Karnataka’s road to a trillion

Karnataka aims to become a $1 trillion economy by 2031, a goal with transformative potential for its 6.85 crore people, especially its young and dynamic workforce.  
With an average nominal GSDP growth rate of 15.22% from 2021-22 to 2024-25, the state is on track to achieve this milestone by 2033. However, with focused policy interventions and efficient implementation, the timeline could be advanced to 2032.

With a sustained nominal growth of 15.22%, Karnataka could reach high-income status — defined by developed country’s per capita income threshold — by 2034-35, about 13 years ahead of India’s national Viksit Bharat (2047-48).

As India’s third largest economy, Karnataka has emerged as the second fastest-growing state, with last four-year average nominal GSDP growth of 15.22% — just 0.16 percentage points below Uttar Pradesh (15.38%), the fastest-growing state.

This is a notable improvement over the pre-pandemic period (2015-16 to 2018-19), when the state’s average nominal growth was only 12.82%. The recent surge highlights Karnataka’s resilience and potential for sustained expansion, strengthening its prospects of achieving both a trillion-dollar economy and high-income status.

During the post-pandemic phase (2021-22 to 2024-25), Karnataka recorded an average real GSDP growth of 8.73%, higher than the national average of 8.25% — the best among southern states, including Puducherry. This strong performance was driven primarily by the service sector, which grew by 10.54%.
Within this sector, trade, hotel and restaurants registered the average growth of 12.16%, while real estate grew
by 11.46%. The secondary sector also performed well, averaging 7.98% growth, led by an 8.95% expansion
in construction.

Agriculture revitalisation: The Trillion-Dollar Vision Document proposes several initiatives for the agriculture sector —  adoption of modern farming techniques, promotion of agri-startups, focus on post-harvest management, use of IOT based micro irrigation, carbon credit monetisation, and silvi-horticulture. These strategies appear to be yielding positive results, reflected in the sector’s recent recovery.

In 2024-25, Karnataka’s real growth rose to 7.37%, up from 5.98% in 2023-24, largely due to a rebound in the primary sector, which shifted from a contraction of -1.62% to a growth of 5.17%. 

To hit the trillion-dollar target by 2031, Karnataka would need to maintain a nominal growth rate of 18.95% per annum, assuming a 2% depreciation of the rupee-equivalent to a real growth rate of 13.95%, which seems ambitious. Based on current growth dynamics, the state is more likely to reach the goal by 2033.
For comparison, at their respective (four-year average) growth rates, Maharashtra (14.84%) could reach the trillion-dollar mark by 2030–31, followed by Gujarat (16.63%) by 2032–33 and Tamil Nadu (14.92%) by 2033–34. Other states are expected to reach this milestone after 2033–34.

Karnataka’s growth engine continues to be the services sector, driven by high value modern services such as IT, financial services, real estate and professional services and traditional services like trade, hotels and transport.

Bengaluru anchors this dominance, serving as India’s technology and innovation hub and a top global investment destination. The state’s services exports have grown rapidly, crossing $150 billion in 2024-25, up from $130.3 billion in 2022–23 and $139.9 billion in 2023–24. Karnataka also ranks second after only to Maharashtra in FDI inflows, attracting $57.65 billion between October 2019 to March 2025, accounting for 20% of national FDI equity inflows.

Karnataka has a diverse industrial base encompassing electronics and hardware, pharma and biotech, aerospace, automobile components, and engineering goods. The state is now emerging as a semiconductor and electronics manufacturing hub, with dedicated parks and targeted investment promotion.

In merchandise exports, Karnataka consistently ranks among the top states, exporting significant volumes of electronics, machinery, pharmaceuticals, gems and jewellery, and processed agricultural products. Its merchandise exports doubled from $15.14 billion in 2020-21 to $30.481 billion in 2024-25, highlighting its growing global competitiveness.  

According to the World Bank, the per capita income threshold for high-income countries is currently $14,006 (2024-25) and is expected to rise to $18,414 by 2047-48. For 2034-35, this benchmark is estimated at $16,100. As per National Statistical Office (NSO) of the Ministry of Statistics and Programme Implementation (MoSPI), Karnataka’s per capita income stands at Rs 3,80,906, second only to Telangana (Rs 3,87,623) and 1.86 times the national average of Rs 2,05,234. Maintaining its nominal growth rate of 15.22% would enable the state to cross the high-income threshold by 2034-35, alongside Gujarat and Tamil Nadu.

Challenges and policy imperatives

While Karnataka’s fundamentals remain strong, sustaining double-digit growth requires addressing emerging constraints. The recent slowdown — from 11.06% (2021-22) and 10.52% (2022-23) to 5.98% (2023-24) and 7.37% (2024-25) — reflects a decline in construction and real estate activities, partly due to regulatory bottlenecks and financing constraints.

The agriculture sector also faced negative growth in 2022-23 and 2023-24, driven by erratic rainfall, water scarcity and lower crop incomes.

While Karnataka still ranks second in attracting the FDI, next only Maharashtra, the FDI flows declined from $10,429 million in 2022-23 to $6,619 in 2024-25, signalling the need for infrastructure upgrades, logistics efficiency and regional skill development to scale manufacturing.

The Karnataka Economic Survey (2021-22) outlined a 13-point agenda, emphasising investments in specialised hi-tech industries like biotechnology, semiconductors, electronics design, and advanced materials. Effective execution of this road-map could accelerate Karnataka’s progress, potentially enabling it to achieve the trillion-dollar milestone by 2032 and emerge as a national leader in innovation-led inclusive growth.

Although Karnataka ranks second in per capita income, it records the lowest revenue receipts-to-GSDP ratio and the second-lowest revenue-expenditure-to-GSDP ratio among major states. Enhancing its fiscal capacity is crucial to meet infrastructure and business needs.  

The trillion-dollar target is not merely an economic milestone; it is a symbol of Karnataka’s aspirations to lead India’s next growth chapter. Powered by its youth, technology ecosystem, and entrepreneurial spirit, the state stands at the threshold of a historic transformation. If it sustains its reform momentum and bridges existing gaps, Karnataka could well emerge as the first Indian state to combine high income with high inclusion — a true benchmark for Viksit Bharat.

(Manjunatha is associate professor and head, Centre for Ecological Economics and Natural Resources, Institute for Social and Economic Change; Shanmugam is former director, Madras School of Economics; Madheswaran is former director, ISEC)