UP Election: Elephantine Enigma

Published: February 8, 2012 - 15:54 Updated: February 8, 2012 - 16:59

Will UP's relatively high economic growth in recent years yield political dividends for BSP?

Ajit Kumar Singh Lucknow               

With development becoming a major issue in the elections, it would be instructive to look at the economic performance of the Mayawati government during the past five years. It is a well-known fact that UP has been one of the slowest growing states of India. As a result, the gap between the per capita income of UP and that of India has been continuously growing. UP had a per capita income almost equal to the national per capita income in 1951. Today, UP’s per capita income is half of that of India. Mayawati has been blaming past governments for the poor state of the economy. As soon as she came to power, she submitted the demand of a special package of Rs 80,000 crore for the state to overcome its backwardness. 

A close scrutiny of growth trends reveals the fact that there has been an encouraging uptrend in the growth rates of the state’s economy in the last decade. During the Tenth Plan (2002-07), UP registered a growth rate of 5.2 per cent per annum, much above the 2-3 per cent annual growth registered during the 1990s. In the first four years of the Eleventh Five Year Plan, the UP economy, coinciding with the present tenure of the BSP government, posted a growth rate of around 7 per cent per annum. Thus, in terms of economic growth, the performance of the present government has been by far the best. 

This economic growth, however, has been lopsided. Construction and communications have been the fastest growing sectors in UP. The growth of the industrial sector has been rather poor. In the last five years, the manufacturing sector shows a growth rate of about 8 per cent. The services sector has also grown at a lower rate as compared to the national average. 

A major failure of the present government has been its inability to attract private investment on a significant scale. Proposed investment, according to IEMs filed during the year 2007-08 and 2008-09, amounted to Rs 26,122 crore. The regional pattern of proposed investment was highly skewed. Thus, 86.4 per cent of proposed investment was in western UP alone. The share of the central region was 8.5 per cent. Very little investment was proposed in the two backward regions of eastern UP and Bundelkhand. Power shortage, cumbersome and dilatory regulatory system, and high levels of rent-seeking have been the main factors discouraging private investment in UP. 

To the credit of the BSP government, it has successfully negotiated some big projects in the infrastructure and power sectors through the Public Private Partnership (PPP) model. However, most of these projects are in the initial stages of implementation and will take several years for completion. The mega Ganga Expressway, the much touted project of the Mayawati government, has remained a non-starter in the absence of environment clearance, forcing JP Group to withdraw from the project recently. 

The fiscal performance of the UP government in recent years has also been fairly satisfactory in terms of macro indicators. Since 2005-06, the state budget has shown a revenue surplus. This has been due to the larger flow of funds from the central government as well as growth in the state government’s own revenue. As a result, the annual plan size of UP has increased by more than six times in the last decade. During the present regime, the plan size more than doubled from Rs 25,000 crore in 2006-07 to Rs 47,000 in the current year. 

Higher public expenditure on the plan side has contributed to the acceleration in the growth rate of the state’s economy seen in recent years. The size of the state budget has more than doubled during the last five years. The current year’s revised budget proposes an outlay of almost Rs 1,70,000. It’s a million dollar question how the enormous public expenditure on plan and non-plan size have impacted the quality of life of the common man in UP in the absence of any hard data for the recent years. 

Many questions have been raised about the effectiveness of public expenditure. Much attention has been drawn to the construction of gigantic memorials in the name of Dalit icons from public funds. The Election Commission has ordered that these statues should be covered during the election period to provide a level playing field to all political parties. Of much larger dimension and import are the massive leakages and corruption which are being reported in the press from time to time, and which the opposition parties are harping upon. 

The CAG has called in question the way Rs 5,000 crore of National Rural Health Mission (NRHM) funds received from the Centre has been spent without following appropriate financial procedures. Mayawati had to
remove more than a dozen ministers of her cabinet against whom corruption charges were levelled. 

There is little evidence to show that the quality of public service delivery at the grassroots level has improved, despite the huge public expenditure on education and health. The problem of absenteeism of teachers and doctors is well-known. Primary Health Centres are languishing in the absence of required medicines, machines, doctors and other technical staff. No wonder, UP is lagging behind even Bihar and MP in several health indicators like infant and mother mortality rates, and the extent of malnourishment of children and mothers. 

On the positive side, there has been a rise in the real wages of rural workers. One of the first measures announced by the BSP government was to enhance the minimum wages to Rs 100, much above the market wages prevailing at the time. Coupled with the MGNREGA scheme, this has had a positive impact on wage levels, improving the condition of agricultural labourers, who mostly belong to the Scheduled Castes (SCs) – the hardcore BSP support base. Much of the gains, however, has been lost due to the high rise in the cost of living over the last two or three years. 

Farmers are unhappy with the government as it has failed to ensure power for irrigation and other agricultural inputs in time. Shortage of good quality seeds and fertilisers is widely reported during sowing time. Reports of a thriving black market in fertilisers often appear in the press. Higher state support price for sugarcane was recommended by the state government to woo sugarcane farmers. However, the mills are not in a position to pay these prices and huge arrears of dues for farmers have piled up. 

It’s a million dollar question how the enormous public expenditure has impacted the quality of life of the common man in UP 

The benefit of the raised Minimum Support Prices of wheat and paddy failed to reach the majority of farmers because of weaknesses in the procurement system. The issue of land acquisition has agitated farmers in western UP, forcing the government to hastily announce a new pro-farmer land acquisition policy. 

A number of welfare schemes for SCs have been launched by the BSP government, including Ambedkar Gram Vikas Yojana, Garib Madad Yojana for the BPL families not covered under the central schemes, Kanshiram Avas Yojna for the urban poor, scholarships to SC girls etc. However, the overall reach of these schemes has been low in terms of numbers, and their implementation has suffered from various shortcomings. 

The anti-incumbency factor and the issue of corruption would work against the present government in the coming election. However, Mayawati retains her traditional vote bank of Dalits, irrespective of the good or bad performance of the government. It is doubtful whether the social engineering ploy will work this time as the upper caste sections may switch their loyalty. The main advantage of the BSP remains the divided opposition and the multi-cornered elections where small shifts in votes affect the final results. 

Noted economist Arvind Virmani has developed a model to show that in the states which have registered a growth rate of 7 per cent and above in the past, the ruling party has been able to continue in power after elections. The results will show whether the relatively high economic growth in UP in recent years can yield the expected political dividends for BSP. Or, will UP yet again plunge into a period of unstable political coalitions as most political pundits are predicting?   

Prof Ajit Kumar Singh is a noted economist and Director, Giri Institute of Development Studies, Lucknow

Will UP's relatively high economic growth in recent years yield political dividends for BSP?
Ajit Kumar Singh Lucknow

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