CHALLENGES OF DEVELOPMENT AND EMPLOYMENT GENERATION IN UP: THE ROLE OF FINANCIAL INSTITUTIONS

Abstract

The distinguishing feature of UP’s economy is its regional imbalance. The state is divided into four economic regions – eastern, western, central and southern. All these regions have different climatic conditions, soil types and infra-structural development. The western region is the most prosperous region, despite some catching up by other regions in the 1970s and 1980s.The food grain yield per acre in the eastern and central regions is only 80% of the yield in the western region. And the west-to-east gap widens when one considers all crops: the west has witnessed greater diversification of output and has more area under high-value commercial crops. The southern region has made little progress. By the mid-1990s, crop value per acre in this region was on average less than half that for the western region. Consequently, the gap between the southern region and the rest of the state has continued to widen. Thus, to interpret the state as one economic unit in undifferentiated terms would be misleading. Given the wide variations in the level of development in the state, we can expect that factors driving employment growth would also vary. It is likely that in the more developed western region, diversification of employment away from agriculture would reflect the role of demand-pull factors generated by agricultural dynamism, while in the eastern, central and southern regions distress-push can play a role in increasing the volume of non-farm employment. After 1991, banks have become the spine for the development of the economy on all parameters in any state. The banking sector of Uttar Pradesh is predominated by nationalized banks like SBI, Regional Rural Banks, Foreign Banks and also Private Banks. But the state’s credit deposit ratio stands at 43.6% (March 2011), which is lower than the national level of 75.1% during the same period. High credit ratio represents effective functioning of banking sector. Again, there is diversification of credit ratio from one region to other.