Analysing economic progress of states through budgets & advance estimates

State budgets are often analysed to gauge the fiscal performance of the governments. But they, along with advance estimates, are also important tools to understand the broader economic progress of the respective states. Several states have come out with the Budgets for 2024-25 and hence advance estimates. Let us use them to analyse the economic performance or outlook of some of those states.

Uttar Pradesh

The budget assumption of the state showed that the nominal economic growth would be 5.8 per cent for the next financial year. This is much lower than 10.5 per cent pegged by the union Budget for the entire country during 2024-25. And Uttar Pradesh’s nominal GDP growth projections for FY25 did not have any high base effect as the economy is estimated to grow just 4.6 per cent in the previous year.

Size of the state’s economy in proportion to the nation’s is projected to come down to 7.6 per cent in the next financial year, which would be the lowest in six years. However, real GSDP growth is estimated to be higher at 8 per cent during the current financial year compared to 7.6 per cent at the national level. The state’s per capita income in proportion to the country’s declined during the Covid year of 2020-21 and 2021-22 compared to that in 2019-20. After that, it has been recovering but was still estimated to be just half of the nation’s during the current financial year.

Maharashtra

The state presented an interim-Budget for 2024-25 and may come out with the full budget after the general elections. Growth of the state economy in nominal terms is assumed by the budget to closely follow the nation’s even though it is a bit lower at 10 per cent against the latter’s 10.5 per cent for 2024-25. This could also be because of the much higher estimated growth of ten per cent during the previous year compared to the All-India’s 9.1 per cent. Due to this, the size of the state’s economy in proportion to the country’s is pegged at 14.5 per cent, a tad higher than 14.4 per cent estimated for 2023-24. However, it was lower than the previous two years but much higher than that during 2019-20 and Covid-hit year of 2020-21. The other numbers for the state are not updated.

Delhi

The state’s economy is estimated to grow by 9.2 per cent in nominal terms during the current financial year, a tad higher than the nation’s at 9 per cent. The Budget assumption for the next financial year is not in the public domain. The state’s economy is estimated to constitute 3.8 per cent of the national economy during 2023-24, almost the same as the trend line. With Delhi’s population contributing just 1.5 per cent to the nation’s, the per capita income of the state is likely to be two and a half times of the nation’s during the current financial year, according to official estimates. This is also more or less the same as the trend line in six years.

It should be noted that there is no one-to-one relation between GSDP and per capita income but a broad link. However, there is a one-to-one relationship between GSDP and GSDP per capita which, at the state level, is also 2.5 times of the nation’s, state finance minister Atishi Singh disclosed in her Budget speech. She said Delhi ranks first in per capita income (per capita GSDP) among states with a population of over ten million.

Punjab 

The state’s nominal GSDP growth is pegged at 9 per cent for 2024-25, lower than 10.5 per cent for the nation. It was always the case for the previous five years too except for the Covid-hit 2020-21 when the economy grew at current prices against contraction in the nation’s GDP. The same was the case with GSDP growth at constant prices vis-à-vis the national comparison. 

The economic size of the state has been slowly coming down compared to the nation’s over the six years. Its per capita income has been higher than at all-India level over this period but its proportion to the nation’s has also been declining. It is estimated to stand at around 107 per cent during the current financial year, as against around 117 per cent six years ago.

Himachal Pradesh

The state GSDP growth at current prices is assumed to be straight 1 percentage point shorter at 9.5 per cent for 2024-25 against the national one at 10.5 per cent. This has been the trend for the past four years. As such, the state’s per capita income, though always higher than the nation’s, has been coming down from 141 per cent of the all-India average six years ago to 128 per cent (estimated) during the current financial year.

Chhattisgarh

The state’s economy is expected to grow higher in nominal terms than the nation’s next financial year, according to budget assumptions. If this happens, this will be for the first time in at least six years. However, the size of the state economy in proportion to the national economy remained the same at 1.7 per cent over the years, barring the Covid-hit year of 2020-21 when it was slightly more.  The story in terms of real GSDP growth is expected to be quite encouraging for the current financial year. While the national GDP growth is projected to be better than expected at 7.6 per cent, the GSDP growth is likely to be even higher at 11.4 per cent, according to advance estimates.

Unlike, 2021-22 when the economy expanded 11.7 per cent in real terms on the low base of GSDP contraction during the Covid-hit 2020-21, this time around the base was quite high as the economy had expanded eight per cent during 2022-23, higher than the national GDP growth of 7 per cent.  However, the state’s per capita income is yet to catch up with the national average and remained in the range of around 80-83 per cent over the years.