Mayawati government sent several proposals to UPA government seeking funds for development. In one such proposal, Mayawati government sought Rs 80,000 crores for development of Bundelkhand and Eastern UP.

The Opposition parties, however, accused Mayawati of diverting several thousands of crores of rupees to construction of statutes including her own and development of parks.

Prime minister Dr Manmohan Singh constituted a committee under the chairmanship of Central Planning Commission member and former cabinet secretary Mr B.K. Chaturvedi to prepare a roadmap for rapid economic development of UP and submit a report accordingly.

The Planning Commission report pointed out that the most important factor responsible for the slow rate of growth in UP was the low level of public and private investment in the state. UP was unable to mobilize adequate resources of its own due to low income level. Central plan assistance to UP has also been below average. Moreover UP was not able to attract investment in central PSUs on any substantial scale as the state did not possess any technical and economic locational advantage.

UP is not perceived as an investment destination .The state has not been able to attract much investment from outside whether domestic or foreign .The state being land-locked did not find investors in major export industries like IT sector, gems, jewellery, textiles, engineering. UP's share in total proposed investment through Industrial Entrepreneur's Memoranda in the country between August 1991 and November 2007 was a meager 5.3 per cent.

The inflow of foreign investment into the state has been even less. UP could only get a paltry sum of Rs 2252 crores during January 1997 and April 2006 as foreign direct investment approvals which was a mere 1.04 per cent of total FDI approvals of Rs 2,17,487 crores in the country.

Other indicators of investment flow also reveal a similar scenario for UP. For instance, UP's share in bank loans has declined from 5.15 per cent in 2001 to 3.3 per cent in 2006.Its bank credit-deposit ratio is much lower than the national average.

The major factor responsible for the slow pace of development identified by the Planning Commission report are: (a) Poor Investment Climate (b) Infrastructural Bottlenecks (c) Land-locked nature of the state (d) Policy related issues and governance related issues.

The Planning Commission report pointed out that the investment climate in the state is far from attractive. Entrepreneur's in the state complained about power shortage, anti-competitive practices, tax rates and adverse perception about corruption, regulation and law and order. Among the other bottlenecks mentioned by them include tax administration, transportation, economic and regulatory policy uncertainty, macro instability, skill and education of workers, labour regulation, business licencing customs and trade, access to land and telecommunication.

The report said that UP lagged behind the infrastructure development. Power was the most critical bottleneck in case of UP. The shortfall in supply has been around 20 per cent in recent years while peak demand shortfall is nearly 28 per cent.

The road system in UP is marked by several deficiencies like low road density substandard quality of roads and poor maintenance. A major problem in the state is the poor village connectivity, which is a major constraint in linking rural economy with markets.

The financial infrastructure in UP is very inadequate as revealed by various indicators such as number of bank branches pr lakh of population, per capita credit, credit deposit ration. Agricultural credit system in UP is extremely weak except in a few western districts. The primary agriculture cooperative credit societies are mostly sick. The Central Cooperative banks too are not in a healthy condition.

Major cities of the state are suffering from the problem of urban infrastructure. All cities have to face power shedding for several hours every day. The urban road system is overloaded with heavy traffic and frequent jams to problems of narrow roads.

Another constraint, which has acquired importance especially in the context of the post-liberalisation era and globalisation, is the land-locked nature of the state. The ports in east and west are far away; that is why the transporting cost for exporting goods is high. That is also the reason the state did not attract investors in major export industries.

The report also pointed out that policy framework in the state has failed to create a conducive environment for promoting investment and economic growth. Rigidities in land labour and product markets constraints investment and restrict economic activity. The land market is not very active.

The report said that there was widespread perception that poor governance and corruption are major causes for poverty, backwardness and low human development in UP. The quality of civil services has been adversely affected by frequent transfers and short tenures of officers.

A major issue with policymaking process has been lack of stability in policy decisions. Often policy declarations of the previous government are rescinded by the succeeding government or remain unimplemented.

The report said that there had been a lack of effective decentralization in the state. Progress with respect to the transfer of function and functionaries to the local bodies has remained rather unsatisfactory. (IPA Service)