OPTIONAL

UPSC
/
IAS
PREPARATION:
ECONOMICS OPTIONAL
JUNE 26, 2014 ABC 91 COMMENTS

Has Optional Weight Gone Down in CSE 2013?

Even though on paper, UPSC has reduced the weightage of optional to
half and doubled GS, by its marking pattern the effective weightage of
optional has become more than GS! This is because in GS people have
been awarded very low marks. So even if someone has done
exceptionally well in GS, it is likely that his/her difference from others
will still be less. On the other hand people have been awarded higher
marks in optional, so that if someone has done exceptionally well in
optional, he/she will score a lot of marks more than others. UPSC is a
relative exam, only difference of marks matters. So importance of
optional in CSE 2013 is more than GS for sure!
This year I have scored 296 / 500 in Economics (last year I scored 280 /
600). It wont be unfair to say it was economics that made me an IAS
this year.
Choosing an Optional
People often have many criteria to choose the optional.. some of them
are
Scoring optional: People think some optionals are more scoring than
others.. Dont know what to say on this. Every year UPSC changes the
optionals it favors / punishes, so u never know whether the scoring
optional u took may end up in the butchering list of UPSC next year..
Overlap with GS: Pubad le lo, GS ki bhi taiyyari ho jaayegi
Nothing could be more dangerous than this attitude.. coz if we dont
like pubad, and still take it, then we anyways wont be able to study it
well enough and not only will we screw the pubad portion of GS but
also additional 500 marks optional. We only amplify our weakness by
this attitude.

I believe an optional must be chosen out of our strength. When I took

economics, many people advised me against it saying economics is
technical, not scoring etc. etc. But I knew economics was my
strength doesnt matter if no one has scored 400/600 in economics
so far, I know I would score it (as per the older marking scheme). When
UPSC is giving us 500 marks to play by our strength, why should we
pick anything else? These are our marks and let us score the maximum
out of it. And ofcourse, such a strength can only develop when we have
deep interest and luv for the subject.
Optional preparation requires a great deal of in depth study as well as
wide coverage. One has to write like a historian to take history
optional, one has to write like an economist to score well in economics.
This is only possible when the subject is our strength.
I have no Economics degree. Should I take Economics as
Optional?
That depends on your reason. If you want to take Economics optional
only because the topper this year had it (and so it has become
scoring), pls dont.
If, on the other hand, you want to take it because u have been exposed
to it briefly and found it very interesting and could understand it, then
you can explore more. Even if you have no prior exposure, but think
you will like it once exposed, you can explore more.
The only way to decide whether to take it or not is to study it for a
week or two. Take any topic from the syllabus, say macro. Read the
books i am mentioning below (or any other standard textbooks). If you
are understanding what you are reading and can read it for long hours
and still feel good, economics is your subject. Dont worry if you cant
attempt previous years questions at this stage. That will come later.
Only your understanding and keen interest should suffice at this stage.
So How to Prepare Economics Optional?
Stages of Preparation
There are multiple stages of preparation in a subject like Economics.
Stage 1: In this stage, we just focus on understanding what we are
reading. While reading, we must understand the concept fully. We will
forget the thing 2 days after we have read it, dont worry. We will not

even understand half the questions which have been asked in previous
years, dont worry. We dont even have a clue of how to write answers
in the exam, dont worry. Just ensure you understand what you are
reading and finish the syllabus.
Stage 2: This begins after the syllabus has been finished once. In the
second time, we again focus on understanding what we are reading.
This time we would find, it takes less time to understand all the stuff
and most of it seems familiar once we read. Our retention would
increase at this stage. Read, re-read, revise the syllabus 2-3 times,
ensure that we can recall without any aid what was said in a given
topic / theorem and can reproduce it on paper. At the end of this stage,
we would still not be able to even understand half the questions in the
paper.
Stage 3: Many questions in the eco question paper are not direct i.e.
they ll not ask write abt XX theorem. These questions are indirect and
we wont even know which theorem / model to apply! The aim of this
stage is to identify which model to apply. This can only come if we sit
down with previous years question papers and think and think and
discuss with others on what model to apply for a particular question.
by now we have internalised all the stuff, we can not only reproduce
the entire model / theorem on paper but also understand when and
where to apply them. We will be able to answer most (90-95%) of the
questions in previous years question papers now.
Method of Studying
In economics, diagrams are of utmost importance. UPSC economics is
completely non mathematical and totally diagramatical. So while
reading any model / theorem, we should simultaneously practise its
diagram on paper / computer.
Assumptions are very important while writing answers. We should
clearly state all the assumptions in our answers and so we should
systematically remember all the assumptions in any theorem / model.
Stats: In eco 2, stats are very important. If we supplement our
answers with stats, nothing like it. Not all stats need to be
remembered, only important ones. I am mentioning the important stats
to be remembered in the book list section.

Book List / Sources for Syllabus

Paper I

1. Advanced Micro Economics:

(a) Marshallian and Walrasiam 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,
Arrows Impossibility Theorem, A.K. Sens Social Welfare
Function.
These topics have to be studied from HL Ahuja Advanced
Microeconomics. Find the relevant chapters to study from this thick
book. In addition, questions are asked on Rent, quasi rent and
Product Exhaustion Problem, so study the relevant chapters also. HL
Ahuja is UPSC exam standard book for micro. Sens swf and proof of
Arrow can be studied from my notes. I took Sens swf from one of his
book and proof of Arrow from one of Sens paper. Proof of Arrow given
in HL Ahuja and taught by most coachings is wrong, it is simply a proof
of Concordets paradox, not Arrow. Just imagine, had the proof of Arrow
been so elementary, would he have got the Nobel prize for it?

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.
These topics should be first studied from HL Ahujas Macroeconomics
book. This book is below UPSC exam standard, but reading this is
essential to understand higher concepts. The UPSC level book is Brian
Snowdon and Howard R Vane Modern Macroeconomics (given to me
by Amit Sahu). Only first 5 chapters need to be studied from this book.

3. Money Banking and Finance:

(a) 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.
This can be studied from HL Ahujas Macroeconomics and Snowdons
Modern Macroeconomics (Ch 2, 3). Also, although UPSC doesnt
mention post keynesian Baumols and Inventory theory of money
demand in syllabus, it asks questions on these. So read them from HL
Ahuja. There are some topics for which material may be scarce, read
them from my notes.

(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.
I studied from Musgrave and Musgrave, selected chapters. People also
mention HL Bhatia a lot. I was satisfied with my preparation until I saw
the public finance questions this year. I couldnt even understand the
questions. I dont know where else to study public finance from.

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
Approaches.

of

Payments

Adjustments:

Alternative

(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 Implicationns 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.
There is only one book on International Economics and it is by
Dominick Salvatore. Diagrams are the key in IntEco.

5. Growth and Development:

(a) Theories of growth:
(i)
Harrods
model,
(ii) Lewis model of development with surplus labour
(iii) Balanced and Unbalanced growth,
These topics are covered well in A P Thirwalls book. Todaro may also
be referred for some topics.

(iv)
Human
Capital
and
Economic
Growth.
(v) Research and Development and Economic Growth
These are dicey topics and cover many models. I studied them from a
paper by John Bluedorn The human capital augmented solow model
and a book Introduction to Economic Growth by Charles I. Jones
(given to me by Amit Sahu).

(b) 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.
Myrdal and Kuznets can be studied from AP Thirwall. Not all aspects of
Myrdal are covered in Thirwall, I had one pdf I found after googling on
Myrdal which covered aspects like how less developed economies have
backwash effects strong and how developed democracies have
stronger spread effects, I dont seem to have the pdf now.

(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.
These are general topics and havent found a single source for them so
far. Very little preparation.
Paper II

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.
These I studied mainly from my hitory optional preparation for cse
2012. You can see some in my notes.
2. Indian Economy after Independence:

A The Pre Liberalization Era:

(i) Contribution of Vakil, Gadgil and V.K.R.V. Rao.

Till date I have not found a single decent source to prepare this. I have
never been able to prepare this. If someone has a good source, pls let
me know, I ll update here.

(ii) Agriculture: Land Reforms and land tenure system,

Green Revolution and capital formation in agriculture,
(iii) Industry Trends in composition and growth, Role of
public and private sector, Small scale and cottage
industries.
(iv) National and Per capita income: patterns, trends,
aggregate and Sectoral composition and changes their in.
(v) Broad factors determining National Income and
distribution, Measures of poverty, Trends in poverty and
inequality.
Uma Kapilla is a very good source for these topics. One should also
focus on economic stats. Can also see my notes. Stats on efficacy of
land reforms need to be remembered (see my notes), stats on
economic growth rate, growth rates of agriculture, industry,
manufacturing, capital goods, services, per capita income need to be
remembered for 3 periods 1950s to 1965, 1965 to 1980, 1980 to
1990.

B The Post Liberalization Era:

(i) New Economic Reform and Agriculture: Agriculture and
WTO, Food processing, Subsidies, Agricultural prices and
public distribution system, Impact of public expenditure on
agricultural
growth.
(ii) New Economic Policy and Industry: Strategy of
industrialization, Privatization, Disinvestments, Role of
foreign
direct
investment
and
multinationals.
(iii) New Economic Policy and Trade: Intellectual property
rights: Implications of TRIPS, TRIMS, GATS and new EXIM

policy.
(iv) New Exchange Rate Regime: Partial and full
convertibility,
Capital
account
convertibility.
(v) New Economic Policy and Public Finance: Fiscal
Responsibility Act, Twelfth Finance Commission and Fiscal
Federalism
and
Fiscal
Consolidation.
(vi) New Economic Policy and Monetary system. Role of RBI
under
the
new
regime.
(vii) Planning: From central Planning to indicative planning,
Relation between planning and markets for growth and
decentralized planning: 73rd and 74th Constitutional
amendments.
(viii) New Economic Policy and Employment: Employment
and poverty, Rural wages, Employment Generation, Poverty
alleviation schemes, New Rural, Employment Guarantee
Scheme.
No single source. EPW helps. One also has to study a lot of research
papers by eminent economists working in India. I studied a lot of them
n put the gist in my notes. So can see my notes. Stats on poverty,
unemployment (recent ones as well as from 1993-94) need to be
remembered. See notes.
Answer Writing in Economics
Neeraj Singh (AIR 11, CSE 2011) told us the following things about
answer writing. I am sorry I am reproducing his email without his
permission but I hope he wont mind. I dont think I can put it in better
words than him
For paper 1
1. Make maximum use of graphs I think a picture is worth thousand
words is much more than just an adage. Graphs are extremely helpful
in writing precise answers in Econ. When you look at a question in
paper 1 the first question you should be asking yourself is What
graph(s) would best answer this question? Try to think of ways in which
you can answer the question through graphs. The benefit of using
graphs is that once you make a graph, the writing part becomes very
easy as it is only an explanation of the graph. It might not be possible

to put graphs in every question but do give your best shot at

explaining things through graphs.
2. Precision matters We would agree that Econ is quite technical a
subject with it own vocabulary. Being an economist you cannot hence
afford to use words loosely. For example, if we are using the term
depreciation we must mean depreciation and not devaluation. The
answer that you write should reflect your absolute clarity over
technical economic terms. Where it is possible to use a technical word
go ahead and use it instead of explaining it in laymans terms provided
that you know that it is the precise technical term to be used in that
place. I am sure all of us on the group are already good at this but just
felt like pointing it out explicitly.
Precision is equally important in graphs as well. One simply cannot
afford to draw graphs that look rough in the exam. If you are drawing
isoprofit curves, for example, for firm A marked on X axis you have to
ensure that the higher isoprofit curves are such that the maxima is
always to the left of the lower one and the reaction curve passes
through all these maxima. If you happen to draw the curves in such a
way that the reaction curve does not pass through all maximas then
you are drawing an imprecise graph. I believe ones basic
understanding of microeconomics is tested in the precision of these
graphs. If the graphs are not precise it leaves a bad impression about
your basic understanding. Agreed that it is near impossible to draw
graphs as good as the computer generated ones but at least we can
practice enough to ensure that we do not violate any principle of
mircoeconomics while drawing our graphs. I personally had devoted a
lot of time and effort before the exam in getting my graphs right. It so
happened that on the day of my Econ paper I had forgotten to take an
eraser with me (it isnt a nice feeling when you get to know that in the
exam hall) but I had all my graphs so well etched in my mind that I
didnt need to use an eraser in my paper.
3. Cut the chase and get to the point Your first sentence of the
answer should itself reflect that you have a command over the topic.
Even if you know the topic and you dont get down to the job right from
the first sentence it gives an impression that you are trying to fool your
way around. So at least for Econ paper 1 get straight down to the core
of the answer. You need not explain whats the background or history
the examiner isnt really looking for that.

4. Avoid math Yes, for UPSC at least. The less equations you put the
better. If at any place there is a way to show something through a
graph and the same thing through a mathematical proof, go for the
graph.
5. Be logical Economics is as close to decuctive logic as any social
science can get. Most answers in paper 1 are based on deductive logic.
Make sure you get the premises right and place arguments in such a
way that the conclusion flows.
6. Choose questions wisely At times there may be some questions
from the similar topics. Like for HO there maybe two questions of 20
marks, one in question 3 and one in question 5. As far as possible
attempt either question 3 or 5, not both. But if you have no other
choice attempt them anyways but be strategic there. Suppose question
3 is about criticisms of HOS model and question 5 is about Leontief
Paradox then you have to make sure that you dont get carried away
writing a lot about Leontief Paradox in question 3 because anyways
you have to answer that in detail in question 5. You cannot write
similar things in two answers and expect the examiner to give you
marks for both.
7. Cut the et cetera This is a small point but I say this because I see
people all too often using the indeterminate et cetera (yours truly
being guilty himself). In Econ, you have to show your precise
knowledge and understanding of the topic asked. Using et cetera
simply gives an impression that you are trying to cover for things you
do not know. So if there are multiple things and you want to mention
only few of them state upfront that the ones you are stating are in your
opinion to more relevant ones for this particular answer.
For paper 2
1. Have a narrative In my opinion, this is the most important thing in
both Econ paper 2 and Pub Ad answer writing. Paper 2 is where you
have the luxury to present your own opinions. Your opinions, should
hence look like they are firmly grounded in facts. For that you need to
build a narrative into your answer. By narrative I mean it should be a
piece standing all by itself. It shouldnt be on crutches. If shouldnt read
like an excerpt from a chapter. It shouldnt read like a part incomplete
without the whole. It should read like a whole in itself. A precise, clinical

dissection of the issue in hand and inferences drawn from the

dissection aided by facts that is what a good answer is according to
me.
2. Use data wherever possible It is good to use data if you remember.
If you dont, do not attempt the questions that require you to. I, for
one, am bad at remembering data. So I let the data heavy questions in
paper 2 pass.
3. Use examples liberally Use them to support your arguments. Use
innovative examples, not the routine ones. Keep your ears and eyes
open for such examples when you are reading newspaper. Look around
you, see what is happening in your state or district. You could quote
examples from your state which will make your answer different.
4. Never take a radical stand on any issue unless you have strong data
and facts behind you.
5. Use a style that befits the question You will have to decide then
and there whether the question best lends itself to a paragraph format,
point format or tabular format. Do not go with preconceived notions
about one style being better than the other.
Finally, practice writing answers a lot and set absolutely high standards
for yourself. When you have written a piece you cannot let yourself be
content if your dont think it is your absolute best. Re-write, re-write
thats the only key.
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91 THOUGHTS ON UPSC / IAS PREPARATION: ECONOMICS

OPTIONAL

COMMENT NAVIGATION
OLDER COMMENTS

1.

Anita Pal
JANUARY 10, 2015 AT 11:14 AM

Nice way to communicate with other ias asoirant

REPLY

2.

raksha
JANUARY 22, 2015 AT 12:18 AM

Referring to the question of UPSC final exam held in December 2013,

only Gaurav agarwal could solve. I tried but couldnt figure out. My
request to Gaurav to show me how it is done. I would really appreciate
it.
REPLY

3.

raksha
JANUARY 22, 2015 AT 12:26 AM

-+-+-+-+-=30
Use
numbers
1,3,5,7,9,11,13,15.
Plz. Gauvrav show me how you solved it. I am sure it is impossible.
REPLY

1.

kapil sharma
JANUARY 23, 2015 AT 1:04 AM

I
want
to
ask
complete
numbers are repeatable or no-repeatable.

question.

can you tell me the complete question?

REPLY

2.

Paramjeet
JANUARY 30, 2015 AT 10:32 PM

15-9+13-7+11-5+9-3+7-1=30
REPLY

3.

OJASWEE KUMAR DHAYAL

APRIL 25, 2015 AT 10:45 AM

(_-_)+(_-_)+(_-_)+(_-_)+(_-_)=30
and
we
have
to
put
the
numbers
on
underscores
there are 5 brackets that have difference of two number
here
we
can
observe
that
we
have
5
numbers
if all five numbers become 6 then we can make it 30
and we numbers provided are permitting us to try this method
so,
(15-9)+(13-7)+(11-5)+(9-3)+(7-1)=30
65=30
REPLY

4.

Vignesh
APRIL 28, 2015 AT 10:36 PM

The answer for that question is No!!We cannot solve the problem!!!
REPLY

4.

Shashank Garg
MAY 23, 2015 AT 3:15 AM

How did you managed to get hold of all this material? Most of the
books are very expensive and it doesnt seem pragmatic to purchase
them. I wanted to try economics optional for a week or two, but
couldnt find free source for any topic and I dont want to buy any book
before finalizing upon my optional.
REPLY