Karnataka economy hit as IT, ITES face slowdown

Economic Survey report says service sector to grow at 8.9 pc

The IT and ITES sectors, driver of the Karnataka’s economy, is in all probability slipping into another slowdown phase in the current financial year.

According to the Economic Survey report for 2012-13, yet to be released by the State government, the service sector is most likely to register a disappointing 8.9 per cent growth against 10.6 per cent last year, and it may further slowdown the State’s economic growth. 

Due to sluggishness in the IT sector, drought hit agriculture and continued stagnation in the industry, the overall economy of the State is likely to grow at 5.9 per cent against 6.4 per cent in the previous year. The State government is likely to release the report before the presentation of 2013-14 budget scheduled on February 8. The State Planning, Programme Monitoring and Statistics Department has prepared the report based on the advance estimates.

The big blow to the State economy is expected to come from the service sector, which contributors about 55 per cent to the Gross State Domestic Product (GSDP). It is for the first time since 2008-09, the worst year of global economic slowdown, the service sector (IT and ITES) is estimated to register decline in its growth. The sector had recovered in 2010-11 and 2011-12 financial years after recording the slowest growth rate of 8.2 per cent in 2009-10.

Food production 

The drought-hit agriculture sector (primary sector) is estimated to grow at just 1.8 per cent against 2.4 per cent last year. And the foodgrain production is estimated to be 125 lakh tonnes against the target of 135 lakh tonnes. The State has been experiencing severe drought for almost two years now. As many as 157 of 176 taluks have been declared as drought-affected by the government.

The primary sector had registered the highest growth of 13.3 per cent in 2010-11, with the record foodgrain production of 145 lakh tones. But the sector recorded a negative growth in 2011-12 with only 2.9 per cent. 

The industry or the secondary sector is expected to remain almost stagnant with 2.4 per cent growth. The poor performance in the sector is largely due to overall economic slowdown, official sources said.

Institute of Social and Economic Change Director Prof R S Deshpande said the drought has done major damage to the agriculture sector. There will be decline in production of oilsseeds, pulses and cash crops this year. Still there will be reasonable growth due to increase in productivity. Overall, the State finances have been well maintained, he added.