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Uttar Pradesh's Economy: Down the Rabbit Hole and Beyond

The complete breakdown of infrastructure, failure to redistribute land and dismal law and order situation has made UP an economic wasteland.
A view of Lucknow. Photo: Prasoon Srivastav/Unsplash

India is gearing up for significant general elections in 2024. To be sure, the world will be watching as the largest democratic festival plays itself out. This will undoubtedly have profound implications for the geopolitical order, perhaps even more so than the US presidential elections. The world knows China’s economy is faltering; therefore, it will closely look towards India as the next big economic force. There has been growing optimism about India’s growth story, but there is one state that is pulling India down. Uttar Pradesh (UP), one of India’s largest states, has been one of the most poorly performing economies in the north and the east for decades.

Uttar Pradesh recorded a per capita Net State Domestic Product of Rs 70,792 for the fiscal year 2021-22. With a population roughly equivalent to Pakistan’s, which is almost 200 million, the state’s economic disparity becomes stark. Despite Pakistan’s economy teetering on the edge of collapse due to democratic setbacks and sluggish growth, its per capita income in 2022, according to World Bank data, stands at $1,588.9 – nearly double that of UP.

Not many know this grim reality: Uttar Pradesh not only trails behind Pakistan but also lags behind Sub-Saharan Africa, renowned as one of the world’s poorest regions. World Bank Open Data indicates Sub-Saharan Africa’s (excluding high income) per capita income at current US$ is $1700.1 in 2022. While some economists argue that per capita income alone fails to fully encapsulate a region’s economic standing, it’s undeniable that Uttar Pradesh’s economic condition falls significantly short of optimal levels. For example, Noida plays a big role in increasing the per capita income of UP. The per capita income simply does not mean all citizens of UP are earning Rs 70,792 per year. Per capita income is calculated by taking the ratio of the total income of the state and the total population of the state.

The fundamental flaw in UP’s economy lies in its entrenched feudal system, where the state lords over cattle, women, marginalised communities and minorities. The pervasive presence of the so-called mafia raj, along with frequent brutalities such as gang rape and violence, has tainted UP’s reputation. Consequently, when the chief minister convenes an investor summit, prominent business leaders may attend and sign Memorandums of Understanding, yet the conversion rate remains abysmal. In essence, these investors, gripped by apprehension regarding the current administration, may momentarily commit, but they rarely follow through with the initiation or actualisation of commercial projects in UP. The share of industrial sector in gross value added has been decreasing. From 2012-17, the compound annual growth rate of the industrial sector has been 9.9% and from 2017-22, it declined to a mere 0.6%. In terms of number of factories, Bihar saw a 100.4% increase, Haryana saw a 159% increase, Assam saw a 200% increase while UP saw an increase of only 69% from the period 2004-05 to 2019-20. The complete breakdown of infrastructure, failure to redistribute land and dismal law and order situation has apparently made UP an economic wasteland.

Another facet of UP’s predicament manifests in the relentless scourge of poverty. The state has nearly 23% of population who are multidimensionally poor. Just two years ago, three districts of UP namely Bahraich, Balrampur, Shravasti were in the headlines for recording a 70% poverty rate. As per the latest NITI Aayog report in 2023, Bahraich has more 50% population who are multidimensionally poor. The state’s life expectancy, at 66 years, parallels that of African nations like Ethiopia and Gabon. According to the RBI Handbook of Indian States, the infant mortality rate stands at 38 per 1,000 in 2020, the maternal mortality rate stands at 167 per 1,00,000 live births and 45.6% of pregnant women aged between 15-45 and 66% of children of aged between 6-59 months are anaemic. Despite the touted “demographic dividend”, the grotesque reality is when 50.4% of the female population aged between 15-49 years are anaemic, the prospect of any dividend is risible.

Let’s delve into the growth rate. The chief minister of the state has made the bold claim of a $1 trillion economy. It is conventionally believed that states with a lower initial economic base possess higher potential for growth. In other words, the poorer a state, the faster it can advance economically, thereby gaining increased access to funds within the Indian Union. For example, UP receives Rs 2.73 back for every Re 1 it contributes to the Union of India, while Tamil Nadu receives only 29 paisa for every Re 1 it contributes to the Union. Perhaps an argument could be made that the people of Tamil Nadu are working more towards funding the freebies of UP, but for the sake of objectivity, I would focus solely on UP. The compound annual growth rate of UP’s Gross State Domestic Product at current prices has been 8.28% during the period 2016-17 to 2021-22, as per data released by the Directorate of Economics and Statistics, GOUP (Government of Uttar Pradesh). To achieve a $1 trillion target in five years, UP needs to grow by 32% per annum. There is no harm in having the audacity of ambition, but truth be told, spaceships can’t be lit up by candles.

The lamentable part of UP’s story is that the voters are completely agnostic about the democratic power they posses to bring in an economic transformation. The poor voters are failing to grasp the fact that they are voting for forces that are further disenfranchising them. The result of this is that UP has become a purgatory of prosperity and a geography of maladies. The economy cannot be drastically upscaled unless there is massive democratic reform in the state. The steady shrinkage of democratic spaces, laceration of institutional autonomy, the focus on cults need to stop. Income, quality of living needs to be on the top of the discourse replacing caste and cult. In a conservative democratic milieu, any hope for economic resurgence remains futile.

Snehasis Mukhopadhyay is a data science enthusiast with a penchant for drawing insights from political economy.

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