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Reuters/Pawan Kumar
My way is the highway.
ROAD TO LUCKNOW

Akhilesh, Mayawati or Modi: Can anybody actually fix Uttar Pradesh’s economy?

By Devjyot Ghoshal

Elections in Uttar Pradesh (UP), India’s most populous state, rarely disappoint. There are fast-moving family feuds, rousing rhetoric, dramatic alliances, and breakups, and the sheer unpredictability of gauging an electorate divided by complex caste and communal calculations.

The disappointment inevitably comes later: No matter who wins power in UP these days, the economy of the state—with a population of 204 million, larger than Brazil’s—almost invariably remains in disarray.

The data is telling.

Between 1961 and 2016, except one decade under the Congress party, UP’s economic growth rate has consistently lagged India’s national average, according to data scrutinised by Ravi Srivastava and Rahul Ranjan of New Delhi’s Jawaharlal Nehru University (JNU).

The analysis, published in the Economic and Political Weekly (paywall) last December, segregated the state’s economic performance into five political periods: 1961 to 1967 (Congress rule), 1968 to 1980 (non-Congress and mixed regimes), 1981 to 1989 (Congress rule), 1990 to 2003 (mixed regimes) and 2004 till present (stable governments of regional parties).

Historical incompetence aside, the recent failures are clear. Every political party, or coalition, that has come to power in UP since the 1980s—the Bharatiya Janata Party (BJP), the Bahujan Samaj Party (BSP) or the Samajwadi Party (SP)—has failed to revive the state’s flagging economy.

The prolonged economic mishap is grounded in the inability of successive regimes to provide proper economic planning, argued Srivastava, who teaches at JNU’s Centre for the Study of Regional Development. ”Since the 90s, there has not been much focus on developing a strategy, which is, in my view, UP specific,” he told Quartz. “There’s been a standard application of standard solutions, and they’ve been pretty much the same (policies).”

This incompetence is also a reflection of the realpolitik that underpins elections in UP. “It (the economy) was never a major focus of any party,” said Ajit Kumar Singh, former director of Lucknow’s Giri Institute of Development Studies. “Because, you know, in UP, the (voter) mobilisation is more on identity basis, caste and communal lines. So, in that atmosphere, development—although people talk of development—but that is not the primary objective.”

“It (the economy) maintains its own momentum,” Singh added, “irrespective of political things.”

Mirage of progress

Akhilesh Yadav claims otherwise.

On Jan. 22, the incumbent chief minister of UP stepped up to the podium at the SP’s Lucknow office to release his election manifesto for the 2017 polls. In his 30-minute speech, the 43-year-old repeatedly listed out all the roads his government had built since taking power in 2012—and also those it plans to build if the SP is voted back.

In the long list of development projects that the SP government claims credit for, its push to bolster the state’s road network takes pride of place. So when Yadav and his father, Mulayam Singh Yadav, opened the 302-kilometre Agra-Lucknow Expressway last November, no less than eight Indian Air Force fighter aircraft made celebratory touchdowns on the fresh tarmac.

For all that spectacle, the expressway still isn’t fully functional, although it’s the sort of hoopla that has helped the chief minister shape the narrative. “He has built up an image, through ad campaigns and other things, that he is development-oriented,” said Singh, with much publicity for the government’s work on the roads and power sector and social security schemes.

Many businessmen, too, feel that they’ve been given a raw deal under the government’s infrastructure push. Yadav’s grand highways scheme, they argue, has been made to appease ordinary voters instead of helping connect the state’s industrial clusters. “They’ve been made so that the general public notices the roads and then votes,” said Shailendra Jain, president of the Associated Chambers of Commerce and Industry of UP (AssochamUP).

The available economic numbers aren’t impressive, and not just in comparison with India’s more industrialised states, including Gujarat and Maharashtra. Even neighbouring Bihar, once an economic laggard, seems to have done better lately.

It’s not just the numbers.

Those doing business in UP insist that little has changed on the ground. ”The government has tried a lot but the policies haven’t been implemented by the bureaucracy,” said Jain.

For example, although the UP government has tried to streamline the tax filing processes, businessmen are still regularly harassed by corrupt bureaucrats, Jain alleged. “After you file your returns,” he said, “they’ll find some error and once you go to meet them, the usual game starts off.”

The Indian government’s ranking of states on the implementation of the Business Reform Action Plan, which seeks to improve 58 regulatory processes that most businesses encounter, provides further proof. Out of 36 states and union territories, UP is currently ranked at 14.

“Ultimately, whichever government comes to power, they don’t make policies with any specific vision,” Jain added. “They always look at the votes, whichever party it is.”

Manufacturing mayhem

Sudhir Panwar has an entirely different perspective of what’s transpired in UP over the past five years.

“I think in the last 20-25 years this is the first time when a government actually worked on development projects, besides the symbolism,” said Panwar, a member of the UP state planning commission. “This is the first time a government was free from any kind of symbolic construction or symbolic message.”

Unlike the BSP and the BJP—and their indulgence in symbolic construction of parks and temples, respectively—the SP government, Panwar explained, concentrated on infrastructure and social sector development projects. This investment, he emphasised, is reflected in the rise of the state’s per capita income.

Indeed, since 2012, UP’s per capita income, measured as per capita net state domestic product (NSDP), has steadily risen. But it is hardly a standout number.

In a state where the agriculture sector is critical—with nearly 74% of rural households involved in farming—the Yadav government has provided support for farmers to tide over two consecutive years of deficit monsoons. “We are providing the basics to the farmers,” Panwar said. So there’s been free water supply, a direct benefit transfer scheme for seed subsidy, loan waivers worth some Rs1,600 crore and a cash infusion of Rs2,100 crore for the sugarcane industry. The subsequent uptick in the annual growth rate of agriculture and allied activities in UP, from 1.8% in 2014 to 4.2% in 2015, may be evidence of this.

But not even Panwar can quite explain the mess that is UP’s manufacturing sector.

“There’s not been much thinking about how to develop the non-agricultural economy,” said JNU’s Srivastava. The handicraft and traditional industries, which make up nearly half of UP’s manufacturing base, have suffered chronic neglect. The silk industry in Varanasi, prime minister Narendra Modi’s constituency, is a classic example where the lack of state support and the rise of mechanised looms have strangled an ancient craft.

“You have to look at networks, you have to look at linkages, you have to look at issues of infrastructure, which are specific to each industry and each cluster in UP,” Srivastava added. “This is an area where there could’ve been a lot more focus, a lot more diagnostics.”

In fact, UP’s entire small and medium enterprises (SME) sector is riddled with problems.

Only 31% of SMEs in the state have a rating of above average creditworthiness or better, according to data from ratings agency CRISIL, compared to the nationwide average of 60%. And nearly a quarter of all SMEs in the state are rated as having below-average creditworthiness or worse.

“They are largely not great ratings because the size of the operation is small, they don’t seem to be of the nature where entrepreneurs have the ability to scale up,” explained Manish Jaiswal, the head of CRISIL’s SME ratings. “And very, very importantly, they are poorly capitalised and funding is the largest challenge.”

That’s not to say that the infrastructure development pushed by the Yadav government hasn’t helped. It simply isn’t enough. “Infrastructure has to be one component,” said Srivastava, “but in a state like UP you can’t have purely infrastructure-led industrial growth.”

In any case, almost 50% of the industry is located in western UP, with a handful of districts in the area drawing over 90% of new investments during the last two decades, according to Singh. Large swathes of the UP’s other regions—Bundelkhand and Purvanchal, in particular—remain mostly shorn of industry, despite a slew of government incentives.

All this hasn’t gone unnoticed in Lucknow. On paper, UP state planning commission’s Panwar explained, the policy framework exists. So the problem is with the execution then? “Yes, I agree with you,” he admitted, “all of these are not implemented because of the bureaucratic struggles.”

Too often, such a divergence between intention and implementation can prove fatal for political regimes. But in UP, where the economy has been somewhat of an afterthought for decades, it might not matter after all.

Whatever the data may say, the final arbiter will be UP’s electorate.