Karnataka and Uttar Pradesh at the forefront of growth – the pandemic effect

As the financial year 2021-22 came to an end, one saw a lot of jousting between ministers of different states about where the economic growth of India is coming from. We decided to examine the budgets and economic surveys of various state governments to understand which areas are growing rapidly.

India's GDP is estimated at ₹230 trillion for 2021-22, at current prices — a growth of about 18% over the previous year, representing a compounded growth of 7% over 2019-20.

Impact of Pandemic at State Level

5 states comprise about half the economy — Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka and Gujarat. What is remarkable is that the incremental growth is not coming in the same order as the size of the economy: UP and Karnataka are delivering 2-year CAGRs in excess of 12%, significantly higher than India's growth. Maharashtra, in this 2-year period, lags the India growth rate slightly.

Two possible hypotheses: a massively services-driven economy like Karnataka (66%) has been able to take advantage of the Work-From-Home environment; and a state like Uttar Pradesh has been able to utilise workers who migrated back in productive work, especially in infrastructure build-out.

The Famous $4k

Once GDP per capita crosses $4,000 (about ₹3 lakh), consumption basket changes significantly. 9 states / Union Territories have GSI in excess of ₹3 lakhs. Of these, the largest economy is Karnataka, followed by Gujarat and then Delhi.

Analysis Summary

Pandemic has caused significant re-location of growth over the last 2 years. Uttar Pradesh and Karnataka have emerged as drivers of the Indian economy.

A Practitioner's View

Anand Bhatia, CMO of Fino Payments Bank, has a ring-side view with their 8+ lakh merchant network. He mapped every single village across the country and its desirability for an immediate merchant location, using Aaloka extensively — delivering sustainable profitable growth to the newly listed entity.