(a) Marshallian and Varrasiam Approaches to Price determination.

(b) Alternative Distribution Theories; Ricardo, Kaldor, Kaleeki.

(c) Markets Structure: Monopolistic Competition, Duopoly, Oligopoly.

(d) Modern Welfare Criteria: Pareto Hicks and 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 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.

(b) Public Finance and its Role in market Economy: In stabilisation of supply, allocative, of resources and in distribution and development. Sources of Government 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 underdevelopment in an open economy.

(b) Forms of Protection: Tariff and quota.

(c) Balance of Payments Adjustment: 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 macromodel.

(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) (i) Theories of growth: Harrod’s model;

(ii) Lewis model of development with surplus labour.

(iii) Balanced Unbalanced Growth.

(iv) Human Capitals and Economic Growth.

(v) Research and Development and Economic Growth.

(b) Process of Economic Development of less developed countries: Myrdal and Kuznets on economic development and structural change: Role of Agriculture in Economic Development of less developed countries.

(c) Economic Development and International Trade and Investment, Role of Multinationals.

(d) Planning and Economic Development: 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.

As can be seen from above, the UPSC syllabus is fairly comprehensive. The main topics are- Advanced Micro Economics, Advanced Macro Economics, Money-Banking and Finance, International Economics, and Growth and Development.

The Booklist

TopicBooks/Magazines/Sources etcRemarks
Advanced Micro Economics1. Ahuja’s “Advanced Economic Theory”
2. Abhimanyu Gehlaut’s handwritten summaries from Ahuja. https://reluctanteconomistblog.wordpress.com/econ-p1/   I am also attaching the files here and here for your convenience.		This is the only book. Read it once completely, except some of the skipped chapters I have mentioned.     Once completing the first reading, can go through Abhimanyu Gehlaut’s notes for revision. Ahuja is very repetitive.
Advanced Macro Economics1.  Froyen  
2. Ahuja’s “Macroeconomics”		Froyen gives a good understanding of the concepts and theory. Please read it thoroughly at least once.   Ahuja should be read after that, to plug the gaps and cover the entire syllabus.
Money, Banking and Finance1.  Froyen   2. Ahuja’s “Macroeconomics”Only the relevant chapters on banking, monetary policy and theories of money from these two books. First, read Froyen. Then, Ahuja.
International Economics1. Salvatore’s “International Economics: Trade and Finance”  
2. Gaurav Agarwal’s notes for revision		Salvatore is the bible for this topic. Read it thoroughly. Almost every topic is important. Try to relate it with the syllabus.   Gaurav Agarwal’s notes are good for revision. They are very comprehensive.
Growth and Development1. Thirwall’s “Economics of Development” 2. Jhingan’s “The Economics of Development and Planning”Every chapter of Thirwall need not be read. Read only those chapters that correspond to the syllabus topics.   Jhingan should be used to cover the remaining portions.   Use Google and Wikipedia extensively in this topic. Many parts are not covered in either book and it is better to use the internet to gather good info on the same.

Websites and blogs

A few important points

  • Revision is key. Before the exam, one should have revised at least once. Between prelims and mains, we get around 3 months. One can spend about 1.5 months in a thorough revision of the paper.
  • Answer writing is extremely important. Even if you know the model or the theory, you need to be able to explain it clearly and concisely in a limited set of words and space. That requires practice.
  • Diagrams. The appropriate diagram or a graph is a must if the answer or the model so requires. Missing out on it not only reduces scores but also make it difficult to write a concise answer.
  • While economics is a highly mathematical and quantitative subject, UPSC does not demand that much of mathematical rigour. Avoid the use of large or complicated mathematical equations. This is especially true for those who have done Masters in economics. Masters courses are very mathematical, but UPSC syllabus is not. One needs to be careful of that.
  • Textbooks of Indian writers are not that good at explaining the key concepts. Foreign writers are better suited for that purpose. But Indian textbooks are more important when it comes to the questions in the exam. So, once you have understood the key concepts from the foreign textbooks, focus on the Indian textbooks.

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