Karnataka's outperformance highlights state's importance to political parties

Poll-bound Karnataka is a key state for all political parties, especially given its strong economic performance.

No state election is too small in politics. And the stakes rise exponentially with the size of the state. Karnataka is no different.

The southern state goes to polls on May 10 with the opportunity to settle the political battleground once and for all – or at least for the next five years. Since the last assembly elections, the state has had three different chief ministers as governments have been toppled. The last time a government lasted even half a term was the Siddaramaiah-led Congress back in 2018. Since then, instability has reigned as parties battled for supremacy.

There is no understating of Karnataka's importance to any party. Despite the political instability over the past half a decade, the state has been a stellar performer economically and would burnish the image of any leader.

Compared to the national average, Karnataka's economy has grown faster in all but one of the last 11 years. And in that particular year, it grew at a slightly slower clip ― 6.41 percent versus 6.45 percent for India in 2018-19.

One basis point is one-hundredth of a percentage point.

On the whole, India has grown by 5.7 percent on average every year starting 2012-13. Karnataka, on the other hand, has clocked an annual average growth rate of 7.5 percent over the same period ― nearly 2 percentage points faster.

Unsurprisingly, the services sector has led Karnataka's charge. The home state of India's Silicon Valley has seen services grow at a double-digit pace in five of the last 11 years, with even the pandemic-hit 2020-21 seeing only a minor 1.7 percent contraction on the back of 10.2 percent growth in 2019-20. Overall, the 11 years starting 2012-13 have seen Karnataka's services sector grow by 8.7 percent every year, comfortably outstripping the 5 percent growth recorded by industry over the same period.

If Karnataka's status as one of the powerhouse states of India cannot be denied, it has also done better than the nation as a whole when it comes to keeping inflation in check, especially in recent years.

While Karnataka's Consumer Price Index (CPI)-based inflation eased gradually following the Reserve Bank of India's informal adoption of the flexible inflation targeting framework in early 2014, it has not flared up sharply over the last few years.

Other economic indicators also check out favourably with solid prospects. In 2021-22, the state was the fourth-biggest exporter. This can only improve given the double focus ― India's services exports are booming, making Karnataka an obvious beneficiary, while emphasis is being placed on the merchandise front too, in the form of goods such as millets.

For the Union Finance Ministry, the state is crucial as it provides the most direct tax collections after Maharashtra and Delhi.

Clearly, irrespective of who is running the state government, Karnataka can motor along faster than the country. It is one of the largest destinations of foreign direct investment (FDI) in the country, has a skilled population, and an entrepreneurial spirit that is the envy of the country. Where the state authorities can really make a difference is the ease with which the residents can live.

Take the capital city of Bengaluru, for instance. Awash with filth, the city's transport problems are known all over the country. Yet, the metro and suburban rail projects are moving at a snail's pace. Perhaps nothing encapsulates the frustrations of the public more than the skywalk over the busy Outer Ring Road in Bellandur. Built-in 2016 for a paltry Rs 4.7 crore, the skywalk was constructed after more than two dozen companies came together to put an end to pedestrian-related accidents on the stretch.

The robust growth of Karnataka's economy has ensured the state gives plenty to the country. If the next government can sort out the visible everyday mess, the state may be set on a new developmental trajectory.