Uttar Pradesh Budget Analysis 2023-2024 | Course for UPPSC Preparation - UPPSC (UP) PDF Download

The Budget for the financial year 2023-24 in Uttar Pradesh was presented by Mr. Suresh Khanna, the Finance Minister, on February 22, 2023. Here are the key points: 

Budget Highlights

• The projected Gross State Domestic Product (GSDP) of Uttar Pradesh for 2023-24 is Rs 24,39,171 crore, indicating a growth of 19% over 2022-23 at current prices.
• Estimated expenditure (excluding debt repayment) for 2023-24 is Rs 6,59,061 crore, reflecting a 17% increase over the revised estimates of 2022-23. Additionally, the state plans to repay a debt of Rs 31,181 crore.
• Receipts (excluding borrowings) for 2023-24 are anticipated to be Rs 5,74,178 crore, a 19% increase compared to the revised estimate of 2022-23. The previous fiscal year's receipts fell short of the budget estimate by Rs 20,396 crore (4% decrease).
• Revenue surplus for 2023-24 is estimated at 2.8% of GSDP (Rs 68,512 crore), slightly higher than the revised estimates for 2022-23 (2.6% of GSDP). In 2022-23, the revenue surplus is expected to surpass the budget estimate (2.1% of GSDP).
• The targeted fiscal deficit for 2023-24 is 3.5% of GSDP (Rs 84,883 crore). In 2022-23, the revised estimates indicate a fiscal deficit of 4% of GSDP, consistent with the budget estimates for the year.

Policy Highlights

• The power subsidy for private tube-well owners' electricity consumption will be increased from 50% to 100% in 2023-24, with an allocation of Rs 1,500 crore.
• A budget of Rs 10,952 crore has been allocated for flood control and irrigation projects, including Rs 3,400 crore for minor irrigation projects.
• The destitute widow pension scheme receives an allocation of Rs 4,032 crore for 2023-24, benefiting 32.6 lakh destitute widows.
• Under the Pradhan Mantri Awas Yojana (Grameen), 12,39,877 houses are targeted for construction in rural areas during 2023-24.

Uttar Pradesh’s Economy

• In 2021-22, Uttar Pradesh's GSDP (at constant prices) is estimated to grow at 4.2%, recovering from a 5.5% contraction in 2020-21. In comparison, the national GDP is projected to grow at 8.7% in 2021-22, following a 6.6% contraction in 2020-21.
• Sectors such as manufacturing and services grew at 5.6% and 4.2%, respectively, in 2021-22 over a low base. Agriculture, which experienced positive growth in 2020-21, continued to grow at 2.7% in 2021-22. The sectors are estimated to contribute 28%, 24%, and 47% to the economy, respectively, at current prices.
• The per capita GSDP of Uttar Pradesh in 2021-22 (at current prices) is estimated at Rs 79,396, showing an annualized increase of 4% over 2018-19.

Figure  1 : Growth in GSDP and sectors in Uttar Pradesh at constant prices (2011-12)

Note: These numbers are as per constant prices (2011-12) which implies that the growth rate is adjusted for inflation.
Sources: Ministry of Statistics and Programme Implementation; PRS.

Budget Estimates for 2023-24

• The targeted total expenditure (excluding debt repayment) for 2023-24 is Rs 6,59,061 crore, reflecting a 17% increase over the revised estimate of 2022-23. Funding for this expenditure is proposed to come from receipts (excluding borrowings) of Rs 5,74,178 crore and net borrowings of Rs 77,933 crore. Total receipts for 2023-24 (excluding borrowings) are anticipated to witness a 19.3% increase over the revised estimate of 2022-23.
• The projected revenue surplus in 2023-24 is 2.8% of GSDP (Rs 68,512 crore), slightly higher than the revised estimate for 2022-23 (2.6% of GSDP). The targeted fiscal deficit for 2023-24 is 3.5% of GSDP (Rs 84,883 crore), lower than the revised estimates for 2022-23 (4% of GSDP), with an absolute increase in fiscal deficit of Rs 3,558 crore.

Table  1 : Budget 2023-24 - Key figures (in Rs crore)

Note: BE is Budget Estimates; RE is Revised Estimates.
Sources: Annual Financial Statement, Uttar Pradesh Budget 2023-24; PRS.

Expenditure in 2023-24

• The proposed revenue expenditure for 2023-24 is Rs 5,02,354 crore, reflecting an 18% increase over the revised estimate of 2022-23. This includes expenditures on salaries, pensions, interest, grants, and subsidies. The capital outlay for 2023-24 is proposed to be Rs 1,47,492 crore, indicating a 17% increase over the revised estimate of 2022-23. Capital outlay signifies expenditure directed towards the creation of assets.
• In 2022-23, state loans and advances are expected to be Rs 11,179 crore, surpassing the budgeted amount by Rs 8,250 crore (a 280% increase). This increase may be attributed to public sector loans of Rs 8,000 crore provided under the Chief Minister Expansion and Construction of Industrial Areas Scheme.

Issues with budget estimates
The state budget provides three sets of numbers: budget estimates, revised estimates, and actuals. Actuals may deviate from or surpass budget estimates. A comparison between budget estimates and actuals aids in evaluating the credibility of the proposed budget. In Uttar Pradesh, such a comparison reveals underspending and lower revenue realization in 2021-22. Notably, there was a 12% decrease in net receipts collected and a 20% decrease in actual net expenditure incurred compared to the budget estimates. The Comptroller and Auditor General (CAG) identified a pattern of underspending in Uttar Pradesh from 2016-17 to 2020-21, with 20% of the total budget provision remaining unspent in 2019-20.
The ratio of own tax revenue to GSDP, indicating the state's revenue-raising capacity, is estimated to be 10.2% in 2023-24. However, actuals for 2021-22 show it was only 7.9%.

Table  2 :  Expenditure budget 2023-24 (in Rs crore)

Sources:  Annual Financial Statement, Uttar Pradesh Budget 2023-24; PRS. 
Committed expenditure: Committed expenses in a state typically encompass payments for salaries, pensions, and interest, thereby limiting the state's flexibility in determining other spending priorities such as capital outlay. For the fiscal year 2023-24, Uttar Pradesh is projected to allocate Rs 3,25,204 crore for committed expenditure, constituting 57% of its anticipated revenue receipts. This includes allocations for salaries (29% of revenue receipts), pensions (14%), interest payments (9%), and subsidies (5%). Subsidy expenditures witnessed a 12% increase in the revised stage of 2022-23. Pension expenditure is estimated to be 23% lower than the budget estimate for the same fiscal year. In the preceding fiscal year 2021-22, 59% of revenue receipts were utilized for committed expenditure, based on actual figures.

Table  3 : Committed Expenditure in 2023-24 (in Rs crore)

Note: Subsidy figure for 2021-22 refers to revised estimates
Sources: Annual Financial Statement, Uttar Pradesh Budget 2023-24; PRS.
Sector-wise expenditure: Regarding sector-wise spending, the sectors mentioned below make up 63% of the overall state expenditure on sectors for the fiscal year 2023-24. A comparative analysis of Uttar Pradesh's sectoral spending in key areas with that of other states is presented in Annexure 1.

Table  4 : Sector-wise expenditure under Uttar Pradesh Budget 2023-24 (in Rs crore) 

Sources: Annual Financial Statement, Uttar Pradesh Budget 2023-24; PRS.

Receipts in 2023-24

• The projected total revenue receipts for the fiscal year 2023-24 are anticipated to be Rs 5,70,866 crore, reflecting a 19% increase over the revised estimate of 2022-23. Out of this, the state aims to generate Rs 2,73,416 crore (48%) from its own resources, while Rs 2,97,450 crore (52%) will come from the central government. The central contribution will consist of the state's share in central taxes (32% of revenue receipts) and grants (20% of revenue receipts).
• Regarding devolution, the state's share in central taxes for 2023-24 is estimated to be Rs 1,83,238 crore, marking an 8% rise from the revised estimate of 2022-23. In contrast, grants from the central government are expected to be Rs 1,14,213 crore, indicating a 5% decrease compared to the revised estimates for 2022-23.
• For its own tax revenue, Uttar Pradesh anticipates a total of Rs 2,49,625 crore in 2023-24, showcasing a substantial 42% increase from the revised estimate of 2022-23. The proportion of own tax revenue to GSDP is projected to be 10.2% in 2023-24, surpassing the revised estimate for 2022-23 (8.6%). In the fiscal year 2021-22, the actual figure was 7.9%.

Table  5 : Break-up of the state government’s receipts (in Rs crore)

Note: *State’s Own Tax and Grants from Centre figures have been adjusted to account for GST compensation grants as Grants from Centre.
BE is Budget Estimates; RE is Revised Estimates. Sources: Annual Financial Statement, Uttar Pradesh Budget 2023-24; PRS.

• In the fiscal year 2023-24, State GST is expected to be the predominant source of own tax revenue, constituting a 38% share. State GST revenue is projected to rise by 41% compared to the revised estimates of 2022-23. However, the receipt for the current fiscal year (2022-23) is predicted to be 13% lower than initially budgeted.
• Anticipated revenue from taxes and duties on electricity in 2023-24 is set to experience a significant surge (173%) compared to the revised estimates for 2022-23. The revised estimates for the latter year are 57% lower than the budgeted figure of Rs 5,531 crore.

GST Compensation Loan

• Regarding the GST Compensation Loan, under the GST (Compensation to States) Act, 2017, states are assured compensation for revenue loss due to GST implementation. The compensation, provided until June 2022 in the form of grants and loans, resulted in Uttar Pradesh having pending GST compensation grants worth Rs 1,215 crore as of February 18, 2023. Despite the compensation period ending in June 2022, Uttar Pradesh has estimated receiving Rs 17,939 crore in 2023-24 and Rs 15,574 crore in 2022-23, raising concerns about potential inflation of capital receipt estimates.

Table  6 :  Major sources of state’s own-tax revenue (in Rs crore)

Outstanding liabilities:  

Outstanding liabilities represent the cumulative total of borrowings and any obligations on the public account at the conclusion of a financial year. As of the end of 2023-24, the anticipated outstanding liabilities stand at 32.1% of the Gross State Domestic Product (GSDP), marking a decrease from the revised estimate for 2022-23 (34.2% of GSDP). This figure has seen a significant increase compared to the 2019-20 level (29.6% of GSDP).

Outstanding Government Guarantees: 

The outstanding liabilities of states do not encompass certain contingent liabilities that states may need to fulfill in specific scenarios. State governments provide guarantees for the borrowings of State Public Sector Enterprises (SPSEs) from financial institutions. As of March 31, 2022, the outstanding guarantee for the state is estimated to be Rs 1,71,705 crore, equivalent to 8.4% of Uttar Pradesh's GSDP in 2021-22.
Annexure 1:  Comparison of states’ expenditure on key sectors
The following graphs compare Uttar Pradesh's expenditure in 2023-24 on six key sectors relative to its overall expenditure on all sectors. The sector averages indicate the average expenditure in each sector by 31 states (including Uttar Pradesh) based on their budget estimates for 2022-23.

• Education: Uttar Pradesh has earmarked 13% of its expenditure for education in 2023-24, a figure lower than the states' average allocation for education in 2022-23 (14.8%).
• Health: Uttar Pradesh has allocated 7.3% of its total expenditure to health, surpassing the states' average allocation for health (6.3%).
• Rural Development: Uttar Pradesh has allocated 5% of its expenditure to rural development, falling short of the average allocation for rural development by states (5.7%).
• Urban Development: Uttar Pradesh has allocated 4.4% of its expenditure to urban development, exceeding the average allocation for urban development by states (3.5%).
• Agriculture: Uttar Pradesh has allocated 2.9% of its total expenditure to agriculture, approximately half of the average expenditure on agriculture by states (5.8%).
• Energy: Uttar Pradesh has allocated 6.7% of its total expenditure to energy, surpassing the average allocation by states (4.8%).

Note: 2021-22, 2022-23 (BE), 2022-23 (RE), and 2023-24 (BE) figures are for Uttar Pradesh.
Sources: Annual Financial Statement, Uttar Pradesh Budget 2023-24; various state budgets; PRS.
[1]  The 31 states include the Union Territories of Delhi, Jammu and Kashmir, and Puducherry .
Annexure 2:  Comparison of 2021-22 Budget Estimates and Actuals
The following tables compare the actuals of 2021-22 with budget estimates for that year.

Table  7 :Overview of Receipts and Expenditure (in Rs crore)

Source: Uttar Pradesh Budget Documents of various years; PRS.

Table  8 : Key Components of State's Own Tax Revenue

Source: Uttar Pradesh Budget Documents of various years; PRS.

Table  9 : Allocation towards Key Sectors

Source: Uttar Pradesh Budget Documents of various years; PRS.