UPSC Economics Optional Question Paper 2026: Paper I and Paper II, All Questions
Every question from the UPSC Economics optional 2026 Paper I and Paper II, with marks, syllabus units, the numericals and where the weight fell.
The UPSC economics optional paper 2026 is reproduced below, question by question, with the marks and the syllabus unit for every part of Paper I and Paper II. Each paper carried 250 marks over three hours. UPSC printed 8 questions of 50 marks in two sections, and you answer 5: Q1 and Q5 are compulsory, and the other three must include at least one from each section.
Paper I is general economics: micro and macro theory with numericals, money and public finance, international economics and development. Paper II is the Indian economy, from the colonial period through planning to the post-1991 reforms, and it had no numericals. After each paper you’ll find its marks split by syllabus unit.
Economics Optional 2026 Paper I
Official paper: Economics Optional 2026 Paper I (UPSC PDF). Time allowed three hours, maximum marks 250.
The two numericals, a duopoly problem in 2(c) and an IS-LM problem in 3(a), are worth 35 marks together, and both sit in Section A’s optional questions. Q1, Q4 and Q5 carry no numericals, so a candidate who prefers theory can meet the Section A requirement through Q4. Income and employment determination (classical, Keynesian and new classical) led the paper at 60 marks, followed by public finance at 55.
Section A
| Q. | Question | Marks | Unit |
|---|---|---|---|
| 1(a) | According to Michal Kalecki, how the degree of monopoly and the level of investment interact to determine the functional distribution of income between wages and profits ? | 10 | Distribution Theories |
| 1(b) | Show how the aggregate demand curve is derived in the classical system. Mention its special property. | 10 | Income & Employment Determination |
| 1(c) | Discuss the term structure of interest and the rule of arbitrage inherent in this. | 10 | Money & Interest |
| 1(d) | Differentiate between public goods and private goods. What is a ‘Free Rider’ problem ? | 10 | Public Finance |
| 1(e) | What is the crowding-out effect in Fiscal Policy ? How can foreign capital mitigate the crowding-out effect ? | 10 | Public Finance |
| 2(a) | Under what conditions, does a market reach equilibrium ? Analyse the differences in stability between Marshallian and Walrasian approaches. | 20 | Price Determination & Market Structure |
| 2(b) | Critically examine the statement, “Pareto optimally does not give a sufficient basis for ordering economic states from the perspective of social welfare”. Can an economy with extreme inequality be considered Pareto efficient ? | 15 | Welfare Economics |
| 2(c) | The following data are given for a duopoly market : P = 100 – 0.5 (q1 + q2); C1 = 5 q1; C2 = 0.5 q2^2. Suppose the duopolists recognise the mutual interdependence and decide to act as one group to maximize the total profit of the industry. Find out q1, q2, P and the profits of the firms denoted as pi1 and pi2. | 15 | Price Determination & Market Structure |
| 3(a) | The following values for an economy are given : C = 0.8 (1 – t)Y; t = 0.25; I = 900 – 50r, G = 800; L = 0.25Y – 62.5r; M/P = 500, P = 1. The variables have their usual meaning. Find the following : (i) The equilibrium values of Y and r (ii) Slopes of IS and LM curves (iii) Expression of government expenditure multiplier for income in terms of slopes of savings function, investment function and money demand function (iv) If the government expenditure goes up by 240, how much will be the rise in Y in terms of the multiplier derived in the part (iii) above ? | 20 | Income & Employment Determination |
| 3(b) | (i) Show how automatic full-employment is guaranteed in the classical model. (ii) How does Keynes show the possibility of underemployment equilibrium in the labour market ? | 15 | Income & Employment Determination |
| 3(c) | Give an outline of the new classical policy ineffectiveness proposition. | 15 | Income & Employment Determination |
| 4(a) | Explain the instruments through which the government of any country tries to successfully carry out its three major roles namely, Allocation, Distribution and Stabilization. | 20 | Public Finance |
| 4(b) | Discuss the relative effectiveness of capital expenditure versus revenue expenditure in stimulating economic activity. | 15 | Public Finance |
| 4(c) | Discuss the major difference of Friedman’s restatement of quantity theory of money from the Keynesian demand for money. | 15 | Money & Interest |
Section B
| Q. | Question | Marks | Unit |
|---|---|---|---|
| 5(a) | “Import tariffs typically result in a net welfare loss for a country”. Do you agree ? Justify your answer by applying an import tariff for a small economy and a large economy. | 10 | Trade Policy & WTO |
| 5(b) | In what sense trade can act as an engine of growth ? Elaborate. | 10 | Trade, Investment & MNCs |
| 5(c) | Throw light on the changing role of markets in economic development of developing countries. How it has affected planning process ? Discuss. | 10 | Planning & Markets |
| 5(d) | Analyse the role of Research and Development (R&D) in fostering economic growth and strengthening competitiveness in a knowledge-based economy. | 10 | Growth & Development Theories |
| 5(e) | Explain the “Single Undertaking” principle used in the Doha Round and its implications for WTO negotiations. | 10 | Trade Policy & WTO |
| 6(a) | Discuss the major differences between Old and New international trade theories. | 20 | International Trade Theory |
| 6(b) | Explain the effect of a monetary expansion on exchange rate in the short and the long run under perfect capital mobility. | 15 | Exchange Rates & Open Economy |
| 6(c) | Explain whether the parallel imports violate provisions of TRIPS and affect the pricing policy of a patent holder MNC. Give reasons why all rich nations do not follow this ? | 15 | Trade Policy & WTO |
| 7(a) | Analyse the role of human capital as a driver of economic development in developing countries. How can education and healthcare investment overcome the “Low productivity trap” in developing nations ? | 20 | Human Capital & Human Development |
| 7(b) | Compare Gunnar Myrdal’s “backwash effects” with Simon Kuznets’ “structural transformation” in the context of developing economies. | 15 | Growth & Development Theories |
| 7(c) | Explain the factors contributing to the rise of MNCs. Discuss whether their efficiency is driven by superior technology or anti-competitive practices. | 15 | Trade, Investment & MNCs |
| 8(a) | “Earth provides enough to satisfy every man’s needs, but not every man’s greed”. Analyse this statement in the context of environmental degradation and the rights of future generations. To what extent does the rapid, industrial-driven depletion of non-renewable resources constitute a violation of intergenerational equity. | 20 | Environment & Sustainable Development |
| 8(b) | What strategies are required for Agriculture Sector transformation to ensure rapid economic development of a developing country ? Discuss. | 15 | Growth & Development Theories |
| 8(c) | What are the various approaches to Human Development ? Elaborate Basic Needs Approach. | 15 | Human Capital & Human Development |
2026 Paper I: where the marks sat
| Unit | Marks | Share of paper |
|---|---|---|
| Income & Employment Determination | 60 | 15.0% |
| Public Finance | 55 | 13.8% |
| Growth & Development Theories | 40 | 10.0% |
| Human Capital & Human Development | 35 | 8.8% |
| Price Determination & Market Structure | 35 | 8.8% |
| Trade Policy & WTO | 35 | 8.8% |
| Money & Interest | 25 | 6.2% |
| Trade, Investment & MNCs | 25 | 6.2% |
| Environment & Sustainable Development | 20 | 5.0% |
| International Trade Theory | 20 | 5.0% |
| Exchange Rates & Open Economy | 15 | 3.8% |
| Welfare Economics | 15 | 3.8% |
| Distribution Theories | 10 | 2.5% |
| Planning & Markets | 10 | 2.5% |
Economics Optional 2026 Paper II
Official paper: Economics Optional 2026 Paper II (UPSC PDF). Time allowed three hours, maximum marks 250.
Section A stayed with the pre-1991 economy. Colonial questions on the drain theory, indigo, laissez-faire and the railways took 50 marks, land reforms and the Green Revolution came up twice each for 55 marks, and industrial policy before 1991 took another 55. Section B moved to the reform era, led by WTO, trade and IPR at 45 marks, with TRIPS asked twice in this paper and once more in Paper I.
Section A
| Q. | Question | Marks | Unit |
|---|---|---|---|
| 1(a) | Critically examine the ‘drain theory’ as propounded by Dadabhai Naoroji. How did it explain the root cause of poverty in colonial India? | 10 | Colonial Economy |
| 1(b) | “Commercialization of agriculture in British India was a forced process rather than a natural one.” Elucidate with reference to cash crops like indigo. | 10 | Colonial Economy |
| 1(c) | Assess the efficacy of land tenurial system reforms in post-Independent India in addressing intermediary abolition. | 10 | Land Reforms & Agriculture |
| 1(d) | “The Green Revolution ensured food security but exacerbated regional disparities.” Give your views. | 10 | Land Reforms & Agriculture |
| 1(e) | What are the different methods of measurement of poverty in India? Which one do you think is most appropriate and why? | 10 | Poverty & Employment |
| 2(a) | Evaluate the success of land reforms in post-Independent India. Why was the success limited in certain States while non-existent in others? Link land reforms to the broader agricultural transformation and explain. | 20 | Land Reforms & Agriculture |
| 2(b) | Analyze the relationship between the Green Revolution and capital formation in Indian agriculture. Did this strategy-led growth trickle down to small and marginal farmers? | 15 | Land Reforms & Agriculture |
| 2(c) | Compare and contrast the economic thoughts of D. R. Gadgil and V. K. R. V. Rao regarding Indian economic planning and development strategies. | 15 | Indian Economic Thought |
| 3(a) | Trace the trajectory of India’s industrial policy from the Nehruvian model of ‘Mahalanobis Strategy’ to the liberalization era. How has the focus shifted regarding the role of the State and heavy industries? | 20 | Industry before 1991 |
| 3(b) | Provide a detailed analysis of the trends in National Income in India since Independence. Discuss the structural changes in the sectoral composition of GDP. | 15 | National Income |
| 3(c) | Discuss the application of laissez-faire theory in colonial India. Why did the nationalist economists criticize this policy as a tool for deindustrialization? | 15 | Colonial Economy |
| 4(a) | Trace the evolution of the debate between the public and private sectors in India’s industrial development from the Industrial Policy Resolutions to the 1991 reforms. | 20 | Industry before 1991 |
| 4(b) | Discuss the significance of small-scale and cottage industries during 1947-1991. What role did Indian States play during the above period in facilitating these industries? | 15 | Industry before 1991 |
| 4(c) | “Railways in India were the forerunner in facilitating modern industries.” Discuss. Critically analyze the role of railways in the economic development of India. | 15 | Colonial Economy |
Section B
| Q. | Question | Marks | Unit |
|---|---|---|---|
| 5(a) | Analyze the impact of the TRIPS Agreement on the pricing and availability of generic drugs in the Indian pharmaceutical sector. | 10 | WTO, Trade & IPR |
| 5(b) | Distinguish between current account and capital account convertibility. Why has India been cautious regarding full capital account convertibility? | 10 | Exchange Rate & Convertibility |
| 5(c) | Explain the core objectives of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. Has it been successful? | 10 | Public Finance & Fiscal Federalism |
| 5(d) | How has the role of the Reserve Bank of India (RBI) shifted from stabilization policy to inflation targeting as a monetary authority? Explain. | 10 | Monetary Policy & RBI |
| 5(e) | How far is the Direct Benefit Transfer (DBT) scheme in India successful in achieving its objectives? | 10 | Poverty & Employment |
| 6(a) | Critically examine the impact of the New Economic Policy on the Indian corporate sector. Discuss its effects on privatization, the surge in FDI, and the domestic industry with the entry of multinational corporations. | 20 | Reforms & Industry |
| 6(b) | Examine the implications of the WTO agreements on Indian agriculture with special reference to food security, subsidies and market access. | 15 | WTO, Trade & IPR |
| 6(c) | Elaborate on the indicative planning in India with its objectives. What role does the NITI Aayog play in this new framework? | 15 | Planning & Decentralization |
| 7(a) | “Economic development without employment generation is meaningless.” Give your views. Critically analyze the phenomenon of ‘jobless growth’ in India in post-reform period, and its impact on poverty and social sector outcomes. | 20 | Poverty & Employment |
| 7(b) | Discuss the structure of fiscal federalism in India. How have successive Finance Commissions tried to address the vertical and horizontal fiscal imbalances? | 15 | Public Finance & Fiscal Federalism |
| 7(c) | The economic reforms marked a paradigm shift in India’s industrial strategy. In this context, discuss deregulation, delicensing, and their impact on industrial efficiency. | 15 | Reforms & Industry |
| 8(a) | Explain the Intellectual Property Rights (IPR) regime under the WTO. Discuss the specific implications of TRIPS and GATS on India’s trade policy and domestic regulations. | 20 | WTO, Trade & IPR |
| 8(b) | Analyze India’s exchange rate regime post-1991. Discuss the move towards market-determined exchange rates, and the management of volatile capital flows. | 15 | Exchange Rate & Convertibility |
| 8(c) | Discuss how decentralized planning may lead to inclusive growth in India. In this context, explain the role of 73rd and 74th constitutional amendments. | 15 | Planning & Decentralization |
2026 Paper II: where the marks sat
| Unit | Marks | Share of paper |
|---|---|---|
| Industry before 1991 | 55 | 13.8% |
| Land Reforms & Agriculture | 55 | 13.8% |
| Colonial Economy | 50 | 12.5% |
| WTO, Trade & IPR | 45 | 11.2% |
| Poverty & Employment | 40 | 10.0% |
| Reforms & Industry | 35 | 8.8% |
| Planning & Decentralization | 30 | 7.5% |
| Exchange Rate & Convertibility | 25 | 6.2% |
| Public Finance & Fiscal Federalism | 25 | 6.2% |
| Indian Economic Thought | 15 | 3.8% |
| National Income | 15 | 3.8% |
| Monetary Policy & RBI | 10 | 2.5% |
What the 2026 Economics Papers Reward
Paper I shows the subject’s two tracks clearly. Section A was theory and technique, with 35 marks of numericals and questions on Kalecki, Marshall against Walras, Pareto optimality and Friedman against Keynes. Section B was applied, covering trade theory, WTO rules, exchange rates under perfect capital mobility and development economics, from Myrdal and Kuznets to human capital and intergenerational equity.
Paper II rewarded history and policy detail more than models. Section A was almost entirely about colonial India and the planning era, which suits candidates who read economic history properly, and Section B asked about the FRBM Act, the RBI’s move to inflation targeting, DBT, NITI Aayog, Finance Commissions and the 73rd and 74th amendments. Much of that overlaps with GS Paper III, but the optional expects the theory behind each policy, not only the facts.
In Paper I, Public Finance gained marks every year: 15 in 2023, then 25, 45 and 55 in 2026. Growth & Development Theories went the other way, from 80 to 50, 45 and 40. Money & Interest peaked at 80 marks in 2024 before dropping to 50 and then 25, while Income & Employment Determination stayed between 35 and 70 in all four papers. Trade, Investment & MNCs had no marks in 2023 or 2024, then picked up 15 and 25.
In Paper II, Land Reforms & Agriculture was the biggest unit from 2024 to 2026 (85, 75, 55, the last tied with Industry before 1991) and second in 2023, when its 65 trailed WTO, Trade & IPR’s 70. Colonial Economy barely moved (45, 55, 50, 50). Industry before 1991 is the 2026 outlier: 25, 15 and 15 in the three earlier papers, then 55. Reforms & Industry jumped from 10 in 2023 to 50 in 2024 and has eased to 35 since, National Income slid from 40 to 15, and WTO, Trade & IPR swung between 25 and 70.
Paper I: marks by unit, 2023 to 2026
| Unit | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|
| Income & Employment Determination | 70 | 35 | 45 | 60 |
| Public Finance | 15 | 25 | 45 | 55 |
| Growth & Development Theories | 80 | 50 | 45 | 40 |
| Price Determination & Market Structure | 60 | 40 | 45 | 35 |
| Trade Policy & WTO | 20 | 25 | 55 | 35 |
| Human Capital & Human Development | 10 | 30 | 10 | 35 |
| Money & Interest | 25 | 80 | 50 | 25 |
| Trade, Investment & MNCs | 0 | 0 | 15 | 25 |
| International Trade Theory | 40 | 25 | 20 | 20 |
| Environment & Sustainable Development | 40 | 10 | 15 | 20 |
| Welfare Economics | 0 | 20 | 15 | 15 |
| Exchange Rates & Open Economy | 30 | 45 | 25 | 15 |
| Distribution Theories | 10 | 0 | 0 | 10 |
| Planning & Markets | 0 | 15 | 15 | 10 |
Paper II: marks by unit, 2023 to 2026
| Unit | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|
| Land Reforms & Agriculture | 65 | 85 | 75 | 55 |
| Industry before 1991 | 25 | 15 | 15 | 55 |
| Colonial Economy | 45 | 55 | 50 | 50 |
| WTO, Trade & IPR | 70 | 30 | 25 | 45 |
| Poverty & Employment | 60 | 45 | 50 | 40 |
| Reforms & Industry | 10 | 50 | 45 | 35 |
| Planning & Decentralization | 20 | 15 | 30 | 30 |
| Exchange Rate & Convertibility | 15 | 10 | 30 | 25 |
| Public Finance & Fiscal Federalism | 10 | 40 | 30 | 25 |
| Indian Economic Thought | 30 | 10 | 0 | 15 |
| National Income | 40 | 25 | 35 | 15 |
| Monetary Policy & RBI | 10 | 20 | 15 | 10 |
The <a href=”/economics-optional-upsc-guide/”>Economics optional guide</a> covers who the subject suits, the booklist, a 24-week roadmap and the answer-writing approach for both papers.
To weigh Economics against other subjects, see <a href=”/upsc-optional-subjects/”>UPSC optional subjects</a>, or browse the <a href=”/upsc-optional-notes/”>optional notes directory</a> for guides to all 48 subjects.
Frequently Asked Questions
What was asked in the UPSC Economics optional 2026 papers?
Paper I asked about Kalecki’s distribution theory, Marshall against Walras, Pareto optimality, duopoly and IS-LM numericals, Friedman against Keynes, import tariffs, TRIPS and human development. Paper II asked about Dadabhai Naoroji’s drain theory, land reforms, the Green Revolution, the Mahalanobis strategy, the FRBM Act, the RBI, DBT, Finance Commissions and the 73rd and 74th amendments.
How many questions and marks are in each Economics paper?
Each paper carries 250 marks and runs for three hours. UPSC printed 8 questions of 50 marks in two sections, and you answer 5. Q1 and Q5 are compulsory, and the remaining three must include at least one from each section.
Where can I download the official Economics 2026 question paper?
The official papers are on the previous question papers page of upsc.gov.in, printed in Hindi and English. Each paper on this page also carries its own download link.
How should I use the 2026 Economics paper in my preparation?
Solve the two numericals under time first, because they show quickly whether your Paper I technique is exam ready. Then check each Paper II question against your notes for dates, committees and data, since that paper asked about specific policies such as the FRBM Act, inflation targeting and Finance Commission transfers.
How does the 2026 Economics paper compare with earlier years?
This page covers 2026 only. Between the two papers, Paper I mixed theory, numericals and applied international and development economics, while Paper II split cleanly into the pre-1991 economy in Section A and the reform era in Section B. For earlier years, the official papers on UPSC’s previous question papers page are the most reliable record.
Does Economics Paper I 2026 have numerical questions?
Yes, two: a duopoly profit-maximization problem in Q2(c) for 15 marks and an IS-LM problem in Q3(a) for 20 marks. Both sit in optional questions and Q4 has none, so the Section A requirement can be met without them. Paper II had no numericals.