Covid-hit Karnataka economy to contract by 2.6% in FY21: Survey

Karnataka's revenue resources were hit when a nationwide lockdown was announced to prevent the spread of Covid-19

The Covid-19 pandemic-induced lockdown has taken a toll on Karnataka's economic growth. As per the initial estimates based on fixed prices, the gross state domestic product (GSDP) is likely to contract by 2.6 per cent as against 5 per cent growth witnessed during 2019-20. In contrast, the national economy is projected to contract by 7.7 per cent for the current fiscal.

While the industries and services sectors are set to contract by 5.1 per cent and 3.1 per cent respectively, the agriculture sector is set to see a remarkable growth of 6.4 per cent, according to the Economic Survey of the state for 2020-21, tabled in the state legislature on Monday.

The share of Karnataka’s GSDP in all India GDP is 8.5 per cent during 2020-21.

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The revenue resources of the state include the state's own tax, non-tax receipts, share from central taxes and grant-in-aid from the Centre. However, most of these were hit when a nationwide lockdown was announced to prevent the spread of Covid-19 during 2020-21. “The state and central government's tax collections are lesser than the budgetary estimates due to complete stoppage of economic activities on account of lockdown,” CM B S Yeddyurappa said in his budget speech.

Due to this, the share of central taxes payable to the states has been reduced in the revised estimates. Hence, the share of the state in central taxes has come down to Rs 20,053 crore in the revised estimates from the budgetary estimates of Rs 28,591 crore in 2020-21. Due to these reasons, the state’s revenue resources could not reach the targets of 2020-21. The Centre has stated in its 2021-22 budget that the share from central taxes to be provided to the state will be Rs 24,273 crore, Yeddyurappa said in his budget speech.

The advance estimates of Gross State Domestic Product (GSDP) of Karnataka for the year 2020-21 highlight that at constant prices (2011.12), the GSDP is likely to attain a level of Rs 11,13,818 crore due to lockdown.

The per capita state income (i.e. per capita NSDP) of Karnataka at current prices is estimated to be Rs 2,26,796 showing a rise of 1.6 per cent during 2020-21, as against Rs 2,23,175 in 2019-20.

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The contribution of the agriculture sector to the overall GSDP saw a marginal increase from 12.16 per cent to 13.15 per cent in 2020-21 against 2019-20. Industry sector saw a marginal decrease from 21.68 per cent to 20.31 per cent in 2020-21 against 2019-20. The services sector, the largest component of GSDP saw a marginal increase from 66.16 per cent in 2019-20 to 66.53 per cent in 2020-21.

The contribution of real estate, professional services and ownership of dwellings is highest with 33.46 per cent in 2020-21, followed by manufacturing at 13.11 per cent, trade and repair services at 10.38 per cent and crops at 8.57 per cent.

The state’s revenue receipts increased from Rs 1,77,255.48 crore in 2019-20 (RE) to Rs 1,79,919.76 crore in 2020-21 (BE). The state’s own tax revenue has increased from Rs 17,220 in 2019-20 (RE) to Rs 18,249 in 2020-21 (BE). The budgeted tax revenue is anticipated at Rs 1,56,698.04 crore in 2020-21 (BE) as against Rs 1,49,907.91 crore in 2019-20 (RE).