IAS Mains Economics Paper 2012

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Section –A

Q.1 Answer the following in about 150 words each:

  1. “Validity of Marshall’s equi marginal utility depends on the assumption of unitary elasticity of the marginal utility curves of the commodities under the budget.” Clearly explain this assertion.

  2. “For most developing nations fighting persistent balance of payments crisis and inflationary crisis, monetary contraction is a better option.” Do you agree ?

  3. Show how price output decision is taken by duopolists, taking into account, their mutual reaction. Under what condition will the duopolistic market be in equilibrium?

  4. “If firms produce differentiated products it is neither possible to identify the industry nor possible to draw its supply curve.” Discuss and show how Chamberlin handles the problem.

  5. “Agriculture is not just a sector contributing a small proportion of GDP, it is a way of life for the Indians.” Discuss.


  1. Mention the different components of supply of money as specified by the Reserve Bank of India. In what sence is the narrow money ‘narrow’?

  1. Why is under-employement equilibrium possible in Keynesian economics, but not possible in Classical economics? Give reasons.

  1. Is rent a surplus? Give reasons in support of your assertion and point out the difference between ‘rent’ and ‘quasi-rent’.


  1. What is the difference between private and social cost-benefit ? Which one of the two is more relevant to government investment decision and why ?

  1. Explain why money supply remains unaffected if budget deficit is met by borrowing from the public.

  1. Is there significant difference between Value added tax and Sales tax ? If so, what is that ?


  1. “Industrial development and environmental degradation are highly correlated.” If it is true what should be, in your opinion, the policy options for industrialization process vis-à-vis pollution control ?

  1. Discuss the role of multinationals in employment creation, income generation and transfer of technology.

  1. For optional allocation of resources, which of the options – market forces, planning exercise or a combination of both – should be suitable for the third world countries ? Defend your stand.

Section –B

Q.5 Answer the following in about 150 words each:

  1. “The assumption of fixed coefficient production function is at the root of Harrod’s instability.” Discuss and explain wherher giving up the assumption really helps.

  2. Derive Marshall’s welfare economics from his concept of consumer surplus after explaining consumer’s surplus along with the underlying assumptions.

  3. What is prisoner’s dilemma ? How is it releted to a strictly dominant industry?

  4. Show different stage of product life cycle. How do the shortcomings of diffusion lag of new technologies in recent years cause a time compression of the cycle?

  5. Distinguish between Currency Board Arrangement and dollarization. Why would a nation adopt one or the other?


  1. What do you mean by money multiplier ? What are the factors that determine the value of the multiplier ?

  1. Why does the point of intersection of IS and LM curve coincide with two markets ?

  1. What are the fiscal and monetary implications of vertical IS and vertical LM curves?


  1. Discuss the impact of FDI on level of output and employment of the host country. Why do we need some precaution in allowing FDI in retail sectore in India?

  1. “Transaction demand for money is interest rate elastic.” Explain in reference to the post Keynesian theories of demand for money.

  1. Why are trading blocks formed ? Explain the welfare impact of such trading blocks for non-member countries.


  1. Distinguish between backwash and spread effects of Myrdal. How do they operate in backward economics?

  1. “The solution of long term development needs of India lies in promoting public-private partnership.” Discuss.


Section –A

Q.1 Attempt the following in not more than 150 words each:

  1. Discuss in detail the views VKRN Rao on deficit finacing.

  2. During the British rule, commercialization of agriculture was forced on the farmers, while now it is the need of the hour. Discuss.

  3. What do you means by the ‘Hindu rate of growth’ ? Why has it been argued that poverty can not be eradicated under the Hindu rate of growth ?

  4. Trace the growth of real per capita income in India in the pre-liberalisation period, keeping in view the interplay of increasing population and increasing real national income.

  5. Explain why in spite of economic planning income distribution has turned more unequal through time.

Q.2 Attempt the following in not more than 250 words each:

  1. ‘Population is not just a denominator to deflate aggregates. It is determined by the level and pattern of economic development.’ Comment.

  2. Distinguish between cooperative, contractual and corporate farming. Which of these is best suited for India and why ?

  3. Delineate the trends in the growth and industrial composition of public sectore in India during the pre-liberalisation period.

Q.3 Attempt the following in not more than 250 words each:

  1. Compare the strategies of trickle down growth with inclusive growth. Why should the strategy of inclusive growth be preferred ?

  2. How was the Jute industry attected after partition? What remedial measures were taken to arrest its decline ?

  3. Discuss the various measures of poverty with policy implications for removal of poverty.

Q.4 Attempt the following in not more than 300 words each:

  1. A number of production lines ware reserved for the small scale sector in the pre-liberalisation period. Did such reservation achieve its objectives ? Explain in detail.

  2. What are the factors which determine the size and composition of national income ? In this respect contrast the scenarios between pre and post liberalization periods.

Section –B

Q.5 Attempt the following in not more than 150 words each:

  1. Characterise the inflationary process in the last three years. What steps were taken by the RBI and the Government to control it ?

  2. Explain why in spite of poverty alleviation schemes number of the poor has not fallen very much.

  3. Discuss the factors responsible for slow growth in agriculture in recent years. What steps ought to be taken for sustained growth in this sectore?

  4. Can disinvestment in public sector units be a sustainable alternative for raising resources for government expenditure ?

  5. Would a flexible exchange rate regime serve India better then a fixed exchange rate regime in the current international scenario ?

Q.6 Attempt the following in not more than 300 words each:

  1. Discuss the salient features of TRIPS and Indian position on (i) geographical indications and (ii) plant breeders’ rights.

  2. Why is capital inflow through multinational corporations preferred over foreign dept ?

Q.7 Attempt the following in not more than 250 words each:

  1. Discuss the major recommendations of the Thirteenth finance Commission with regard to augmentation of resources of local governments.

  2. Distinguish between fiscal federalism and political federalism. How has fiscal federalism been evolving in relation to special category States in particular and other States in general ?

  3. How is GST different from VAT ? What is the grand bargain suggested by the Thirteenth Finance Commission for implementation of GST ?

Q.8 Attempt the following in not more than 300 words each:

  1. Examine the new EXIM policy. Given the tough competition in international trade, What corrective measure would you suggest to make it more successful in boosting Indian exports ?

  2. Explain the salient feature of the Fiscal Responsibility Act. Explain to what extent has the Government of India been able to adhere to the provisions of this Act ?

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