Will Uttar Pradesh become $1 trillion by 2027? Facts and Figures say it’s next to impossible!!
Uttar Pradesh's growth story is mesmerizing to hear. The state which was once known for its poverty, lawlessness, higher unemployment rate, and lower health expectancy compared to other Indian states, and unsafe for women such that it had come into the category of ‘B.I.M.A.R.U’ which is synonymous with the Hindi word ‘bīmār (बीमार)’ meaning “sick” is risen up itself to become the 4th biggest economy in India with GDP of $260 billion in the year 2022, the chief minister of UP has vouched to turn Uttar Pradesh into $1 trillion dollar economy by 2026–2027.
…………………………………………………………………………………………………
But would it be possible for Uttar Pradesh to become a $1 trillion dollar economy within 5 years?
A closer look at its GDP growth of 9.9% in financial year 2021 indicates that Uttar Pradesh will need more than 15 years to reach a $1 trillion dollar economy.
For Uttar Pradesh to actually reach $1 trillion by 2027, it must reach an average growth rate of 34% for the next 5 years, which seems to be an impossible scenario because for that to happen:
- The growth rate of manufacturing sector should be 40–42% and it should grow from current $61.6 billion to $333 billion.
- The growth rate of agriculture sector should be 18–20% and it should grow from current $51 billion to $145 billion.
- The growth rate of service sector should be 34–36% and it should grow from current $110 billion to $485 billion.
Tourism brings in $5 billion dollars to UP’s economy and it contributes to less than 5% of the state’s GDP. The contribution. Within 5 years, it should grow to almost 6 times of its present contribution to $27 billion with the annual growth rate of 40%.
As mentioned above, the overall growth rate should touch 34.6%.
What was the annual growth rate in the last financial year 2022?
A: The annual growth rate of Uttar Pradesh in the financial year 2021–2022 was around 4.2%.
What was the GDP annual growth rate of Uttar Pradesh in the last 10 years?
According to the above figure, in the last 10 years UP hasn’t touched even 15% annual growth rate.
Even in terms of compound annual growth rate(CAGR) from financial year 2012–2013 to 2020–2021, the CAGR was around 8.84%. [CAGR calculated from figures taken from statistics times]
..
If we ponder upon individual sectors like manufacturing, agriculture and service sectors from 2017 — 2020 then we can see that the growth of manufacturing has been abysmal as compared to 2012 — 2017.
There has been growth in agriculture and service sector; but it is just 3% and 7.8% respectively whereas the growth rate should be above 10%.
By analyzing these facts and figures, it is predicted that it is next to impossible for Uttar Pradesh to become 1 trillion dollar in next 5 years.
…………………………………………………………………………………………………
Now, to the second question:
How can Uttar Pradesh achieve higher growth rate than present so that it could achieve $1 trillion economy earlier than 16 years?
There are several steps to be taken for which it can achieve higher GDP growth rate:
1: Improvement of infrastructure
Infrastructure is the cornerstone of any developed society. In-fact, better the infrastructure, more healthy is the society and in-turn leads to higher social development which leads to increased efficiency to do the given task properly which contributes to the development of the country.
Infrastructure is composed of physical and private physical structures such as roads, railways, bridges, water-supply, sewer-treatment, electricity and internet connectivity.
- When it comes to road connectivity and mobility; Uttar Pradesh does surprisingly well in it. As per logistical ease index — 2021, Uttar Pradesh ranks 6th on the basis of ease of logistical parameters which means there is an upgradation of quality of roads and enhanced road connectivity.
- In terms of water-supply, Uttar Pradesh lags behind its peers. Only 13% of rural UP has proper water supply.
It needs to improve in water access to rural population which would help in strengthen the social development of the state and avoid road-blocks which hinders economic development as well. [Even industrialized states like KA and TN needs to take this into consideration].
- In terms of access to electricity, Uttar Pradesh still lags behind other states even though there was great improvement in access to electricity in last 5–6 years.
If industries are to be run then there should be greater access to electricity as it plays vital role in increasing the industrial output and for sustainable economic growth.
2: Skill Development
Skill development is more important in providing students skills required while applying for jobs as well as it helps in job creation as the corporates who are looking for talent acquisition can fulfill their prospects can setup their companies in the land.
Under skill development, there will be vocational trainings along with technical education in colleges and universities which would help students earn extra skills required for job aspirants to get internships and jobs.
3: Establishment of SEZ’s
SEZ’s are set up in order for foreign investments to come into India. FDI helps in the economic growth of our country. In terms of attracting FDI’s, Uttar Pradesh is not up to the mark compared to other states:
SEZ’s can play major role in turning the state into export based manufacturing especially in the domain which is labor intensive, which can help in state creating thousands of jobs and boost export earnings.
The size of SEZ’s should be as much as 3 to 4 large size SEZ’s covering 150 sq km(which is present in china) as compared to large number of very small scale SEZ’s covering 1 sq km area already established in India.
It should provide liberal labor laws and exit policies to succeed like Chinese SEZ’s. An exit policy needs to be formulated such that firms can enter and exit freely from the market. The policy needs to be formulated and implemented properly to avoid turning into barrier which affects the health of the firms.
SEZ’s should enable the state to invite FDI investors who can provide the capital and training to achieve export competitiveness in multiple industrial sectors. The key goal is to link foreign investor capital and expertise with large-low cost labors. The foreign investors will help bring in the product design, specialized machine tools and capital goods, key intermediate products and knowledge of world marketing channels.
SEZ’s can be an enclave that helps in attracting investment, create jobs and promote exports. Unless concerns are addressed, the result is unlikely to be encouraging.
4: Police reforms
Police reforms are important step for justice system to be efficient as they help in maintaining law and order of the state with greater accountability and transparency in the work. As per IPF smart policing index, UP and Bihar ranks worst in policing.
Bihar, UP worst in policing, south states placed better: survey (indianexpress.com)
There are several things why policing is in bad condition:
- Understaffing of police: There is huge man power shortage in police departments. As per UN data on police organizations, India had 144 police force for every 100,000 people. In case of Uttar Pradesh, its much worse as the figure comes down to 89 police force for every 100,000 people.
This leads to overburden of work which results in decrease in efficiency and effectiveness of the personnel and cause psychological stress to them which results in them committing crimes against general populace.
- Lack of accountability: Due to not being able to keep police accountable for their actions, there has been cases of custodial killings recorded in all states, UP tops in number of police killings.[4,484 custodial deaths in past two years, UP tops chart: Centre | Latest News India — Hindustan Times | 2,544 custodial deaths in the country in last one year, Uttar Pradesh tops the list with 501 such incidents (firstpost.com)]
- Lack of quality training: Policeman are often not taught about how to interact with public since they come from non-affluent background. Since they aren’t trained to interact with public, they often come across as brash and abusive.
- Lack of equipment: Adding on with lack of quality training, the weapons used by police personnel are very old or obsolete. Uttar Pradesh in particular where 48% of police personnel used outdated weaponries. [Policing woes in India: outdated weapons, lack of communication devices, transportation, plenty of funds (nationalheraldindia.com)]
The ways to tackle this problem is huge and complex and beyond the scope of this topic. But if we summarize in short of what should be done then:
- Scrapping the outdated equipment.
- Recruiting more staffs and impose fixed 8 hours on the personnel than forcing them to work overtime
- To prevent custodial deaths, using body cameras and compatible defibrillators can prove beneficial.
5: More Urbanization:
Urbanization is necessary as it helps in reducing inequality and poverty by improving employment opportunities and quality of life. Urbanization and productivity goes hand in hand based on 3 postulations:
- First, it deepens local product and labor markets, leading to greater competition and efficiency.
- Second, it permits more specialization and division of labor and, hence, productivity improvements.
- Third, it enables greater learning at all levels of workers, and better technology adoption and innovation.
As of today, only 22–24% of UP population is urbanized and if UP is to be developed like Maharashtra and Tamil Nadu, this is necessary. As per data collected by ‘McKinsey institute’, its the cities which drive half of economic growth in the world.[https://www.ft.com/content/24dbcc0f-7974-48d7-9824-ab86b58a3a29]
6: Tourism and Remittances
Tourism contributes to 10% of Uttar Pradesh’s GDP. Many parts of Uttar Pradesh offer great destinations for rural and religious tourism. It has great artistic displays, crafts and religious centers like Varanasi, Ayodhya etc, and developing it efficiently can help increase in growth of revenue from tourism.
Remittances contribute to 1.11% of the state GDP which is $2 billion and it can do its fair share for contributing to the state GDP.
7: Enhancing agriculture productivity
By allowing farmers to sell their crops in open market rather than only APMC or mandi can help in getting huge amount of profit for large farmers who can then buy farming equipment’s with the surplus money to grow more crops and thereby increase the efficiency of farming.
Improving soil quality by using bio-mass than using fertilizers is important to avoid soil pollution and degradation. Smart water management is important so as to grow crops with minimal wastage of water.
Credit reforms are necessary to enhance small farm productivity and it is responsible for improved efficiency by controlling both transactions and risk costs.
8: Bringing in more women into workforce
In terms of Working women population, Uttar Pradesh unfortunately lags behind other states.
Working women are more important for the development of the state and country. Almost all developed countries have more than 60% of women working across all sectors of industries. As per ‘McKinsey Global Institute’ India can add additional $700 billion to its economy and hike its GDP growth by 1.4% if it can bring additional 68 million women into workforce. [The power of parity: Advancing women’s equality in India, 2018 | McKinsey]
There should be initiatives taken by the government to bring in more women to workforce such that GDP growth will be enhanced and Uttar Pradesh will become $1 trillion in shorter period of time.
Footnotes:
$1 Trillion Target: How Can Uttar Pradesh Enhance Economic Growth? (outlookindia.com)
