Even as the Reserve Bank of India (RBI) has claimed that the collective debt of states as a percentage of the GDP is expected to decrease to 29.5 per cent in 2022-23 — compared to 31.1 per cent in 2020-21 — the debt burden of Uttar Pradesh is estimated to touch Rs 7.84 trillion in the next fiscal year 2023-24 – almost 40 per cent higher.
With general elections round the corner and the Yogi Adityanath government pushing populist schemes, financial experts feel that the debt could rise further.
According to the UP annual budget, the nominal UP Gross State Domestic Product (GSDP) has been estimated at Rs 24.39 trillion in 2023-24.
Interestingly, the estimated public debt of Rs 7.84 trillion exceeds the UP annual budget of Rs 6.90 trillion by Rs 94,000 crore or nearly 14 per cent.
Last year, an RBI article flagged concerns over built-up financial stress and suggested corrective steps in the five most indebted provinces.
Although UP does not figure among the top indebted states in India, yet the state witnessed its public debt ratio shoot past 30 per cent of the GSDP during the pandemic years owing to difficult economic conditions and muted tax collection, a phenomenon which was pan-Indian as well as global following the pandemic.
“While UP had successfully tamed the public debt ratio below 30 per cent till 2020-21, it increased to 33.4 per cent and 34.2 per cent during the 2021-22 and 2022-23 (revised estimates) fiscal years due to the pandemic,” said a senior official in the state finance department.
Meanwhile, UP is estimated to receive about Rs 71,200 crore, 2.9 per cent of GSDP, in loans from the Centre during 2023-24 compared to Rs 51,860 crore (2.5 per cent of GSDP) during 2022-23.
According to Chief Minister Yogi Adityanath, the UP budget of Rs 6.90 trillion was aimed at laying the foundation of the ambitious target of UP becoming a trillion-dollar economy by 2027.
“We have provided budgetary allocation to all the key sectors. UP must develop to realise the aim of India becoming a $5 trillion economy,” he underlined.
Yogi Adityanath said his government adhered to the fiscal responsibility and budget management norms and tamed the fiscal deficit to Rs 84,883 crore or 3.48 per cent of the GSDP.
The state government is apparently aware of its debt burden and is avoiding essential payments including the old pension scheme for government employees.
However, a former finance minister said, “The expenditure burden is bound to increase because Lok Sabha elections are now round the corner. To counter the anti-incumbency factor, the state government is sure to announce sops for various sections of society and this will add to the burden on the state exchequer.”
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