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A continuous decline in the growth rates of services and industrial sectors for the third year in a row is expected to pull down Karnataka's gross state domestic product (GSDP) growth rate to 5 per cent for 2013-14. The GSDP growth rate at constant prices (2004-05) is expected to reach Rs 3,11,628 crore in 2013-14. In 2012-13, the GSDP grew 5.3 per cent to touch Rs 2,96,658 crore.
According to economic survey of Karnataka for 2013-14 tabled in the legislative assembly at the weekend, the services sector, which is the largest contributor to the economy, is expected to grow at 7.2 per cent which is lower than the growth rate of 8.4 per cent in 2012-13.
The industry sector is expected to grow at 1.2 per cent, which is lower than 4.4 per cent seen in 2012-13.
Although the drought conditions continued from 2011-12, the GSDP growth rate of agriculture and allied activities is expected to increase by .6 per cent in the state during 2013-14 as against a contraction of 4.9 per cent during 2012-13.
A marginal decrease in the composition of GSDP of agriculture and allied activities, and the industrial sector is evident from 14.90 per cent and 26.16 per cent in 2012-13 to 14.10 per cent and 24.50 per cent in 2013-14 respectively. At the same time, the marginal increase is expected in the composition of service sector from 58.94 per cent in 2012-13 to 61.40 per cent in 2013-14.
The per capita state income (per capita NSDP) of Karnataka at current prices is estimated at Rs 86,788 during 2013-14 as against Rs 77,309 in 2012-13, an increase of 12.3 per cent. The per capita income at constant (2004-05) prices for the year 2013-14 is estimated to increase to Rs 44,857 compared to Rs 43,075 achieved in 2012-13.
During the last few years, the services sector has been the largest component of the GSDP. The composition of Railways, storage, trade, hotels and restaurants, real estate, ownership of dwellings and business services, communication, public administration and other services has contributed to the services sector. The manufacturing sector is expected to grow at 0.2 per cent, which is lower than the growth of 6.1 per cent that was observed in 2012-13.
State finances
The buoyant tax revenue, owing to the tax reforms and toning up of the tax administration, largely aided the state's fiscal consolidation efforts since the enactment of the FRA. The state's revenue receipts as a percent of the GSDP has decreased marginally from 16.55 per cent in 2006-07 to 16.29 per cent in 2013-14. The global economic meltdown has led to a contraction of its share in the state's tax revenues during 2008-09 and 2009-10, bringing down the share of of revenue receipts to the GSDP to 14.07 per cent and 14.26 per cent respectively, the survey said.
However, the state's revenue resources are showing signs of recovery from 2010-11 (15.28) and further expected to increase to 16.29 per cent in 2013-14.
The state's own tax revenues (SOTR) increased from Rs 25,987 crore in 2007-08 to Rs 62,464 crore in 2013-14 at a CAGR of 19.2 per cent.
On the expenditure front, capital (net) outlay as per cent of the GSDP has decreased from 3.76 in 2006-07 to 2.90 in 2012-14.
"This poses a great challenge and it is a matter of concern for Karnataka due to the infrastructure inadequacies in the state. In this context, the Expenditure Reforms Commission (ERC) constituted by the government of Karnataka has recommended that the capital outlay needs to be insulated from revenue adversities," the economic survey said.
There has been a significant increase in the state's plan outlay by Rs 6,585 crore from Rs 42,100 crore (RE) in 2012-13 to Rs 48,685 crore in 2013-14 (BE).
There has been an increase in the plan expenditure as percentage of GSDP from 6.96 per cent in 2008-08 to 9.78 per cent in 2013-14. As regards to the non-plan expenditure as percentage of the GSDP, there has been a decline from 13.62 per cent in 2007-08 to 11.76 per cent.
The state's plan expenditure has been growing significantly. The outlay for the 11th Five Year Plan was Rs 1,01,664 crore at 2006-07 prices, which was 133 per cent more than the 10th Five Year Plan's outlay of Rs 43,558.22 crore. Karnataka's plan achievement is impressive and plan expenditure has revealed an impressive growth over the years and the state has one of the highest per capita plan expenditure in the country at Rs 6,693 in 2012-13 (RE), the economic survey added.
