Aided by the strong growth of services sector, the Karnataka economy is likely to grow at 6.4 per cent (gross state domestic product at constant prices 2004-05) in 2011-12, which is marginally lower than the all India average of 6.9 per cent. The decline is largely attributed to the state’s economy being more exposed to external trade compared to the national economy.
The growth has slowed down from the earlier 8.2 per cent during 2010-11, mainly due to the strong agriculture and services growth. The state’s economy is expected to reach Rs 2,97,964 crore in 2011-12 as against Rs 2,79,932 crore in the previous year. The economic performance has been led by a strong dominance of the service sector which is likely to grow 10.6 per cent in 2011-12, the pre-budget economic survey of Karnataka for 2011-12 released here on Tuesday said.
During 2010-11, the services sector had shown a growth of 9.1 per cent. “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.
The growth rate of the industrial sector is estimated to have decreased to 3.6 per cent due to constraints in the mining and manufacturing sectors. However, agriculture and allied sectors have contracted 2.9 per cent due to a decline in crop area following the drought conditions and floods. Composition of GSDP shows a further decline in the share of agriculture and allied activities sector from 16.9 per cent and 28.6 per cent in 2010-11 to 15.9 per cent and 27.7 per cent respectively in 2011-12. At the same time, a marginal increase in the composition of the services sector from 54.6 per cent to 56.3 per cent is apparent. During the last few years, the services sector has been the largest component of GSDP in Karnataka, the economic survey stated.
Due to drought conditions in major parts of the state, and the failure of Kharif and Rabi crops during 2011-12, the state’s foodgrain production is likely to be 12.42 million tonnes as against the target of 13 million tonnes.
The state government had declared drought in 123 taluks in 24 districts in the month of October 2011. During 2010-11, the state achieved an all-time high foodgrain production of 13.98 million tonnes comprising 12.42 million tonnes of cereals and 1.56 million tonnes of pulses.
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“It is a matter of concern that over the years the contribution of the agriculture sector to the economy has been declining continuously without a commensurate decline in the workforce deployed in agriculture,” the survey said. The per capita GSDP at constant prices is expected to increase from Rs 47,310 in 2010-11 to Rs 49,843 in 2011-12, showing a growth of 5.4 per cent.
The state’s revenue resources are showing signs of recovery from 2010-11, with revenue receipts (as a percentage of GSDP) expected to increase to 15.27 per cent in 2011-12 (from 14.49 per cent in 2010-11 RE). Karnataka’s fiscal deficit (as a percentage of GSDP) has reduced to 2.87 per cent in 2011-12 as compared to 3.23 per cent in 2008-09.
The state’s own tax revenues increased from Rs 25,987 crore in 2007-08 to Rs 43,817 crore during 2011-11 at a CAGR of 14 per cent.
The share of development expenditure in the total expenditure has significantly increased from 8.95 per cent in 2005-06 to 13.23 per cent in 2011-12.