Changing Socioeconomic Situation of UP over the Past Decade

Changing Socioeconomic Situation of UP over the Past Decade

Elections have been announced and UP will be crucial. Parties have been campaigning for them for at least the last 6 months. Media has been awash with advertisements portraying a rosy picture of UP. The ruling party needed this unprecedented media blitzkrieg to overcome the negativity due to the poor management of the COVID second wave. Anyway, the ruling party and the government always try to present a positive image of their work. Other state governments also followed the UP example, to the delight of media which is garnering much revenue.

What is the real situation on the ground in UP. Farmers, workers and students have been protesting. Why this protest if the situation is as rosy as the government is projecting? Where does the truth lie? Citizens need to know, to make up their mind about who to vote for.

Since independence, there has been growth. Even when it is small but positive, improvements will be visible in socio-economic parameters, like, education, health, longevity, etc. There will be more roads, bridges, agricultural production, industry and so on.

So, it is no brainer that the last 5 years would show progress compared to the immediately preceding 5 years and the ones before that, etc.. The meaningful comparison has to be based on changes in the ratios and growth rates between the earlier period and the present one. That tells us whether matters will improve faster or stagnate. Also, comparisons with the all India figures would yield the picture of where UP stands compared to other states.

If the present regimes 5 years are compared to the 5 years earlier this would be unfair since the last two years have been unusual – hit by the pandemic and the lockdown. The economy as a whole experienced a downturn and so did UP. A meaningful comparison would be between the pre pandemic three years and the 5 years before them.

Growth has Decreased

A difficulty arises regarding measuring the growth of the economy since Indian economy's data is suspect, especially after demonetization. A disjuncture has been created between the organized and unorganized sectors while the data is largely from the former. So, the latter goes largely unrepresented and this causes a large error in the growth rates.

Ignoring this aspect for the moment, let us analyse the official data, assuming it to be correct. It shows that out of the 20 major states, UP's position remains at 19 in the last 10 years. In effect, there is no relative improvement in UP's situation at the all India level.

This is because the official growth rate was 11.8% in 2016-17 and has fallen to 6.3% in 2018-19 before the pandemic. The decline is also visible in the real income per person. Between 2012-13 and 2016-17 it increased by 27.63%. If we take the average over three years it increased by 16.6%. Leaving out the pandemic year of 2020-21, it rose by 9.23% (including the pandemic year it was 0.43%, that is it hardly grew). Including inflation also the per person income growth slowed down. It was 25% during 2017–21 as compared to an increase of 65% during 2012–17.

Slower Structural Transformation

UP's income (GSDP) was Rs.19 lakh crore out of GDP of Rs.190 lakh crore in 2019-20 - 10% of the country's income. But its population share is estimated at 17%. The situation has not changed in the last 5 years and that is why the per person income capita income rank or UP remains at 19 th out the 20 major states.

One of the factors underlying the slow growth of UP is that it has structurally not transformed as much as has happened for the country as a whole. In UP, the share of agriculture is 24% while that of services is 50%. The all-India figures are 19.7% and 54.3% respectively. So, UP's structural transformation is lagging behind that of all India. Since agriculture cannot grow as fast as the services sector, the state's growth rate is bound to be less than that for the nation. This feature is also the reason for weak employment generation in UP because agriculture cannot absorb more workers, in fact, it is characterized by mechanization and disguised unemployment.

UP employed 57.13 lakh under MGNREGS, in May 2020 which was the highest in India. This points to high rural unemployment in UP. The large scale migration of workers from other states to UP in 2020 is an indication of the weak employment generation in UP which forced many to look for work elsewhere. No wonder the state faced the biggest impact of Coronavirus in India both in terms of employment and health aspects.

Unfortunately, data invisibilizes the unorganized sector and hence the poor. The country has suffered policy induced crisis due to demonetisation, implementation of GST, NBFC crisis and the pandemic induced lockdown. This has deeply impacted the unorganized sectors of the economy and they have suffered massive losses during 2016-17 to 2020-21. The total loss for the unorganized sector in UP is estimated at 10% of the national loss during this period and amounts to Rs. 7.1 lakh crore. That is an average loss per annum of Rs. 1.78 lakh crore. This loss is far more than what the social welfare schemes of the government give. In any case, the schemes are mired in corruption and inefficiency and do not reach everyone uniformly. So, the poor are the net losers in spite of the government schemes.

Government's Efforts Slowing

Are the government schemes expanding? How much are they able to help UP develop and catch up with the other states of India?

No doubt, the absolute budgetary expenditures rise with inflation and growth. So, on most items more is spent than in earlier years. But to know whether these expenditures will help improve the situation or not, one has to compare the expenditures as a ratio of the state's income (GSDP). On this score, the Budget data shows:

a) Development expenditure peaked in 2015-16 at 16.66% and declined to 13.28% in 2019-20. This signifies that development is decelerating.

b) Non-Development expenditure rose from 6.81% in 2015-16 to 8.49% in 2018-19 and was at 7.12% in 2019-20. This reflects the expenditure on grandiose show schemes of the state government which resulted in a decline in developmental expenditures mentioned above.

c) No wonder expenditure on Education, etc. peaked in 2016-17 at 4.21% and fell to 3.07% in 2018-19 and was at 3.3% in 2019-20. The target should have been 6% of GSDP on public education. Instead of moving towards that goal, there is retrogression.

d) Similarly, health expenditure peaked in 2016-17 at 0.84% and fell to 0.79% in 2019-20. It should have been raised to at least 3% of GSDP and instead it fell. The impact of this was visible during the pandemic with poor health facilities in large parts of the hinterland and unnecessary deaths.

e) Budgetary Capital outlay peaked in 2015-16 at 5.66% and fell to 3.55% in 2019-20. This slows down infrastructure development and adversely impacts private investment.

In brief, as the economy expands, there will be development in a state – more hospitals, schools, colleges and so on. Further, development may be skewed and leave the poor behind as is the case in recent times. The real picture become clear when one looks at the ratios and compares with other states. In these respects, UP has lagged behind both its past performance and other states. The virtual campaigning required due to the spread of Omicron would marginalize the less tech savvy parties and give BJP an advantage in painting a glorious image of itself, in spite of its recent indifferent performance.

Arun Kumar

Arun Kumar

Arun Kumar is a veteran Indian economist. He studied at Delhi University, Jawaharlal Nehru University (JNU) and Princeton University, USA, and taught economics at JNU for three decades till 2015. His areas of interest include public finance, development economics, public policy and macroeconomics. Kumar has written widely on these subjects, both in the popular press and for academic journals. At present, he is the Malcolm S. Adiseshiah Chair Professor at the Institute of Social Sciences, New Delhi.

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