Projected growth at 7.9%, Karnataka picks pace on recovery road

Karnataka is estimated to register a 7.9 per cent growth in Gross State Domestic Product (GSDP) during the current fiscal, potentially setting the pace for the state’s run-up to its 2032 target of a $1-trillion (Rs 99.5 lakh crore) economy.

The state Economic Survey 2022-23, released on Friday, projected a GSDP growth from Rs 12.29 lakh crore in 2021-22 to Rs 13.26 lakh crore in 2022-23. The services sector has remained the strongest contributor, accounting for 64.04 per cent of the GSDP.

Karnataka’s GSDP share in the national GDP is at 8.2 per cent, compared to 8.3 per cent in 2021-22. Terming the progress in the state’s health indicators over the past few years “encouraging”, the economic survey highlighted the decrease in maternal mortality rate (per one lakh live births) from 97 in 2015 to 69 in 2020 and infant mortality rate (per 1,000 live births) from 28 in 2015 to 19 in 2020. The state has a Human Development Index of 0.644 and is ranked 11th in the country.

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Marginal falls were reported in the contributions from the agriculture sector (15.36 per cent to 15.08 per cent) and the industry (21.48 per cent to 20.88 per cent) to the GSDP. The services sector registered a minor jump (63.16 per cent to 64.04 per cent); within the sector, computer-related services contributed 24.34 per cent of the GSDP.

Recovery and future challenges

Karnataka’s per capita income – Rs 176,383 – saw a 7.2 per cent rise from Rs 164,471 in 2021-22. The survey said the steep rise in per capita income following a Covid-induced dip in 2020-21 indicated “gradual recovery”.

Highlighting a slew of measures to contain the revenue deficit and increase tax and non-tax revenues that helped the government maintain the fiscal deficit at 3.26 per cent, the survey said the state’s total expenditure increased from Rs 253,165 crore in 2021-22 to Rs 265,720 crore.

The survey did not track patterns in the post-Covid labour force and quoted the National Sample Survey data from 2020-21 to report an increase in labour force participation rate (51.2 per cent in 2018-19 to 56.9 per cent in 2020-21) and a fall in the unemployment rate (from 3.9 per cent in 2018-19 to 2.7 per cent in 2020-21).

The state’s outstanding liabilities, expected to grow to 27 per cent by 2025-26, presents a medium-term fiscal risk. The survey also highlighted challenges in improving efficiency in public expenditure and finding alternative revenue sources.

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Devolve and develop, the way forward

Only six districts – Bengaluru Urban, Belagavi, Dakshina Kannada, Ballari, Tumakuru, and Udupi – have a GDP higher than the state average.

Aimed at accelerating growth across sectors, the survey identified key-driver domains and underlined the need for policy shifts, including a critical push for decentralised governance in line with a NITI Aayog programme that has the district as a “fulcrum of development”. Delegation of powers, capacity-building measures and enhanced infrastructure support are envisioned under the programme.

A committee constituted by the Planning Department has recommended initiatives to achieve a state GDP of Rs 99.5 lakh crore by 2032.

Across the agriculture, industry and services sectors, focus areas have been identified for their growth potential. These include rural tourism, agri-tech startups, agro-processing, plug-and-play industrial clusters outside of Bengaluru, e-mobility, digihealth, edutech and gig economy.