Summary: Karnataka represents a microcosm of the development prospects and problems and challenges for India, and for developing countries more generally. Known globally for the high tech achievements of Bangalore, and for being an early proponent of the panchayat system, the state also contains large rural areas where poor agricultural communities live in poverty, and spatial inequalities have grown in the last decade. It has enjoyed relatively high growth rates, but faces increasing water shortages and problems of environmental degradation. It has an active civil society, which has produced the wellknown phenomenon of the "report cards" on municipal performance, drinking water and sanitation facilities. But it also faces problems of corruption and misuse of public resources, in spite of several good governance measures such as passing the Transparency Act in 2000, and establishing Lokayukta and Consumer Protection Forums. It has profitable public enterprises that are responsive to the needs of consumers, and moribund parastatals that cannot be closed because of political pressures. It has a need to shrink its public deficit, but faces pressures for expenditure on social and public infrastructure, on which depend the future growth and poverty reduction prospects of the economy.

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