UP Budget 2025-26: Keeping borrowings within limits a challenge amid GSDP growth

Although the Uttar Pradesh government has sounded optimism with the gross state domestic product (GSDP)’s growth rate projections in its annual budget for 2025-2026, it faces the challenge of keeping the rising borrowings in permissible limits.

Minister for finance Suresh Khanna, while presenting the budget in the UP legislative assembly on Thursday, said UP’s GSDP has doubled over the years and the GSDP growth rate was more than the national average.

“U.P.’s economy was in bad shape when we got an opportunity to serve the people in 2017-2018 and the GSDP was ₹12.89 lakh crore. The GSDP is estimated to be ₹27.51 lakh crore in 2024-2025... The GSDP growth rate was 11.6 percent against India’s GDP growth of 9.6 percent in 2023-2024,” he said.

The GSDP’s growth rate projections for 2025-2026 indicate growth rate of 11.85 percent. The state government, however, needs a much higher growth rate to achieve the objective of making the state a trillion-dollar economy.

The state government has also claimed that the per capita income has gone up from ₹52,671 in 2016-2017 to ₹93,514 in 2023-2024. Its expenditure on payment of salaries/pension and interest is likely to go up to 57.3 percent of revenue expenditure against revised estimates of 54.3 percent in 2024-2025.

The state government’s rising borrowings, however, remain a cause of serious concern. The estimates in the budget indicate that the state’s indebtedness will reach ₹846095.83 crore by March 31, 2025 and ₹903924.54 crore by March 31, 2026 from ₹323935.66 crore in 2015-2016.

This indicates that the UP’s indebtedness will nearly triple in ten years. The debt-GSDP ratio, which was 28.1 percent in 2015-2016, is expected to go up to 30.8 percent on 31 March 2025. The state government proposes to bring this down to 29.4 percent by 31 March 2026. This, however, needs to be brought down further in coming years.

“The projected growth rate of GSDP for 2025-26 is given as 11.85%. Given the goal of a trillion-dollar state economy, this rate of growth needs to be accelerated considerably. For this, more investment both domestic and foreign is desirable,” said prof Yashvir Tyagi, former head of economics department, Lucknow University

“For a healthy fiscal state, debt-GSDP ratio is required to be brought down to 20% as per FRBM norms. It is encouraging, that Uttar Pradesh has been able to moderate debt-GSDP ratio to around 30% which is projected to be29.4% in 2025-26. This trend needs to be continued,” prof Tyagi added.