Chapter 7Economy

7.1 Economy of Bengaluru- The Historical Perspective

Bengaluru’s economy is diverse and has evolved from historic focus on trade and commerce centre and its shift to Public Sector Undertaking (PSU) to the recent shift to manufacturing and IT/ITES sector. Although the major drivers of the economy have changed, the sectors which have existed historically have remained as cornerstones and are significant in the present scenario. Aerospace, IT, BT and manufacturing e-commerce and transport/logistics are expected to be driving sectors in the future. Bengaluru has also emerged as the start-up hub of the nation, bringing innovation and contribution to GDP, diversity of economy and adding to employment opportunities.

Bengaluru started as trade centre in 1537 from Petta area and grew when Bengaluru was chosen as a British Cantonment and an administrative headquarters in 1800s. Binny Mills, Tata Silk Farm (Basavangudi), Indian Tobacco Company (Cox Town), United Breweries, Government Soap Factory (now Yashwanthpura), Minerva Mills, Government Porcelain Factory were the major contributors to the economy of Bengaluru before 1940. During 1940s to 1960s, the government invested heavily into large public sector units like HMT, BEL, BHEL, HAL and ITI. Industrial areas like Rajajinagar, Dyavasandra started around 1960s. In 1978, Electronic City was established for encouraging electronic industries to be set up which has now become one of the two major IT nodes of the city, catering to the world. Table 7-1 presents the quick chronological economic timelines for Bengaluru.

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Sources: Census of India (2001), Bengaluru through the Ages, Provisional Population Totals, Rural Urban Distribution; Websites of the Public Sector Undertaking (PSUs) and Industrial Areas (accessed on 24th February 2015); Interactions of the Consultant with representatives of stakeholder groups.

Economic activities in the urban area has direct implications on the city fabric and structure like employment opportunities, densities, level of interaction between employment nodes, employment pattern and so on. Thus it is important to understand how city economy is connected to its region and structure of economy within the urban area.

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T e Major s are o Karnata a GSDP as een coming from Bengaluru Urban District. In the year The Major share of Karnataka GSDP has been

2014-15, Bengaluru Urban District alone has contributed 1.73% to India’s GDP and 34.36% to Karnataka GSDP. The contribution of Bengaluru Urban District to GSDP of Karnataka has increased from 26.24% (2004-05) to 34.36% (2014-15). The Gross district domestic product of Bengaluru Urban has been highest during 2004 to 2015. It is important to note here that it takes combined GDDP of 10 following districts to equal to GDDP of Bengaluru Urban District. The GDDP of BUD has increased by 4.40% between 1999-00 and 2011-12 whereas at the State level it has increased by 2.94 times and at the National level 2.33 times during the same period.

Major sectoral contribution to the economy of BUD is from manufacturing and tertiary sector, though the contribution of manufacturing has reduced steadily from 1991 to 2011. As on 2011, three sectors, 1) Others Services, 2) Real estate, Ownership of Dwellings, Business & Legal Services and 3) Manufacturing are the main pillars of economy as they constituted

 Largest Biotechnology Hub in India

 Largest Software Exporter in India (Exports from IT - 1,74,418 crores (2013-14)

 CAGR of Exports from IT in Bengaluru 17.29% (2007-2014)

 For 1 Job in IT/ITES sector, 2.7 other jobs are created (Direct Employment - 9,40,000; Indirect Employment - 26,00,000)

 CAGR of Number of IT companies in Bengaluru 3.40% (2007-2014)

 80% of global IT companies have based their India operations and R&D centres in Bengaluru.

Bengaluru is not just an IT/ITES centre but also economic leaders in Light and Heavy engineering, Automobiles, Earthmovingand Aeronautics industries.

24.6%, 22.7% and 21% of total GDDP (2011) respectively.

There is a steep growth in Real estate sector, Business & Legal Services from 2001 to 2011 with its sectoral share increasing from 4.3% to 22.7% during 1991 to 2011. However, the share of manufacturing has reduced from 34.2% to 21.1% during 1991 to 2011. The other important sector – public administration reduced during the same period from 6.1% to 1.2%. Further, the contribution of construction (~8%) and other services (~23% to 25%) have more or less remained constant during past three decades. Figure 7-1 presents the sectoral GDDP share trends for BUD over 1991 to 2011. It is expected that Other Services (includes IT/ITES), Manufacturing, Real Estate, Business, and Banking and Insurance are going to retain dominant position in Bengaluru’s GDDP.

The work force participation rate has increased from 34.27% in 1991 to 44.14% in 2011. This increase in the workforce can be attributed to the growth in employment opportunities and thus inmigration and also increase in the women workforce. The growth trend of WFPR over three census years is presented in Table 7-2.

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Figure 7-1: Sectoral GDDP Share trends for Bengaluru Urban District (1991, 2001 and 2011)

Source: Economic Survey of Karnataka, 1993, 2001 and 2011

Source: Census of India, 1991, 2001 and 2011 and Consultants Analysis 2015