The severe drought in 2023, global economic slowdown and post-Covid crisis over the last few years had slowed down the economy in Karnataka. Now, good rain, state-sponsored guarantee schemes and growing Gross Domestic Product (GDP) are pushing the state to score better on the economic front.
But as the state is spending massive amounts on implementing guarantee schemes, infrastructure development has taken a hit.
Just a few weeks ago, the Chief Minister’s Office released a statement that the state continues to drive India’s economic progress, registering a robust GSDP growth of 10.2% for 2023-24, significantly surpassing the national average of 8.2%, according to data from the Ministry of Statistics and Programme Implementation (MoSPI).
“The state achieved this feat despite severe challenges, including the worst drought in a decade and a slowdown in global IT markets,” it stated.
Breaking down the data, economists said buying power has been increasing among the upper class in urban areas, but not so with the lower middle-class. “By giving Rs 2,000 per family through the Gruhalakshmi scheme, the poor and lower middle-class now have more consumption power. The money is mostly spent on groceries, soaps, detergents, toothpaste, oil and other essentials that give 15% back to the state government in terms of GST,” a retired bureaucrat said. This could be one of the major reasons for economic growth in Karnataka, he surmised.
According to the bureaucrat, when a product is purchased, the company produces more of it, creating more jobs. Also, these companies purchase raw products from other sectors, generating money and pushing the overall GDP.
This year, the state witnessed good rains filling up all the dams. When the dams are full, hydro-electric generation is more. This means the state need not look for an alternative source for generation or purchase power from outside like last year. Also, in drought years, the government ends up paying more compensation to farmers for crop loss. This year, with good rain, the government’s financial burden has reduced.
But there has been widespread displeasure over the allocation of funds for development works for each constituency. This anomaly has a cascading effect. Companies that come to invest in the state look for better infrastructure. With the money being spent on guarantee schemes, there is none left for infrastructure. Some of the companies are already looking to move outside Karnataka. If they move in large numbers, job opportunities go down, affecting the state’s economy, government sources said.
For farmers, 2024 has been better than 2023 when the state witnessed a severe drought. According to Srinivas Reddy, former director, Karnataka State Natural Disaster Management Centre, dams were dry last year. This year, as of December, 90% of dams are full which is good news for farmers as this has improved groundwater level too, he added.
Though the economic situation is good, the state government has been complaining about lesser tax allocation by the central government. Recently, Chief Minister Siddaramaiah met Prime Minister Narendra Modi in New Delhi and stressed that the state should get its rightful share. The chief minister stressed on urban infrastructure, stating that Bengaluru is among the top three contributors to the country’s GDP and the city needs major infrastructure investment.
In his letter to the PM, Siddaramaiah also sought funds for irrigation works and clearance to proceed with various irrigation projects, including Mekedatu.