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Importance of Economics in Prelims

The syllabic content of Economics as defined by the UPSC include ‘Economic and Social Development Sustainable Development, Poverty, Inclusion, Demographics, Social Sector initiatives, etc.’ This portion has assumed significance in Prelims over the years, with many developments taking place in the economy.

This write-up discusses about the importance of this domain in prelims, changing questioning pattern and how the aspirants’ preparation concerning this subject should be.

Economics – The Subject
Economics, a branch of social science is concerned with factors that determine the production, distribution, consumption of goods and services and generation of wealth. This traditional idea of economics where its subject matter is to do with resource utilization, wealth and all about money has now changed. Various sub branches evolved like behavioral economics, cultural economics, family economics etc., impacting every aspect of human life. Combining all this form the essence of a nation’s economics.

Growth of a nation depends on the health of its economy. It determines the wellbeing of the public, the generation of economic opportunities, social indicators and overall wealth of the nation. A healthy economy enables to tackle issues that beset the nation. Especially so to a country like India, which became independent, with almost 80% of its population being poor. To eradicate poverty, have good social indicators, provide opportunities to earn a living, have equality in society (wealth) all depends upon the country’s economic progress. In order to achieve this, governments since independence have implemented various socio-economic policies to uplift the masses from poverty and help the nation grow.

But growth was stagnant until India chose to open its doors for liberalization, privatization and globalization (LPG). Benefitting from LPG the economic growth got higher and the economy bigger and complex. Many laws, regulations, policies and programmes are being brought out to sustain the growth levels which ultimately provide jobs for the people, feed them and help them lead a life they desire. In a nutshell economy is the lifeblood of a nation.

In this context, it is important for a government servant to know various mechanisms of our ever growing economy. Especially so for an All India Civil Servant. That is why Union Public Service Commission (UPSC), that selects these civil servants, tests an aspirants’ knowledge on economics, its impact on the social development, poverty eradication, demographic challenges of the country etc.

Syllabic Content
The syllabic content for economics in prelims as given by UPSC is ‘Economic and Social Development - Sustainable Development, Poverty, Inclusion, Demographics, Social Sector initiatives, etc.’. The word ‘etc’ makes this section dynamic and major part of questions in prelims are asked from this section. In the year 2017, 29 questions were asked from this part of the syllabus. Similarly, in 2016 a total of 22 questions were asked from economics. In 2015 - 19; in 2014 – 12; and in 2013 – 19 questions were asked. We came to this statistic while taking into consideration the interdisciplinary nature of the questions. This shows the importance of this section of the syllabus in the exam. If done well it will change your fortune in preliminary examination.

Question Pattern
When we say interdisciplinary what does it mean? This question might have raised in your mind. In prelims, often some questions appear to be of foreign policy or of general awareness domain. But, many of these questions are to be viewed in an economic perspective. For example, in 2016 preliminary examination a question was asked regarding ‘Global Economic Prospects’. It appears to be a general awareness question but, in an interdisciplinary approach it can be understood as a question asked in the context of Indian economy championing the global economic growth and World Bank was stating the obvious. As India is gaining global attention due to its exemplar growth among the nations, more such questions will be asked in the future. Even without factual memory, an aspirant with good conceptual understanding can answer these types of questions. It is to be remembered by the aspirant that such questions are asked based on very recent occurring, say within a year.

Over the years, UPSC is blending factual information into an analytical question though with some exceptions. In this way it is trying to test the aspirants’ conceptual understanding of economics as a whole. Consider this example from 2010 prelims exam, ‘When the Reserve Bank of India announces an increase in Cash Reserve Ratio (CRR), What does it mean?’. In the options it was directly given what would factually happen, i.e., ‘the commercial banks will have less money to lend’. But, in the current frame of things, UPSC will ask the same factual question with a dynamic option. It can mention the likely impact of rise in CRR on infrastructure building or on social sector. As CRR increases it impacts bank lending to infrastructure and social sector. That is to say the essence of the answer is the same in both the scenarios. In the former it is explicit and in the late it is implicit. This type of indirect questioning has become the norm. To answer such questions, the aspirant must have a clear conceptual understanding on CRR’s various impacts rather than the obvious facts.

Also there are many questions that appear outright factual but, can be answered by having a good conceptual knowledge. Consider this from 2015 exam, a question was asked regarding highest weight among the given industries in the ‘Index of Eight Core Industries’. This seemingly factual question can be tackled with a thorough knowledge of economic concepts. Though it would be easier if one memorizes the facts. But in preparation phase it is not always possible to memorize vast number of facts. So, conceptual clarity is needed.

The options given for the question were a) coal production, b) electricity generation, c) fertilizer production and d) steel production. If you observe carefully, out of the four choices, three of them – coal production, fertilizer production and steel production are stagnating industries with low production, high imports and stagnating prices. On the other hand, electricity generation is increasing due to high generation capacity from renewable sources and has a huge demand that provides sustained growth to the industry. Hence electricity generation has to have higher weight in the index. This type of thinking can be developed only by following a multidimensional approach to understanding concepts and synthesizing facts together.

Some questions are out rightly factual which needs one’s memory to answer. For example, consider the following question from 2016, ‘India’s ranking in the ‘Ease of Doing Business Index’ is sometimes seen in the news. Which of the following declared that ranking?’. This question can be answered only if you know the exact organisation that declares it. In this case it is World Bank that declares the ranking. This issue has been a constant news item of that year. It shows that one can expect a recurring news item to be asked contrary to the myth that ‘UPSC does not ask recurring and most visible news in prelims’. But, this type of questions is a rare occurrence nowadays. Hence one cannot neglect anything in the course of their preparation. A single mark earned or lost can make the difference in qualifying the exam or failing the exam.

Coming to questions related to poverty, inclusion, demographics and social development, these are not independent issues to learn. These social issues are impacted by the various economic policies and programmes launched by the government. Though there may be other reasons for their occurrence, the impact of economic decisions and various developmental activities has direct impact on these issues. Also agriculture issues – that fall between the domains of both economics and geography – which have wider repercussions on the socio-economic development of the country mostly fall under economics yonder.
Agriculture is a major job provider in our country and majority of the poor depend on it. Any policies/programmes that impact the sector are bound to be asked by UPSC. Thus the question regarding Pradhan Mantri Fasal Bima Yojana had been asked in 2016 prelims. Same is the case with question on Stand up India scheme. It is to promote entrepreneurship among SCs, STs and women. These are social-economic policies of the government.

Therefore, it is imperative for the aspirant to know each and every policy change and programmes launched by the government that impacts socio-economic dynamics in the country. It is to be seen as understanding of basic economics in a multi-dimensional view point that includes behavioral economics, welfare economics, demographic economics. Thus, aspirants need to follow this multi-dimensional approach while preparing for economics related syllabi.

Preparation Process
This is true for both prelims and mains. While preparing for prelims you will be simultaneously covering many topics required for mains. The preparation process for mains - where in-depth knowledge of concepts is required - smoothens as one has covered their basics in prelims.

Preparation must start from understanding the basics of economics. That is from very rudimentary topics like demand and supply to definition of GDP, GNP and different tax structures in the country etc. Also one has to be thorough in their knowledge of micro and macroeconomic policies, global economic issues etc. Banking issues that play a big part in economic decision making, socio-economic development and progress of industry have to be understood thoroughly. For example, UPSC can ask about demonetization and present you with multiple options of similar resemble but with subtle difference. It becomes difficult to answer unless you have maximized your knowledge about impacts of demonetization using multidimensional approach. Further, issues regarding primary and secondary markets and various regulatory functions, corporate sector’s investment mechanisms and various issues plaguing different sectors of the economy are to be studied.

Also, aspirant have to know about various government indices, international reports, banking rates and other statistical information that can be used in answering direct fact based questions. Make sure that one gets authenticate information. Governmental, international and autonomous organisations websites are a good source for this information. For analytical understanding of concepts regular reading of newspaper and noting down important issues is a must. It helps during your revision phase.

Along with these an aspirant has to have knowledge on budget announced by the government, arguments brought out by the Economic Survey and proposals of various committees and commissions. This helps enhance an aspirants conceptual understanding and fetches good marks in the exam. Also, one can choose a good magazine and have discussions with fellow aspirants to further the learning process.

All this might feel exhaustive to cover but, with smart learning one can come out of prelims with flying colours. Choose your content wisely, for example, it is unnecessary to go through the entire document of budget. Instead a summary of important issues in the budget would suffice. Same is the case with other reports and surveys. Never take newspaper reading and notes making for granted. It helps a lot both in prelims and mains.

Finally, keep revising the matter you learned. As the old adage goes - practice makes man perfect – it is true for preliminary exam. The more one practices mock tests the more one gets comfortable in answering the questions at actual exam. So keep practicing. Keep up the good work in your preparation. Do not get overwhelmed by the workload and get demotivated. Enjoy the process of preparation. Consider it as a great learning process. Do not lose focus. Take breaks when needed. Do not be harsh upon yourself. Life is a constant battle field. Some battles we fail but many we win. Your time to win will come too. All the Best.

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