State’s Economy to Stay on Growth Track - The New Indian Express

State’s Economy to Stay on Growth Track

Published: 01st January 2014 08:22 AM

Last Updated: 01st January 2014 08:22 AM

Despite a slump in activity in key sectors like mining and Information Technology (IT), economists and trade bodies are optimistic of growth in Karnataka’s economy in 2014.

Karnataka is the biggest IT exporter state in the country. According to IT trade body National Association of Software and Services Companies (NASSCOM) IT exports will increase by 12-14 per cent to reach $86 billion this year.

The services sector contributes more than 50 per cent to the gross state domestic product (GSDP) and signs of recovery in the US will see Bangalore-based companies, such as Infosys and Wipro, rake in better revenues. Good monsoons, coupled with recovery of Western markets, are said to improve  agriculture and the services sector, providing much needed impetus for State’s economy, they said.

“Since we had good rains, agriculture is likely to make good progress. We should be able to achieve 4 per cent growth in agriculture which will provide a good base for Karnataka’s economy,” Abdul Aziz, economist and visiting professor at National Law School told Express.

He said that this would help increase employment opportunities in rural areas and eventually bring down poverty. 

Federation of Karnataka Chambers of Commerce and Industry (FKCCI) said there will be a more ‘Bangalore- centric’ approach in 2014. “We have requested the Chief Minister for `1 lakh crore investments for the city. `25,000 crore each should be funded by the State and the Union governments and the remaining `50,000 crore should be mobilised through other channels, including private sector,” R  Shivakumar, president of FKCCI, said.

Narendar Pani, economist and professor in the school of social sciences at National Institute of Advanced Studies (NIAS), said that the State has to look beyond a ‘Bangalore-centric’ approach to help growth in other regions of the State as well.

In the new year, the economy will ‘not be great’, Pani said. Manufacturing activity has also seen consistent decline. There is no efficiency in investments. Money is not going into creating good growth. Though there is a massive shift from agriculture, there is no money going towards manufacturing,” he remarked.

Meanwhile, the State government has announced a new manufacturing task force to boost the labour and capital intensive sector to increase its share of GSDP to 25 per cent by 2020. It will take feedback from eminent persons from various manufacturing sectors such as, steel, automobile, textile, machine tool and  electronics. However, the Department of Commerce and Industries conceded that the sector is is facing a lack of appropriate infrastructure support in the form of developed land, connectivity, power, water and logistics among other issues.

“The regulatory mechanism of the State such as stringent labour laws, absence of Exit policy, delayed environmental clearance and heavy taxation,” the department said in an e-mail response to Express.

Stating that there has been a good growth overall, M Maheshwar Rao, Commissioner for Industrial Development and Director of Industries and Commerce, said that there is also good ‘quality of investments’ coming in to the State. “There is enough room for expansion as well as establishing new big ticket ventures,” he said and added that there were many big investments in sectors like manufacturing and IT lined up for entry in 2014.

Though the State has announced many infrastructure projects and MoUs in various sectors, decisions are most likely to be implemented after the General Elections. But Pani believes that the State can do much to salvage the situation without additional funds. “We have to move from a glamorous to an efficient approach,” he said.

Added burdens like the ‘Anna Bhagya Scheme’ which is said to have cost the exchequer `4,500 crore will further slow down growth. Economists are uncertain how the State proposes to bear the cost of this populist scheme when overall growth is slow. “The State must take a more macro economic approach. Giving money to the State and expecting to take care of itself is not where the solution lies,” Pani said.

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