UP Economy, Budget, Industry, Investment and Infrastructure
2. The state budget: constitutional basis, process and the 2026-27 numbers
The Constitution makes the state budget a legislative act. Under Article 202 the Governor causes the Annual Financial Statement, the budget, to be laid before the Legislature for each financial year. All revenues received by the state and loans raised flow into the Consolidated Fund of the State under Article 266, and no money may be withdrawn from it except under law or Appropriation Bill. Article 267 creates the Contingency Fund for unforeseen expenditure. The process runs from departmental estimates to the Finance Department, the presentation of the budget, general discussion, the Appropriation Bill, and then the passage of demands for grants. Budgets reach the House in February, and the financial year runs from 1 April to 31 March.
The 2025-26 budget was presented on 20 February 2025 with a total expenditure of Rs 8,08,736 crore. The 2026-27 budget was presented on 11 February 2026 with a total outlay of about Rs 9,12,696 crore. Excluding debt repayment, net expenditure for 2026-27 is Rs 8,50,901 crore. Capital outlay, the spending that creates assets, is Rs 1,77,744 crore, about 19.5 per cent of the total outlay. Revenue expenditure is Rs 6,64,471 crore. These are budget estimates and are revised later, so the revised figure for the same year is always reported separately.
| Item | 2025-26 Budgeted | 2025-26 Revised | 2026-27 Budgeted |
|---|---|---|---|
| Total expenditure | 8,08,736 | 7,16,231 | 9,12,696 |
| Fiscal deficit | 91,400 | 91,670 | 1,18,481 |
| Capital outlay | 1,65,243 | 1,59,781 | 1,77,744 |
The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004 requires annual targets for reducing outstanding debt, revenue deficit and fiscal deficit. Under the 16th Finance Commission the annual fiscal deficit limit for states for 2026-31 is 3 per cent of GSDP, and the 2026-27 budget targets about that level (2.98 per cent of GSDP in the government's own document; PRS rounds it to 3 per cent). A second structural feature matters more than the total: average underspending of capital outlay by about 28 per cent between 2021-22 and 2024-25 means budgeted assets were often not created, a point PRS raises directly.
3. Revenue, debt and the power sector
The state's revenue is about half its own and half from the Centre. For 2026-27 the budget estimates revenue receipts of Rs 7,28,928 crore. Own resources, meaning own tax and own non-tax revenue, come to about half of this. The state's share of central taxes is estimated at Rs 2,68,911 crore, which is 36.9 per cent of revenue receipts, and central grants are Rs 98,772 crore, or 13.6 per cent. State GST is the largest own tax at about 45 per cent of own tax revenue. Own tax revenue rises from 7.1 per cent of GSDP in 2024-25 (actual) to a budgeted 8.4 per cent in 2026-27, a jump that depends on tax buoyancy and should be watched in the revised figures.
On the debt side, PRS estimates outstanding liabilities at the end of 2026-27 at 23.1 per cent of GSDP, below the 27.6 per cent of the revised estimate for 2025-26. The Survey reports public debt-to-GSDP at about 28 per cent. These are different definitions and sometimes different years, and an answer must name the definition it uses. Guarantees are a contingent liability: PRS puts guarantees on discom borrowings at Rs 94,213 crore, or 3.2 per cent of GSDP, as of 31 March 2025, and total outstanding guarantees at about 6.5 per cent of GSDP as of March 2024.
The power sector is the main drag on the state's accounts. The Uttar Pradesh Power Corporation Limited was set up in January 2000 as part of the restructuring of the Uttar Pradesh State Electricity Board. Its distribution companies, which serve regions centred on Agra, Lucknow, Meerut, Varanasi and Kanpur, reported an aggregate technical and commercial loss of 19.6 per cent in 2024-25, against a national average of about 15 per cent, according to PRS. Accumulated discom losses were about Rs one lakh crore as of March 2025, and the state's power subsidy reached 3.7 per cent of revenue receipts in 2024-25.
4. Industrial policy: from UPSIDC to the 2022 policy
UP's industrial policy has moved through institutions as much as through policy documents. The UP State Industrial Development Corporation (UPSIDC) was incorporated on 29 March 1961 as a wholly government-owned company under the Companies Act, 1956, and was renamed UPSIDC in 1973, according to the CAG audit report. The Uttar Pradesh Industrial Area Development Act, 1976 gave the state the power to constitute industrial authorities. NOIDA was constituted under it in April 1976. The Uttar Pradesh State Industrial Development Authority (UPSIDA) was formed in 2001 under the 1976 Act, and a 2018 ordinance moved the corporation's assets and functions to it. The Yamuna Expressway Industrial Development Authority (YEIDA) was constituted in April 2001 under the same Act.
Policy documents then followed a rough sequence. The Industrial Investment and Employment Promotion Policy, 2017 was in force by July 2017, and its implementation rules took effect on 13 July 2017. The same period produced sector policies for electronics manufacturing, information technology, solar energy, food processing and micro, small and medium enterprises, all listed by Invest UP. The Industrial Investment and Employment Promotion Policy, 2022 was launched in November 2022, and it is the policy most likely to be asked about in its current form.
| Element | Design, as published by Invest UP |
|---|---|
| Investment promotion subsidy | Investor picks one of three mutually exclusive options: capital subsidy with boosters, net SGST reimbursement, or PLI top-up |
| Stamp duty exemption | 100 per cent in Bundelkhand and Poorvanchal; 75 per cent in Madhyanchal and Paschimanchal; 50 per cent in Gautam Buddh Nagar and Ghaziabad |
| Nodal agency | Invest UP and UPSIDA, under the Infrastructure and Industrial Development Department |
Two institutional threads run through the policies. The first is a single-window clearance system: the Udyog Bandhu body, now Invest UP, runs Nivesh Mitra, the portal through which clearances and no-objection certificates are sought from many departments. The second is the business-climate ranking. Under the Business Reform Action Plan of the central Department for Promotion of Industry and Internal Trade, UP was 12th in 2018 and 2nd in 2019, a jump of ten places that the state reported in its own releases. The 2019 ranking was released in September 2020, and Andhra Pradesh topped it. Rankings are a pattern to teach; the rank of any single year must be quoted with its round.
5. Investment, corridors and public-private partnership
The state's investment promotion is organised around Invest UP, the investor summit and the sector corridors. The UP Global Investors Summit held in Lucknow from 10 to 12 February 2023 is reported by the state government to have received investment proposals worth about Rs 32.9 lakh crore, with about 18,645 memoranda of understanding cited at the inauguration; later tallies differ. These are proposals and intentions, and the realised investment is a much smaller and later figure. A candidate should always separate proposals, MoUs and realised investment, and quote the state's claim as a claim.
The Defence Industrial Corridor is the clearest example of a corridor that the state built around a central initiative. It has six nodes: Kanpur, Jhansi, Lucknow, Aligarh, Agra and Chitrakoot. It is developed by the UP Expressways Industrial Development Authority (UPEIDA), and its investment proposals are reported in tens of thousands of crores, though the totals and the node-wise split differ between state releases and press reports of 2025 and 2026, so quote the node list with confidence and the investment totals only with their date. Around 2,040 hectares were reported acquired by March 2026.
The Noida International Airport at Jewar is the flagship public-private partnership in the state's infrastructure. Zurich Airport International won the development bid in 2019, and the concession runs for 40 years. It is being implemented on a design, build, finance, operate and transfer basis through Yamuna International Airport Private Limited. The Directorate General of Civil Aviation granted the aerodrome licence on 6 March 2026, and commercial operations began on 15 June 2026 with the first IndiGo flight from Lucknow. The delay from earlier target dates is itself a lesson in concession risk.
| Body or corridor | Established or defined | Legal basis |
|---|---|---|
| UPSIDC | Company incorporated 29 March 1961 | Companies Act, 1956 |
| NOIDA | Constituted April 1976 | UP Industrial Area Development Act, 1976 |
| YEIDA | Constituted April 2001 | UP Industrial Area Development Act, 1976 |
| Defence Industrial Corridor | Six nodes; developed by UPEIDA | Central initiative with state development |
The One District One Product (ODOP) programme was launched on 24 January 2018 to name one traditional or signature product for each of the 75 districts the state then had, and to support its producers through design, finance, marketing and export help. The district count changes with reorganisation, so tie the figure of 75 to 2018, and learn the idea rather than a product list: it turns each district's craft or farm speciality into an industrial and export identity.
6. Energy, infrastructure, development indices and science
Thermal power remains the largest part of UP's installed generation capacity, while renewable energy is a growing share. The MW total is a dated snapshot, so quote it from the latest regulator filing. Bundelkhand is the planned centre of new solar capacity, with bulk solar parks approved by the central ministry, though the timelines are long. A candidate should treat the capacity figure as a dated snapshot and the thermal-dominance pattern as the stable lesson: UP's coal-based base load sits beside a growing solar programme.
- Expressways. The Agra-Lucknow Expressway was inaugurated on 21 November 2016. The Purvanchal Expressway opened for public use in February 2022 and the Bundelkhand Expressway began operating in July 2022. The Ganga Expressway, from Prayagraj to Meerut, has been reported as under construction; check its current status before quoting.
- Metros. The Lucknow Metro began operations in September 2017 and the Kanpur Metro in December 2021. Both are state-level urban transit assets, and their ridership and fares are the kind of figure that changes yearly.
- Science and technology. Recent state announcements cite missions for emerging technologies and artificial intelligence; check the budget speech for the exact names. Teach the stable core: the state's S&T policy sits on the Science and Technology department, and the policy names change more often than the institutions do.
Development indices test whether growth reaches people. NITI Aayog's National Multidimensional Poverty Index, using NFHS-5 for 2019-21, puts UP's multidimensional poor at 22.93 per cent, down from 37.68 per cent in NFHS-4 for 2015-16. The fall of about 14.75 percentage points is among the largest, and UP accounts for the largest number of people who moved out of multidimensional poverty, about 3.43 crore. The Aspirational Districts Programme, launched by NITI Aayog in January 2018 across 112 districts, includes eight in UP: Chitrakoot, Fatehpur, Bahraich, Shrawasti, Balrampur, Siddharthnagar, Chandauli and Sonbhadra.
Key takeaways
- Read the Survey with its label: GSDP and per capita figures differ by definition (gross or net), price basis and vintage, and sector shares differ between sources for the same year.
- The budget is a legislative act under Articles 202, 266 and 267; the 2026-27 outlay of about Rs 9.12 lakh crore has capital outlay of about 19.5 per cent, and the fiscal deficit is set at about 3 per cent of GSDP.
- Committed expenditure on salaries, pensions and interest absorbs about half of revenue receipts, which limits the room for capital spending; underspending of capital outlay has been a structural problem.
- Industrial policy moved from UPSIDC (1961) and the 1976 industrial area authorities to the 2017 and 2022 incentive policies, where subsidy and stamp-duty incentives rise as the region moves away from the western districts.
- Investment figures are proposals until they are realised, and the Defence Industrial Corridor (six nodes, developed by UPEIDA) and Noida International Airport (a 40-year DBFOT concession) are the main corridor and PPP examples.
- Development indices show progress and its limits: UP's multidimensional poverty fell from 37.68 to 22.93 per cent between NFHS-4 and NFHS-5, and eight of its districts are among the Aspirational Districts.
Practice questions (16)
Attempt each one before opening the answer. Every explanation names the tempting wrong option as well as the right one, because that is where marks are lost.
Under which Article of the Constitution must the Governor cause the Annual Financial Statement of the state to be laid before the Legislature?
Show answer
Answer: A — Article 202
Article 202 requires the Annual Financial Statement for each financial year. Article 266 creates the Consolidated Fund, Article 267 the Contingency Fund, and Article 280 provides for the Finance Commission, which is a central body. The tempting error is to pick Article 280 because it is the financial article most often quoted; it is not the budget provision.Into which fund do all revenues received by the state government and the loans it raises flow?
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Answer: C — Consolidated Fund of the State
Article 266 provides that all revenues received, loans raised and receipts in repayment of loans form the Consolidated Fund. The Public Account holds money the state holds in trust, such as provident fund deposits, and is separate. The Contingency Fund is for unforeseen expenditure, so it is a distractor by function.The Uttar Pradesh budget for 2026-27 has a total outlay of about Rs 9,12,696 crore and capital outlay of Rs 1,77,744 crore (both budget estimates, as reported by PRS). What share of the total outlay is capital outlay?
Show answer
Answer: B — About 19.5 per cent
1,77,744 divided by 9,12,696 is about 0.195, so the capital share is about 19.5 per cent. The nine-and-a-half option comes from misplacing the decimal, and the higher options come from dividing by a smaller total. The figure must be taken as a budget estimate, not an outturn.Consider the following statements about public finance concepts in Uttar Pradesh and select the correct answer using the codes given below.
P. The fiscal deficit is total expenditure minus receipts other than borrowings.
Q. A revenue surplus means revenue receipts exceed revenue expenditure.
R. The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004 sets annual targets for reducing revenue and fiscal deficits.
S. Outstanding liabilities in a year are equal to that year's fiscal deficit.Show answer
Answer: D — P, Q and R only
P, Q and R are correct as definitions and as the FRBM Act's stated purpose. S is false, because outstanding liabilities are the accumulated stock of borrowings and liabilities, while the fiscal deficit is a single year's flow that adds to that stock. The error to avoid is treating a stock as a flow.The 2025-26 budget estimate for total expenditure was Rs 8,08,736 crore, the 2025-26 revised estimate was Rs 7,16,231 crore, and the 2026-27 budget estimate is Rs 9,12,696 crore (PRS figures). By what percentage does the 2026-27 budget estimate exceed the 2025-26 budget estimate?
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Answer: B — About 13 per cent
9,12,696 divided by 8,08,736 is about 1.129, so the rise is about 13 per cent. The 27 per cent figure is the increase over the revised estimate, which is the wrong base for this question. The question fixes budget against budget, and the explanation must name that base each time.In the 2026-27 budget estimates of Uttar Pradesh, what share of revenue receipts comes from the Centre through devolution and grants combined?
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Answer: C — About 50 per cent
Devolution is Rs 2,68,911 crore (36.9 per cent of revenue receipts) and grants are Rs 98,772 crore (13.6 per cent), which together make about half of the Rs 7,28,928 crore total. The 36.9 and 13.6 options each name only one component, and 45 per cent is the state GST share of own tax, a different base.Committed expenditure on salaries, pensions and interest is estimated at about 49 per cent of revenue receipts in 2026-27 (PRS estimate). Which conclusion follows most directly?
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Answer: A — Less room remains for discretionary spending such as capital outlay
When almost half of revenue goes to fixed claims, the remainder for choices, including capital assets, is limited. The FRBM limit is a target, not a legal consequence of committed spending, and pension cuts and devolution are unrelated to this ratio. The item is a cause-and-effect reading of a budget share, which the PRS analysis draws out.Consider the following statements about the debt and guarantees of Uttar Pradesh and select the correct answer using the codes given below.
P. PRS estimates outstanding liabilities at the end of 2026-27 at about 23.1 per cent of GSDP.
Q. Guarantees on the borrowings of the state's power distribution companies were about 3.2 per cent of GSDP as of March 2025.
R. Accumulated losses of the state's power distribution companies were about Rs one lakh crore as of March 2025.
S. The distribution companies have made an operating profit in every year since their formation.Show answer
Answer: D — P, Q and R only
P, Q and R are the PRS figures. S is false: the discoms reported losses, which rose from Rs 7,436 crore in 2023-24 to Rs 10,796 crore in 2024-25, according to PRS. The tempting error is to treat a state's debt ratio as its total obligation, which ignores guarantees and discom losses.Arrange the following events in the order in which they occurred.
I. UPSIDC incorporated as a state-owned company
II. Uttar Pradesh Industrial Area Development Act, 1976 enacted and NOIDA constituted
III. One District One Product programme launched
IV. Industrial Investment and Employment Promotion Policy, 2022 launchedShow answer
Answer: B — I, II, III, IV
UPSIDC was incorporated in 1961, the 1976 Act and NOIDA followed, the ODOP programme was launched on 24 January 2018, and the 2022 policy came in November 2022. The distractors swap the first two events or the last two, which are the orders most often confused by candidates who remember the policies but not the institutions.When the One District One Product programme was launched on 24 January 2018, how many districts was it designed to cover?
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Answer: B — 75
Uttar Pradesh had 75 districts when the programme was launched, and the scheme identifies one product for each. The number of districts changes with reorganisation, so the answer is tied to the 2018 position. The distractors are close numbers chosen to catch a candidate who recalls a rough figure.In the Business Reform Action Plan ranking for 2019, which was released in September 2020 and placed Uttar Pradesh second, which state was placed first?
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Answer: C — Andhra Pradesh
Andhra Pradesh topped the 2019 ranking, with Telangana third, Madhya Pradesh fourth and Jharkhand fifth. Telangana was second in 2018, which is the reason it is the tempting wrong answer for a candidate who remembers the earlier round. The ranking must always be quoted with its year.Under the Industrial Investment and Employment Promotion Policy, 2022, in which group of regions is the stamp duty exemption 100 per cent?
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Answer: A — Bundelkhand and Poorvanchal
The policy gives 100 per cent in Bundelkhand and Poorvanchal, 75 per cent in Madhyanchal and Paschimanchal, and 50 per cent in Gautam Buddh Nagar and Ghaziabad. Lucknow lies in the Madhyanchal region, which gets 75 per cent, so it is not in the 100 per cent tier. The incentive rises with backwardness, which is the rule the wrong options reverse.Consider the following statements about Noida International Airport and select the correct answer using the codes given below.
P. It is being developed on a design, build, finance, operate and transfer basis.
Q. The concession period under the agreement is 40 years.
R. Commercial flight operations began on 15 June 2026.
S. The airport is owned and operated directly by the state's development authority.Show answer
Answer: C — P, Q and R only
P, Q and R are correct: the DBFOT model, the 40-year concession, and the commercial start in June 2026. S is false, because the airport is run by a private concessionaire, Yamuna International Airport Private Limited, and not by the state authority. The trap is to assume a state-linked project is state-run.A report states that the per capita income of Uttar Pradesh for 2024-25 is Rs 1,09,844 and the per capita GSDP for the same year is Rs 1,26,304. Which is the best explanation for the gap between the two figures?
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Answer: A — The income figure is net of depreciation, while GSDP is gross
A net measure subtracts depreciation from a gross measure, so the net per capita figure must be lower than the gross one for the same year, as here. The constant-price option is a tempting false explanation because both figures are for the same year at current prices. The Survey itself reports both, so the gap is a definitional matter rather than an error.According to NITI Aayog's National Multidimensional Poverty Index progress review of 2023, which uses NFHS-4 and NFHS-5, what was the change in Uttar Pradesh's share of multidimensional poor between the two surveys?
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Answer: A — A fall of about 14.75 percentage points
The share fell from 37.68 per cent in NFHS-4 to 22.93 per cent in NFHS-5, a fall of 14.75 points. The 22.93 option names the end value rather than the change, and the rise option reverses the direction. The index measures deprivation, so a fall is an improvement.How many Uttar Pradesh districts were among the 112 Aspirational Districts identified by NITI Aayog when the programme was launched in January 2018?
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Answer: B — 8
The eight UP districts are Chitrakoot, Fatehpur, Bahraich, Shrawasti, Balrampur, Siddharthnagar, Chandauli and Sonbhadra. The count refers to the 112-district list NITI Aayog identified at launch in January 2018. The close numbers are the distractors.