How to prepare Economics for IAS
This is the basic introduction of Economics like what are the sources of economics, relative books, newspapers, magazines and what are the topics to be covered and the basic general approach etc. Economics is literally the toughest nut to crack for majority of IAS aspirants in both IAS Prelims and Mains. Many aspirants search for a ultimate book for this but that does not exist in economics and you need multiple sources to prepare, because it is a huge course. Few phases are analytical and technical including the use of mathematics, graphs, equations, numbers etc (but these are hard theory of economics and we usually don't delve into that with that much of details.) You have to emphasis a lot on concepts and current affairs and very less on actual facts.
Basic concepts: Economy and Economics
Economics is how to manage and most effectively use scarce and finite resources. Economy on the other hand is study of economics of particular unit, this unit can a particular country, state, district and trade union etc. The syllabus says Indian Economy, and we don't need to read hardcore economics concepts like opportunity cost, marginal utility, diminishing marginal utility etc. Some economics concepts can be used somewhere, and it will be specified there.
Why to study economy?
Study of economy (Indian economy in particular) provide people with valuable insight into:
- How foreign and domestic markets operate (Stock exchange, Indian banking, monetary policy, fiscal policy etc.)
- financial literacy
- financial management and planning
UPSC gives a significant weightage to economics in both pre and main exam.
- Microeconomics deals with decision making at level of individual entity (like Government, household, firms and public financial institutions etc).
- Macroeconomics deals with behaviour of aggregates.
- Indian Economy deals with economy at the level of India.
- International Economy deals at international level (like World Bank)
Both Indian and International economy are co-related and affect each other very significantly.
Economics Question Analysis
Economics questions in last five years (in Prelims Exam):
In 2011 they asked 18 questions, 2012 (13), 2013 (18), 2014 (10) and in 2015 total 13 questions which were asked. So, atleast around 10% of the paper is always composed of economics questions. Also paper three of mains is more or less economics plus some portion of Science and technology, and even in paper two you find some areas which are covered by economics lightly.
CSAT - 1 Economics Syllabus (Economical and Social Development)
- Sustainable Development
- Poverty, Inclusion, Demographics
- Social Sector Initiatives
- Indian economy and issues related to planning, mobilization of resources, growth and development etc.
- Employment Issues, Inclusive growth and issues arising from the same.
- Poverty and its eradication
- Financial inclusion
- Policies and Programmes for inclusive growth
- Government Budgeting
- Expenditure of government, Taxation policies and Forms of the budget, FRBM Act and issues related to Federal Finance and recommendation of Finance Commission (Now there is no Planning Commission replaced by NITI Aayog.
- Major Crops cropping pattern in the country and irrigation systems, storage, transport, marketing. Issues related to direct and indirect farm subsidies, Public distribution system, buffer stocks and food security, technology missions.
- Economics of animal-rearing, Food processing and industries etc.
- Land reform, Effect of liberalisation on Economy and industrial growth, Infrastructure (Energy, port, roads, airports, railways etc), Investment models.
Approach to deal with Economy
First of all you need to understand the basic economics than you need to know the concepts like GDP, REPO, Reverse REPO, Cash reserve ratio (CRR), Statutory liquidity ratio (SLR), Inflation indices, Growth, Inclusion, Development so on and so forth. At this stage your text books and classnotes will help you a lot but you need to apply these fundamental concepts like 'Why we do we need to reduce CRR', 'What will happens when we increase REPO rate' etc. So, these are the applications of the fundamental concepts.
When you done with above steps come to next stage that how to associate these concepts with contemporary currents issues like How to read the Hindu. Now, you yourself have to apply here what you learned). You have to reach and learn basics before you are able to actually know how to do apply your concepts.
Sources to Prepare
You need to just focus on building conceptual knowledge from the books and classnotes.
- NCERT Books of 6th to 12th
- Ramesh Singh's Indian Economy
- Sanjiv Verma's Indian Economy (This is book is more crisp and concise in manner)
- Read The Hindu (Economy sections without fail)
- Economic Survey (always read recent edition)
- Budget: Railway, Annual Financial Statement (AFS)
Major topics to be covered
Indian Economy: Banking, Money supply in India (Public Finance), Taxation Structure (India), Insurance, Niti Aayog (Economic Planning) Stock market and Exchange (Fundamentals), Progress of economy (specially emphasis since independence, in last 300 years because you need to know that how it was in colonial era or pre colonial era also). LPG reforms, Demographic dividend, Human development, Money and Capital markets, sectors like Agriculture, Industries and Services respectively.
Economic Theory: Demand & Supply, Indexes, Marginal utility, Opportunity cost, Production substitution, inflation, Business cycle. Infrastructure: Information & communication technology, Transport and Energy etc. Poverty (specially in India), Social security ( Aadhar), subsidies (Fuel subsidy), growth and development (basic contradiction and analogy).
Sustainable development and climate change in India. You need to know about Economic implications of Climate change and Development vs Environment debate, its very old debate going for last 20-30 years. You need to know that we need to balance out both there should be harmony between the two. And finally indicators like HDI, GII, iHDI, Gini etc.
International Economics: External trade, External Assistance, International Economic Organisation, Reports, International Bodies like WTO, World Bank etc.
Current Issues includes like GST, Niti Aayog, Fourteenth Finance Commission, Land reforms, Labour reforms, Foreign Trade Policy (yearly). These current issues will obviously change for next year prelims so, it can be other tax reform, other commissions, it can be various policies and social security schemes like Pradhan Mantri Suraksha Bima Yojana, Atal Pension Yojana etc. Flagship programmes like Swacch Bharat, Make in India, Digital India and Committees like Shome Committee, Nachiket Committee, PJ Nayak Committee etc. So, these are the major categories of current issues and you need to put your current affairs accordingly.