Economic Growth of Uttar Pradesh, Despite Increase in Health and Education Expenditure Decline: As per CAG Report
The Comptroller and Auditor General (CAG) has tabled a report on Uttar Pradesh's finances for the year 2023-2024 in the legislative assembly, highlighting several financial management issues and concerns about underinvestment in social sectors.
Uttar Pradesh's Gross State Domestic Product (GSDP) grew at 10.31% between 2019-2020 and 2023-2024, and increased by 11.55% in 2023-2024, reaching ₹25,47,861 crore (at current prices). However, the per capita GSDP of Uttar Pradesh increased by 10.42% in 2023-2024, reaching ₹1,07,468. This remains significantly lower than the national per capita GDP of ₹2,11,725 for the same year.
The CAG noted a dip in state expenditure on health and education despite growth in the state economy. The state government's ratio of expenditure on health and family welfare decreased from 5.53% in 2019-2020 to 5.27% in 2023-2024. Similarly, the state government's expenditure on education decreased from 15.34% in 2019-2020 to 13.16% in 2023-2024. This suggests that spending on critical social sectors did not keep pace with overall economic growth.
Enhancing human development levels requires states to increase expenditure on key social services like education and health, as the CAG observed. The state government's expenditure on these sectors was more than the average of general category states in 2019-2020, but went below this average in 2023-2024.
The state government raised ₹38,464.14 crore as extra-budget borrowings through public sector enterprises, which were not part of the consolidated fund. These borrowings did not flow into the consolidated fund but need to be repaid and serviced through the budget, raising concerns about state financial management and sustainability.
The CAG also pointed out delays and blockage of funds in incomplete projects, which negatively impact the quality and benefits of expenditures. As of March 31, 2024, 608 projects (603 Public Works Department and 5 Irrigation Department) worth an estimated ₹8,644.93 crore were incomplete, with ₹4,444.68 crore already spent.
Budgetary deviations and classification issues were also noted in the report. The report highlighted a significant underspending relative to budget provisions, and misclassification of revenue expenditure as capital expenditure overstated the revenue surplus. Also, lump sum budget provisions lacking details and discrepancies in the depiction of centrally sponsored schemes’ funding patterns were noted, impairing financial control and transparency.
The return on investment for the state government in 2023-2024 was ₹49.66 crore (0.03%). The difference in the cost of government borrowings and return on investment in the PSUs and other entities between 2019-2020 and 2023-2024 was ₹56,492 crore. The return on investment was between 0.03% and 0.14% from 2019-2020 to 2023-2024.
The CAG observed that the state government's capital expenditure, investment, and loans given to loss-making PSUs and PSUs with eroded net worth are not sustainable. The state government's expenditure on health and family welfare was more than the average of general category states in 2019-2020, but went below this average in 2023-2024. The state government paid 7.24% and 7.72% interest on its borrowings.
These observations collectively point to financial management challenges in the state despite economic growth, with particular concerns about underinvestment in social sectors, opaque budget classification, and risks from off-budget borrowings through PSUs.
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