<p>Karnataka confronts a challenge that extends beyond headline growth numbers: deep and persistent regional imbalances that threaten the sustainability and inclusiveness of its development trajectory. The state ranks among India’s strongest-performing states on macroeconomic indicators. It contributes close to 9 per cent of national GDP, and its per-capita income, estimated at around Rs 3.8 lakh in 2024-25, is substantially higher than the national average, according to the Karnataka Economic Survey. Gross State Domestic Product (GSDP) rose from about Rs 25.6 lakh crore in 2023-24 to nearly Rs 28.8 lakh crore in 2024-25, reflecting growth of over 12 per cent at current prices. On aggregate, Karnataka stands among India’s top growth engines.</p>.<p>Yet these averages conceal stark inter-district disparities. District-level income data reveal that Bengaluru Urban’s per-capita income exceeds Rs 6 lakh, while districts such as Yadgir and Kalaburagi report per-capita incomes close to Rs 1.2 lakh. Such gaps are not marginal; they reflect structural divergence within the state economy that has persisted for decades.</p>.<p>The concentration of economic output further illustrates this imbalance. Bengaluru Urban alone accounts for roughly 36-39 per cent of Karnataka’s GSDP. High-value services – information technology, finance, professional services, and start-ups – are overwhelmingly concentrated in the capital region. Outside Bengaluru, even relatively advanced districts such as Dakshina Kannada and Udupi contribute far smaller shares, typically under 6% each. Meanwhile, the combined contribution of several northern and interior districts remains modest, with economies dominated by agriculture, informal employment, and low-value manufacturing. Growth is not only uneven; it is spatially narrow.</p>.National Consumer Day | From scarcity to instant gratification.<p>These patterns are the outcome of historical policy choices. Bengaluru’s emergence as India’s leading technology and services hub was enabled by decades of sustained public investment in higher education, research institutions, transport connectivity, and urban infrastructure, long before the IT boom of the 1990s. State-supported engineering colleges, management institutes, and public research centres created a skilled labour base that attracted private capital and multinational firms.</p>.<p>A parallel, regionally distinct trajectory unfolded along the coastal belt, particularly in Dakshina Kannada and Udupi. Early investments in port infrastructure, petroleum refining, cooperative banking, education, and healthcare produced diversified local economies. Mangaluru Port remains one of Karnataka’s key maritime gateways, while the region’s dense network of educational and medical institutions has delivered better human development outcomes than the state average. These institutional advantages translated into higher labour productivity, entrepreneurship, and economic resilience.</p>.<p>In contrast, many districts in Uttara Karnataka and interior regions lack such networks, making them less attractive to private investment and locking them into lower-productivity activities. The neglect is not confined to the traditionally backward districts of northern Karnataka. Uttara Kannada presents a distinct but equally concerning case. Despite its rich natural endowments – forestry, hydropower potential, fisheries, biodiversity, and ecotourism assets – the district remains under-invested in industrial infrastructure, logistics connectivity, and higher education.</p>.<p>Human capital disparities further deepen these divides. Bengaluru and coastal districts consistently outperform northern and interior districts on education, health, and skill indicators.</p>.<p><strong>Necessary course correction</strong></p>.<p>These realities point to clear policy imperatives for the 2026 Budget. Public investment can no longer remain spatially neutral. Capital expenditure must adopt a spatially corrective approach, explicitly prioritising districts with the lowest per-capita incomes and weakest infrastructure. Investments in irrigation, rural roads, logistics hubs, cold chains, and market infrastructure are essential to unlock agribusiness, non-farm employment, and regional value chains in lagging regions.</p>.<p>Human capital spending must also be reoriented. Equal per-capita allocations for health and education do not yield equal outcomes. Districts with poorer indicators require higher and sustained spending on teacher deployment, school quality, district skill centres, and primary healthcare infrastructure, guided by measurable district-level outcomes.</p>.<p>Industrial policy must be locally grounded. Replicating Bengaluru’s IT-centric model across regions is neither feasible nor desirable. Districts such as Uttara Kannada require tailored strategies that combine environmental sustainability with value-added activities in fisheries, forestry-based industries, renewable energy, and ecotourism, supported by appropriate infrastructure and regulatory clarity.</p>.<p>Karnataka’s regional imbalance is not an inevitable consequence of geography. It is the cumulative result of historical investment choices, agglomeration dynamics, sectoral concentration, and uneven institutional capacity. The 2026 Budget offers a critical opportunity to correct this trajectory not through blanket subsidies, but through precise, data-driven fiscal policy that enables lagging regions to catch up, broadens the state’s economic base, and strengthens long-term resilience.</p>.<p><em>(The writer is an associate professor at the Department of Economics, Christ University)</em></p><p>(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)</p>
<p>Karnataka confronts a challenge that extends beyond headline growth numbers: deep and persistent regional imbalances that threaten the sustainability and inclusiveness of its development trajectory. The state ranks among India’s strongest-performing states on macroeconomic indicators. It contributes close to 9 per cent of national GDP, and its per-capita income, estimated at around Rs 3.8 lakh in 2024-25, is substantially higher than the national average, according to the Karnataka Economic Survey. Gross State Domestic Product (GSDP) rose from about Rs 25.6 lakh crore in 2023-24 to nearly Rs 28.8 lakh crore in 2024-25, reflecting growth of over 12 per cent at current prices. On aggregate, Karnataka stands among India’s top growth engines.</p>.<p>Yet these averages conceal stark inter-district disparities. District-level income data reveal that Bengaluru Urban’s per-capita income exceeds Rs 6 lakh, while districts such as Yadgir and Kalaburagi report per-capita incomes close to Rs 1.2 lakh. Such gaps are not marginal; they reflect structural divergence within the state economy that has persisted for decades.</p>.<p>The concentration of economic output further illustrates this imbalance. Bengaluru Urban alone accounts for roughly 36-39 per cent of Karnataka’s GSDP. High-value services – information technology, finance, professional services, and start-ups – are overwhelmingly concentrated in the capital region. Outside Bengaluru, even relatively advanced districts such as Dakshina Kannada and Udupi contribute far smaller shares, typically under 6% each. Meanwhile, the combined contribution of several northern and interior districts remains modest, with economies dominated by agriculture, informal employment, and low-value manufacturing. Growth is not only uneven; it is spatially narrow.</p>.National Consumer Day | From scarcity to instant gratification.<p>These patterns are the outcome of historical policy choices. Bengaluru’s emergence as India’s leading technology and services hub was enabled by decades of sustained public investment in higher education, research institutions, transport connectivity, and urban infrastructure, long before the IT boom of the 1990s. State-supported engineering colleges, management institutes, and public research centres created a skilled labour base that attracted private capital and multinational firms.</p>.<p>A parallel, regionally distinct trajectory unfolded along the coastal belt, particularly in Dakshina Kannada and Udupi. Early investments in port infrastructure, petroleum refining, cooperative banking, education, and healthcare produced diversified local economies. Mangaluru Port remains one of Karnataka’s key maritime gateways, while the region’s dense network of educational and medical institutions has delivered better human development outcomes than the state average. These institutional advantages translated into higher labour productivity, entrepreneurship, and economic resilience.</p>.<p>In contrast, many districts in Uttara Karnataka and interior regions lack such networks, making them less attractive to private investment and locking them into lower-productivity activities. The neglect is not confined to the traditionally backward districts of northern Karnataka. Uttara Kannada presents a distinct but equally concerning case. Despite its rich natural endowments – forestry, hydropower potential, fisheries, biodiversity, and ecotourism assets – the district remains under-invested in industrial infrastructure, logistics connectivity, and higher education.</p>.<p>Human capital disparities further deepen these divides. Bengaluru and coastal districts consistently outperform northern and interior districts on education, health, and skill indicators.</p>.<p><strong>Necessary course correction</strong></p>.<p>These realities point to clear policy imperatives for the 2026 Budget. Public investment can no longer remain spatially neutral. Capital expenditure must adopt a spatially corrective approach, explicitly prioritising districts with the lowest per-capita incomes and weakest infrastructure. Investments in irrigation, rural roads, logistics hubs, cold chains, and market infrastructure are essential to unlock agribusiness, non-farm employment, and regional value chains in lagging regions.</p>.<p>Human capital spending must also be reoriented. Equal per-capita allocations for health and education do not yield equal outcomes. Districts with poorer indicators require higher and sustained spending on teacher deployment, school quality, district skill centres, and primary healthcare infrastructure, guided by measurable district-level outcomes.</p>.<p>Industrial policy must be locally grounded. Replicating Bengaluru’s IT-centric model across regions is neither feasible nor desirable. Districts such as Uttara Kannada require tailored strategies that combine environmental sustainability with value-added activities in fisheries, forestry-based industries, renewable energy, and ecotourism, supported by appropriate infrastructure and regulatory clarity.</p>.<p>Karnataka’s regional imbalance is not an inevitable consequence of geography. It is the cumulative result of historical investment choices, agglomeration dynamics, sectoral concentration, and uneven institutional capacity. The 2026 Budget offers a critical opportunity to correct this trajectory not through blanket subsidies, but through precise, data-driven fiscal policy that enables lagging regions to catch up, broadens the state’s economic base, and strengthens long-term resilience.</p>.<p><em>(The writer is an associate professor at the Department of Economics, Christ University)</em></p><p>(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)</p>
