UPSC organised the CSE Mains 2025 Economics Optional Paper on 31st August (Sunday), 2025. This date served as an important landmark for the candidates. This examination tested the candidates’ grasp and knowledge of economic concepts and theories and their applications from broad as well as specific areas in part as microeconomics, international economics, and the Indian economy. A detailed analysis of this year’s paper and identifying the salient features would help future candidates in deep understanding of the syllabus as well as preparation of the examination.
| Exam Name | UPSC Civil Services Mains Exam 2025 |
| Total Optional Subjects in the UPSC CSE Exam | 48 subjects |
| UPSC Economics Optional Exam Date | 31st August (Sunday), 2025 |
| UPSC Economics Optional Paper Duration | Economics Optional Paper-I (Morning Session – 9 AM to 12 PM) Economics Optional Paper-II (Afternoon Session – 2:30 PM to 5:30 PM) |
| Total Marks (Economics Optional) | 500 Marks (250 Marks Each) |
UPSC Mains 2025 Economics Optional Paper-I
SECTION-A
1. Answer the following questions in about 150 words each : 10×5=50
(a) Show that when prices and income increase in the same proportion, there will be no change in quantity demanded for a commodity in Marshallian approach.
(b) Interpret the slope of the IS curve. Why is IS curve normnally negatively sloped?
(c) What is classical dichotomy? Is it the same as neutrality of money? Explain.
(d) What are the major reasons for market failure? Explain the role of the government in this context.
(e) What are the determinants of velocity of money in Fisher’s equation ? How does it differ from the Cambridge version of velocity of money?
2. (a) Derive Marshallian demand Curve for an inferior good in two-commodity framework by using incomne and substitution effects. Is this demand curve always negatively sloped ? Explain. (15+5=20 Marks)
(b) Consider a firm in a Duopoly market with product differentiation in which, Duopolist I faces a demand function given by :
P₁ = 200 − 4q₁ − 2q₂
The cost function of Duopolist I is :
c₁ = 5q₁²
Assume that Duopolist II has 1/3rd share of the whole market.
Find out optimal price, output and profit for Duopolist I. Also find out the output of Duopolist II. (15 Marks)
(c) What is Scitovsky Paradox? Explain it in the context of Kaldor-Hicks compensation test.
3. (a) Define liquidity trap. Show that fiscal policy is fully effective in the horizontal part while the monetary policy is fully effective in the vertical part of the LM curve. Illustrate your answer graphically with economic reasons.(5+15=20)
(b) How does the loanable fund theory become superior to the classical theory of interest? (15 Marks)
(c) “The failure of classical full employment equilibrium paved the way for Keynes’ theory of underemployment equilibrium.” Discuss critically. (15 Marks)
4. (a) (i) Explain the effects of public spending on national income, if it is financed through government borrowings.
(ii) Why do some believe that it is important to restrict the growth of public expenditure? Suggest how public expenditure might be controlled. 10+(5+5) 20 Marks
(b) (i) Suppose that the market demand and supply functions are given by:
Qd =−500P + 5000
and Qs=400P−400
Find out the effects of imposition of specific sales tax of 18% on equilibrium price and quantity.
(ii) In a monopoly market, the demand and cost curves are given by:
p= 200 − 8q
and c = 25 + 10g
Suppose that the government imposes a tax of ₹10 per unit. How will equilibrium price and quantity be affected ? (8+7=15 Marks)
(c) Define money multiplier and discuss its determinants. Explain in terms of money multiplier, how the banking system of an economy can control money supply. 15 Marks
SECTION-B
5. Answer the following questions in about 150 words each : 10×5=50
(a) Define offer curve and explain its slope. 10 Marks
(b) What is J-curve effect ? Explain it graphically. 10 Marks
(c) State Heckscher-Ohlin theory. Explain the Leontief Paradox in this context. 10 Marks
(d) Write down the implications of knife-edge problem in Harrod’s model of growth. 10 Marks
(e) Write down the major limitations of HDI developed by the UNDP. 10 Marks
6. (a) Explain the price effect; protective effect, consumption effect, revenue effect and distributive effect of tariff in partial equilibrium framework. 20 Marks
(b) Define the concepts of trade creation and trade diversion. Explain their role in the context of gains from trade bloc. (5+10=15 Marks)
(c) Do you think that perfect capital mobility under fixed exchange rate improves the effectiveness of fiscal and monetary policies ? Explain. 15 Marks
7. (a) Analyse critically the role of human capital and Research and Development (R&D) expenditure on economic growth in the framework of endogenous growth model. 20 Marks
(b) “Increasing role of multinationals has reduced the significance of foreign aid during post-World Trade Organization (WTO) regime.” Do you agree with this statement ? Explain. 15 Marks
(c) Define the concept of natural growth in Harrod’s model. What are the implications of deviation of actual growth from natural growth? (5+10 =15 Marks)
8. (a) Explain the role of World Trade Organization (WTO) in the present context. Discuss the merits and demerits of TRIMs and TRIPs. (10+10= 20 Marks)
(b) Do you think that economic growth and sustainable development contrary to each other ? Justify your answer. 15 Marks
(c) Explain the role of planning in the development process in the context of increasing significance of market economy. 15 Marks
UPSC Mains 2025 Economics Optional Paper-II
SECTION-A
1. Answer the following questions in about 150 words each :
(a) Distinguish between the Zamindari system and the Ryotwari system of land revenue under the British rule in India.
(b) What were the major impacts of “commercialisation of agriculture’ on Indian farmers during the pre-Independence India? Discuss.
(c) What were the economic consequences of the Drain of Wealth’ theory as practised during the British rule in India? Analyse.
(d) Why did the British lead to the destruction of India’s traditional cotton industry? Discuss.
(e) Describe the phases of colonisation in British India.
2. (a) Is land reform necessary to improve agricultural productivity in India? Discuss. 20 Marks
(b) Critically analyse the constraints of public and private capital formation in Indian agriculture. 15 Marks
(c) What were the thrust areas of economic planning during the pre-liberalisation era? Discuss. 15 Marks
3. (a) Examine the objectives and components of the Green Revolution in India. 20 Marks
(b) Why does inter-State disparity in income persist in India despite plethora of development initiatives undertaken by the Government of India? Analyse. 15 Marks
(c) Point out the main challenges faced by the small-scale and cottage industries in Indian economy. 15 Marks
4. (a) What are the methods used in measuring poverty and inequality in India? Analyse. 20 Marks
(b) How have rural and urban economic development contributed to poverty reduction in India? Discuss. 15 Marks
(c) What are the guidelines of the Decentralized Planning process in India? Describe. 15 Marks
SECTION-B
5. Answer the following questions in about 150 words each : 10×5-50
(a) Discuss the components of food processing schemes introduced by the Government of India.
(b) Do you agree with the view that India’s Foreign Trade Policy, 2023-2028 will boost country’s trade surplus and generate employment? Give reasons.
(c) What are the structural shortcomings of the Public Distribution System (PDS)’ in India? Explain.
(d) Justify the importance of Disinvestment Policy’ of India.
(e) What are the implications of the Goods and Services Tax (GST) reforms for Indian federalism? Discuss.
6. (a) What are the causes of industrial backwardness in India? Critically evaluate the role of the New Industrial Policy, announced in July 1991, towards correcting such backwardness. 20 Marks
(b) Examine the implications for India due to agreements on agriculture that are signed under the World Trade Organisation (WTO) in 1995. 15 Marks
(c) Why is a National Employment Policy necessary for India? What are the initiatives taken by the Government to facilitate employment generation? Explain. 15 Marks
7. (a) What is the sectoral composition of India’s national income? Mention the most important source of national income in India. 20 Marks
(b) What are the advantages and disadvantages of full convertibility of Indian rupee? Do you believe that capital account convertibility is feasible under the present circumstances in India? Discuss. 15 Marks
(c) What is the strategy of the Reserve Bank of India (RBI) for exchange rate management? Discuss the recent changes in India’s Exchange Rate Policy. 15 Marks
8. (a) How do the current Finance Commission’s recommendations align with the government’s Fiscal Consolidation goals? Elucidate. 20 Marks
(b) Why was the public sector given a leading role in industrial development during the pre-liberalisation era? Explain. 15 Marks
(c) Discuss the initiatives launched by the Reserve Bank of India (RBI) to promote financial inclusion. 15 Marks
UPSC Mains 2025 Economics Optional Papers PDF
The UPSC Civil Services Mains 2025 Economics Optional Paper has been completed. The PDF of the question paper is uploaded for reference. This question paper is now available for reference purposes which is very useful in understanding the unique demands of the Economics optional. Students can analyse the Economics question paper to understand the themes from which questions are framed and the level of the question paper which helps in understanding the needs of the examination. For your convenience, the link to download the PDF of the Economics Optional question paper for UPSC Mains 2025 is given below.
How to download the UPSC Civil Services Mains 2025 Economics Optional Papers
To download the UPSC Civil Services Mains 2025 Economics Optional Papers, follow these steps:
- Visit the Official UPSC Website: Go to the official website of the Union Public Service Commission at upsc.gov.in.
- Navigate to the Examination Section: Look for the ‘Examinations’ tab in the main menu and click on it.
- Select ‘Previous Year Papers’: Within the Examinations section, find the link for ‘Previous Year Papers’ papers.
- Locate the 2025 Mains Examination Papers: Look for the section dedicated to the 2025 Civil Services Mains Examination.
- Find the Economics Optional Paper: Scroll through the list of available papers to locate the Economics Optional Paper.
- Download the PDF: Click on the link for the Economics Optional Paper to open it. Then, you can download the PDF file by clicking the download icon or using the ‘Save As’ option from your browser.
- Save for Reference: Once downloaded, save the document in a folder for easy access and future reference.
With the UPSC Mains 2025 Economics Optional Paper, the commission has once again given aspirants a decisive tool with which to analyse the exam pattern and design working strategies for future preparations. Keep an eye out for further updates and insights on the UPSC Mains Optional exam. We also encourage you to download the Economics Optional question paper using the link attached.
