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UP’s Development Mess: WILL SP PUT STATE IN ORDER?,by Shivaji Sarkar, 9 Mar, 2012 Print E-mail

Economic Highlights

New Delhi, 9 March 2012

UP’s Development Mess


By Shivaji Sarkar


Development somehow always eludes Uttar Pradesh and it may continue to do so despite a change in regime. The outgoing Chief Minister and BSP supremo Mayawati was blaming the Centre for the mess the State is in. Well, she may not have been entirely incorrect. The Planning Commission’s document on UP released 2011-end needs a closer look. It puts the blame on the State’s political establishment but doesn’t exonerate the Centre either.


Clearly, the Samajwadi Party government, which has held the reins in the past, would have extreme difficulty in putting UP back on the rails. A massive activity in all sectors is critical. The new dispensation must realise that the State has to grow on the strength of its agro base but investment in industries and related sectors too need the requisite boost.


The State requires an estimated investment of Rs 323161 core. The Centre has to contribute about Rs 60,000 crore and the rest Rs 260,000 crore has to be raised by the State, indeed a herculean task. With the Centre feeling a further crunch on its finances, its contribution looks to be difficult.


The State also has the highest debt ratio. Average primary deficit as percentage of Gross State Domestic Product (GSDP) is more than the difference between real growth and real interest rate. This debt in the State is expensive as it has to pay higher interest rates than others. The government will need to find ways to restructure the debt, be it through swaps or bringing down administrative expenses. It calls for receipt and as well as expenditure management. Importantly, governance deficit has to be addressed foremost.


Shockingly, two of the main expenses in the State are in providing security to its panchayat leaders, MLAs, MPs, ministers and even some bureaucrats and the other is on law and order. Additionally, administrative expenses on ministries and departments too have increased by at least three times during the past decade. At the same time, State’s progress has been falling. During 1993-94 – 2000-01, the gross GSDP was increasing at 4.22 per cent against the all-India average growth of 6.3 per cent. Recently, it has come down to 2.24 per cent against the national 4.88 per cent.


During 2002-03, UP had a per capita real income that was 47.7 per cent less than the all-India average. There has been a considerable deterioration since 1980-81, when it was 17.2 per cent less. Accordingly, the document considers this to be a reason for high migration from the State in search of livelihood. The share of real activity has too shrunk from 13.8 per cent in 1980-81 to 10.5 per cent in 1999-2000. It has fallen to less than 8 per cent now. The most dramatic decline is noticed in services-tertiary sector, while agriculture is still holding ground “with difficulty”.


This apart, the State has lagged in vital segments of infrastructure such as power, water supply, roads and railways –despite the fact it has the largest share, 31 national highways, and widest rail network.

Growth in real estate, trade, hotels & restaurants and unorganised manufacturing has suffered equally. Since industrial activity has shifted from the State, the services sector has too regressed. Against the national average of 51.17 per cent of industry and services share in the economy, UP has a mere 25.64 per cent! Worse, on the agriculture front, its dominance has reduced significantly.


The new leadership, however, must be cautious against getting into the pocket of any industrial house – as it had done in its previous regime or as the BSP government has done now. Selling the State to one or two houses has greatly harmed the State. Corporate fiefdom has reportedly made life difficult, wherein it has created monopolies at the cost of development. These monopolies, whether in power, road or real estate sector have sought to it that a competitive investment environment is smothered. Worse, mafia has been promoted to prevent entry of its competitors in the State.


Worse, an environment has been created that has led to the flight of entrepreneurs from thriving industrial areas such as Noida, Ghaziabad, Allahabad etc. In fact, the deteriorating law and order is their creation for safeguarding their fiefdom and tragically, political establishments have been manipulated to support the mafiosi.


While the people hope that the new dispensation would be able to break from the past, it may not be the case. The SP is known to be close to some industrial groups, but it must ensure that it should be no reason for mortgaging the interest of the State to one group or another as the State has witnessed during the past decade. For example, while liquor is one of the big contributors to the State’s revenue, the entire business is said to have been awarded to an individual, by manipulating the auction process! It’s not just the recent regime, but apparently it seems to be the regional outfits’ culture, with national parties paying little heed. An uncertain political situation at the Centre has been a reason for them to deliberately look the other way.


Recent trends and movements in the Annual Survey of Industries (ASI) show a declining or stagnant share of UP as compared to fast moving States such as Gujarat, Maharashtra or Karnataka. Since 1995, UP has entered into MoUs worth over Rs 50,000 crore with different industries, including foreign. At the ground very few came to set up their businesses. Apparently, various kinds of extortions, called rangdari tax, have been a dampener. Since the mafiosi changes their loyalty with new regimes, it has been thriving at the State’s cost. Nobody has so far shown much interest in curbing their activities as elimination of these groups is not considered lucrative.


This apart, the Centre too has not been kind to UP. During the Ninth, Tenth and 11th Plan per capital plan expenditure in UP was just about 59 per cent of national average in all other States. This has affected irrigation, power and transport sectors. As Central investments reduced further the State’s agricultural GSDP has shown a slowdown. This apart, the State’s own capacity in raising revenue from taxes has been deteriorating, and thereby throwing up the moot question of how it could increase revenue collection to bridge the gap with other States.


Uttar Pradesh’s efficiency of capital in manufacturing is very poor. Despite high deposit rates, the credit ratio is low. Agriculture productivity is low in terms of per hectare yield. When it increases production as in the current year in potato, vegetables, or other grain production, poor marketing structure leads to distress sales.


The Planning Commission too has noted severe disparities in the eastern and western sectors. It suggests immediate removal of governance deficit, stress on rural entrepreneurship, agricultural marketing and an intelligent way of combining investment in industry and manufacturing along with the growth in its traditional sector. Of course, it is a difficult path. Whether the SP shall catch or miss the development bus this term, time alone will tell. ---INFA


(Copyright, India News and Feature Alliance)

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