Industrial sector has been lagging in agriculture and service sectors in Karnataka over the last five years and its growth rate has declined in the pandemic years. While the agriculture sector and service sector have grown 16.6% and 11.6% CAGR respectively, the industrial sector grew by 6.1% CAGR in five years. The dampened industrial contribution has continued even in 2022.
The pandemic dampened industrial growth more than other sectors as industrial share in the gross state value added (GSVA) of Karnataka fell from 21.3% to 19.4% in the financial year 2021 even as the agriculture sector supported by favourable monsoons, significant Budget spends and subsidies increased from 12.3% to 14.3%, data in the Karnataka Economic Survey 2021-2022 shows. The service sector contributed 66.3% during the same period.
Agriculture workers
Significantly, an analysis by the Government shows that Karnataka’s workforce-to-sector dependence shows a greater skew. In 2019-2020, the workforce dependent on the service sector declined to 33.7% from 37.6% in 2018-2019 while the agriculture workforce grew from 41% to 46.6%. The industry workforce dependence declined to 19.8% from 21.5% during the same period. Though the data collection for 2020 was disrupted due to pandemic, the onset of pandemic and subsequent lockdown has shown significant labour migration. The survey puts the workforce dependent on agriculture to be 41% of Karnataka’s 6.6 crore population and 21.5% to be dependent on industry and the rest on the service sector.
This declining figure for industry comes amid a total investment of ₹1.02 lakh crore in 54 big projects approved by State High-Level Clearance Committee to create employment for 2.16 lakh between 2016-2017 till November 2021, and investment approval through single window approval of ₹87,968 crore to generate employment opportunities for 5.99 lakh. Similarly, the foreign direct investment for the same period is ₹38,393 crore
“The severe lag of the industry sector signifies that structures to support this sector are inadequate and require investment, incentives and a structured movement to skill and transfer excess agricultural workforce to industry,” the survey noted.
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Decline for education
The Economic Survey has called for reassessment in the subsidy spending to create additional spending on health and education that have seen decline over the years.
It pointed to expenditure on education that has declined from 14.7% in 2011-2012 to 11.8% in 2021-2022, and health spending has slightly increased from 3.9% to 5% in the same period. “It is true that children in schools have remained constant or declined over the decades with the maximum decline in Government schools,” said the report.
On the other hand, the total subsidy has gone up to ₹23,758 crore in 2022. This includes ₹13,500 crore power subsidy, which is severely undercut by wastage and leakages that must be rationalised to improve efficiency. Higher education needs much higher allocation to create a world class knowledge economy, the survey says.
