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How to prepare Economics for IAS

Strategy for Preparing Economics

(Part - 1)

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.

How to prepare Economics optional for IAS

Strategy for Economics (Optional) Paper

In this article we will talk about Economics optional. Aspirant will get a detailed discussion and useful tips in order to evaluate the study approach for this subject in civil services main examination.

Method of studying Economics

There are multiple sources of preparation in a subject like Economics.

Stage - 1

Concentrate on understanding and concepts of whatever you are reading whether it be theorems or some models. We might forget the things 2 days after we have read it, Don't worry it is normal because you are not able to understand even the half the questions which have been asked in previous years. You don't have the clue of how to write answers in the exam, don't worry. Just ensure you finish the syllabus once appropriately.

Indian Economy: High savings rate with low-income and high savings rate with low growth rate

IAS Mains General Studies Sample Answers

Indian economy presents a paradox of high savings rate with low-income and high savings rate with low growth rate. Analyse.

Indian Economy & Saving Rate

For its growth economy requires capital formation. Due to lack of capital formation Indian economical growth has been slow. Gross domestic capital formation is composed of two components. Gross Domestic Saving and Net Capital Inflow from abroad. A country requires to raise its saving rate for higher rate of capital formation as it cannot depend upon loans or debts for a large capital. Though the income has always been low but public has, by not spending a part of their income over the consumer goods and save them and thus raised saving rate in India. It has become a social phenomenon or tradition in India which has led to high savings rate with low income.

Comparative Analysis of Civil Services Prelim Paper - I (GS - Economics)

Analysing Civil Services Prelims Exam
UPSC In-depth Question Analysis - General Studies (Pre)

Subject Year - 2011 Year - 2012 Year - 1013
Questions from Science & Technology 22 11 19
Questions from Geography + Environmental 24 24 26
Questions from Economics 18 13 19
Questions from Polity 11 16 16
Questions from History + Art and Culture 13 21 16
Questions from Miscellaneous 7 8 4
Questions from International Relation 5 1 0


This is a very important area and to start with, you should read 11th and 12th NCERT Economics books. Now in current scenario the traditional economics, facts and figures are not asked. They ask questions based on your understanding of economics like, Why FDI is important for us, What is Fiscal Cliff and problems in United State, About Greece Crisis or Euro Crisis etc. So, you should always looking for these kind of news and issues which affect us.

Evaluate the FDI in retail sector in the Indian context

IAS Pre General Studies Sample Answers

Evaluate the FDI in retail sector in the; Indian context.
Do you think that it will open more opportunities? Suggest your own opinion on this point.

The government has already allowed 51 per cent FDI in single-brand retailing and is contemplating the pros and cons of allowing FDI in retail for multiple brands. If the sector is indeed opened up, it would increase India's bargaining power in the WTO, which then would have tremendous ramifications for future trade talks, specially the Doha round which has presently got stuck up. It would provide better quality of employment to many. In other words, there would be better salaries and better work ambience.

What is the difference between SEZ and Export Processing Zone

IAS Pre General Studies Sample Answers

"Elucidate Special Economic Zones. What is the difference between Special Economic of Zone and Export Processing Zone? How China benefiting from SEZ policy?"

The main objective of SEZ is to f an provide an internationally competitive and hassle-free environment for export production. The SEZs imply a qualitative transformation of traditional Export Processing Zone. The units operating in these zones are deemed as outside the nations' customs territory and shall have full flexibility in operations. They can import capital goods and raw materials duty free. The only precondition is that the units in the zones would have to be a net foreign exchange earner.

Multinational Military Exercise Cobra Gold 2012 (CG 2012)

IAS Pre General Studies Sample Answers

Co-sponsored by the U.S. and Thailand, was held in the Gulf of the Kingdom of Thailand. The 10-day military drill witnessed participation of 13000 military personnel from 17 nations. The Cobra Gold series of military exercise begun in 1982 and the exercise now in 31st year is designed to promote regional peace and security. It is the United State’s largest multilateral exercise in the Asia-pacific region and offers more than 20 participating countries critical training opportunities to improve involve interoperability in conducting multinational operations.

5th IBSA Summit at Tshwane

IAS Pre General Studies Sample Answers

The 5th India-Brazil-South Africa (IBSA) summit was held in Pretoria, South Africa.

Important Topics: General Studies - Economy (National Housing Bank - NHB)

Civil Services Preliminary Examination


The DFIs were set up and developed to meet specifically the requirements of industry for long-term finance and equity capital and foreign currency resources. The AIFI's constitute the most important source of funds after the commercial banks. With the progress in the deregulation of the financial sector, the Government has tried to tighten the prudential norms of the AIFI's by a number of measures.

The important measures are:
1. The NP A's limit has been reduced from 365 days to 180 days.
2. Now the AIFI's have to keep Commercial Papers (CPs) in dematerialized form
3. Industrial Finance Corporation of India (IFCI) has been restructured. Government of India subscribed Rs. 400 crore through 20 year convertible bonds to improve the capital adequacy ratio of IFCI. In addition, major shareholders of IFCI, viz., Industrial Development Bank of India (IDBI), SBI and UC agreed to extend assistance of Rs. 200 crore each share up the capital adequacy ratio.
4. The participation of AIFI's in the call money market has to be phased out.

Important Topics: General Studies - Economy (Monetary System)

Civil Services Preliminary Examination

It refers to the whole mechanism pertaining to money and, it is conducted through the ‘Monetary Policy’ formulated and controlled by the Central Bank of the country, i.e. RBI in India.

Reserve Bank of India

Established in 1935 with a capital of 5 crore on the recommendation of Hilton Young Committee and nationalised in 1949. It got the membership of the Bank of Internationalised Settlement (BIS) in 1996. It is managed by a team if 20 members headed by the government. Its headquarter at Mumbai and four local boards situated in the 4 metropolitan cities.

Its main functions can be envisaged as follows:

Important Topics: General Studies - Economy (Inflation)

Civil Services Preliminary Examination

It is one of the most important macroeconomic events that has created a lot of embarrassment not only among the public but also for the union government and RBI. It refers to the persistent rise in the general price level, i.e., in the price of goods and services.

It reduces the purchasing power of money and ultimately hurt the economy in many way:
1. Reduces savings or create a situation like forced saving.
2. A greater portion of income goes to fulfill basic requirements.
3. Interest rates increase.
4. Dampens investment
5. Domestic currency get depreciated and imports become costlier which again pushes up input cost and creating various circle like situation.

Causes of Inflation

Though causes of inflation aremulti-dimensional but broadly it could be expressed in tow forms:
(1) Demand-pull-inflation
(2) Cost-push-Inflation
It means that inflation is caused either due to increase in demand, because when demand will be high princes, will certainly go up and increase in the cost of production, or due to both.

Important Topics: General Studies - Economy (Foreign Investment)

Civil Services Preliminary Examination
(Foreign Investment)

It refers to the investment made in foreign currency by foreign investors with a view to spread their business and to earn profit. Broadly foreign investment is of two type:
(1). Foreign Direct Investment i.e. FDI
(2). Portfolio Investment

FDI refers to the net inflow of investment to enquire a lasting management interest in an enterprise operating in an economy other than that if investor. It usually involves participation in management, joint ventures, transfer of technology and expertise. It it the best form of foreign investment given its longevity, stability and far reaching objectives. In long term it brings growth, generate employment and fuels economic activities.

FDI has also three categories:
(1) Green Feild FDI : When it is made in new projects.
(2) Brown Field FDI : When it is made in vender develop or under utilised projects.

Important Topics: General Studies - Economy (Fiscal System)

Civil Services Preliminary Examination
(Fiscal System)

It refers to the system of income and expenditure of the government. To conduct this system fiscal policies are formatted and implemented by the government.

The prime objectives of the fiscal policy under the economy are:
1. To achieve full employment in the economy.
2. To maintain price stability.
3. To enhance income inequality.
4. To enhance economic growth.
5. To induce savings and investment in the economy.

Important Topics: General Studies - Economy (Capital Market)

Civil Services Preliminary Examination
(Capital Market)

It is the market of long-term i.e., more than one year funding. In other words companies go to Capital Market for raising long-term funds. Today in India it has been a very common phenomenon. Now it is interesting to know that how does it happens?

There are two main sources of raising capital:
1. Development Financial Institutions (DFIs)
2. Securities Market

A number of DFIs have been established on sectorial basis to meet the need of fund like IDBI, IFCI, IDFC & SIDBI etc.

On the othe hand Securities Market is the market of govt. & corporate securities like Bonds & Debentures, and Shares. Govt’s securities market is also known as “Gilt-Edged-Market” because of its low-risk.

Important Topics: General Studies - Economy (Basic Economy)

Civil Services Preliminary Examination
(Basic Economy)

[N.B.: The study of Basic Economy will help the aspirants to develop better understanding of up going subject matter and further study as well as they shall be able to get many questions based on it. ]

In brief, Economy is the study of economic behaviour and activities of human being aimed at satisfying their needs and wants. Broadly it is divided into two main branches:-

1. Micro Economics Study: It deals with the economic behaviour of the individuals like Consumption, Demand, Supply and Businesses.
2. Macro Economic Study: It refers to the study of economic behaviour of masses as a whole like National Income, Employment, Poverty, Inflation etc.