GDP contracts by 7.3%: All eyes on size of UP’s economy now

All eyes will now be set on provisional estimates about the size of the state’s economy to be released in coming weeks, amid the state government’s claims that Uttar Pradesh’s gross state domestic product (GSDP) is estimated to reach 19,40,527 crore in 2020-2021.

The Indian economy contracted by 7.3% in the fiscal year 2020-21, according to the gross domestic product (GDP) statistics released by the National Statistical Office on May 31.

The state government had made the projections about the growth in the size of GSDP in the budget analysis presented in the state assembly along with the budget for 2021-2022 on February 22 this year. The state government had estimated that the GSDP would reach up to Rs 1791263 crore in 2020-2021. Its revised estimates, however, projected the GSDP to reach Rs 19,40,527 crore during the period.

“Advance estimates of state’s income as released by the UP’s State Planning Institute’s Economics and Statistics Division in March 2021 have indicated the state’s economy has been adversely impacted by Covid-19. It shows estimated contraction of 6.4 per cent in the GSDP in 2020-2021. This contraction in GSDP comes after a low growth of 3.8 per cent in 2019-2020. Under such a situation the targeted size of GSDP for 2021-2022 put at Rs 21,73,390 crore appears to be highly ambitious in view of the damage inflicted on state’s economy by the second wave of Covid-19 in the first quarter of 2021-2022,” said Yashvir Tyagi, former professor, department of economics, Lucknow University.

However, a final picture about the size of GSDP in 2020-2021 will be available when provisional estimates are out in the next few weeks. The state government may have to mobilise additional resources as the projected contraction in GSDP is bound to have an adverse impact on the state government’s goal of making the state a trillion dollar economy in five years (20202025). “What is more worrisome is the fact that the state’s manufacturing sector has consecutively witnessed negative growth rate of -3.5 per cent (2019-2020) and -5.4 per cent (2020-2021). Agriculture sector is the only bright spot which witnessed a healthy growth of 6.2 per cent in 2020-2021. This clearly indicates that the state government faces a tough challenge of saving lives along with livelihood in the coming months,” said Tyagi.

As the state government may need additional funds to complete various development projects before UP goes into poll mode (by end of 2021) for 2022 assembly elections, its task of mobilizing additional resources would become even more challenging.