The credit flow to the state’s priority sectors is most likely to be substantial; for the fiscal year 2024-25 (FY25), the aggregate amount of lending is to reach Rs 5.73 trillion, which results from over 50% growth compared with the previous fiscal. Uttar Pradesh’s FY24 saw a credit flow of Rs 3.75 trillion, with strong financial momentum.
Uttar Pradesh faces the test of growth in key sectors and has a challenge to go for the ambitious target that it has set for becoming a $1 trillion economy, which will require 250 per cent growth in agriculture; 300 per cent in MSMEs; and a 450 per cent expansion in services. These targets put prime importance on increased credit flow to stimulate the engine of the state’s economic growth.
The Yogi Adityanath government is aggressively pushing banks to expand the Uttar Pradesh credit deposit (CD) ratio. Having risen from 47 per cent in 2017 to 60 per cent in FY24, the state is now targeting 65 per cent by FY25-end. The CD ratio is the proportion of loans disbursed by a bank against the deposits available with it. A more positive CD ratio would mean increased liquidity and access to financing for industries.
The state’s agricultural as well as MSME sector is expected to receive loans at Rs 2.46 trillion and Rs 2.92 trillion, respectively during FY25. Agricultural loans would grow by 6% but MSME loans would surge by as much as 178%, from Rs 1.05 trillion in FY24 to Rs 2.92 trillion in FY25. The boom in MSME lending is critical as it forms 60% of the state’s industrial output and focuses upon two-fold exports from Rs 1.5 trillion to Rs 3 trillion in the next few years.
To encourage private investment and enhance the credit ecosystem, the state government has announced a policy that makes the performance of the district magistrates and the divisional commissioners dependent on the efforts made by them for encouraging investments and bettering the business environment. This will improve credit flow by easing the ease of doing business and by encouraging a better environment for investment.
Additionally, the state is promoting initiatives in modernizing agriculture by encouraging agri-tech startups. This will collaborate with international institutions such as IFC, World Bank, and Google for innovation in agriculture using AI and data analytics. This will result in the generation of nearly a million new employment opportunities in the rural sector. It will ensure sustainable farm growth and enhance credit demand across sectors.
