Uttar Pradesh (UP) to be the slowest within the BIMAROU states:

Uttar Pradesh’s GSDP improved somewhat in recent years. However, growth remained below the national average. Thus, its share in India’s GDP declined gradually from 8.7% in FY05 to 8.1% in FY10, although it continues to be the second-largest contributor to India’s GDP after Maharashtra.

Sectoral composition of UP’s GSDP reveals that the state has experienced a gradual increase in the share of the services sector during the perivous decade. However, the state continues to be agrarian in nature, given that agriculture contributes to around 23.9% (FY10) of the states’s GSDP and provides income to majority of the households. Sustained high growth in financial services during the past few years also augurs well for growth prospects of the state.

Unbalanced growth

While the state has substantial potential, especially in terms of manpower, it has not been able to significantly leverage its abundant resources. We expect UP to grow at an annual average rate of 9.2% during the FY11-FY20 - the slowest pace among the BIMAROU states. However, GSDP is expected to grow at an annual average growth of 10.6% during FY16-FY20, a higher pace versus 7.8% during FY11-FY15. Major contribution is expected from the Western region of the state, especially Greater Noida We expect the state government to devise initiatives for overall development, seeking lessons from competitive states that are marching ahead on development.

Infrastructure – power and roads

Significant investments in the power sector and roads will drive growth over the next ten years. Investments, however, would remain concentrated in the western region with major upcoming industrial proposals situated here. Development of the Dedicated Freight Corridor (DFC) in the Eastern region passing through UP will attract some investment.

Focus on infrastructure development would support industrial development in the state. Major projects that would bring about upgrade in transport infrastructure include Development of Feeder Road/Rail Linkages, passenger and goods terminal, Inter State Bus Terminal (ISBT) and a Greenfield airport in Greater NOIDA. Moreover, mega road projects such as the 1,047 kms long, 8-lane Ganga Expressway and Yamuna Expressway will improve transportation.

Another major focus of the state is the power sector. Following major power projects are under implementation in UP:

• 1,750 MW power plant and 740 MW gas-based power plant in Dadri and 250 MW gas-based power plant in Greater Noida.
• Bara 3x660 MW and Karchana 2x660 MW thermal power projects; these have been handed over to private developers through a Case-2 bidding process (state government facilitates arrangement of land, water, fuel linkage and all the statutory clearances for the project) with SPVs for pre-project activities.
• UP Power Policy 2009: Many new and bold initiatives and incentives were recently announced to bring in private participation in generation, transmission and distribution.

It is important to note that most of these projects are concentrated in the western part of the state. It would be essential for the state government to carry out balanced development to catch up with other fast-growing states in the country. Given the predominance of agriculture in the eastern part of the state, the government can take initiatives to develop agro-based industries in eastern UP. Moreover, concentrated efforts are needed for development of infrastructure in remote areas of the state. This will help in efficiently mobilising agriculture produce, which is expected to increase the remuneration of farmers.

Significant potential for development of the financial services industry

Although there has been gradual improvement in the penetration of the banking services in the state there is a huge potential for further development given the significantly low levels of credit off take and under penetration of these services in the rural areas. Underdevelopment of the banking services can be gauged from the following:

• Uttar Pradesh has 9595 scheduled commercial banks branches (FY09), merely 12% of 79056 at the all India level.
• Credit deposit ratio (CDR) for the state in FY09 was only 42.06 as against the national average of 72.58.
• Credit off-take is lowest in the eastern part of the state reflecting low industrial and commercial activity in this area.

Thus, there exists substantial potential for development of the banking services in the state. We expect the services industry to flourish in the state during the current decade and be a major driver of UP’s economic growth.

Educating the youth - an imperative to sustain long term growth and development

UP is the most populous state in India, accounting for 16.8% of India’s total population. Despite this, the literacy rate is amongst the lowest (~56.3% in terms of number of persons in 2001) in the country. Thus, the government should focus on improving the quality of its huge manpower base by encouraging education (especially for females). High literacy levels would result in skilled manpower in the state and increase demand for basic infrastructure facilities, which in turn would put significant pressure on the government for pro-growth policies. The state ranks among the first few to have successfully implemented an ‘education for all’ policy. Expenditure on education within the state has more than doubled, registering CAGR of 19.6% from र 73.8 bn in FY05 to र 180.8 bn in FY10. The state has made investments toward enhancing the standard of education across different levels. UP has 16 general universities and few world-renowned institutes such as the Indian Institute of Technology (Kanpur), Indian Institute of Management (Lucknow), National Institute of Technology (Allahabad) and Asian Academy of Film and Television (NOIDA).

The numerous initiatives being taken by the state government to improve infrastructure, facilitate industrial development and improve skill levels are expected to yield benefits over the long term. Moreover, the key lies in efficient and timely implementation of projects. It will be very essential for the state government to concentrate and devise policies to reduce the regional imbalance within the state for an all-round and sustained development of UP.