West's slowdown may weigh down State's economy

West's slowdown may weigh down State's economy

With the crisis in global economy overturning the Centre’s growth target, Karnataka’s economy is most likely to again slip into the slow growth path in the forthcoming fiscal.

According to the economic survey report for 2011-12 fiscal, which is yet to be released by the State government, the Gross State Domestic Product (GSDP) growth in the current fiscal is pegged at around 6.4 per cent against the estimated 8.5 per cent.

A combination of factors like sluggishness in the IT sector, severe drought in 122 taluks and ban on iron ore mining and exports have hindered the State from achieving the target of 8.5 per cent growth. The State’s economy had clocked 8.2 per cent growth in 2010-11 fiscal, which was seen as a turnaround year after two successive years of global recession.

Sources said the global crisis affects the State economy more severely than the national economy. For, the State’s economy is closely linked to the global economy through Information Technology (IT) and mineral exports.

Trends in annual growth rates of India’s Gross Domestic Product (GDP) and Karnataka GSDP reflect that Karnataka is more vulnerable. Karnataka’s GSDP grew at a rate higher than the national GDP in the pre-economic slowdown period (between 2008-09 and 2010-11): while the State’s GSDP grew at 10.1 per cent and 12.9 per cent in 2006-07 and 2007-08 fiscal, respectively.

The national GDP recorded the growth of 9.7 per cent and 9.2 per cent during the same period.

At the same time, the State’s GDSP had touched a low of 3.7 per cent and 5.2 per cent during the slowdown periods of 2008-09 and 2009-10, respectively, while the national GDP growth was 6.7 per cent and 8 per cent, respectively, during the same period.

In 2010-11, when the State’s economy bounced back to the high growth path, the GSDP grew at 8.2 per cent, with 55 per cent, 28 per cent and 17 per cent contribution by service sector (IT and ITES), industry sector and primary sector (agriculture), respectively. Primary sector had performed well with 5.9 per cent growth rate.

The worst affected is said to be the primary sector in the next fiscal. Drought has wreaked havoc in the agriculture sector, the growth of which is expected to be around 4.5 per cent.

The total food grain production is likely to be 105 lakh tonnes, which is about 20 lakh tonnes less compared to the last year’s. In 2010-11, the primary sector had registered the growth rate of 5.9 per cent.

Sources said the service sector (IT and ITES), which is the biggest contributor to the GSDP, has not posted a very impressive growth and it is said to be in the region of 9 per cent. Last year, the sector had registered a growth rate of 9.7 per cent. Growth in the industrial sector is said to be by and large the same as the last year.


* State’s GSDP likely to register a growth of 6.4 pc in 2011-12 fiscal
* Primary sector likely to be worst affected due to severe drought
* Industry and service sector to register sluggish growth

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