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.
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.
According to an EXIM Bank report, in FY25, total exports from the state stood at Rs. 2,31,888 crore (US$ 27.15 billion) in FY25 (until February 2025). Engineering Goods were the top exported item from Karnataka, accounting for 25.3% of the total exports, followed by Electronic Goods 23.7%.
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 February 2025, the state had an installed power generation capacity of 34,544.76 MW. Of this, central utilities contributed 4,062.22 MW, private utilities 21,263.01, and state utilities 9,219.54 MW. Of the total installed power generation capacity, 10,829.47 MW was contributed by thermal power, followed by nuclear 698.00 MW, renewable power 23,017.29 MW and hydropower 3,631.60 MW.
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. 30.70 trillion (US$ 359.45 billion) in FY26. The state’s GSDP increased at a CAGR of 11.38% between FY16 and FY26. 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. According to the Department for Promotion of Industry and Internal Trade (DPIIT), the state’s cumulative FDI inflow stood at Rs. 4,27,130 crore (US$ 55.52 billion) between October 2019-December 2024, the second highest in the country after Maharashtra, and accounted for 20% of India’s cumulative FDI inflows.
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:
- As per the State Budget FY26:
- Chief minister’s infrastructure development program has been announced with an allocation of Rs. 8,000 crore (US$ 936.7 million). The focus will be placed on minor irrigation, roads, and urban infrastructure throughout the state.
- Rs. 16,021 crore (US$ 1.8 billion) has been allocated for subsidies to supply free power to irrigation pump sets.
- The Gruha Jyothi scheme has been allocated Rs. 10,100 crore (US$ 1.18 billion).
- Rs. 3,715 crore (US$ 435 million) has been allocated towards Samagra Sikshana Karnataka.
- Rs. 1,235 crore (US$ 144 million) has been allocated for Ayushman Bharath scheme.
- Policy for agriculture: An additional Rs. 450 (US$ 5.28) will be provided over the Rs. 7,550 (US$ 88.58) per quintal minimum support price for toor dal procurement, with a total allocation of Rs. 138 crore (US$ 16.2 million)
- Karnataka achieved Rs. 54,427 crore (US$ 6.52 billion) in Foreign Direct Investment (FDI) during 2023-24, ranking third in India. Chief Minister of Karnataka, Mr. Siddaramaiah highlighted the government's multidimensional programs across industry, agriculture, infrastructure, and education, which aim to accelerate economic growth and create jobs. Additionally, 13 industries signed MoUs expected to bring in Rs. 42,915 crore (US$ 5.14 billion) and generate around 22,600 jobs.
- The Centre has sanctioned Rs. 2,675.31 crore (US$ 320 million) for the 4-laning of the Belgaum-Hungund-Raichur section of National Highway-748A in Karnataka, covering 92.4 km. This project, part of the Panaji-Hyderabad economic corridor, will be implemented through a Hybrid Annuity Model (HAM).
- Karnataka is set to launch a Rs 48,686 crore (US$ 5.84 billion) long-term infrastructure plan for Bengaluru, aimed at transforming the city into a world-class tech hub, with projects including improved transportation, highways, and the Peripheral Ring Road to address traffic congestion and enhance economic growth.
- 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, several 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.
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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