Uttar Pradesh no longer Bimaru? Take CAG endorsement with a pinch of salt

Uttar Pradesh has notched up a remarkable fiscal achievement, recording a revenue surplus of Rs 37,263 crore in the financial year 2022-23, outstripping even economic powerhouses like Gujarat. This positions the state at the top of the revenue surplus rankings among India’s 28 states, according to a comprehensive Comptroller and Auditor General (CAG) report released in September 2025. Officials hail it as a turning point, proof that Uttar Pradesh is shedding its long-standing “Bimaru” label—a term coined in the 1980s by demographer and economic analyst Ashish Bose to denote the economic and demographic backwardness of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. 

With 16 states now boasting surpluses against 12 in deficit, the report paints a picture of post-pandemic fiscal resilience. But does this CAG endorsement truly mark the end of the state’s economic struggles, or is it a superficial gloss over deeper, unresolved frailties?

Fiscal surplus: Headline figure under scrutiny

At first glance, the state’s surplus appears transformative. The CAG’s State Finances 2022-23 analysis, the first decadal review of state finances, attributes the state’s lead to improved own-tax revenues—such as state goods and services tax (SGST) and value-added tax (VAT)—coupled with restrained expenditure. This surplus, more than double Gujarat’s Rs 19,865 crore, underscores a national trend where revenue receipts outpaced expenditures in surplus states, aiding recovery from Covid-19 disruptions.

Yet, peeling back the layers reveals a figure inflated by context rather than inherent strength. The state’s absolute surplus benefits from its sheer scale: with a population of 240 million—nearly 17% of India’s total—the state generates volumes that smaller, wealthier peers cannot match. Critics argue this masks inefficiencies; for instance, the state’s gross state domestic product (GSDP) growth of 42% from 2019-20 to 2023-24, while commendable, lags behind southern states like Tamil Nadu in relative terms. Moreover, the surplus excludes capital outlays, where Uttar Pradesh continues to borrow heavily, with public debt surging 60% over the same period—outpacing GSDP expansion and raising red flags on long-term sustainability.

The CAG report itself tempers enthusiasm, noting uneven progress across sectors. While revenue management has improved, underspending in critical areas like water and sanitation—down 60% in 2020-21—highlights misplaced priorities. In essence, the surplus is less a beacon of self-sufficiency and more a temporary buoy, propped up by one-off gains rather than structural reforms.

Excessive reliance on central transfers: A crutch for growth?

A core pillar of the state’s fiscal narrative is its dependence on federal largesse, which undermines claims of autonomous progress. In 2023-24, the state received Rs 55,803 crore in central grants, comprising a hefty chunk of its revenue receipts. Nationally, states’ share of Union tax devolution ballooned from Rs 1.92 lakh crore in FY14 to Rs 5.92 lakh crore in FY23, with Uttar Pradesh claiming 17.89%—the largest slice—fuelled by its demographic weight under the Finance Commission’s formula.

This reliance is stark: own-tax revenue accounts for just 40-50% of total receipts in Uttar Pradesh, far below leaders like Haryana (80%) or Gujarat (72%). Detractors, including opposition voices from non-BJP states, decry this as evidence of partisan favouritism; BJP-ruled states, including Uttar Pradesh, dominate the 16 surplus list, while deficit-hit peers like West Bengal (-Rs 27,295 crore) receive slimmer shares. Such dynamics suggest the surplus is less a product of state ingenuity and more a byproduct of New Delhi’s fiscal federalism, which critics label as “asymmetric” and politically motivated.

Furthermore, this dependency fosters complacency. With central funds often earmarked for schemes like MGNREGA or Pradhan Mantri Awas Yojana, the state’s own revenue mobilisation—through property taxes or excise duties—remains anaemic. A 2024 NITI Aayog assessment flagged this as a “vulnerability trap,” where states like Uttar Pradesh risk fiscal cliffs if devolution norms shift post-2026 Finance Commission review. In a federal system meant to empower regions, the state’s economy appears tethered, not liberated.

Per capita realities: Prosperity for few, penury for many

Beyond aggregates, the state’s economy falters most glaringly on human scales. The revenue surplus translates to meagre per capita gains in a state where rural monthly per capita expenditure (MPCE) stands at Rs 3,578—the lowest among large states—against a national rural average of Rs 4,122. Urban MPCE fares marginally better at Rs 5,474, yet still trails the all-India figure, underscoring a yawning urban-rural divide.

Multidimensional poverty, encompassing health, education, and living standards, has plummeted from 37.68% in 2015-16 to around 12% by 2023 estimates—a faster decline than the national rate of 14.96% (2019-21). However, this leaves Uttar Pradesh with one of India’s highest absolute poor populations, exacerbated by its role in 49.1% of projected national population growth to 2036. Literacy hovers at 71.7% (below the 77.7% national average), and sanitation access covers fewer than 70% of households, per recent surveys.

The table above illustrates the disconnect: macroeconomic wins rarely percolate to the ground. Food insecurity affects 20% of households, and youth unemployment—compounded by outmigration to cities like Mumbai and Delhi—fuels social unrest. While schemes like free rations under the National Food Security Act provide palliatives, they do little to build enduring skills or industries, perpetuating a cycle where Uttar Pradesh supplies cheap labour but reaps scant investment returns.

Hidden cracks in fiscal facade

The CAG report, often invoked as an unimpeachable authority, ironically furnishes ammunition for sceptics. Audits from 2023-24 reveal misclassifications inflating the surplus by Rs 283 crore, alongside excess expenditures sans legislative nod. Historical precedents sting: in 2020-21, Uttar Pradesh swung to a revenue deficit of Rs 2,367 crore after 14 years of surpluses, exposing Covid-era fragilities that linger.

Broader CAG findings indicate systemic lapses. Borrowing trends show debt-to-GSDP ratios climbing toward 30%, with off-budget financing—via corporations and public entities—ballooning liabilities. Underspending plagues welfare sectors; for example, only 40% of allocated funds for women’s empowerment reached targets in 2022-23. These aren’t mere accounting quibbles but symptoms of governance opacity, where political expediency trumps fiscal prudence.

Opposition-led probes, such as those in the state assembly, amplify these concerns, accusing the Yogi Adityanath administration of “creative bookkeeping” to burnish pre-election optics ahead of the 2027 polls.

Bimaru legacy: Outdated label or persistent truth?

The “Bimaru” moniker, evoking sickness, stemmed from the state’s 1980s woes: low per capita income (then one-third the national average), high fertility (total fertility rate of 3.5 in 2010, now ~2.4) and dismal human development indices (HDI). Proponents of progress cite GSDP’s ascent to India’s third rank and annual growth of 8-9% in spurts, outpacing southern laggards in 2008-11.

The label endures in substance if not name. Convergence towards national per capita norms remains stochastic at best; the state’s income per head is 40% below the average, with stochastic trends showing no guaranteed catch-up. 

NITI Aayog’s SDG Index places it 24th out of 36 states, trailing in goals like zero hunger and quality education. Demographically, unchecked urbanisation strains infrastructure—witness the 2023 floods displacing millions—while agrarian distress, with 60% of the workforce in farming on shrinking holdings, breeds inequality.

Dismissing Bimaru as “outdated” risks complacency, although the state’s growth may not be entirely “jobless,” as the UPA’s favourite economist and part of the AAP’s NGO lobby, Jean Drèze, claims. 

When Yogi Adityanath took over in 2017, up to the time when the One District One Product (ODOP) scheme started paying dividends, the state government indeed favoured capital-intensive sectors over labour-absorbing ones. However, recent data show that overall employment has increased, particularly for women, with a 17.9% increase in women's labour force participation in rural and urban areas between 2017-18 and 2022-23:

• The number of people employed in Uttar Pradesh increased by 1.9% annually between 2011-12 and 2020-21.
• The state’s female labour force participation rate saw a significant increase from 14.2% in 2017-18 to 32.1% in 2022-23, which is higher than the national average.
• Agriculture, allied sectors and communication have shown some of the highest employment growth, along with efforts in industrialisation and entrepreneurship.
• The unemployment rate in Uttar Pradesh has reduced to under 3% as of March, a substantial drop from 19% in 2016.

The state does need to create more sustainable employment for its large, young population to ensure inclusive and growth-oriented economic development. The following remain the state’s key economic challenges:

• The state has over 100 million young people aged 15-29, requiring massive job creation to prevent the issue from becoming more urgent.
• While overall employment grew, some growth in agriculture and services was characterised by a slower increase in value added per person engaged, which is a concern for productivity.

Pathways to sustainable growth: Beyond surplus

Escaping scepticism demands more than fiscal headlines. Prioritising own-revenue streams—via land reforms and digital taxation—could wean Uttar Pradesh off central dependency. Investing surpluses in human capital, such as skilling 10 million youth annually through targeted programmes, may help bridge per capita gaps. Infrastructure, from expressways to renewables, holds promise, but only if paired with inclusive policies curbing caste-based disparities.

The CAG report offers a starting point, not salvation. True transformation hinges on governance that confronts vulnerabilities head-on, lest the state’s economy remain a tale of peaks masking profound valleys. As the state eyes 2027, the question lingers: will leaders heed the critics, or let the surplus become another fleeting accolade?