Questioning the hype around Uttar Pradesh’s ‘revenue surplus’ in 10 charts

Uttar Pradesh Chief Minister Yogi Adityanath, who spoke emphatically about the State’s economic growth at his government’s Industry Leaders Roadshow in Bengaluru on June 24, highlighted how the State has become “revenue surplus in the last six years,” while shedding its image of being a “BIMARU” State — an uncomplimentary term used to refer to a group of North Indian States that lagged behind on developmental indicators.Mr. Adityanath rarely fails to mention this “achievement” of revenue surplus in his speeches of late about the economic transformation Uttar Pradesh is witnessing after he took charge as Chief Minister in 2017.The Comptroller and Auditor General (CAG) of India’s annual State Finances Report for the year 2024-25, released on June 16, added to the hype. As per the report, U.P. was not only among the 13 of the 28 States that reported revenue surpluses in 2024-25, but its ₹59,327 crore surplus was the highest, accounting for nearly half of these 13 States’ total revenue surplus of ₹1.27 lakh crore.Curiously, almost none of the remaining 12 States, as shown below, are among those known for performing better on most developmental indicators.S. No.StateRevenue surplus in 2024-25 (in ₹ crore)1Uttar Pradesh59,3272.Odisha22,6513.Gujarat18,9434.Arunachal Pradesh8,5975.Jharkhand7,9246.Goa2,8687.Tripura1,5858.Madhya Pradesh1,5739.Uttarakhand1,45810.Manipur1,11311.Nagaland75312.Sikkim48213.Meghalaya73Total1,27,347An analysis of the State Finances reports of the CAG and the Reserve Bank of India (RBI) showed that the “revenue surplus” status of at least some of these States is not the result of buoyant growth in revenues or commendable fiscal discipline, but primarily of their inability to spend the budgeted amount despite the availability of funds.U.P., the biggest State and the third biggest economy in the country, which has the biggest budget, highest revenue surplus, and highest allocation from the Centre, in fact exemplifies this problem.1. Ideal State on paper?The Fiscal Responsibility and Budget Management Act and the Fiscal Responsibility Legislations of States emphasise that borrowing should ideally be done for capital expenditure and not for revenue expenditure.Hence, while a fiscal deficit within prescribed limits is not considered bad, a revenue deficit is seen as a symptom of poor fiscal discipline.Going by these standards, U.P. stands out as the ideal case, reporting a high revenue surplus and a manageable fiscal deficit. The chart below shows the revenue and fiscal status of the top 10 economies in the country in terms of their Gross State Domestic Product (GSDP).2. The underspending problemThough U.P.’s revenue and fiscal indicators portray a rosy picture, its expenditure pattern shows that the revenue surplus is mainly due to the huge deviation from its total budgeted expenditure, including capital expenditure.The chart below shows the percentage of underspending by the 10 States, compared with their budgeted expenditure.Telangana’s underspending was bigger than U.P.’s. However, its problems — and those of Andhra Pradesh, which is now more dependent on Central transfers — are the outcome of their bifurcation in 2014. Moreover, unlike U.P., Telangana reported a revenue deficit of ₹9,420 crore.3. The problem is persistentAn analysis of the past 10 years’ data showed that U.P.’s pattern of underspending — which is also an indicator of poor budgeting, besides its inability to spend efficiently — has been persistent. The chart below shows the deviation from the budgeted expenditure of the 10 States. Since 2019-20, U.P. has consistently underspent its budgeted expenditure by at least 15%.4. A comparison with MaharashtraU.P.’s budgeted receipts and expenditure are the highest in the country, with Maharashtra being the only State with comparable figures. The comparison of these two States’ budgeted versus actual receipts and expenditures shows how U.P.’s revenue surplus is a likely outcome of its underspending.A reve