Karnataka is in the southern region 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.

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.

Merchandise exports from the state stood at US$ 26.63 billion in FY24, and US$ 27.93 billion in FY23. In overall exports, sectors such as petroleum products, iron & steel and organic chemicals were the key contributors.

Export of electronic instruments from the state reached US$ 4.6 billion for FY24.

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 is home to 34 operational SEZs, 61 SEZs with formal approvals and 50 notified SEZs, as of July 2022.

The state’s total food grain production was estimated to be 143.55 lakh tonnes in 2022-23. Karnataka is also the third largest producer of plantation crops in the country. Sugarcane is the key crop of the state, with production of ~583.10 lakh tonnes in 2023-24.

Karnataka boasts of diverse flora and fauna and a 320 km natural coastline, which makes it a nature tourist's paradise. Tourist arrivals in the state stood at 81.33 million in 2021, compared with 77.45 million tourists in 2020.

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).

Karnataka has a stable political environment and ranked third in terms of attracting private sector investments in India. According to the Department for Promotion of Industry and Internal Trade (DPIIT), between October 2019- June 2024, cumulative FDI inflows in the state reached US$ 53.31 billion, the second-highest in India, after Maharashtra. In FY23, Karnataka was the top FDI equity inflow recipient in India, with a 24% share of the total US$ 10.42 billion.

The Government is developing Hassan Airport at an estimated cost of Rs. 193.76 crore (US$ 23.24 million) to operate ATR-72 flights, with a grant of Rs. 164.70 crore (US$ 19.66 million) released so far, targeted for completion by 2024-25; Mysuru Airport is undergoing a runway extension with administrative approval for 240 acres land acquisition at a grant of Rs. 276.13 crore (US$ 33 million) released so far; and Raichur Airport is being developed at a cost of Rs. 219 crore (US$ 26 million), with a grant of Rs. 18.71 crore (US$ 2.24 million) released after the Budget 2023-24, expected to be completed by 2025.

In December 2019, the New South Parallel Runway (NSPR) at Kempegowda International Airport became operational. This will enable the airport to handle around 35 million passengers per year. The airport became the first in the country to operate independent parallel runways, enabling aircraft to land and take off simultaneously on both runways.

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).

In April 2022, the government of Karnataka accepted Azure Power's expression of interest (EoI) to develop solar, wind, and hybrid renewable energy projects totaling 1,700 MW capacity at a cost of Rs. 13,300 crore (US$ 1.62 billion).

Karnataka has seen significant growth in rooftop solar installations, surpassing 600 MW total capacity, but experts highlight the need for increased consumer awareness and state promotion of the Surya Ghar: Muft Bijli Yojna to fully tap its solar potential.

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.

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 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 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 Karnataka government and the British Council have launched four skilling programs—SCOUT, English Skills for Youth, Capacity Building Training for International Officers, and a Freemium Digital Library Wall—aimed at enhancing higher education, improving employability, and facilitating students' transition into the workforce.

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. The export of electronics and computer software accounted for 85% share in Karnataka’s overall exports. In FY23, the software and service exports stood at US$ 130.3 billion.

Karnataka is the first state which came out with an aerospace policy in the country. 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. In August 2022, the Karnataka government cleared the 'Karnataka Aerospace and Defence Policy 2022-27‘, which is expected to attract investments worth Rs. 45,000 crore (US$ 5.48 billion).

In May 2022, the Karnataka government signed an MoU with Israel-based ISMC Analog Fab Private Limited to set up a semiconductor fabrication plant in the state with an investment of Rs. 22,900 crore (US$ 2.95 billion).