A Postelection Development Agenda for Karnataka

With national elections a year away, the outcome of the state assembly elections in Karnataka are being closely watched, both in India and abroad. Karnataka was the largest source of Bharatiya Janata Party (BJP) seats in the 2009 national election and the largest source of Lok Sabha seats for Congress in the 2014 national election. Politically, it is a test of the BJP’s ability to return to power in the southern state after its recent string of successes elsewhere, most notably the northeast and Uttar Pradesh. For the incumbent Congress party, it will be a test of resilience and of its ability to mount an effective challenge in the next general elections. Regardless of who wins, the government will have to ensure that the Karnataka of tomorrow leverages the state’s entrepreneurial and intellectual capital to cement its global status as a knowledge and innovation hub, manage the challenges of urbanization, and reduce regional disparity.

Why Karnataka Matters

Karnataka is an important state for India’s economic and geostrategic performance. Its capital, Bengaluru, is a global hub for innovation and information technology (IT)–enabled services. It has been instrumental in projecting India as a leader in technology and has been a preferred destination for investments by almost all major global IT companies. It is also an important manufacturing hub, especially for automobiles, pharmaceuticals, biotechnology, and defense, sectors that are driving the “Make In India” initiative. With access to a major port and naval base on the western coast, it is also strategically important as India determines its position in the emerging security landscape in the Indian Ocean region. The outcome of Karnataka elections, therefore, matters beyond narrow political considerations, not only for its 65 million people but for India as a whole.

Economic Performance: Past and Future

On the economic front, Karnataka’s recent performance has been steady. It has recorded an average growth rate of 7.68 percent between 2012 and 2016, the third fastest among Indian states. The services sector recorded double-digit growth in 2017, but agriculture and industry have lagged behind. The state is also fiscally prudent and has invested its public resources equitably between infrastructure and social services.

The new government, therefore, will have the luxury of a relatively well-managed state without any major crisis on the horizon. This presents an opportunity to take bold initiatives and make it an example among its peers. The unfolding digital revolution in artificial intelligence, machine learning, and blockchain provides a unique opportunity for Karnataka to leverage its existing comparative advantage in the knowledge economy. With a ready pool of talent to draw from, Bengaluru can remain the destination of choice for investors in the IT space. However, Bengaluru’s potential to become India’s equivalent of Silicon Valley has not yet been fulfilled. It is time for the government and the private sector collaboratively to support an ecosystem where investors, incubators, and innovators can come together to create products and services for the digital age, both for India and globally.

Beyond Bengaluru

Innovation cannot thrive in a singular island such as Bengaluru, especially when it is facing problems managing its civic infrastructure. As many cities across India struggle with congestion, pollution, and poor service delivery, the economic dividends of growth are being compromised, and Karnataka is no exception. The next government will oversee Karnataka’s transition to an urban majority state, joining the ranks of Maharashtra, Tamil Nadu, and Gujarat. There is a unique opportunity here to leverage the seven urban centers in Karnataka that are included in the Smart Cities Mission. Given the right mix of policies and incentives, they can become leaders in emerging fields such as renewable energy and robotics, as well as centers of high-tech manufacturing jobs. Their potential can be unleashed by completing the lagging 1,000-kilometer Mumbai-Bengaluru economic corridor, which will create global market access to the hinterlands of northern and central Karnataka.

Regional disparities have often been flagged as a source of discontent among Karnataka’s voters. This is important for political parties, given that more voters consistently went to the polls in the 2013 state assembly elections in districts outside Bengaluru than within the district. Per capita income of the poorest district in the state is almost one-fifth of the richest, the region around Bengaluru (see Figure 1). To address this issue, the relatively disadvantaged districts of the northern part of the state have been given special status that could lead to greater investment and economic growth. Irrespective of who wins the election, reducing the development gap within the state should be at the top of the policy agenda. This requires a mentality that envisions a “beyond Bengaluru” model of development, one that will see multiple engines of innovation powering this large state well into the future.

Anit Mukherjee is an adjunct fellow with the Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Kartikeya Singh is a fellow and deputy director of the CSIS Wadhwani Chair in U.S.-India Policy Studies.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2018 by the Center for Strategic and International Studies. All rights reserved.