Buoyed by a strong performance in the services sector (which is allied to the Information Technology industry in Bengaluru), the Karnataka economy is set to register a GSDP growth of 18.4 per cent in the current fiscal year â€“ the highest in the last five years and the first GSDP growth in excess of 10 per cent since the Covid-19 pandemic years, according to a state economic survey released by the government Friday.
The state will record a GSDP of Rs 20.49 lakh crore in 2021-22 which is a sizable jump from the Rs 17.31 lakh crore recorded in 2020-21, according to estimates presented in the economic survey. The biggest contributor to the surge in GSDP has been the services sector â€“ the bulwark of the state economy â€“ with a 15 per cent growth in GSDP from Rs 10.40 lakh crore to Rs 12.06 lakh crore. The two other key sectors contributing to the Karnataka economy, agriculture and industry, have been sluggish.
Despite the effect of the Covid-19 pandemic being felt across the whole state economy â€œthe state has rallied, however, towards the end of FY21 and continues to do so through FY22,â€ says the survey.
â€œThe state grew by 7.2 per cent in nominal terms during the pandemic-struck FY21 compared to the -3 per cent recession of the national economy. In FY22, Karnataka is estimated to grow at a robust rate of 18.4 per cent compared to 17.5 per cent for India,â€ says the economic survey of Karnataka.
â€œKarnataka is among the top five states in India and has demonstrated strong growth over the years. Its per capita GSDP of INR 3.05 lakh (estimated for FY22) is the highest among the top five states. A stand out feature of the state economy is it has the highest share of services in the Gross State Value Added of 66.1 per cent in FY22 (estimates) â€“ the highest among all states, a product of its robust IT services industry and other technology-driven areas,â€ the economic survey has reported.
The last time Karnataka recorded a year-on-year GSDP growth in excess of 15 per cent was in 2016-17, when a growth of 15.5 per cent was reported. The growth was in the range of 10 per cent for two subsequent years before slipping below 10 per cent in the Covid years. The services sector has seen a surge in growth in GSDP in the Covid year compared to the industry and agriculture sector.
The industry sector GSDP in 2021-22 is Rs 3.61 lakh crore compared to Rs 3.04 lakh crore the previous year and Rs 3.14 lakh crore in 2019-20 while the agriculture GSDP is Rs 2.57 lakh crore in the current fiscal compared to Rs 2.24 lakh crore last fiscal and Rs 1.81 lakh crore in 2019-20.
â€œThe pandemic dampened the industrial growth more than the other sectors. As a result, in FY21, the industrial share has decreased to 19.4 per cent (gross state value added or GSVA from 21.3 per cent in FY20) while services remain at 66.3 per cent and agriculture jumped to 14.3 per cent (from 12.3 per cent in FY20). Agricultural growth has been supported by favourable monsoons, significant Budget spends and subsidies. This new composition with dampened industrial contribution has continued in FY22,â€ the economic survey for Karnataka for the year 2021-22 has reported.
â€œThe state has had to face a lot of challenges over the past two years due to the onset of the Covid pandemic which has resulted in a slowdown of the economy. However, the economy seems to be rebounding as seen in the revenue collection figures for 2021-22,â€ Karnataka Chief Minister Basavaraj Bommai said in his Budget speech Friday.
He added, â€œThe revenue collection started in a sluggish manner due to the second wave of the Covid pandemic at the start of the year. However, during the course of the year, it has picked up and we will be reaching our targets estimated in the Budget.â€
Although allied services sectors, like the hospitality and tourism services, suffered during the pandemic, the IT services sector, which is a key component of the economy in Karnataka, has thrived in the last two years on account of a surge in demand for IT-related services in the Covid hit world.
Indian software exports in the current financial year are estimated to be worth $170 billion USD with Karnataka contributing an estimated 38 per cent. â€œMore than 21 lakh people are employed in the software industry with high-paying jobs centred mostly in Bengaluru city. Further, the state has more than 40 unicorns (companies with valuation of more than $1 USD billion) â€” 42 per cent of Indiaâ€™s total of 95 unicorns. It has 13,000 plus start-ups. Karnataka received more than $16 USD billion in FDI in the pandemic struck FY21 signifying the potential of its technology based growth engines,â€ the economic survey reads.