Economy of Uttar Pradesh: A brief Survey

Since the settlement of Aryans in Ganga-Yamuna Valley about 3500 years back, the area which we now call Uttar Pradesh has been the centre of economic, intellectual, political and cultural consciousness of India. Throughout the ages this region has remained the leader in nurturing intellectual and economic activity across South Asia and has been an epitome of growth and prosperity. But despite this great cultural and economic heritage, it lost the momentum in post-independence India and could not move with the needs of modernization. It is very difficult to confine such a complex economic system in a brief article but a large size will defeat the very purpose which I have in mind for writing this article. So I would only try to briefly touch some of the most important aspects of the states economy to establish a background. Then later on different issues can be taken separately in other articles, if need is felt. In this article I would try to give a brief survey of economy of the state with an aim to inspect the reasons behind the underperformance, major constraints that are inhibiting the growth and a way forward for the economy to overcome the challenges. Most of the data provided is taken from department of planning of UP and Planning commission of India Reports.State is going through a very important phase of its economic history with growth returning back after a long period of underperformance during a period when wave of liberalization, globalization and privatization significantly accelerated the economy of India. Following characteristics highlights the current economic scenario of economy of the state:1. If we arrange countries of the world according to their population only 5 countries China, India, US, Indonesia and Brazil has population higher than the population of UP. As per census 2011, State contains about 0.17% of area of the world but contains 2.7% of world population. Decadal growth rate of population is still very high at 20.9% in comparison to 17.64% at all India level. This high growth rate of population poses a great threat for food security and employment generation but one positive observation is that decadal growth rate of population has registered a decline of about 5% during census 2001 to 2011 from about 25% to 20%. Population density of the state is 828 in comparison to 382 at all India level. Also demography of state suffers from very low sex ratio at 908 in comparison to 927 at all India level. 2. State also lags in human development indicators compared to other states. Education and Health and sectors have performed abysmally in past. Literacy rate is 69.72% in comparison to all India achievement of 74%. Rate of female literacy is especially very low at 59.26 in comparison to 65.46 at all India level. Situation of male literacy is relatively better at 79% in comparison to 82% at all India level. 3. State suffers from high constraint on health infrastructure. Number of hospitals and dispensaries on per lakh of population is 0.43 in UP and 1.1 in India on 1st January 2010. Number of beds in hospitals and dispensaries on per lakh of population is 28.2 in UP and 48.5 in India on the same date. Infant mortality rate is as high as 53 in comparison to 42 at all India level. But a positive trend is that it has declined from 82 to 53 during 2003-11. Maternal Mortality in state is also very high at 359 in comparison to 178 at all India level. Again a positive trend is that it has declined from 359 in last five years. 4. State has been characterized by high rate of poverty. As per Tendulkar Committee estimates, the poverty ratio in UP has declined from 40.9% in 2004-05 to 29.43% in 2011-12. While during the same period poverty at national level declined from 37.5% to 22%. The per capita income of the State, as we all know, was very close to that of All-India way back in 1951 when planning had just started in the country. It was Rs. 259 against Rs. 267 of All-India, short by Rs. 8 (3%) only. However, the short-fall went on increasing as the rates of over- all growth in the economy of the State trailed behind the rates of growth in the country, as a whole, in all the Five Year Plans during this period. The State has been trailing behind All-India in the rates of growth in the economy over a very long period, the shortfall in per capita income of the State against that of All-India shot up to 43.9% at the end of the Ninth Five Year Plan in 2001-02 and still higher to 48.7% at the end of 2006-07 against a meager 3% in 1951. The per capita income of the State at current prices in 2011-12 was Rs. 29417 against Rs. 60972 of All-India. 5. Economy of the state is dominated by Agriculture which employs more than 60% population of the state but contribute about 23% of the SGDP. While secondary and tertiary sectors are relatively developing with a lag in comparison to other parts of India, with respective share of about 53% and 24% in SGDP in 2011-12. State has seen significant shift from primary to tertiary sector in last one decade, while share of secondary sector nearly remains constant. Low growth rate of secondary and tertiary sectors during 8th & 9th five year plans have been successfully arrested and growth rates of 10.8% and 5.4% were achieved in secondary sector and tertiary sectors during while it was 5.2% and 9.6% for tertiary sector. 6. State is suffers from very high constraint of infrastructure. The share of the resources deployed on economic infrastructure in the Five Year Plans, from Second to the Eighth Plan, was in the range of 48% to 49% of the total expenditure. The share rose from the modest 48% in the Second Plan to 72% in the Fifth Plan. The share started declining thereafter and came down to 49% in the Eighth Plan, 44% in the Ninth Plan, 38% in the Tenth Plan and 35% in the Eleventh Plan. It is clearly visible from the growth figures given in Table 1 that a declining share of economic infrastructure in the expenditure of the plan and the declining trend in average annual growth and economy has, thus, gone together. Growth rate of States GDP during various five year plans is shown in graph 1 which shows that state performed fairly well during 5th, 6th and 7th five year plan that comprises the period from mid 70s to end 1980. Growth during this period can mostly be attributes to success of green revolution. Growth rate was commendable during 6th five year plan (1980-85) but performed miserably after 7th plan till 10th Plan. There has been some improvement in during 11th plan and state has registered the growth rate of about 7%.

Graph 1: Comparison of growth rates of UP with India during different plan periodsSector wise elaborate growth trend is provided in the following table:SECTORSI PlanII PlanIII PlanIV PlanV PlanVI PlanVII PlanVIII PlanIX PlanX PlanXI Plan

PRIMARY1.81.5(-)0.20.95.59.62.72.51.61.83.1

1-Agriculture & Animal Husbandary1.71.4(-)0.50.85.79.72.72.70.81.33.0

2-Foresty & Logging6.22.28.12.3(-)2.93.9(-)7.4(-)13.132.95.92.0

3-Fishing1.213.07.33.94.39.611.65.39.15.59.4

4-Mining & Quarrying32.030.025.3(-)1.45.823.76.40.00.214.04.9

SECONDARY1.63.29.26.77.39.58.83.3(-)0.910.85.4

5-Manufacturing 2.31.75.73.49.411.810.94.2(-)4.36.63.4

Tertiary3.02.32.62.95.36.58.03.93.85.29.6

6-Trasport,Storage, Communication & Trade2.92.01.82.56.68.64.52.63.15.68.6

7-Finance and Real Estate2.42.52.52.97.35.711.25.52.94.710.9

8-Community and Personal Services3.82.74.13.71.83.111.04.45.84.99.8

Total ( UP)2.01.91.62.35.78.75.73.22.05.26.9

Per Capita Income (UP)0.50.3(-)0.20.43.36.33.31.4(-)0.43.25.0

All Sectors (India )3.64.02.23.35.35.35.86.85.67.87.6

Per Capita Income(India)1.71.90.01.12.93.13.64.93.66.16.2

Table 1: Details of Sector wise growth rateOne of the main characteristic of economy is the share of contribution from different sectors in its GDP. Rostow's Stages of Growthmodel suggest that as economy grows from a nascent stage to more and more mature stages share of primary activities such as Agriculture, Horticulture, fisheries etc. decline and gradually share of secondary activities ( manufacturing, construction etc.) and tertiary activities (services etc.) increases. This trend is perceptible in almost all the economies of the world. For example at all India level The share of primary sector in GDP at factor cost (at 1999-2000 prices) which was 56.5 per cent in 1950-51 declined to 34.6 per cent in 1990 91 and then to 17 per cent at present. The secondary sectors share in GDP was 13.6 per cent in 1950-51 increased to 23.2 per cent in 1990-91 and further to 26 per cent at present. Tertiary sectors share in GDP increased from 29.9 per cent in 1950-51 to 57 per cent at present.Graph 2 show a comparison of contribution from different sectors of the economy for India and UP. It shows that at start of 1980s Agriculture, Industry and Services contributed about 40%, 23% and 37% respectively at all India level while distribution was about 52%, 17% and 31% for UP. In next two decades distribution changed to about 20%, 30% and 50% respectively at all India level while it remained about 35%, 25% and 40% for UP.

Graph 2: Comparison of Sectoral division of economy of UP with IndiaClearly economy of the state lagged in diversifying itself from its primary sector orientation. To some extent trend can be explained by the fact that state comprises one of the most fertile land of across the world and thus domination of agricultural is natural. But agriculture is stagnant from almost three decades. Slow pace of development in other sectors is creating hindrance to the growth. It is very rare to maintain more than 5% growth rate in agriculture for long time. While growth rates of above 10% can easily be achieved in secondary and tertiary sectors. During the 11th five year plan state has performed reasonably well in tertiary sector. Finance, real state and communication sectors performed especially well. Following section presents an overview of various sectors of economy of states:AgricultureIt is a challenge for the state to ensure food security for its humungous population which is about 200 million as per census 2011 and expected to reach about 300 million by 2030. Agriculture is backbone of economy the state withdependency of the work force on agriculture as high as 66% as against the national average of 58%, which is highest except that in Bihar, M.P. and Orissa.Although UP lagged in sectors that performed well in other parts of India, services and to some degree manufacturing, UP did better in agricultural growth than the country as a whole.Following table gives the Contribution of UP in different agricultural crops for 2011-12. There is predominance of Wheat, Rice and Potato which distorts the nutritional balance. So there is a need for promotion of more protein based crops and commercial cropping.

Name of CropsProduction in Lakh Mt during 2010-11Contribution of U.P. %

IndiaU.P.

Total Food grain2415.6476.819.74

Rice953.2123.4212.9

Wheat859.3300.0134.9

Jowar67.42.073.07

Bajra100.815.6215.49

Maize212.811.765.33

Total Pulses180.919.8210.96

Gram82.55.309.65

Arhar28.93.0110.42

Total Oilseeds311.0113.924.48

Groundnut75.380.841.11

Rapeseed/Mustard76.6710.5013.71

Sunflower6.250.162.56

Sugarcane3391.681168.7834.46

Rapid increase in population has led to predominance of marginal and small holdings, which constitute 76.9 % and 14.2% of the total land holding respectively. This small holding size badly affect the investment appetite of farmers and farm level economy. Though yield levels in U.P. compare favourably with that in India, there is a significant lag in yield levels as compared to agriculturally progressive states like Punjab and Haryana. Also the actual yield levels are much below the potential thus indicating a large technological gap between known technology and its application. Another worrying trend is stagnation or decline in yield of some of the major crops in post green revolution period. Special efforts are needed to fill this gap by addressing the various constraints operating in the agricultural sector.Comparison of average yield of major crops

Being situated in area of several perennial rivers availability of water is relatively better in the state. State has an advantage of comparatively high irrigated area of about 80% of net sown area, one the main reason behind which is irrigation infrastructure created during Green Revolution. As water table is relatively low tube wells are the major source of irrigation (>70%) followed by canals (~20%), tanks and lakes (~1%), which leads to a large dependency upon ground water instead of surface water. A trend of rapidly declining water table is seen in the past and so to maintain the sustainability of agriculture, there is a need to increase share of surface water irrigation and reduce dependence on ground water as this will benefit small and marginal farmers and also restrict the depletion of ground water. There is also need to adopt rain water harvesting schemes to arrest the declining ground water levels in several parts of the state.State planning department has indentified following targets to ensure above 5% growth rate in agriculture during 12th five year plan period: New Agriculture Policy to achieve 5 percent agriculture growth rate Efforts for converting small and marginal holdings viable Improving soil health Focus on balanced use of fertiliser, present NPK ratio of 13:5:1 to balanced towards 4:2:1 Economic zonewise/cropwise strategy for enhancing productivity and production. Improving Seed Replacement Rate from the present level of 34.24% to 42.07% Ensure regular and timely availability of fertiliser through pre-positioning Ensure easy availability of cheap agriculture credit to farmers Additional area of 17.94 lakh ha under horticulture crops Expansion of AI coverage from 32% to 58 % of breedable population To increase milk production from the present level of 221.59 lakh MT to 362.46 Lakh MT (63.6%) and egg production from 1139 million to 1877 million (64.8%) To promote conjunctive use of ground and surface waterAnticipated expenditure on agriculture & allied irrigation sectors during 11th plan period was about 14165 Cr and 12900 cr which amount to 7.8% and 7.1% of total expenditure respectively. During the Twelfth Five Year Plan, development of agriculture has been accorded priority and outlay for these sectors has been stepped up to 9.3% and 10.5% of total expenditure respectively. State has dual challenges before it in immediate future, to shift a large section of its population from primary to secondary and tertiary sectors and at the same time insure a high growth rate in agriculture to ensure the food security and reduction of mass poverty. Industry and InfrastructureIndustrialization in UP is mostly driven by small scale sector. State witnessed large fluctuations in growth of secondary sector throughout the post-independence period. During the 5th, 6th and 8th Five Year Plan, the industrial growth rate was 9.4, 11.8 & 10.9% respectively. In the post liberalization period the industrial growth rate somewhat dropped. However, the state was able to meet the challenges. The Industrial growth rate during the 9th five year plan dropped to -4.3 which again revived to 6.6% in 10th Five Year Plan. The State is suffering from high infrastructure and logistical facilities constraint, essential for driving industrial, economic and social growth. Growth can only be achieved by combining the industrialization and infrastructure projects. In this direction, to enhance industrialization in the state, efforts have been made for improving infrastructure facilities like speedy transportation of goods by constructing expressways, up-gradation of highways, making more availability of power to the industrial units, etc. but achievements have remained far less than expectations so far.Availability of power is one of the biggest problems in state and peak power shortage is as high as 1500-2000 MW. Peak demand for Uttar Pradesh by the end of 12th Plan is estimated at around 23081 MW. To meet the demand and achieve per capita consumption of 650 Kwh the State needs to add nearly 12000-15000 MW new generation capacity during the 12th Plan period. Following table shows a comparison of different states in availability of power and shows the poor performance by UP:ItemHaryanaPunjabUttar PradeshDelhiRajasthanMaharashtraBiharAssamAll India

Peak Demand (MW)613397861085645026859193882249920119166

Peak Met (MW)56787407856344086859146641509874104009

Per capital consumption Kwh Unit1491.371663.01386.931447.72811.121054.10117.48209.21778.63

Villages electrified Nos.6764122788645015828253362962391419741497550

PLF State Sector %81.9988.4364.2682.6282.8469.719.6249.9770.90

With rapid social, economic and industrial development of the state the demand for electricity is increasing at an average rate of about 12% per annum. . In order to keep the ongoing pace of development, there is an urgent need for generation capacity augmentation, strengthening and augmentation of transmission and distribution network. Prevention of theft of electricity, reduction in system distribution losses and Energy conservation will also help in reducing the load/demand on the distribution system and help in providing quality supply of electricity to consumers.As a result of liberalization / globalization the opportunities for the development of industries has increased many folds during the recent years but the State has to face the competition of neighboring states also. There are certain bottlenecks in the industrial development in the State; 12th plan document identifies following major constraints in industrial development of the state : Being land locked State, deprived of harbour facilities. Lack of standard infrastructure facilities. Increasing gap between demand and supply in power sector. Regional Imbalances Complexities of Labour laws Lack of resources for investment Low C: D ratio in the state. Sickness in SSI units.Following Strategy have been suggested to accelerate the growth rate of Industries: Investment Promotion Strengthening of Existing Industrial Infrastructure Strengthening of Single Table system and the Help Desks Emphasis on development of MSME Sector. Promotion of Handicrafts Export & Marketing Promotion Promotion of service sector Thrust on MSE clustersFinally I would like to discuss some issues related to regional disparities in state. There are large variations in geophysical conditions of the State, including land, soils, rainfall and climate, owing to its geography and expansive area. Partly on account of these variations and partly for some historical reasons, there are also marked differences in levels of development within the State. State can broadly be divided in four different regions namely Western UP, Eastern UP, Central UP and Bundelkhand with more or less similar conditions and easily distinguishable from each other. Out of these regions, Eastern and Bundelkhand are chronically backward in almost every critical area. Deficiency in some natural resources or exposure to natural calamities, both which are largely beyond human control and have been great barriers to their growth and development. The accelerating income growth since the early 80s appears to have aggregated regional disparities while ongoing economic reforms since1991 have further widened the regional disparities.Following table shows the distribution of population and area among the four regions:RegionsPopulation (Lakh), (2011)*Area (Sq. km.), 2001

Eastern797.42 (39.95%)85845 (35.63%)

Western742.38 (37.20%)79831 (33.13%)

Central359.41 (18.01%)45834 (19.03%)

Bundelkhand96.60 (4.84%)29418 (12.21%)

U.P.1995.81240928

As per provisional data of Census 2011, the density of population is as high as 937.15 persons per sq. km. in Western region followed by 928.92 in Eastern and 679.86 in Central region. It is lowest in Bundelkhand region (328.49) while for the State it is (828). There is considerable unevenness in degree of urbanization across the regions and districts in the State. The Census data 2001 reveals that the urbanization in State is the highest (28.25 percent) in Western region followed by Central (25.15 percent) and Bundelkhand region (22.39 percent). It is extremely low (11.74 percent) in the Eastern region of the State.Quality of land is not even in the entire region of the State. The Bundelkhand region is characterized as low rain fall and dry with vast marginal lands. Although, the Bundelkhand Region has larger average size of holdings in comparison to other regions, but the total food grains productivity in Bundelkhand region was lowest (12.41 qt. / ha.) among all the regions during 2009-10. The rocky terrain of the region reduces the moisture retaining capacity of the land and makes it unsuitable for intensive cultivation. On the other hand due to application of new agricultural technology and proper irrigation facilities, the Western region having productivity of (27.02 qt. / ha.) is the most developed region in the State. As per data 2008-09, the gross value of agricultural output per hectare gross cropped area at current prices was highest in Western Region (Rs.53671.96) followed by Central Region (Rs.45165.57) and Eastern Region (Rs.36453.92). It was lowest in Bundelkhand Region (Rs.28999.68).

Gross value of agricultural output per hectare gross cropped area at Current price in (Rs), 2008-0936453.9253671.9645165.5728999.6843968.70347800.0010000.0020000.0030000.0040000.0050000.0060000.00Eastern WesternCentralBundelkhandU.P.IndiaRegionsGross value of agricultural output perHectare gross cropped area (Rs)

Irrigation is also a deciding factor for the growth of agriculture production. The growth of agriculture production can not be achieved without sustained irrigation facilities. In Bundelkhand region, the irrigation facilities are inadequate because of very difficult terrain and rocky strata. The percentage of net irrigated area to net area sown is lowest in Bundelkhand region (51.81) and highest in Western region (92.32) followed by Central (84.60) and Eastern region ( 76.31) against the State figure of (80.68).

Percentage of net irrigated area to net area sown 2009-1076.3192.3284.6051.8180.6845.20.0010.0020.0030.0040.0050.0060.0070.0080.0090.00100.00Eastern WesternCentralBundelkhandU.P.IndiaPercentage of net irrigated areaTo net area sown

As per data 2007-08, the number of total registered factories per lakh of population was highest (11.46) in Western region followed by Central region (5.88) and Eastern region (1.67). It was lowest (1.52) in Bundelkhand region. This indicates that development of industry in Bundelkhand region is inadequate. Similarly the number of persons engaged in registered factories per lakh of population during 2007-08 was only 70.42 in Bundelkhand region, while the Western region is most developed with 809.62 persons followed by 317.60 persons in Central region and 114.85 persons in the Eastern region.Although significant achievements have been made in education sector but still regional disparities are prevailing among the regions. The Census data 2011 indicates that Bundelkhand region has highest literacy rate (70.69 percent) followed by Central region (70.50 per cent). The lowest literacy rates are in Western region (69.35 per cent) and Eastern region (69.59 per cent). In terms of female literacy, the Central region has highest female literacy rate (61.68) against the State figure of (59.26). It is lowest in Eastern region (58.20).State has decided to put special efforts to ensure the inclusive growth with positive actions by targeted intervention. In line with the policy of inclusive growth, State has also realized the importance of social development and identified following monitor-able targets for 12th five year plan: To reduce infant mortality rate from the level of 61 to 32 To reduce maternal mortality rate from the level of 359 to 200 Reduction in Total fertility rate from 3.5 to 2.8 To reduce malnutrition of children below 3 years of age from 47.0 to 23.5 percent Reduction of anemic ever-married women in the reproductive age group (15-49 years) from 51.6 to 20 percent Sex ratio in the age group 0-6 years to be improved from 899 to924 Drop out in the elementary education up to the level of 5 percent. Literacy rate to be increased up to the level of 85 percent and gender gap in literacy to be lowered up to 10 percentage points 10 percent rate of growth in State's economy Targets for the primary, secondary and tertiary sectors of the economy are fixed at the level of 5.0, 11.2 and 11.9 percent respectivelyAchievement of these targets will have a great bearing on future of the state. Despite a great heritage and capabilities for growth, state has failed to take advantage of wave of growth in post reforms India and precious time that it lost has pushed it far behind the neighbouring states. Now it is facing huge competition from neighbouring states and window of opportunity is relatively narrow. Last decade has been relatively better for the store but great challenges lies ahead to be talked. With such a large population to look after state is in dire need for a great leap in its economy. Whether it will develop its man power into human resource and re-establish its leadership or will become a paralysed limb of healthy India lies in the course that its leaders will take in next one decade.