UP proves how improved law and order, good policies can yield handsome results: Arvind Panagariya

Dr Arvind Panagariya, Chairman of 16th Finance Commission
| Photo Credit:
SANDEEP SAXENA

Uttar Pradesh has proved that good policies and established law and order can deliver positive results, Arvind Panagariya, Chairman of 16th Finance Commission has said. Meanwhile, for the country as a whole, he cautioned about serious challenges in the area of energy due to the ongoing war in West Asia.

In an e-mail interview to businessline, Panagariya, the Jagdish Bhagwati Professor of Indian Political Economy at Columbia University, highlighted the growth story of the northern state by underlining that average growth in the last three years ending FY25 has been 8.3 per cent. “This is the highest rate among the large states. Uttar Pradesh is an example of how improved law and order and good policies can yield handsome results,” he said.

According to the state’s Economic Survey, tabled in the assembly on February 10, the size of UP’s economy has more than doubled over the past eight years and is poised to touch ₹36 lakh crore in 2025-26. According to the Survey, the state’s Gross State Domestic Product (GSDP) has risen from ₹13.30 lakh crore in 2016-17 to ₹30.25 lakh crore in 2024-25, registering a compound annual growth rate (CAGR) of 10.8 per cent. The state’s contribution to the national economy has increased from 8.6 per cent to 9.1 per cent during the same period, it added. Now the state aims to achieve $1 trillion (approximately ₹82 lakh crore) by 2027-28.

Overall Indian economy

Panagariya said the economy’s performance has been better than predicted with all domestic and international institutions, agencies, and individuals having to keep revising their forecasts upwards. He said that based on the new GDP series, real GDP grew at an average annual rate of 7.3 per cent over the three years ending in 2025-26. Manufacturing grew at the average annual rate of 11.2 per cent in real terms. “I am cautiously optimistic that we may be finally seeing a significant acceleration in manufacturing growth,” he said.

However, there is big challenge to the country’s economy.  

“Immediately, we do have a serious challenge in the area of energy from the Israel-US-Iran war,” he said. This remark has come at a time, when shipping through the Strait of Hormuz between Iran and Oman, which carries around a ​fifth of oil consumed globally as well as large quantities ​of gas, has ground to a near halt after vessels in ⁠the area were struck as Iran hit back after US and Israeli ​strikes. Nearly 40 per cent of crude supply to India comes from this route.

Published on March 5, 2026