Introduction
Karnataka is located in the south of India. It is surrounded by the Arabian Sea on the west, Goa on the northwest, Maharashtra on the north, Andhra Pradesh on the east, Tamil Nadu on the southeast, and Kerala on the southwest.
According to an EXIM Bank report, by 2024-25, Karnataka’s merchandise exports can reach US$ 35.3 billion, and software and services exports can reach US$ 150 billion.
Karnataka has a vibrant automobile, agro, aerospace, textile and garment, biotech, and heavy engineering industries. The state has sector-specific Special Economic Zone (SEZs) for key industries such as IT, biotechnology, engineering, food processing and aerospace. Karnataka is the IT hub of India & home to the fourth-largest technology cluster in the world.
Karnataka boasts of diverse flora and fauna and a 320 km natural coastline, which makes it a nature tourist's paradise.
Karnataka offers a Wide range of fiscal and policy incentives for businesses under the Karnataka Industrial Policy 2020-25, with simplified procedures for investment. In September 2017, the government of Karnataka passed the ‘Karnataka Electric Vehicle and Energy Storage Policy 2017’.
In June 2021, the Karnataka government amended the policy to offer more impetus to the electric mobility sector. As per the amendment, a 15% subsidy was announced on capital expenditure on land value (fixed value assets up to a maximum limit of 50 acres of land).
As of May 2024, the state had an installed power generation capacity of 33,389.69 MW. Of this, central utilities contributed 4364 MW, private utilities (20179 MW), and state utilities (8,845 MW). Of the total installed power generation capacity, 10,761 MW was contributed by thermal power, followed by nuclear (698.00 MW), renewable power (18,298 MW) and hydropower (3,631 MW).
As per the State Budget 2024-25, Rs. 23,100 crore (US$ 2.77 billion) was allocated for the energy sector. Out of this, Rs. 12,786 crore (US$ 1.53 billion) was allocated to provide subsidies to Karnataka Power Transmission Corporation Limited.
Tourism in Karnataka
Karnataka is a premier tourist destination in India, offering a diverse array of attractions. The state boasts ancient architectural marvels like Hampi and Mysore, serene beaches in Gokarna, and the lush greenery of the Western Ghats. Bengaluru, the state capital, is a blend of modernity and tradition, featuring historic sites like the Bangalore Palace alongside a thriving tech industry. Wildlife enthusiasts are drawn to the Bandipur and Nagarhole National Parks, home to tigers, elephants, and a variety of other wildlife. Tourism in Karnataka has been on the rise, with tourist arrivals reaching 28.45 crore in 2023, up from 18 crore in 2022.
Economy of Karnataka
At current prices, Karnataka’s revised gross state domestic product (GSDP) was estimated to be ~Rs. 28.09 trillion (US$ 336.81 billion) in 2024-25. The state’s GSDP increased at a CAGR of 11.61% between 2015-16 and 2024-25. The state's economy is driven by key sectors such as information technology, biotechnology, manufacturing, and agriculture. Bengaluru, the state capital, serves as a global IT hub, hosting numerous major tech companies such as Infosys, TCS, and Wipro, that significantly contribute to the state's GDP. Total exports from the state stood at US$ 78.69 billion in FY24 (Until September 2023), and US$ 152 billion in FY23. In overall exports, sectors such as petroleum products, iron & steel and organic chemicals were the key contributors. Between October 2019-March 2024, cumulative FDI inflows in the state reached US$ 51.03 billion, the second-highest in India, after Maharashtra.
Industries in Karnataka
Karnataka has a diverse and dynamic industrial landscape. The state is a leader in the IT and biotechnology sectors, with Bengaluru serving as a global hub. According to the Index of Industrial Production (IIP), the manufacturing sector in Karnataka grew by 7.2% in 2023. Key industries in the state include aerospace, automotive, and textiles. Some of the major companies in these sectors are Hindustan Aeronautics Limited (HAL), Toyota Kirloskar Motor, and Raymond. Karnataka is also a key player in the mining industry, boasting abundant reserves of iron ore and other minerals. The state has a strong presence in the handicrafts and cottage industries as well, reflecting its rich artisanal heritage. This varied industrial landscape, coupled with the state's strategic location and well-developed infrastructure, make Karnataka a preferred destination for domestic and international investors.
Recent Developments in Key Sectors:
- Karnataka's revised electric vehicle policy prioritizes affordability through increased subsidies, aims to attract investments of Rs. 50,000 crore (US$ 6 billion), create one lakh jobs, foster innovation, and integrate MSMEs and component vendors into state-level incentives.
- On June 19, 2024, it was reported that former Sri Lankan cricketer Mr. Muttiah Muralidharan is set to invest Rs. 1,400 crore (US$ 167 million) to expand his soft drink business to Karnataka, with a new manufacturing unit being developed in Chamarajanagar district and plans to invest further in Dharwad as well.
- On January 17, 2024, the Karnataka government signed investment deals worth Rs 22,000 crore (US$ 2.64 billion) with global industry leaders such as Microsoft, Web Werks, Hitachi, Lulu Group, Takeda Pharma, B L Agro, Inox Air Products, Honeywell, Nestle, and Tillman Global at the World Economic Forum 2024, aimed at driving technological advancement, infrastructure development, and economic growth in the state.
- In November 2023, the Karnataka government signed a Memorandum of Understanding (MoU) with the automobile major Toyota Kirloskar Motor (TKM), an Indian subsidiary of Japan's Toyota Motor Corporation, to facilitate the further expansion of its car manufacturing facility at Bidadi in Karnataka. TKM will make an additional investment of Rs. 3,300 crore (US$ 395.7 million) to establish its third manufacturing facility with a capacity of 1 lakh units at Bidadi.
- The Centre in March 2022 approved two major road projects in Karnataka at a cost of more than Rs. 890 crore (US$ 107.7 million).
- Karnataka reached another milestone in terms of improving connectivity as the Shree Siddharoodha Swamiji Station in Hubballi now has the longest platform in the world. It is a 1,507-metre-long platform and was built at a cost of about Rs. 20 crore (US$ 2.4 million).
- The Karnataka government in November 2022 signed memorandums of understanding (MoUs) worth Rs. 1.29 lakh crore (US$ 16 billion) were signed under the ‘Renewable Energy’ sector with Vedanta assuring Rs. 80,000 crore (US$ 9.68 billion) investment, during the inaugural day of the three-day Invest Karnataka 2022–Global Investors Meet.
- The state is India’s largest software exporter, with electronics and computer software exports totalling US$ 81.4 billion in FY20 and US$ 70.9 billion in FY21, US$ 91.8 billion in FY22. In FY23, the software and service exports stood at US$ 130.3 billion.
- South India’s first Vande Bharat Express connecting the capitals of Tamil Nadu and Karnataka (Chennai-Mysuru via Bengaluru) was flagged off in November 2022.
- In October 2022, Karnataka Governor Mr. Thawar Chand Gehlot virtually launched the Tele Mental Health Assistance and Networking Across States (Tele-MANAS) programme, which provides 24/7 counselling and mental health services.
- In October 2022, Chief Minister Mr. Basavaraj Bommai stated that Karnataka has been at the forefront of agriculture sector digitisation, and by connecting farmers with survey numbers and Aadhaar details, 78 lakh farmers have been brought under its purview.
- In September 2022, Prime Minister Mr. Narendra Modi approved the New Coastal Zone Management Plan for Karnataka and set the foundation stone for numerous projects totalling Rs. 3,800 crore (US$ 462.69 million) in Goldfinch City.
- In September 2022, according to Karnataka Chief Minister Mr. Basavaraj Bommai, the state had agreements worth Rs. 1.3 lakh crore (US$ 15.83 billion) in the field of renewable energy.
- In July 2022, the Karnataka Industries Department approved 61 industrial projects worth Rs. 3,830 crore (US$ 463 million), which were expected to generate over 19,500 jobs.
- In June 2022, a number of rail and road infrastructure projects totalling more than Rs. 27,000 crore (US$ 3.29 billion) were officially opened and the foundation stones were laid by Prime Minister Mr. Narendra Modi in Bengaluru, Karnataka.
- In May 2022, the Karnataka Government announced the new ‘Karnataka Renewable Energy Policy’ for the 2022-27 period. The policy intends to position Karnataka as a preferred renewable investment location and to build a sustainable and green energy-friendly economy.
- In FY22 (till January 2022), Karnataka produced 33.91 million tonnes of iron ore, which was an 18.80% growth YoY.
- Total export value of iron & steel from Karnataka in FY23 was US$ 835 million and in FY22 it was US$ 2.22 billion.
- More than 60% of the biotechnology companies in India have a base in Bangalore and the state drives 50% of the total revenue in India’s biotechnology sector.
- The Information Technology, Electronics and Communication Department of the state has established a new IoT policy within the state with a view to attaining a substantial market share in India’s IoT market by 2020.
- Karnataka is the first state which come out with an aerospace policy in the country. The Karnataka Aerospace Policy has identified an investment potential of US$ 12.5 billion in this sector during 2013-23 and plans to develop aerospace clusters in different regions of the state. The Karnataka Government granted approval for an investment of Rs. 480 crore (US$ 68.67 million) to Goodrich Aerospace Service Pvt Ltd to establish a unit in Bengaluru.
FACTFILE
Capital
BengaluruGeographical Area (sq km)
192,000State Language
Kannada, Tulu, Kodava, Hindi and EnglishLiteracy Rate
75.6 per centKey Industries:
IT and ITeS
Biotechnology
Engineering
Electronics and telecom
Automotive
Textiles and apparel
Aerospace
Animations
Tourism
Renewable energy
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