Karnataka economy grows by 5.9% in FY13

Service sector remained major growth driver, agriculture, allied sector bounced in the year to record a growth of 1.8% despite 2 years of drought

Despite slowing growth of the services sector the Karnataka economy is expected to grow at 5.9% and reach Rs 3,03,444 crore in 2012-13 (GSDP at constant prices 2004-05)) as against 5.5% growth rate recorded in 2011-12. The services sector, which recorded 60 basis points drop in the growth rate, continues to be the major contributor to the state’s economy and is showing encouraging trends.

The state’s growth rate is slightly less than the all India average. The decline can be largely attributed to the State’s economy being more open to external trade as compared to the national economy, the pre-budget economic survey for 2012-13 released here today said.

The good news for the state’s economy is that the agriculture and allied sector has bounced back despite facing drought for two consecutive years and has achieved a growth rate of 1.8% in 2012-13 as against a contraction of 2.2% in 2011-12, according to advance estimates of Karnataka’s gross state domestic product (GSDP) at constant prices (2004-05).

Karnataka’s food grain production is likely to be 12.5 million tonnes as against the target of 13.65 million tonnes. On account of drought in 157 taluks of the state, low area coverage under Kharif and Rabi crops and loss of rain fed kharif crops is about 1.62 million hectares during 2012-13.

“The state’s various initiatives in the primary sector, especially in agriculture and allied activities, have contributed to better redistribution of wealth and inclusive growth,” the survey said.

According to the economic survey of Karnataka for 2012-13 tabled in the state assembly on Thursday, the growth rate in the industry sector is estimated to have stagnated at last year’s level of 2.4%. This was largely due to a sharp decline in the manufacturing sector and contraction in the growth rates of mining and quarrying sectors. However, the state’s revenue realization from major minerals has increased by 18% to Rs 875 crore as against the target of Rs 742 crore for 2012-13.

The services sector is likely to grow by 8.9% as against 9.5% in 2011-12 and it continues to be the key driver of the 5.9% growth of GSDP in 2012-13. The services sector consists real estate, ownership of dwellings and business services and banking and insurance among others.

At the same time, the per capita GSDP at constant prices is expected to increase by 4.9% at Rs 50,254 as against Rs 47,911 in 2011-12.

A marginal decrease is observed in the composition of GSDP with the contribution of agriculture & allied activities and industry sectors changing from 16.1% and 27% in 2011-12 to 15.3% and 25.9% respectively in 2012-13. However, a marginal increase in the composition of the services sector is seen at 58.8% from 56.9%. During the last few years, the services sector has been the largest component of GSDP in Karnataka.

Per capita net income (i.e. per capita NSDP) of Karnataka, at current prices, is estimated at Rs 78,049 in 2012-13, an increase of 13% as against Rs 69,051 in 2011-12. During 2012-13, the per capita income at constant prices is estimated at Rs 44,389 as compared to Rs 42,218 achieved in 2011-12.

“The state’s revenue resources are showing signs of recovery and are further expected to increase to 15.64% in 2012-13 from 15.28% in 2010-11. The state’s own tax revenues increased to Rs 51,821 crore during 2012-13 from Rs 25,987 crore in 2007-08, showing a CAGR of 14.8%,” the survey pointed out.

The share of development expenditure in GSDP has significantly increased from 10.51% in 2007-08 to 12.89% in 2012-13, while the share of interest payments has declined from 1.93% to 1.44%.