Economics as an Optional


Economics has increasingly become a popular choice for mains amongst the IAS aspirants.Not only are economics’ graduates preferring the subject, but a number of aspirants from varied backgrounds are choosing the subject because of recent success of toppers. However, just because some people scoring well should not be the criteria for choosing economics. Interest in the subject should be the first criterion while selecting any subject including economics.

Syllabus and Resource Recommendations

UPSC Economics syllabus is very well defined. It goes way beyond what you study or the Preliminary exam (that is only the surface). You can take up Economics even if you haven’t studied it at the undergraduate level. But that would require pure dedication and hard work from your end. Below is an outline of the prescribed syllabus and the recommended books for the same.


Covers the theoretical aspects of economics. Questions asked in this section require you to have an in depth understanding over the concepts. Although mathematics is an integral part of Economics at undergraduate and postgraduate level, UPSC does not require you to master mathematical economics


1. Advanced Micro Economics: 

Marshallian and Walrasian Approaches to Price determination;

Alternative Distribution Theories: Ricardo, Kaldor, Kalecki;

Markets Structure: Monopolistic Competition, Duopoly, Oligopoly;

Modern Welfare Criteria: Pareto Hicks & Scitovsky, Arrow’s Impossibility Theorem, A.K. Sen’s Social Welfare Function.

HL Ahuja: Advanced Economic Theory: Microeconomics


A Koutsoyiannis: Modern Microeconomics

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

HL Ahuja: Macro Economics


RT Froyen: Macroeconomics: Theories and Policies


Edward Shapiro: Macroeconomics

3. Money and Banking

 Demand for and Supply of Money: Money Multiplier Quantity Theory of Money (Fisher, Pique and Friedman) and Keynes’ 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.
HL Ahuja: Macro Economics


RT Froyen: Macroeconomics: Theories and Policies


HL Bhatia: Public Finance


Musgrave and Musgrave: Public Finance-Theory and Practice

4. 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 Implicationns 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.

HG Mannur: International Economics (for models, offer curves, TOT, Tariff)


Dominick Salvatore: International Economics: Trade and Finance

5. 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 Kuzent 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.

HL Ahuja: Macro Economics


ML Jhingan: Economics of Development and Planning


Mishra and Puri: Growth and Development


Mrinal Kanti Dutta: Environmental Economics (for environment portion



Exclusively deals with the Indian economy. There are no models or concepts to grasp. The questions are relatively simple and require you to display your understanding of economic history and present of India backed by latest data.


1. 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. Uma Kapila: Indian Economy: Performance and Policies

Mishra and Puri: Indian Economy

2. Indian Economy after Independence

 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.

 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.

Tirthankar Roy: Economic History of India


Ramesh Singh: Indian Economy


Economic survey




Economic and Political Weekly (relevant articles)


Business Newspaper (Up-to-date on economic policies)

Topic wise Distribution of Questions in UPSC Mains (based on last 15 years analysis)

Subject Number of Questions
Indian Economy 40-45
Micro Economics and Macro economics 35-40
International economics 15-25
Money and Banking, and Public Finance 10-15
Growth and Development 5-10
Statistics 5-10


Source Link For
Arthpedia http://www.arthapedia.in/index.php?title=Home_Page Concepts
Investopedia http://www.investopedia.com/dictionary/ Concepts and definitions
RBI www.rbi.org.in/home.aspx All reports, policies, economics fundamentals
NITI Aayog http://niti.gov.in/ Reports and Policies
Planning Commission http://www.planningcommission.nic.in/ Five-year Plans
PRS http://www.prsindia.org/ Bills, Anlysis and Summary
India Budget http://indiabudget.nic.in/survey.asp Budget and Economic Survey
egyankosh http://www.egyankosh.ac.in/ Study Material on all topics, IGNOU
Indian Government https://india.gov.in/topics/finance-taxes/economy Data
Mrunal http://mrunal.org/economy Concepts and latest Topic analysis
BYJUs http://byjus.com/free-ias-prep/economy Economy notes and Concepts

Important Tips

Paper 1

  • Books like HL Ahuja are extremely repetitive, are certain chapters are irrelevant. You can ignore these chapters
  • Make notes wherever possible. This will be a good practice for graphs and will also help you when revising
  • To understand the economic models, you need to revise them at least multiple times.
  • Practice diagrams, figures and graphs properly. You cannot fetch marks if you do not supplement your theory with graphs.
  • Some topics have been asked frequently, prepare these topics thoroughly (more on these later)
  • Macroeconomics and Microeconomics are the backbone of economic theory. You need to have a firm grasp on these two.

Paper 2

  • Time management is really important, especially in this paper. You might have a lot of ideas you want to include, but there might be a time constraint, so practise writing answers as much as possible.
  • Make notes of important topics. Jot down important economic events and examples from current events, these can be incorporated while answering certain questions.
  • Do not forget to supplement your answer with data.
  • Try and make figures/ pie Charts/ Flow Charts etc.wherever possible. It saves time and conveys a lot more. Remember Quality matters, not the quantity.
  • Read one business newspaper daily. Not only will this complement your answers, it will also help in the interviews.

Pros and Cons of Taking Economics


  • The syllabus for economics is well defined and easily available.
  • There are some standard books that need to be followed to understand the basics of the subject.
  • Economics helps in General studies papers as well.
  • Economics has had a good success rate and is scoring as well.
  • Logical, Rational and Interesting
  • Coaching is not required. You need clarity of concepts and need to stay up-to-date on economic Policies.
  • Use of graphs, figures and diagrams can increase chances of a better score


  • You need to be decent at maths, in order to understand certain concepts and equations. (Marginal concepts, slopes of curves, models etc.)
  • Some people find it difficult because of the extensive use of graphs, equations, etc. So need to be genuinely interest in the subject.
  • Economics is a technical concept. You cannot just mug up things you need to understand the concept in depth.

Therefore, before taking the decision of taking up economics, you must go through the syllabus and the previous years’ question papers. Make a fair assessment of your aptitude and interest for the subject and if it suits you, go ahead!

The current article has been written by Ms. Divya Sarjolta who holds a Gold Medal in the subject of Economics and is presently pursuing a P.hD degree in the field of Health Care Economics. Cerebration is grateful for her contribution. 

Akriti Mattu

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