Economics Optional Syllabus

Here is the official UPSC Economics Optional syllabus for Paper I and Paper II, arranged paper by paper and unit by unit. Under each unit we give the official text first, then break it into numbered topics, so you can track your preparation and match every previous year question to its topic.

Source. UPSC Civil Services Examination 2026 notification (Examination Notice No. 05/2026-CSE, dated 04.02.2026, revised file of 06.02.2026, pp. 61–63), upsc.gov.in. The Economics syllabus has been unchanged in recent years.

Scheme. Two papers of 250 marks each (total 500), 3 hours each. Each paper has two sections (A and B) of four questions each; Questions 1 and 5 are compulsory, and three more are attempted with at least one from each section. Paper I (5 units) covers economic theory – advanced micro and macro economics, money, banking and public finance, international economics, and growth and development. Paper II (3 units) covers the Indian economy before independence, in the pre-liberalization era and in the post-liberalization era.

Syllabus at a glance

Paper	Unit	Topics
Paper I	1. Advanced Micro Economics	4
Paper I	2. Advanced Macro Economics	4
Paper I	3. Money-Banking and Finance	5
Paper I	4. International Economics	8
Paper I	5. Growth and Development	7
Paper II	1. Indian Economy in Pre-Independence Era	4
Paper II	2. Indian Economy after Independence: A. The Pre-Liberalization Era	5
Paper II	3. Indian Economy after Independence: B. The Post Liberalization Era	8

Paper I

1. Advanced Micro Economics

1.1 Marshallian and Walrasian approaches to price determination

• Marshallian (partial equilibrium) approach
• Walrasian (general equilibrium) approach

1.2 Alternative distribution theories

• Ricardo
• Kaldor
• Kalecki

1.3 Market structure

• Monopolistic competition
• Duopoly
• Oligopoly

1.4 Modern welfare criteria

• Pareto criterion
• Hicks and Scitovsky (compensation criteria)
• Arrow’s impossibility theorem
• A. K. Sen’s social welfare function

2. Advanced Macro Economics

2.1 Classical approach to employment, income and interest rate determination

2.2 Keynes: the IS-LM curve

• Keynesian theory of employment, income and interest
• IS-LM curve

2.3 Neo-classical synthesis and New classical approaches

• Neo-classical synthesis
• New classical

2.4 Theories of interest rate determination and interest rate structure

• Theories of interest rate determination
• Interest rate structure

3. Money-Banking and Finance

3.1 Demand for and supply of money

• Money multiplier
• Quantity theory of money: Fisher, Pigou, Friedman
• Keynes’ theory on demand for money

3.2 Monetary management

• 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

3.3 Public finance and its role in a market economy

• Stabilization
• Allocation of resources
• Distribution
• Development

3.4 Government revenue, taxes and subsidies

• Sources of government revenue
• Forms of taxes and subsidies
• Their incidence and effects
• Limits to taxation

3.5 Public borrowing and public expenditure

• Loans
• Crowding-out effects
• Limits to borrowings
• Public expenditure and its effects

4. International Economics

4.1 Old and new theories of international trade

• Comparative advantage
• Terms of trade and offer curve
• Product cycle theory
• Strategic trade theories

4.2 Trade as an engine of growth and theories of underdevelopment in an open economy

• Trade as an engine of growth
• Theories of underdevelopment in an open economy

4.3 Forms of protection

• Tariff
• Quota

4.4 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

4.5 Floating rates, currency boards and trade policy for developing countries

• Floating rates and their implications for developing countries
• Currency boards
• Trade policy and developing countries

4.6 Open-economy macro-model, policy coordination and speculative attacks

• BOP adjustments and policy coordination in open economy macro-model
• Speculative attacks

4.7 Trade blocs and monetary unions

• Trade blocs
• Monetary unions

4.8 WTO

• TRIMs
• TRIPS
• Domestic measures
• Different rounds of WTO talks

5. Growth and Development

5.1 Theories of growth

• Harrod’s model
• Lewis model of development with surplus labour
• Balanced and unbalanced growth

5.2 Human capital, R&D and economic growth

• Human capital and economic growth
• Research and development and economic growth

5.3 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

5.4 Economic development and international trade and investment

• International trade and investment
• Role of multinationals

5.5 Planning and economic development

• Changing role of markets and planning
• Private-public partnership

5.6 Welfare indicators and measures of growth

• Human development indices
• The basic needs approach

5.7 Development and environmental sustainability

• Renewable and non-renewable resources
• Environmental degradation
• Intergenerational equity development

Paper II

1. Indian Economy in Pre-Independence Era

1.1 Land system and commercialization of agriculture

• Land system and its changes
• Commercialization of agriculture

1.2 Drain theory; laissez-faire theory and critique

• Drain theory
• Laissez-faire theory and critique

1.3 Manufacture and transport

• Jute
• Cotton
• Railways

1.4 Money and credit

2. Indian Economy after Independence: A. The Pre-Liberalization Era

2.1 Contribution of Vakil, Gadgil and V.K.R.V. Rao

• C. N. Vakil
• D. R. Gadgil
• V. K. R. V. Rao

2.2 Agriculture

• Land reforms and land tenure system
• Green revolution
• Capital formation in agriculture

2.3 Industry

• Trends in composition and growth
• Role of public and private sector
• Small scale and cottage industries

2.4 National and per capita income

• Patterns and trends
• Aggregate and sectoral composition and changes therein

2.5 National income, distribution, poverty and inequality

• Broad factors determining national income and distribution
• Measures of poverty
• Trends in poverty and inequality

3. Indian Economy after Independence: B. The Post Liberalization Era

3.1 New economic reform and agriculture

• Agriculture and WTO
• Food processing
• Subsidies
• Agricultural prices and public distribution system
• Impact of public expenditure on agricultural growth

3.2 New economic policy and industry

• Strategy of industrialization
• Privatization
• Disinvestments
• Role of foreign direct investment and multinationals

3.3 New economic policy and trade

• Intellectual property rights
• Implications of TRIPS, TRIMS and GATS
• New EXIM policy

3.4 New exchange rate regime

• Partial and full convertibility
• Capital account convertibility

3.5 New economic policy and public finance

• Fiscal Responsibility Act
• Twelfth Finance Commission
• Fiscal federalism
• Fiscal consolidation

3.6 New economic policy and monetary system

• Monetary system
• Role of RBI under the new regime

3.7 Planning

• From central planning to indicative planning
• Relation between planning and markets for growth
• Decentralized planning: 73rd and 74th Constitutional amendments

3.8 New economic policy and employment

• Employment and poverty
• Rural wages
• Employment generation
• Poverty alleviation schemes
• New Rural Employment Guarantee Scheme

Total: 45 numbered topics across 8 units.

Last updated: 30 October 2026