scorecardresearch

Why UP can become a $1 trillion economy

The chief minister has set a target to make Uttar Pradesh a $1 trillion economy.

Faster nominal wage growth, albeit from a lower base, results in a greater lift to lifetime earnings in India than in the advanced economies.

By Rahees Singh

About five years ago, chief minister Yogi Adityanath steered Uttar Pradesh forward with Prime Minister Narendra Modi’s ‘5P’ (potential, policy, planning, performance and progress) mantra and ‘5T’ (talent, tradition, tourism, trade and technology) vision. A roadmap for the future was prepared. Despite the global pandemic, the state in the last five years ensured ease of doing business, investment (capital inflow), manufacturing and exports, unprecedented progress in employment, production and procurement in agriculture and allied sectors, infrastructure and connectivity and tourism (especially religious-cultural) as well as gross state domestic product (GSDP). In this sequence, the third ground breaking ceremony (GBC 3) can prove to be another milestone.

The chief minister has set a target to make Uttar Pradesh a $1 trillion economy. Some economists and analysts consider this target to be huge, but his calculus remains optimistic. According to Adityanath’s calculus, the growth rate required for the state’s economy to reach $1 trillion by 2027 is very high. The size of the state’s economy in 2022 was around $274.3 billion. If the target of $1 trillion is to be achieved in five years, UP will have to move ahead with a growth rate of around 31%. At present, the percentage of agriculture sector in the state’s GSDP is 23, manufacturing isv27 and the service sector is 50. To achieve the target, the manufacturing sector would have to grow at 38-40% and increase output by almost five times so that its share could reach Rs 27.6 trillion as against the current Rs 5.6 trillion. The agriculture sector will have to increase the output by about two and a half times from Rs 4.7 trillion to Rs 11.8 trillion. The service sector will also have to increase its output by four times from Rs 10.3 trillion to Rs 40 trillion.

In the target of Rs 1 trillion, certain dimensions need seriousl consideration. First, UP has the largest market volume inside the country in which there is variety in demand. The state has the highest labour potential. Hence, the north holds the highest demand and supply potential in terms of goods and labour. It signifies new dynamics in the economy which will help in bringing about cumulative quantitative growth in the economy. Second, UP has the largest human resource. It can be said that it is becoming an emerging state in terms of middle class as well as skilled youth. This means that in terms of demographic potential, UP is the state with the maximum potential as compared to others. Third, UP has maximum potential in terms of knowledge capital.

Fourth, UP is a very prosperous state in terms of Dharmik/Sanatan capital. It can be helpful in growth with value addition in ease of living and happiness due to the ‘good luck’ motif, which will increase the prospects for qualitative growth along with accelerating economic growth. Five, UP not only has the potential to take ‘Make in UP’ forward on the lines of ‘Make in India’ but is also endowed with immense capabilities of ‘Make for India’. The ‘One District, One Product’ (ODOP) initiative comprising micro, small and medium Enterprises (MSMEs) can be seen as a good example.

With this, a script can be written for a comprehensive change in the socio-economic field. Keep in mind that the MSME or labour intensive industry is growing at a rapid pace. The best aspect of this is that the input cost is low, the social distribution of the economy is high due to which there is a qualitative change in the purchasing power of the society. Such possibilities not only increase aggregate demand but also build a harmonious and progressive society. Ultimately, they become a strong vehicle for stimulating investment and growth.

Sixth, the state’s connectivity, infra, law and order and business friendly environment will create new capabilities for quantitative and qualitative growth in the economy. Seventh, UP’s export potential competitor — the balance between availability of skilled labour and productivity at low input cost creates favorable prospects.

UP’s ODOP programme is not only promoting local and traditional products but is also doing their upgradation, packaging and branding and marketing, due to which these products have reached the national and global market. The growth of micro and small industries of UP and the boom in exports is the result of this. For example, in the last five years in the MSME sector, investment of about Rs 2.5 trillion came from outside. Naturally, at least this much domestic investment must have taken place. This means an investment of about Rs 5 trillion.

Another thing is the export of Rs 1.56 trillion in FY 2021-22 against exports of Rs 1.21 trillion earlier, showing a growth of nearly 40%. If we take this growth as the basis, then in the next five years, exports will reach about Rs 5 trillion. The special thing is that the share of MSME sector in this export is 86%, in which the share of micro and small is 76%.

This means that the growth potential of the micro and small sectors is comparatively very high. Overall, if the state has a conversion rate of 40%, the state will surely be able to achieve the target of $1 trillion within the expected time. Uttar Pradesh is also very rich from geo-economic point of view. The Gangetic plain is one of the most fertile regions of the country. Chief minister Adityanath did recognise this potential and progressed towards the goal. The $1 trillion economy is an important chapter in the script for transformation.

(The author is an economic expert)

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Economy