New Delhi: Uttar Pradesh plans to step up spending on high-tech industries and infrastructure while sticking to strict borrowing limits, finance minister Suresh Kumar Khanna said in an interview with Mint, as the most populous state seeks to market itself as an industrial hub.
Khanna added that Uttar Pradesh remains a revenue-surplus state, giving the government fiscal space to pursue development while keeping its finances under control.
The state projects its budget deficit will remain under the mandatory 3% of gross state domestic product (GSDP) threshold for the upcoming fiscal year, supported by a forecast revenue surplus of ₹64,458 crore. Capital expenditure is slated to expand by 11% to ₹1.78 trillion, even as total debt is projected to shrink relative to the economy’s size.
The 16th Finance Commission has also recommended that states limit their fiscal deficit to 3% of annually during 2026-31 and work towards reducing their debt burden over time.
A surge in tax collection is providing the buffer needed to fund these ambitious growth targets. Uttar Pradesh’s domestic goods and service tax () revenue grew 13.5% in the five months through August, outpacing national gains and pushing the state to fifth place in tax collection nationwide, behind industrial powerhouses like Maharashtra and Gujarat.
Foreign investors, too, are taking notice, with annual foreign direct investment (FDI) inflows into Uttar Pradesh reaching $910 million in 2025, more than double the previous year’s level. Cumulative foreign direct investment (FDI) equity inflows since October 2019 stood at ₹24,708 crore by March 2026.
Uttar Pradesh seeks to position itself as a major investment destination across sectors, including pharmaceuticals, semiconductors, green hydrogen and electronics. Khanna said the state was building an investment facilitation ecosystem to make it easier for companies to establish and expand operations.
Betting on pharma, chips and green hydrogen
Khanna said FDI into the state was on the rise, adding that the government has introduced online incentive schemes and strengthened platforms such as Nivesh Mitra and Nivesh Sarathi to facilitate investment.
“Whatever industries come to the state, there should be a proper facilitation mechanism for them,” he said.
The minister said that the upcoming investment strategy would increasingly focus on sectors that can expand Uttar Pradesh’s industrial and economic base, with pharmaceuticals, semiconductors, green hydrogen and electronics among the areas being targeted.
Khanna also attributed the state’s growing contribution to goods and services tax (GST) collections to increased economic activity and stronger enforcement of the rule of law.
“Uttar Pradesh is becoming a key state in the GST collection. The reason behind this is that the rule of law is being properly enforced and development has accelerated,” he said.
Uttar Pradesh has emerged as one of the country’s largest GST-generating states, with domestic GST collections rising 13.5% to ₹49,493 crore during April-August 2026, according to the latest state-wise data.
This puts Uttar Pradesh fifth among states, after ( ₹1.63 trillion), Karnataka ( ₹73,008 crore), Gujarat ( ₹63,540 crore) and Tamil Nadu ( ₹53,774 crore). Its collections also grew faster than the national domestic GST collection growth of 5.3% during the period. In August alone, UP’s domestic GST collection rose 19% year-on-year to ₹9,092 crore, compared with 9% growth nationally.
No reduction in GST collections
Khanna also pointed to the experience following the GST rate cuts announced on 22 September last year. “When the GST rates were reduced, there was a view that collections would decline, but that did not happen. Collections continued to increase,” Khanna said.
The rate reductions, he added, provided relief to consumers without adversely affecting revenue mobilisation.
“When a new system is introduced, it cannot be completely foolproof in the beginning,” he said. New systems are often initially implemented on a pilot basis and refined before being rolled out more extensively, he added.
The GST system, Khanna said, has similarly undergone considerable refinement since its launch.
He also defended the consultative mechanism of the , saying it provides states with an avenue to repeatedly raise concerns and seek changes.
“The GST Council is a forum where everyone can discuss their issues. Everyone gets an opportunity to put forward their views, and they can do so as many times as they want, including opposition-ruled states,” he said.