On the up and up: Karnataka's share in India's GDP

Per capita income also up but regional disparities, overdependence on services weighing state down, according to the Economic Survey.

Bengaluru: Karnataka's share in India's economy has been rising steadily. The state is expected to contribute 8.9 per cent in the current fiscal year.

The Gross State Domestic Product (GSDP) is estimated to reach Rs 28.83 lakh crore, or $331 billion, an increase of 12.8 per cent from Rs 25.57 lakh clocked in the previous financial year, according to the Economic Survey of Karnataka released on Friday.

At constant prices, Karnataka's GSDP is estimated to expand by 7.4 per cent in 2024-25, higher than the national growth rate of 6.4 percent.

Except for one year, the state has consistently beaten the national economic growth rate since 2012-13.

The net result of this faster growth is a higher share in the national GDP — 8.3 per cent in 2022-23, 8.6 per cent in 2023-24 and Rs 8.9 per cent in 2024-25.

Karnataka has reported growth in all three sectors. In the current fiscal year, agriculture is expected to grow by 4 per cent, compared with -4.9 per cent in 2023-24. Industries will grow slower — 5.8 per cent vs 7.3 per cent — due to the gradual recovery from Covid distress, the survey states.

Services, the mainstay of the state's economy, will expand by 8.9 per cent as against 7.9 per cent due to growth in IT-related services.

The state also seems to be making rapid strides in per capita income, which is expected to rise by 12.1 per cent to Rs 3.8 lakh in 2024-25, the survey notes.

A steady growth in tax and non-tax revenues have helped keep fiscal deficit at 3 per cent of the GSDP. In 2023-24, Karnataka exported goods and services worth Rs 13.78 lakh crore, accounting for 20.5 per cent of India's total exports. Software and services exports dominated with a 41 per cent share, while merchandise exports contributed just 6.09 per cent.

To increase the GSDP, the state's Industrial Policy 2020-25 aims to propel Karnataka's merchandise export to the third position in the next five years, as per the survey.

Skewed growth

The survey also flags skewed growth patterns in the state's economic growth.

The GSDP continues to depend heavily on the services, whose share is estimated at a whopping 68.1 per cent in 2024-25. Industries are expected to contribute 20.2 per cent and agriculture just 11.7 per cent.

Further, economic growth remains highly skewed between Bengaluru and other districts.

Bengaluru Urban's share in the GSDP increased from 37.8 per cent in 2022-23 to 39.1 per cent in 2023-24. Its per capita income was Rs 7.38 lakh, more than the double the state average. Curiously, Bengaluru Rural's share declined from 1.9 per cent to 1.6 per cent.

Yadgir, Karnataka's poorest district, contributes just 0.9 per cent to the GSDP and its per capita income is 1.46 lakh.

On regional imbalance, the survey states that the reduction in devolution for Karnataka under the 15th Finance Commission — 4.74 per cent to 3.64 per cent — was due to the large per capita income of Bengaluru and southern districts. While the socio-economic or human development indicators are far less than backward states, Karnataka does have severe regional imbalance.

While the state government provides Rs 5,000 crore per year to seven backward districts, the government of India should provide matching grants, the survey states.

According to NITI Aayog's Sustainable Development Goal (SD) India Index Report (2023-24), Karnataka's SDG score has improved from 71 in 2020-21 to 75 in 2023-24. While the state has made notable progress in 11 SDGs, including poverty alleviation and health, four goals require further improvement, including education, gender inequality, infrastructure and zero hunger.