Syllabus for the OPTIONAL Paper ‘Economics’ for the IAS Main Examination is listed below. It consists of two parts: Economics PAPER I and Economics PAPER II. PAPER I contains 5 topics while PAPER II contains 2 topics.


Paper I of ‘Economics’ consists of 5 topics:

TOPIC 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.

Material that should be used to prepare this topic.

Dr HL Ahuja – Advanced Economic Theory (Microeconomic Analysis)

A Koutsoyiannis – Modern  Microeconomics

Hal R Varian – Intermediate  Microeconomics: A Modern Approach

Dominick Salvatore – Microeconomics: Theory and Applications

TOPIC 2: Advance 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.

Material that should be used to prepare this topic.

Brian Snowdon & Howard R Vane – Modern Macroeconomics: Its Origins, Development and Current State

Richard T Froyen – Macroeconomics: Theories and Policies

Rudiger Dornbusch, Stanley Fischer, Richard Startz – Macroeconomics

DN Dwivedi – Macroeconomics: Theory and Policy

TOPIC 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, allocation 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.

Material that should be used to prepare this topic.

RS Sayers – Modern Banking

Richard A Musgrave & Peggy B Musgrave – Public Finance in Theory and Practice

Kenneth Kurihara – Monetary Policy and Public Policy

SB Gupta – Monetary Economics

HL Bhatia Public Finance

Bakerman – National Income Accounting

Reserve Bank of India – Money Supply in India: Concepts, Compilation and Analysis: Functions and Working

TOPIC 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.

Material that should be used to prepare this topic.

Dominick Salvatore International Economics: Trade and Finance

Krugman, Obstfeld & Melitz – International Economics: Theory and Policy

Bo Soderston & Geoffrey Reed – International Economics

ML Jhingan – International Economics

TOPIC 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 Kuzments 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.

Material that should be used to prepare this topic.

Charles I Jones & Dietrich Vollrath – Introduction to Economic Growth

AP Thirlwall – Economics of Development

Subhashini Muthukrishnan – Economics  of Environment

ML Jhingan – The Economics of Development and Planning


Paper II of ‘Economics’ consists of 2 topics:

TOPIC 1: Indian Economics in Post-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.

Material that should be used to prepare this topic.

Dutt and Sundaram – Indian Economy

TOPIC 2: Indian Economy after Independence

A. The Pre-Liberalization Era:

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

(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 therein.

(v) Broad factors determining National Income and distribution, Measures of poverty, Trends in poverty and inequality.

Material that should be used to prepare this topic.

Ramesh Singh – Indian Economy

Uma Kapila – Indian Economy since Independence

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 indivative 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.

Material that should be used to prepare this topic.

Ramesh Singh – Indian Economy

Uma Kapila – Indian Economy: Performance and Policies

Sanjeev Verma – Indian Economy

Bimal Jalan – India’s Economic Policy: Preparing for the Twenty-First Century

Waquar Ahmad, Amitabh Kundu & Richard Peet (Editors) – India’s New Economic Policy: A Critical Analysis

Anne O Krueger (Editor) – Economic Policy Reforms and the Indian Economy

Economic Survey that is brought out by the Ministry of Finance every year.

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