Can UP’s economy achieve trillion-dollar target by ’27?

NEW DELHI: Among the first things the Uttar Pradesh government did after the announcement of the election results was refloat a tender -one was first floated in 2020 and was cancelled in 2021 -- for engaging a consultant to “boost the size of the economy of Uttar Pradesh to one trillion dollars in five years”.

The idea to turn UP into a trillion-dollar economy was initially aired by Prime Minister Narendra Modi during the 2018 investor’s summit in the state. The 2020 tender set the deadline for the target to be achieved as 2025. While the latest tender postpones this target by two years, how feasible is it?

An HT analysis shows that it will take unprecedented economic growth to achieve this target. Uttar Pradesh’s Gross State Domestic Product (GSDP) in 2021-22 -- these are advanced estimates issued by the Directorate of Economics and Statistics of Uttar Pradesh -- in current prices is ₹19.10 lakh crores. At the prevailing exchange rate of ₹76.41 to a dollar on March 16, this comes out to $250 billion. For this to become $1 trillion dollars, it will take a compound annual growth rate (CAGR) of 31.95%.

Is this kind of growth rate possible? A look at Uttar Pradesh’s past economic performance might be a good way to answer this question.

The CAGR of GSDP in current prices for Uttar Pradesh has been 10.19% in the past decade (2012-13 to 2021-22). The CAGR for GSDP was 8.19% under the first Yogi Adityanath government (2017-18 to 2021-22).

See Chart 1: CAGR of Uttar Pradesh GSDP in current and constant prices

Uttar Pradesh has shown slightly lower growth rates than India in the past decade (2012-13 to 2021-22) and under the Yogi Adityanath government (2017-18 to 2021-22). India’s CAGR of Gross Domestic Product (GDP) in current prices was 10.47% in the past decade (2012-13 to 2021-22) and 8.96% between 2017-18 to 2021-22.

India’s CAGR of GDP in current prices is projected to be 11.25% for the next four years (2022-23 to 2025-2026), as per the latest estimates from the International Monetary Fund. Even if Uttar Pradesh’s economy manages to record a CAGR of 11.25% for the next five years, it can only reach a size of around $426 billion by 2027.