This election season has been a string of inaugurations - together Prime Minister Modi and Chief Minister Yogi launched one development project after another, shelling some serious amount of money. We are wondering, where does one of the poorest state in the country get so much money from?
30,000 crore for a futuristic airport project in Jewar
36,230 crore for the Ganga Expressway
2,329 crore for 9 medical colleges
9,800 crore for the Saryu Nahar canal in Balrampur
22,496 crore for the Purvanchal Expressway
Wait, we have already crossed 1 lakh crores
There’s also Kashi Vishwanath Corridor, Bundelkhand Expressway, a sports university, metro projects, urban development projects, tourism development, solar park, irrigation projects, fertiliser plant, a defence industrial corridor and honestly we are getting a little exhausted just counting.
In less than 3 months, Prime Minister Modi and Chief Minister Yogi Adityanath have together announced a volley of projects in Uttar Pradesh with some serious budget.
The math is astounding. But we aren’t going to marvel at the expenditure. Or critique the use of development projects for an election campaign.
We have a different question, a simple one - where does this money come from?
India follows a federal fiscal structure wherein the Centre shares its revenue with the states.
A constitutional body is periodically established for 5 fiscal years called the Finance Commission that outlines the sharing criteria
Most states depend on the Central government for a large chunk of their revenue.
There are 4 ways in which States receive this revenue -
1st is through Devolution of taxes: Not included in the Union Budget, this is the state’s share of taxes from the Centre’s gross tax revenue. The Finance Commission sets the percentage for this devolution.
2nd is via Scheme Related Transfer which plays a crucial role in financing social welfare schemes for the states and does so chiefly via Centrally Sponsored Schemes. This transfer is part of the Union Budget.
3rd is from the Finance Commission Grants which are also part of the Union Budget and are based on the Commission’s recommendations.
4th, there are other transfers and loans that the Centre gives to the states.
Apart from the Centre’s tax share, the states generate their own revenue.
This revenue comes from state’s own taxation in the form of GST, excise duty, VAT, stamps & registration duty, vehicle registration and entertainment tax.
Non-taxation revenue is generated from the lease or sale of natural resources, sale of lotteries, interest receipts, charges on economic services and borrowings.
So that is how the state puts money in its own pockets.
Enter pandemic.
Already reeling from a revenue shortfall, states revenues took an unprecedented hit with the coronavirus pandemic.
For UP, it wasn’t just the healthcare system that battled the virus.
Migration crisis, drop in income and elevated inflation made matters worse for the state
Escalated fuel and raw material costs and deescalated demand took a toll on the Micro, Small and Medium Enterprises.
UP’s per capita income of 2019-20 was barely half of the country’s average.
Agriculture, manufacturing and service - growth in all 3 sectors declined.
Taking into account pre-pandemic numbers, the gross state domestic product of UP has had a compound growth rate of only 1.95% per annum over 2017-21.
Compared to 2012, unemployment has increased 2.5 times and youth unemployment nearly 5 times.
Exit pandemic. Enter Election Season
The state presents a mini supplementary budget of 7,301.52 crore on August 18,2021.
The Minister of Finance for the state says that the economy is showing a consistent improvement and the state revenue is going up every month.
UP presents new austerity measures to ensure funds for battling the pandemic
Election Commission raises the cap on election expenditure for candidates for both assembly and parliamentary constituencies
And we are back to the present with developmental projects galore
One foundation stone after another
There’s enough money.
Don’t you worry.
