Karnatakas growth drops sharply to 6.4%   Leave a comment

 Economic Survey Pins Blame On Natural Calamities,Global Economic Slowdown

Karnatakas economic growth rate this year is significantly lower than that in the last year,and is also lower than the national growth rate.
The states Economic Survey for 2011-12,released on Tuesday,says a sharp fall in agricultural production and a slowdown in manufacturing has reduced the growth in gross state domestic product (GSDP) to 6.4%,compared to 8.9% last year.Indias GDP is estimated to grow at 6.9% this year.
Agricultural production fell by 3.9%,compared to a phenomenal growth of 12.9% last year.The Survey attributes this to reduced crop area because of drought and floods.Manufacturing growth has dropped to 3.6%,from last years 6.1%.The Survey says that is largely because of the global economic slowdown and the states huge dependence on exports (almost 43% of manufactured products are exported,garments being a major component in this).
So the overall growth in GSDP this year was all thanks to the service sector growth rate,which rose to 10.6%,from 9.1%,driven by the real estate and communication segments.
The service sector accounts for over a half of GSDP,and that proportion went up further this year to 56.3%,from last years 54.6% (the real estate sub-segment has the highest share in GSDP at 18%).
Correspondingly,the share of agriculture has dropped to 15.9%,from 16.9%,and that of industry has fallen to 27.7%,from 28.6%.The Survey expresses concern about this trend.It notes that over the years,the share of agriculture has been declining continuously without a commensurate decline in the workforce deployed in agriculture.The Survey says the level of urbanization in the state is 38%,which means that 62% of the states population is still dependent on rural activities,predominantly agriculture.
While the Survey attempts to show that the slowdown this year is on account of factors outside the control of the government natural calamities and global slowdown it does acknowledge areas where things could have been better.It admits theres a rising demand-supply gap in power.It admits that the road network needs to be strengthened.
It attributes the power sectors woes to the lack of adequate coal linkages and timely environmental clearances,but does not suggest ways to overcome these challenges.For infrastructural challenges in general,it however emphasises the need for publicprivate partnerships.
During the 11th Five Year Plan (2007-2012 ),Karnataka is estimated to have grown at a compounded annual growth rate of 8%,a shade higher than Indias growth of 7.9%.

Our View

It looks as if the state economy is on an auto-pilot.Even with almost zero governance best exemplified by the empty treasury benches in the assembly on the eve of the state budget the economy has managed to grow at a decent 6.4% this fiscal,a tad short of national average.The booming services sector mainly IT,real estate and retail today accounts for over 50% of the states economy.What is worrying is that the agricultural sector,which has actually de-grown,continues to support 60% of the states population.For all the platitudes that the government dishes out about its concern for the farmers and their well being,they will be ill-served if the share of the agriculture sector continues to shrink in the state GDP without moving significant amount of people out of the sector.


Posted March 21, 2012 by avinash2060 in Uncategorized

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