A miracle, but a miss

Karnataka's rapid growth since 1991 hasn't translated into broader human development. It is time for a policy reset

- M GOVINDA RAO

Karnataka's transformation from being a state with per capita income 19 per cent below the national average in 1990-91 to becoming India's most vibrant technology and innovation hub, and a centre of the modern services industry, has been dramatic. From this lowly position, the state galloped to the second-highest rank among the large states, with per capita income higher than the country's average by 80 per cent in 2022-23.

This phenomenal growth was led predominantly by the services sector, contributing over 68 per cent of the value added—the highest among all the states. The per capita real income grew at an average rate of 6.4 per cent from 2011-12 to 2022-23, which was next only to that of Gujarat (6.8 per cent).

The liberalising reforms of 1991 unshackled entrepreneurship in the services sector more than in manufacturing, as there were fewer regulations. The capital city, Bengaluru, had the necessary ecosystem to seize this new-found freedom and emerge as a technology and innovation hub. With its concentration of scientific and technical institutions and a large pool of technical and scientific personnel, the transformation was only natural.

By 2023, Karnataka had 45 of India's 112 unicorns, accounting for 44.6 per cent of their total value, and hosted over 875 global capability centres (GCCs). In 2025, Bengaluru climbed seven spots to rank 14th in the Global Startup Ecosystem Index. It is the largest foreign investment destination and a leader in services exports. This is due to, inter alia, its impressive knowledge economy, skilled manpower, elite public institutions, salubrious climate, multicultural and cosmopolitan population and responsive bureaucracy.

With the large-scale migration of skilled personnel, the city transformed into a dynamic metropolis and a centre for scientific and technological innovation.