Does anybody know how famed kannada actor Shankar nag died?

 It was a car accident with a lorry.

There are rumours that political leaders were involved in the accident, it has since remained an unsolved mystery.

Konkani-Kannada actor Shankar Nag died in a car collision with a truck/lorry at Anagodu village on the outskirts of Davanagere town on 30 September 1990 at approximately 1 or 2 am during the pre-production work for his film Jokumaraswamy, as he was arriving from Bangalore.

The force of collision/impact with the truck was such that Shankar nag was almost beheaded his head was attached to just a flap of flesh and the driver of the car was also dead at the spot. Only Arundati Nag ( Shankar Nag’s wife) and small daughter Kavya Nag were alive but severely injured.

How did Shankar Nag's contributions, like Malgudi Days and Sanket Studios, shape the Kannada film industry and its move to Bangalore?

Firstly Shankar Nag(1954–1990) and Anant Nag (1948 - present) weren't Kannadigas their mother tongue was Konkani, so Konkanis. They were just born and brought up in Karnataka ( Nagarakatte , Uttar Kannada district I believe).

Later grew up in Mumbai. Shankar Nag was a bank employee in Mumbai.

Shankar Nag decided to direct Malgudi days in Hindi not Kannada. He knew Kannada market was weak back then compared to Bollywood and the film industry was not popular outside Karnataka.

Shankar Nag’s biggest contribution to Karnataka was establishing sanket studios in Bangalore ,the former capital of Karnataka, Now Mandya is the capital of Karnataka and biggest city in Karnataka). Sanket studios now isn't active. However it didn't shape kannada film land.

Shankar Nag's memorial kannada movies were Janma Janmada Anubandha (1980) and Accident (1984). Both these movies were ahead of their time and were good scripts.

Even if Shankar Nag was alive I don't think he would have saved Kannada film industry.