Can investor summits tackle Uttar Pradesh’s development challenge?

Industrialists have committed to investments worth Rs4.28 lakh crore in Uttar Pradesh in the recently concluded Uttar Pradesh Investors Summit. Centre for Monitoring Indian Economy (CMIE) data shows that this amount is almost five times the value of new investment projects announced in the state in five years ending 2016-17. Is Uttar Pradesh on the cusp of an economic turnaround under the present government? At least two reasons would justify caution in taking such claims at face value.

Not all MOUs translate into investments

State level investor summits such as the one held in Uttar Pradesh are not a new phenomenon. Many states organise these events regularly now. The Gujarati version — Vibrant Gujarat— which was started when Prime Minister Narendra Modi was the chief minister, is perhaps the most popular and big-ticket event among its peers.

The event played an important role in portraying Narendra Modi as a pro-business leader. Gujarat model of development was an important plank of the BJP in the 2014 Lok Sabha elections.

A Hindustan Times story by Prashant Jha has suggested that chief minister Yogi Adityanath’s decision to hold an investor summit in the state might be “straight from the Narendra Modi playbook in Gujarat”.

A 2017 Mint story by Dipti Jain shows that the Vibrant Gujarat summit has been more about optics than actual investment. The stated value of investment declarations in Vibrant Gujarat Summit between 2003 and 2015 was 40% more than the state’s Gross State Domestic Product (GSDP) during this period. This is logically impossible as GSDP is the sum of consumption, investment (both public and private) and net exports. CMIE statistics show that the value of investment projects completed in Gujarat is just 25% of the value of total investment announcements during fiscal years of 2003 to 2016. Still, that isn’t insignificant.

Announced investment projects not materialising is not a new thing in Uttar Pradesh. There was a large mismatch in new project announcements and completion of projects during second half of the last decade. Mayawati led Bahujan Samaj Party government was in power during this period.

Development challenge structural in nature

Uttar Pradesh is a part of BIMARU states, an acronym used for least developed regions in the country.

A 2016 Economic and Political Weekly paper by Ravi Srivastava and Rahul Ranjan provides a good summary of the state’s economic decline in the post-independence period. Per capita income in Uttar Pradesh was 97% of the national average in 1951. This came down to just over 40% by 2014-15, the paper shows.

The authors have also analysed the economic performance of Uttar Pradesh under various governments. The state has always lagged behind all-India performance except between 1980-81 and 1988-89, which was the last time the state was ruled by the Congress.This is also the only period when manufacturing registered a double digit growth in the state.

The paper also draws attention towards the regionally skewed nature of organised manufacturing in the state. Uttar Pradesh has been witnessing a concentration of organised manufacturing in the Western region since late 1980s.

In 1987-88 Eastern, Central and Bundelkhand regions of the state accounted for almost half of the total invested capital and total persons engaged in organised manufacturing. This had come down to around one-fourth by 2010-11.

Statistics from the fourth round of National Family and Health Survey (NFHS) confirm the prevalence of regional inequality in the state. Wealthiest households in the state are concentrated in the Western region, while the eastern half of the state has a greater share of poorer people. (Maps).

Uttar Pradesh also fares badly on the education front, which is among the most crucial factors for future development. NFHS statistics show that in 2015-16, Uttar Pradesh was ranked second from the bottom among 36 states and union territories in terms of share of population aged 6-17 years attending an educational institution. The number is 80.4% for Uttar Pradesh against the all-India average of 85%.

To be fair, the new government has inherited most of the economic problems which have been discussed above. Yogi Aditynath is still in his first year as the chief minister of the state. Given the size of UP, governance is an even bigger challenge. It would be unjust to pass any verdict on the development performance of the state government at this stage.

One thing can be said with a degree of certainty though. Any drastic turnaround in the state’s performance would require focus on serious work and accountability rather than mere optics.

The crackdown on use of unfair means in state board examinations has generated a lot of praise for the government. Compare this with the fact that a PRS legislative research report shows that the present government has reduced its 2017-18 education spending as a share of total budgetary spending by one percentage point from budget estimates (BE) to revised estimates (RE).

Even the BE figure was 1.6 percentage points less than the average of what 18 major states had promised to spend on education in their 2017-18 budget.

Given the poor education scenario in Uttar Pradesh, one would have expected better from a government which claims to be committed to development.