Report on Vision 2025 Dec 2017

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Table of Contents

1 Overview of Manufacturing and Service Sector in Karnataka ............................................... 3

1.1 Manufacturing and Service Industry Growth Statistics ................................................... 4

1.2 Sector-wise Operational SEZs in Karnataka .................................................................. 4

1.3 Regional spread of Industrial Activity in the state ........................................................... 6

1.3.1 Agro-processing clusters ......................................................................................... 6

1.3.2 Potential Industrial Corridors ................................................................................... 7

1.4 Performance of Major sectors ........................................................................................ 9

1.4.1 Automobile Sector Karnataka ................................................................................ 10

1.4.2 Agro & Food Processing Industries in Karnataka .................................................. 11

1.4.3 Aerospace & Defense Industry .............................................................................. 14

1.4.4 Pharma & Healthcare ............................................................................................ 16

1.4.5 Construction & Mining ........................................................................................... 18

1.4.6 Karnataka Retail and BFSI Sector ........................................................................ 19

1.4.7 Tourism ................................................................................................................. 22

1.5 Karnataka’s Manufacturing & Service sector compared with other states.................... 27

2 Strategic Analysis of the Manufacturing and Service sector in Karnataka .......................... 29

2.1 Growth drivers for the Manufacturing and Service sector ............................................ 29

2.2 Progress of ongoing Government of Karnataka (GoK) schemes and proposed

interventions……………………... ............................................................................................ 30

2.3 Gap analysis (Challenges and Opportunities) .............................................................. 35

2.4 Good practices and emerging trends in the sector ....................................................... 41

3 Future of Manufacturing Sector in Karnataka ...................................................................... 43

3.1 Vision of the Future for Manufacturing Industry in Karnataka ...................................... 43

3.2 Key goals and Strategic Interventions .......................................................................... 45

3.3 Targets…………….. ..................................................................................................... 56

3.4 Forward and Backward Linkages ................................................................................. 58

4 Future of Tourism Sector in Karnataka ................................................................................ 60

4.1 Vision of the Future for Manufacturing Industry in Karnataka ...................................... 60

4.2 Key goals and Strategic Interventions .......................................................................... 60

4.3 Targets ……………………………………………………………………………………… 62

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1 Overview of Manufacturing and Service Sector in

Karnataka

Karnataka is known for its high performing manufacturing sector be it Electronics, garments,

aerospace and defense, automobiles, biotechnology, and steel production. It has also made its

footmarks globally with R&D centers like Indian Space Research Organization, Defense Research and

Development Organization, HAL R&D Centres, GE Jack welch Centre, Boeing Research And

Technology Center and Airbus Engineering Centers, Honeywell etc.

Of the total live investments attracted by states across India worth INR169 trillion as of FY16,

Karnataka accounted for 6.3 per cent share with INR10.7 billion worth of investments attracted by the

state in different sector.1.

Following chart shows the sector wise growth in different sectors.

Chart 1: Percentage growth in sectors (year-on-year)

Source: Central Statistics Office; PRS.

Insights:

The manufacturing sector gained from previous year registering a growth of 1.1 per cent in

2015-16.2

The services sector was the biggest gainer which registered a growth rate of 8 per cent.

1 Source: http://www.assocham.org/newsdetail.php?id=6474 2 Source: Karnataka Budget 2017-18

-5.4%

9.0%

4.7%

-2.8%

2.3%

7.8%

4.2%5.3%

10.4%9.4%

6.7%8.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2012-13 2013-14 2014-15 2015-16

Percentage growth in sectors (year-on year)

Agriculture Manufacturing Services

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1.1 Manufacturing and Service Industry Growth Statistics

a. The overall organized industrial sector of Karnataka has registered 1.83% growth in 2015-16

as compared to 2014-15. Within the organized industrial sector, Mining sector shows the

highest growth of 19.74% followed by the manufacturing sector 2.34% and electricity sector

registered negative growth of 4.4a1%. As a result of this moderate growth was observed in

industrial sector.

b. In 2015-16, Karnataka’s GSDP grew by 6.4%, at constant prices. The services sector

contributed 63% to the GSDP, manufacturing sector contributed 24% of the GSDP while

agriculture sector contracted by 2.8% (at constant prices) as compared to 2014-15.3

c. The composition of ‘Real estate, Professional Services & Ownership of Dwellings’ is highest

with 32.82 per cent in 2015-16 followed by ‘Manufacturing (14.59 per cent)’, ‘Trade and Repair

Services (9.23 per cent)’ and ‘Crops (8.66 per cent)’.4

d. As per the study by ASSOCHAM’s Economic Research Bureau, in 2017 Karnataka has one

of the best manufacturing process ratio of 2.63 with a maximum value of goods being

converted into finished goods valuing over INR20 billion.5

1.2 Sector-wise Operational SEZs in Karnataka

As of July 2016, Karnataka has close to 25 operational, 40 notified SeZs. It also has one valid in-

principle approval and 61 formal approval SEZs. The Karnataka Industrial Areas development Board

(KIADB) has developed 163 industrial areas across the state. Karnataka strategizes to establish and

modify eight clusters around Bengaluru with and investment of INR23.36 billion in a few years. The

following chart shows sector wise operational SEZs in Karnataka in 2016

3Source: Karnataka budget 2017-18 4 Source: http://www.des.kar.nic.in/docs/Final%20English%20Economic%20Survey%202016-17_Full.pdf 5 Source: http://www.assocham.org/newsdetail.php?id=6474

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Chart 2: Sector-wise Operational SEZs in Karnataka (as on July 2016)

Source: Department of Commerce, Ministry of Commerce and Industry Karnataka

The Karnataka state Industrial and Infrastructure Development Corporation has helped more

than 135 startups through equity participation and offered debt to core industries such as IT,

Aerospace and Telecom.6

A 300-acre SEZ in Belgaum has been developed that will be providing a precision engineering

and manufacturing supply chain ecosystem. This will be a great booster for the Manufacturing

sector.

In September 2017, Government of Karnataka (GOK) passed ‘Karnataka Electric Vehicle and

Energy Storage Policy 2017’. The segment of Electric Vehicles manufacturing would attract

investments worth INR31000 cr and create 55,000 jobs.

Animation, Visual Effects, Gaming and Comics (AVGC) policy has been introduced for 2017-

2022.The policy aims to encourage and support appropriate manpower development,

infrastructure development and business development in the AVGC sector.

6 Source: https://www.ibef.org/download/Karnataka-March-2017.pdf

IT/ITeS68%

Precision, Engineering Product

4%

Multi Product4%

Textile4%

Pharmaceuticals4%

Aerospace and Industry

4%

Electronics/hardware and Softwware/ITeS

4%

Hi-tech engineering products and related

services4%

Biotechnology4%

Sector-wise Operational SEZs in Karnataka (as on July 2016)

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1.3 Regional spread of Industrial Activity in the state

1.3.1 Agro-processing clusters

Source: Report titled ‘Investment Environment & Opportunities in Food Processing’ by Ministry of Food Processing

Industries

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1.3.2 Potential Industrial Corridors

A Inter-state corridor

Karnataka- Maharashtra 1

Karnataka- Telangana 2

Karnataka- Andhra Pradesh 3

Karnataka- Tamil Nadu 4

Karnataka- Kerala 5

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Karnataka- Goa 6

B Intra-state corridor

Bengaluru-Mandya-Mysuru-Chamrajnagar 1

Chitradurga-Bellary-Gulbarga-Bidar 2

Dharwad-Koppal-Raichur 3

Bengaluru-Hassan-Mysuru 4

Chitradurga-Haveri-Karwar 5

Tumakuru-Shimoga-Honnavar 6

Raichur-Bagalkot-Belgaum 7

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1.4 Performance of Major sectors

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1.4.1 Automobile Sector Karnataka

1.4.1.1 Current Scenario

Karnataka ranks fourth in terms of automotive production. It has an output of INR182.09 billion and

contributes about 8.5 per cent to national sector output. It employs about 55,000 workers within the

state.7 The Karnataka’s automobile output has registered a (CAGR) of 36.5 per cent8 between 2012

and 2017.

The Automobile industry received total FDI inflows of INR7.7 between 2000 2015. It amounted close

to 5.20% of the total FDI equity inflows.9 Karnataka has more than 50 automobile component

manufacturers and is house to many automobile majors.

1.4.1.2 Major Companies in the sector

There are many National Automotive majors whose manufacturing units are present in Karnataka.

Some of the main ones are Tata Marcopolo, BOSCH, Toyota Kirloskar, TVS Motors, Mahindra Reva,

Volvo, L&T Komatsu, JK Tyres and many more.

1.4.1.3 Recent Developments in the sector

Two foremost manufacturing hubs will be developed in Vemagal and Narsapur Areas in the

Kolar District.

Honda Motorcycle & Scooter India had scheduled to invest around INR5.93 billion by the end

of 2016 to expand production at the Karnataka plant.

1.4.1.4 Institutional Framework

Government Policies and Initiatives

Karnataka has recognized automotive as a major focus area as per The Industrial Policy 2014-

2019. It shows the state’s assurance to garner growth in this sector and to emerge as the

largest player in the automobile industry in India.

Government of Karnataka has suggested commissioning the ‘Karnataka Automobile Research

& Innovation Centre’. They have plans to establish the center based on a PPP model with

government support.

They have also planned to study and promote the auto component sector in the state.

Government will build a single window clearance mechanism through software called e-

udyami to assist in getting approvals for new investments.

7 Source: http://www.investkarnataka.co.in/focus-sector-auto-parts 8 Source: https://www.karnataka.com/industry/automobile-industry/ 9 Source: http://dipp.nic.in/sites/default/files/Chapter6.2.v_0.pdf

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They have planned to curtail road and registration taxes to act as indirect incentives to facilitate

manufacturers of Hybrid and Electrical Vehicles.

They want to stress upon research by fostering relationship between the academia and

Automobile Industry.10

Major Industry Organizations and their Key Roles

Karnataka Automobile Dealers Association (KADA)

KADA offers a forum for the promotion of the interests of automobile dealers of automobile OEM's in

Karnataka. It has offered a network for automobile dealers to meet and discuss issues of common

interest, to advise and consult with government, businesses and non-governmental agencies. It helps

in assisting automobile dealers in matters of common interest before the appropriate courts of law and

before the relevant Government, Statutory bodies, Quasi Judicial authorities, Industry Associations or

any other forum.11

Automotive Component manufacturer’s Association of India (ACMA)

ACMA’s agreement is to develop a globally competitive Indian Auto Component Industry and

strengthen its role in national economic development as also promote business through international

alliances. It is actively involved in promoting of trade relations, advancing technology,

upgrading the quality and collating and distributing information. It promotes the automotive

components by participating in International trade fairs, sending trade delegations to foreign

land and publishing various articles on this industry. It is headquartered in Delhi but has its branch

offices in Bangalore.12

1.4.2 Agro & Food Processing Industries in Karnataka

1.4.2.1 Current Scenario

Karnataka is one of the major national players in the Agro & food processing Industry. It has a great

agricultural economy and has major raw materials needed for flourishing Agriculture and food

processing industry. It is also backed by proficient workforce and supportive policies that fosters the

Agro& food Processing Industry. This sector has perceived a sturdy growth curve. Exports have

improved from INR51.5 million in 2010-11 to INR112.3 billion in 2014-15. It has registered a growth of

10 per cent13 CAGR (2015-16).It has also provided employment to 0.3 million14 (March 2015). The

10 Source: https://www.karnataka.com/industry/automobile-industry/ 11 Source: https://in.linkedin.com/company/karnataka-automobile-dealer%27s-association 12 Source: http://www.acma.in/contact-us.php 13 Source: http://www.investkarnataka.co.in/karnataka-at-a-glance 14 Source: http://www.investkarnataka.co.in/assets/downloads/agriculture-policy-2015.pdf

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state’s total food grain production is estimated to be 9.64 million tonnes during 2015-16. In 2016-17,

total production of major fruits in the state was 6.91 million tonnes15.

Some of the major leading positions of the Karnataka Agriculture based products are:

1. It leads in the exports of silk in India. This amounts to 25 per cent of the total Indian Silk export

market.

2. It is also one of the major leaders in production of horticultural products and spices, aromatic

and medicinal crops, and tropical fruits.

3. It is the largest producer of Coffee and Cocoa in India.

4. It is the second-largest milk producing state, and third and fourth largest producer of sugar and

sugarcane respectively.

Karnataka has 5 dedicated Food Parks and one Food Processing SEZ.16The share of GSDP for

Karnataka agriculture and Allied sector is 11.68 per cent for 2016-17 and INR65 billion has been

allocated for Agriculture and Horticulture sector.17

1.4.2.2 Major Companies in the sector

Nestle, The Heritage Group, Annapurna Paddy Processing's rice mill in Raichur, ITC, Bangalore, JK

Agro Food Industries, Indira Foods, Café Coffee Day, MTR, Nandini and many more.18

1.4.2.3 Recent Developments in the sector

1. Ruchi Soya company had been approved by Government of Karnataka to set up

manufacturing units at Dakshina Kannada as on 10 June 201619

2. The state has invested a total of INR44.28 billion in 54,905 processing units.20

3. It has initiated processing of horticulture produce, extraction of herbs & medicinal plants Sea

food park at Mudipu near Mangalore

4. It has plans to set up Karnataka Milk Federations projects under PPP model

5. It will set up Rice technology park at Koppal

6. It will develop a Maize technology park at Haveri

7. It has plans to set up Cold storages in APMC yards21

15 Source IBEF Karnataka 16 Source: http://dcmsme.gov.in/dips/state_wise_dips/state_profile_karnatka_11316.pdf 17 Source: http://www.des.kar.nic.in/docs/Final%20English%20Economic%20Survey%202016-17_Full.pdf 18 Source: http://kiadb.in/wp-content/uploads/2017/02/Agri.pdf 19 Source:https://www.ibef.org/download/Food-Processing-January-2017.pdf 20 Source: http://www.investkarnataka.co.in/assets/downloads/agriculture-policy-2015.pdf 21 Source: http://pbdindia.gov.in/sites/default/files/ps_pdf/9/Invest%20Karnataka.pdf

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1.4.2.4 Institutional Framework

Government Policies and Initiatives

Karnataka agribusiness and food processing policy 2015 –

“Its aim is to maintain a sustained growth path in Agri Business & Food Processing sectors

through use of global technologies, innovative mechanisms, frameworks and world class

infrastructure facilities. The highlight of this policy is the exemption it provides to investors with

respect to Stamp duty, Entry tax and Electricity Tax.”

It had formulated Industrial Promotion Policy for Agro Food Processing Industries in June 2003

and the Integrated Agribusiness Development Policy during March 2011.

The Rashtriya e-Market Services Limited (ReMS) was initiated to form an e-trading platform.

Government has created an integrated policy framework to promote investments for entire

value chain and niche sub-sectors.22

Government plans to create post-harvest technologies at Chitradurga. It comprises of a

receiving hall, pack house, pre cooling, Cold storage, washing and waxing unit and related

equipments for the export of pomegranates, Figs, Papaya and other horticulture produce from

Chitradurga and surrounding areas.

It has plans of establishing an IQF unit at Hubli in North Karnataka for the export of Quick

frozen foods under PPP model.

It has plans to create post-harvest infrastructure (cold chain) facility at Bidar for the export of

fruits & vegetables.23

Major Industry Organizations and their Key Roles

Central Food Technological Research Institute (CFTRI)-Mysore

It (A constituent laboratory of Council of Scientific and Industrial Research, New Delhi) came into

existence during 1950 with the great vision to pursue in-depth research and development in the areas

of food science and technology. Research focus of CSIR-CFTRI has been revolved around

Engineering Sciences, Technology Development, Translational Research, Food Protection and

Safety.24

The National Dairy Research Institute (NDRI)

It is headquartered in Bangalore and is known as country’s top most Dairy Research institution. It has

developed considerable expertise over the last five decades in different areas of Dairy Production,

Processing, Management and Human Resource Development. Realizing the challenging need of

global Dairy Trade, the Institute is continuously working to develop its R&D and HRD programmes to

22 Source: http://www.investkarnataka.co.in/focus-sector-agri-food-processing 23 Source: http://kappec.kar.gov.in/future.html 24 Source: http://www.cftri.com/csir

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better serve the nation in terms of food security, employment generation, poverty alleviation and

economic prosperity.

Karnataka State Agricultural Produce Processing and Export Corporation (KAPPEC) Ltd

Karnataka has established (KAPPEC) on 22nd April 1996 to develop and foster the production,

processing and export of agriculture and overcome problems faced by farmers.25

Karnataka Agribusiness Development Corporation (KABDC)

KABDC will help the investors in investing with agribusiness and food processing in Karnataka. It will

be strengthened with requisite manpower drawn from different sectors such as Agriculture,

Horticulture, Animal Husbandry, Fisheries, and Food Processing etc., to facilitate sector specific

investments.

1.4.3 Aerospace & Defense Industry

1.4.3.1 Current Scenario

Karnataka has a strong ecosystem of 2000 SME’s related to aerospace with a well-established value

chain to deliver end to end services. The state has put a major impetus on this sector and it is

highlighted by its quality of skilled workforce and highly rated Aerospace majors and research centers

like ISRO, HAL, ADA, NAL, DRDO and DARE etc.

The Government of Karnataka has drafted first of its kind aerospace policy in India. Of all aircraft and

helicopters available with the nation’s Defense Services, 67 per cent originates from Karnataka. India’s

first Private Aerospace SEZ is functional at Belgaum, Karnataka.The aviation sector registered a

CAGR of 18 per cent (this is the national average). It has plans to employ about 1.05 million in between

2013-2023 as per the Aviation Policy.26

1.4.3.2 Major Companies in the sector

Some of the major Aerospace and defense companies are HAL, NAL, ISRO, DRDO, ADA, DARE

ASTE- IAF and BEL.

1.4.3.3 Recent Developments in the sector

The state has plans to develop Bangalore Aerospace Park at Devanahalli and MRO centers at BIAL

and Mysore, and a defense manufacturing cluster at Mangalore.

25 Source: http://kappec.kar.gov.in/aboutus.html 26 Source: http://www.investkarnataka.co.in/assets/downloads/aerospace-policy.pdf

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The amendments have been made in view of the 33 project proposals received at ‘Invest Karnataka’

meet held early in 2017.The proposals are to the tune of INR1.45 trillion with the potential to generate

over 10,000 jobs.27

1. A Centre of Excellence is being set up in Bengaluru in collaboration with French non-profit for

imparting industry-specific, high-end skill training to make the available manpower readily

employable. As part of the center, two campuses will be started by the government of

Karnataka along with French aerospace and defense major Dassault Systems.28

2. Projects such as the Aerospace Technology Center and Aerospace Common Finishing

Facility, envisioned in the policy are being set up to provide support facilities to SMEs.

3. Bangalore Chambers of Industry and Commerce (BCIC) has proposed to set up India’s first

Multi-Skill Training Institute for Aerospace and Aviation.

4. Greenfield airport development - Shivamogga, Vijayapura, Hassan and Kalbargi through the

PPP model.

1.4.3.4 Institutional Framework

Government Policies and Initiatives

State Government has announced an exclusive policy for the sector – first ever in India.

“The state offers various policy measures to promote the indigenization of the sector. This is

enforced with Prioritization of Buy Indian and Buy and Make Indian for capital acquisition. The

state also allows for Simplification, Faster progress and Enhanced delegation of the financial

powers for capital acquisitions.”

“It also has an offset policy of 30 per cent mandatory for procurements excess of INR3 billion

in a bid to leverage capital acquisition and build the Indian defense industry.”

The state has also opened its FDI cap in defense production from 26 per cent to 49 per cent

under automatic rule with beyond 49 per cent left to the discretion of cabinet committee on a

case to case basis.

The sector policy has a well-defined industrial license regime, tax regime and foreign trade

policy. In a thought through effort, the state has initiated a more practical black listing policy to

keep options open for the three services to source equipment.

In Budget 2017-18 INR371.5 million was allocated to Defense.29

27 Source: http://www.investkarnataka.co.in/mii/images/invest_opp/Aerospace.pdf 28 Source: http://www.thehindubusinessline.com/economy/logistics/airbus-signs-mou-for-setting-up-centre-of-excellence-in-hyderabad/article9544730.ece 29 Source:https://www.ibef.org/download/Manufacturing-October-2017.pdf

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Major Industry Organizations and their Key Roles

Indian Space research Organization (ISRO).

ISRO, the space agency of the Government of India, which is headquartered in the city of Bengaluru,

is the leading center for building satellites and developing associated satellite technologies. It utilizes

space technology for national development and pursues space science research besides planetary

exploration. 30

The Aeronautical Society of India (AeSI)

The Aeronautical Society of India is the predominantly serves the professions aeronautics, aerospace

and aviation. The society is primarily responsible for the advancement of science, engineering,

technology and management of aerospace, aeronautics and aviation. It also cultivates, encourages

and promotes the professionalism of those engaged in these pursuits. 31

1.4.4 Pharma & Healthcare

1.4.4.1 Current Scenario

Karnataka is one of the major contributors to the Pharmaceutical sector in India. It has good policies,

and infrastructure, R&D and skilled workforce capabilities and so it is one of the top contributors to the

state economy.

The Indian Pharmaceutical Industry is expected to undergo rapid growth at a CAGR of 12.1 per cent

during 2012-20 and reach INR2.99 trillion. It is home to 221 formulation units and 74 bulk drug units.

State‘s Pharmaceutical industry generated INR80 billion in revenue contributing 8 per cent of the

country’s total revenues, ranking 10th in the number of Pharmaceutical manufacturing. Karnataka

exports 40 per cent of its pharma produce.32 It generated a total output close to INR123.26 billion in

2016.33 Karnataka has allocated INR80 million for construction of ladies hostel at Government

Pharmacy College, Bengaluru.34

1.4.4.2 Major Companies in the sector

Himalaya Herbal Health Care, GlaxoSmithKline, Novo Nordisk, Cipla, Karnataka Antibiotics and

Pharmaceuticals limited, Micro Labs.35

30 Source: https://www.isro.gov.in/ 31 Source: http://aerosocietyindia.in/iMIS/Portal/ 32Source: http://dcmsme.gov.in/dips/state_wise_dips/state_profile_karnatka_11316.pdf 33 Source: http://planning.kar.nic.in/docs/Economic%20Survey%20Reports/ES_16-17/English.pdf 34 Source: http://northgazette.com/news/2016/03/18/karnataka-budget-2016-17-key-features-of-budget-presented-by-cm/ 35 Source:http://www.investkarnataka.co.in/focus-sector-pharmaceutical

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1.4.4.3 Recent Developments in the sector

1. GlaxoSmithKline Ltd has planned investment of INR10 billion for establishing a new

pharmaceutical unit in Karnataka. It will enhance its global pipeline in areas like respiratory

drugs and vaccines in India. 36

2. Karnataka government aims at achieving 15per cent growth for pharma sector to rise from

current 8per cent. Karnataka Drugs and Pharmaceutical Association (KDPMA) is working

towards 100per cent implementation of the Pharma Policy & establishment of more Pharma

Parks. The state stresses upon procuring investment for Infrastructure Development namely,

PPP-based Pharma SEZ’s and technology parks.37

1.4.4.4 Institutional Framework

Government Policies and Initiatives

It is the Karnataka Pharmaceutical Policy 2012 measures which distinguish Karnataka

amongst India’s leading investment destinations. Policy highlights and focus areas can be

classified broadly under infrastructure, R&D and mega projects.

Development of Pharmaceutical parks in potent locations in Karnataka would be encouraged

through PPP. Further, setting up of SEZs under the provisions of the SEZ policy is of focus.

Attention to setting up R&D institutions to levy the strengths of the State and the allocation of

supportive fiscal incentives and grants for promoting R&D activities.

Karnataka has plans to expand Yadgir SEZ

Karnataka’s healthcare objectives include providing access to good healthcare and developing

the health sector. The state endeavors to provide quality health uniformly to its population.

Karnataka’s health policy goals include to:

Provide integrated and comprehensive primary healthcare, Establish a credible and

sustainable referral system, Ensure equity in delivery of quality healthcare, Encourage greater

public private partnership in provision of quality healthcare in order to better serve the

underserved areas, Strengthen health infrastructure, Develop health human resources,

Improve access to safe and quality drugs at affordable price and Increase access to systems

of alternative medicine

36 Source: http://www.business-standard.com/article/companies/gsk-to-invest-rs-1-000-cr-in-karnataka-for-new-plant-117070900289_1.html 37 Source:http://www.investkarnataka.co.in/focus-sector-pharmaceutical

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1.4.4.5 Major Industry Organizations and their Key Roles

Government of Karnataka Health and Family Welfare services38

The Department of Health and Family Welfare Services implements various National and State Health

programs of Public Health importance and also provides comprehensive Health Care Services to the

people of the State through various types of Health and Medical Institutions. 39

1.4.5 Construction & Mining Current Scenario

Karnataka has prosperous metallic and non- metallic minerals deposits. It has good resources of iron

ore, gold, hematite, bauxite, chromite, dolomite, quartz and sand-silica besides different varieties of

clay, fuller’s earth, talc, and steatite (soapstone)40. It is the only state that produces felsite in India. It

leads in national gold production (99 per cent) and Dunite production (43 per cent). Iron ore, limestone,

gold and manganese comprise more than 3 quarters of the state’s mined area Iron ore production in

Karnataka is estimated to reach 25 million tonne (mt) in 201641.The state’s mining sector has

registered a negative CAGR of -3.2%42 in 2016. The industry produces more than 15 million tonnes of

steel annually.

For 2016-17 the estimated share of GSDP for mining was 0.43 per cent43 whereas for construction

was 6.92 per cent.

Mining new developments

JSW Steel has won five iron ore mines in Karnataka with an estimated reserve of 111 million tonnes.

The steel major has also secured Moitra coking coal mine through an auction in Jharkhand. The mine

has total extractable coal reserve of around 30 MT in 2017.44

Policies and Incentives

The Government of Karnataka had come out with its first Infrastructure Policy in 1997. It has specific

incentives and concessions for infrastructure projects. The Government provides support in obtaining

clearances and approvals and also in providing basic and linkage infrastructural needs like roads,

power and water. Infrastructure Projects would be allowed to charge user fees during the gestation

period and consideration would be given for infrastructure projects having long gestation periods.

38 Source: http://www.karnataka.gov.in/hfw/Pages/Home.aspx 39 Source: http://www.karnataka.gov.in/hfw/Pages/hfws_admin_introduction.aspx 40 Source: http://iosrjournals.org/iosr-jagg/papers/Vol.%205%20Issue%204/Version-3/G0504035558.pdf 41 Source: https://www.ibef.org/download/Metals-and-Mining-February-2017.pdf 42 Source: http://planning.kar.nic.in/docs/Economic%20Survey%20Reports/ES_16-17/English.pdf 43 Source: http://planning.kar.nic.in/docs/Economic%20Survey%20Reports/ES_16-17/English.pdf 44 Source: http://www.jsw.in/sites/default/files/assets/industry/steel/IR/Financial%20Performance/Financials/2017-18/Q1/JSW%20Steel%20-%201QFY18%20results%20conference%20call%20transcript.pdf

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The infrastructure policy of Government of Karnataka offers exemptions from entry tax and contract

tax. The Government will also facilitate the investor in acquiring the required land through KIADB for

use of the project. It also has provisions for awarding the contract on “Swiss Challenge” method,

including consultancy services.45

Real estate sector has expressed concern over the penal provisions in the Karnataka Real Estate

Regulatory Authority (RERA) Act in case of project delays, even for reasons beyond builders’ control.

Recent developments

In Karnataka, 12,371 dwelling units will be constructed in 8 cities under Affordable Housing in

Partnership component of Pradhan Mantri Awas Yojana (Urban) for rehabilitation of slum dwellers.46

Organizations

Aluminum Association of India

It was established to cater the needs of Indian Aluminum Industry and to interface with various

aluminum industries world over. AAI is the apex body representing the entire spectrum of Indian

Aluminum Industry– Primary Producers, Downstream Manufacturers, Endusers, R&D Organizations.

1.4.6 Karnataka Retail and BFSI Sector

Retail sector

Karnataka is one of the leading states in organized retailing in India as there are more retail outlets in

Bangalore city, due to increasing urbanization and expanding service sectors like software, banking,

insurance and Business Process Outsourcing (BPO), which has taken a metropolitan city status more

recently, has led to increase in income of the consumers. Apart from Bangalore, cities such as Mysore,

Mangalore, Hubli-Dharwar and Belgaum in Karnataka are also growing rapidly in terms of

urbanization, income and organized retailing with local food marketers as they are converting

unorganized retail outlets into organized form because of strong demand for convenience products;

and better educated consumers concerned about health, nutrition, food safety, and the environment.47

BFSI Sector

45Source: http://www.investkarnataka.co.in/focus-sector-infrastructure 46Source: http://pib.nic.in/newsite/PrintRelease.aspx?relid=148730 47 Source: http://shodhganga.inflibnet.ac.in/bitstream/10603/134959/10/10_chapter%203.pdf

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The state of Karnataka is known as the home of Banking, as Karnataka is home for five leading public-

sector banks, two private sector banks and many small banks. The GSDP for Financial Services sector

for 2016-17 was 4.73 per cent.48

World Bank’s Investment Climate Index has ranked Karnataka first for a ―Healthy Business Climate

and Attracting Investments49

Karnataka’s Banking, financial services and insurance (BFSI) sector accounted for over 8 per cent

share in job creation.50

Innovation in Financial sector

Airtel recently got the payments bank license from the RBI & is starting its pilot services across 12000

outlets in Karnataka in supplement to Andhra Pradesh & Telangana.51

1.4.6.1 Institutional Framework

Policies and initiatives

Retail

Karnataka passed the first retail policy on the 13th June, 201652. It aims to accelerate

investment flow to underdeveloped regions of the state. It aims at creating large local

employment opportunities, to educate the youth of all sections of the society across the region,

especially in rural areas.

The new policy will allow the retail sector to operate 365 days a year from 5 am to 11 pm. It is

also allowed to recruit women staff to work in night shifts on certain conditions and maintain

the registers and documents electronically, besides issuing electronic bills.

The new policy is expected to bring food and grocery retailing under the ambit of ‘essential

services’ which will mean that they cannot interrupt services due to industrial unrest.

BFSI

Karnataka will roll out Universal Health Coverage (UHC) from November, which will bring all

government health schemes under a single umbrella. Under the UHC program, 14 million

48 Source: http://planning.kar.nic.in/docs/Economic%20Survey%20Reports/ES_16-17/English.pdf 49 Source: http://dcmsme.gov.in/dips/state_wise_dips/state_profile_karnatka_11316.pdf 50 Source: http://www.assocham.org/upload/news/1459875998.pdf 51 Source: https://www.ibef.org/download/Financial-Services-May-2017.pdf 52 Source: http://www.investkarnataka.co.in/assets/downloads/retail_trade_policy_2015.pdf

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households in Karnataka will be eligible for cashless treatment, up to INR0.15 million in

government and private hospitals.53

1.4.6.2 Recent developments

Retail

1. Big Basket and Davangere and Chitradurga District Organic Farmers Federations have

expressed interest in collaborating for supply and procurement of millets of approximately 500

metric tonnes.54

2. Uttara Kannada District Organic Farmers Federation had expressed an intent to establish

linkages with "Big Basket" for supply and procurement of approximately 300 metric tonnes of

organic spices valued at INR120 million, he added.

3. IKEA, the world’s largest furniture retailer, plans to invest INR1.05 billion to set up 25 stores

across India and hire over 15,000 permanent employees and 37,500 temporary employees to

assist in running its stores in 2017.55

BFSI Sector

1. Banks in Karnataka collaborate with new age fintech companies for rural banking

Vaya Finserv is a Hyderabad-based, business correspondent firm using tablet banking to

provide seamless core banking systems in rural areas and loans for women’s self –help

groups. Vaya has partnered with YES bank and The Ratnakar Bank to provide financial

facilities in under-banked districts of Maharashtra, Karnataka, Odisha, Bihar and Jharkhand.56

2. In a move towards realizing Prime Minister Narendra Modi’s Digital India dream, Karnataka

Vikas Grameen Bank (KVGB) has declared Sherewad as a digital banking village.

1.4.6.3 Major companies

Some of the major companies in retail include Flipkart, Amazon India, Myntra, Lenskart, BigBasket,

Tiotan, Café Coffee Day, eZone, Aditya Birla Group, proline, Pantaloons, scullers, Nilgiris,

Some of the major companies in Banking include State Bank of Mysore (SBM), Canara Bank

Corporation Bank, The Karnataka Bank, Syndicate Bank, Vysya Bank, Vijaya Bank, Axis bank and

others

1.4.6.4 Major organizations and their roles

53 Source: http://www.thehindu.com/news/national/karnataka/karnataka-ready-to-roll-out-universal-health-coverage/article19576993.ece 54 Source: https://retail.economictimes.indiatimes.com/news/food-entertainment/grocery/big-baskets-big-plans-for-organic-farmers-in-karnataka/58398182 55 Source: https://www.ibef.org/archives/detail/b3ZlcnZpZXcmMzcxNzEmMzc1 56 Source: http://www.cio.in/feature/banks-collaborate-new-age-fintech-companies-rural-banking

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Retail

Retailers Association of India

Retailers Association of India (RAI) has represented the Government of Karnataka to bring out Retail

Trade Policy since it contributes directly to the growth of the Karnataka State economy.

Visvesvaraya Trade Promotion Centre (VTPC)

VPC, a society under Commerce & Industries Department will be the nodal agency to look after

the interests of the retail enterprise. The nodal office shall coordinate with all the departments and

ministries of Karnataka vis-a-vis central Government and members of industry to speed up

licensing development and growth of retail enterprise. Provide a single window clearance

mechanism for small and organized retail industry of the State. The nodal office shall liaise with

the relevant licensing authorities in the state, on behalf of the retailer, so that these licenses may

be procured faster

BFSI

RBI

The office is entrusted with currency management, foreign exchange management and supervision of

commercial banks, urban banks and non-banking entities in addition to rural planning and

development. The Central Fraud Monitoring Cell of the Reserve Bank with its jurisdiction extending to

the entire country also functions from this office.57

1.4.7 Tourism

A 320 km natural coast line along with various forests and wildlife, makes Karnataka a nature tourist’s

paradise. The state has attracted 119.86 million domestic tourists and 0.63 million international tourists

in 2015. During 2005– 2015, tourist arrivals in the state increased at a CAGR of 16.9 per cent. The

sector contributes 14.8 per cent to the GSDP of Karnataka; plans are afoot to expand to 26 per cent

by 2020. In budget 2016-17, the state government announced the launch of new policy on tourism for

the period 2015-2020 for strengthening and boosting private investments across the tourism sector.

During 2005–2015, tourist arrivals in the state increased at a CAGR of 16.9 per cent. The GSDP of

the Tourism sector in Karnataka grew at a CAGR of 13.33 per cent between 2011-12 and 2016-17.58

57Source: https://www.rbi.org.in/Regionalbranch/bangalore/profile.aspx 58 Source: IBEF Karnataka

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Total Tourist Footfalls 2016 13.30 crore

Contribution to GSDP 14.8%

Visitor Exports INR 1,24,930 crore

Direct Employment 20 lakh

Annual employment growth rate 7%

Number of UNESCO Heritage sites 3 (Hampi, Pattadakal, parts of Western Ghats)

Number of Heritage monuments 507 centrally protected monuments

Ranking – Domestic footfalls 4th (2015)

Ranking – Foreign footfalls 9th (2015)

With over 13 crore tourists, 2016 saw an 10% growth over last year in total tourist arrivals

• According to Karnataka tourism policy 2015-20, it is envisaged that INR 54,000 Cr investments

will be made during 2015-20 period (more investment expected from private sector or under

PPP) which can generate around 30 lakhs employment

• As per WTTC 2016 report, Karnataka tourism contributes ~ 8% to India’s total tourism GDP

(assuming tourism share of 14.8% GSDP in 2015)

• Bengaluru became the first Indian city to have its own logo

1.4.7.1 Policies and initiatives

Under the new Tourism Policy (2015-20) great incentives and concessions are offered for

implementing mega tourism projects.

Karnataka Tourism Trade Facilitation Act has been passed by the legislation. Action is being

taken for the implementation of Act.

Initially 46 destinations have been identified for adoption by the Corporates. 6 destinations

have been adopted by corporates.

During 2016-17, the state government has decided to launch new “Kuteera” scheme for

providing the tourists with basic amenities on the national highways. The state government

has also decided to endorse the Heli and Air taxi services across the vital tourist destinations

of the state. Further, tourist places, pertaining to Jains and Buddhists, are also proposed to be

developed by the state government during 2016-17.

24

As per the budget 2016-17, an amount of INR5.02 billion has been allocated to the tourism

department.59

A tourism project by Cornerstone Property Developers (INR1.3 billion and 5,540 jobs) has been

planned and an industrial infrastructure project by Devi City Industrial Park Pvt. Ltd (INR114 million

and 1,000 jobs).60

Karnataka Tourism Vision Group was created in 2013 which identified clusters of tourism interest.

Few tourism circuits identified are as follows:

Urban Tourism This region has been the most popular one in Karnataka for long. It also has the highest number of rooms in multiple locations. Bangalore-Mysore-Ooty is one of the oldest circuits in Southern India.

Heritage Hampi has been gaining fame as one of the greatest destinations in India. Along with the other ancient locations around Hampi, it has become Karnataka’s top destination for Inbound tours

Nature & Wildlife Western Ghats is a biodiversity hotspot with potential to be developed as a regulated tourism area in lines with Botswana’s Gorilla Tourism. Karnataka has the largest population of Asian Elephants and tigers

Wellness & Spiritual

Medical and wellness tourism has already made substantial headway, primarily in Bangalore. Karnataka already has highly developed individual Spiritual Sites. However, sites need to be connected and developed further to

Sun, Sea & Sand The coastline of Karnataka extends over 300 km. However, significant efforts & investments are needed to build world class beaches comparable to international destinations like Maldives & Mauritius

59 Source: http://www.airda.org/assets/docs/ktpolicy2015to2020.pdf 60 Source: https://allaboutbelgaum.com/business/devi-city-industrial-park-approved-vantmuri-govt/

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STRENGTHS WEAKNESSES

1. The state enjoys the presence of wonderful

locations and destinations across all

tourism themes

2. Karnataka has a rich and unique heritage

and cultural identity

3. Carrying capacity of most destinations has

not reached saturation levels

4. Bengaluru, the origin hub for most visitors,

is well connected to the rest of the country

and has India’s third busiest airport

5. The state has a progressive tourism policy

which encourages private partnership and

ICT use

1. Not all tourist destinations have adequate

last-mile connectivity

2. Basic tourism infrastructure – toilets,

wayside amenities, trained guides - need

improvement

3. Promotion and marketing of Karnataka

destinations could be better

4. Need for increased participation from the

private sector in promoting the Karnataka

Tourism brand

5. Lower rail density as compared to other

southern states. Road infrastructure is

excellent, however road travel to far flung

places is not too attractive

OPPORTUNITIES THREATS

1. Karnataka has all tourism products except

snow. Branding and promotions of

Karnataka tourism can propel it to become

the leading tourism state in India

2. It has 2nd highest number of centrally

protected monuments after Uttar Pradesh.

With its strength in Heritage products, it can

be positioned as a leading heritage tourism

destination in India

3. Bengaluru is a globally recognized city and

can leverage this position to attract more

foreign tourists to Karnataka

4. As Bengaluru is the innovation capital of

India, Karnataka can reap maximum

benefits from tourism technology start ups

in India

1. Competition from other states, mainly the

other southern states - Kerala, Andhra

Pradesh, Telangana and Tamil Nadu and

from Goa

2. Competition from other international

destinations such as Sri Lanka

3. A career in tourism in not perceived as

attractive for many students

1.4.7.2 Major organizations and their roles

Karnataka State Tourism Development Corporation (KSTDC)

KSTDC, established in 1971, provides accommodation and conveyance facilities for tourists visiting

Karnataka. It also conducts 26 package tours through its fleet of 52 buses equipped with state of the

art facilities and owns hotels and guest houses throughout the State –18 properties at unrivalled

locations across popular destinations. KSTDC also undertakes infrastructure development projects.

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KSTDC also operates The Golden Chariot, South India’s first and only luxury train. Rated by Vanity

Fair as “one of the top seven train journeys in the world”, it takes discerning travelers through its 2

packages, “Pride of the South" and "Southern Splendour”.

Karnataka Exhibition Authority, Mysore

The Karnataka Exhibition Authority’s mandate is to promote art, culture, literature, science and

technology of Karnataka through exhibitions/ fairs at the Doddakere Maidan, adjacent to the Mysore

Palace. It also has been conducting the globally acclaimed Mysore Dasara exhibition since 1987

Karnataka Tourism Vision Group (KTVG

Karnataka Tourism Vision Group (KTVG) was set up in October 2013 to advise on promoting tourism

in state61

61 Source: http://karnatakatourism.org/DOTkannada/images/Vision_Group.pdf

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1.5 Karnataka’s Manufacturing & Service sector compared with other

states Following table shows the Karnataka state as benchmarked with other states in terms of

manufacturing:

Table 1: Karnataka’s manufacturing compared with other states.

Parameters Karnataka Tamil Nadu

Andhra Pradesh

Maharashtra Gujarat

Number of MSME 27929162 14310463 1,08,494 1,81,11964 32118165

Installed power capacity (MW)66

21,492.43 29,276.71 16,717 38,372.867 26,126

Major and minor ports68

1 + 10 3 + 23 1+12 2+48 1+46

Exports (US$ billion) 2014-1569

$ 48.93 $ 27.9070 Rs 79,492.31 ($12.23) 71

$72.83 $ 59.58

Karnataka’s performance indicators from Annual survey of Industries by DIPP ASI in 2017

Ranked 4th among at India States/Union Territory

Total Persons Engaged 7.02%

Output 6.71%

GVA 6.17%

Karnataka leads the national average of IIP Growth rates in 2015

IIP Growth Rates (Manufacturing) 2015-2016 Base year 2004-05

Karnataka-2.34

National-2

62 Source: http://dcmsme.gov.in/dips/state_wise_dips/state_profile_karnatka_11316.pdf 63 Source:http://dcmsme.gov.in/dips/state_wise_dips/State%20Industrial%20Profile%20-%20Tamil%20Nadu_4316.pdf 64Source: http://www.goldenmaharashtra.in/wp-content/uploads/2015/03/GMDC-MSME-CENTRE-Overview.pdf 65 Source: https://vibrantgujarat.com/writereaddata/images/pdf/micro-small-and-medium-enterprise-sector.pdf 66 Source: http://greencleanguide.com/top-five-states-in-india-with-highest-installed-electricity-generation-capacity/ 67 Source: http://www.electricalindia.in/blog/post/id/9888/status-quo-of-maharashtra 68Source: http://www.walkthroughindia.com/walkthroughs/the-12-major-sea-ports-of-india/ 69 Source: https://www.ibef.org/download/Tamil_Nadu_July_20171.pdf 70 Source: http://www.thehindu.com/news/cities/mumbai/business/maharashtra-gujarat-corner-46-of-indias-exports-study/article8411933.ece 71 Source: http://www.deccanchronicle.com/business/in-other-news/251116/exports-from-andhra-pradesh-drop-drastically-in-2015-16-fiscal.html

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Table 2: State wise FDI Inflows

States/Years 2013-14 2014-15 2015-16 2016-17 2017-18

Karnataka72 INR123.5 billion

INR244.8 billion

INR275.77 billion INR139.19 billion

INR147.69 billion (till June 2017)

Andhra Pradesh

INR44.30 billion

INR88.87 billion

INR101.29 billion73

INR163.3 billion74

NA

Maharashtra75 INR222.19 billion

INR415.6 billion

INR621 billion

INR660.03 billion

INR278.3 billion76 (till June 2017)

Gujarat77 INR56.2 billion

INR99.98 billion

INR146.38 billion INR219.57 billion

NA

Telangana According to the Department of Industrial Policy & Promotion (DIPP), cumulative FDI inflows in Telangana from April 2000 to March 2017, totaled INR899.2 billion.78

Tamil Nadu INR137.8 billion

INR248.9 billion

INR295.3billion INR144.42 billion79

NA

Source: IBEF state reports

Converted from US$ to INR; 1 USD = 65.35 INR

72 Source: https://www.ibef.org/download/Karnataka_-_November_20171.pdf 73 Source: https://www.ibef.org/download/Andhra-Pradesh-Februray-2017.pdf 74 Source: https://www.ibef.org/states/andhra-pradesh.aspx 75 Source: https://www.ibef.org/download/Maharashtra-March-2017.pdf 76 Source: https://www.ibef.org/states/maharashtra.aspx 77 Source: https://www.ibef.org/download/Gujarat_-_November_20171.pdf 78 Source https://www.ibef.org/download/Telangana-July-2017.pdf 79 Source: https://www.ibef.org/download/Tamil_Nadu_July_20171.pdf

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2 Strategic Analysis of the Manufacturing and Service sector

in Karnataka

2.1 Growth drivers for the Manufacturing and Service sector

a. Growing International Investments:

The cumulative Foreign Direct Investments (FDI) inflows in the state from April 2000 to

June 2017 were recorded at INR1.60 trillion (US$24.63 billion – converted from US$ to

INR; 1 USD = 65.35 INR), the fourth highest in India after Maharashtra, Delhi and Tamil

Nadu.

It accounted for a share of 7.2 per cent in India’s cumulative FDI inflows80.

In 2016, Karnataka received the highest investment intentions worth INR1.54 trillion,

followed by Gujarat (INR561.56 billion). Investment received by Karnataka was almost

three times as compared to Gujarat81.

b. Rich Talent Pool:

Karnataka is also known as the Knowledge Capital of India and availability of a large,

highly skilled workforce is Karnataka’s greatest asset.

The state has successfully attracted skilled labour, especially, in the knowledge sector.

c. State Government’s Preference for Goods Manufactured Locally:

With an aim to promote the 'Made in Karnataka' brand through market development

initiatives, the State Government has amended the Karnataka Transparency in Public

Procurements Act (KTPP) to reserve 350 times (products) for exclusive manufactures of

MSME and SSIs.

Earlier only 28 times were reserved.

Under this Act, goods and products manufactured locally in the State will be given

preference over those manufactured outside the State in case of all purchases made by

Government departments and Government undertakings.

This initiative is mainly to give emphasis to self-employment creation, opportunities for

micro-small enterprises and offer a host of incentives to local entrepreneurs82.

80 Source: IBEF – Karnataka, October 2017 81 Source: http://www.thehindu.com/news/cities/bangalore/Karnataka-to-make-a-new-investment-pitch/article17285835.ece 82 Source: http://resurgentindia.com/wp-content/uploads/research/INDUSTRY/KAR%20MFG%2018%2012%2015.pdf

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d. Karnataka’s Proximity to other Automobile Clusters:

Karnataka’s proximity to the Western and Southern automobile clusters makes it an

attractive place for manufacturers and investors. The state is connected with these clusters

through dedicated Freight Corridor between Chennai- Bengaluru and Mumbai-Bengaluru.

State’s connectivity to six ports through NH and SH helps in growing exports in the

manufacturing sector83.

2.2 Progress of ongoing Government of Karnataka (GoK) schemes

and proposed interventions

83 Source: http://www.investkarnataka. co.in/focus-sector-auto-parts

31

a. Karnataka 'Elevate 100' scheme for start-ups: In 2017, GoK has launched the ‘Elevate 100’

scheme to identify and nurture innovative start-ups from various sectors including

Manufacturing; Pharma; Agritech; IT; Biotech and Animation. The aim is to identify 100 most

innovative start-ups in the state to elevate them to the next level of success. Through Elevate,

the state Government will help startups with funding, technical and business support based on

their need.

The Elevate scheme is the brainchild of the start-up cell, Karnataka Biotechnology and

Information Technology Services (KBITS), to help start-ups across the state succeed by

providing them with access to mentors, networking opportunities, idea validation, incubation

facilities, and in-depth sessions for start-ups on accounting, legal and emerging technologies.

ELEVATE 100 is a part of the ELEVATE initiative, which was launched in May 2017 by the

Government of Karnataka in partnership with the Deshpande Foundation and The Indus

Entrepreneurs (TiE). The goal of the programme was to identify and support 1,000 startups

from smaller cities and towns84.

This initiative would also give the selected 100 startups access to the government’s INR4

billion cumulative startup fund as well as offer mentoring from industry experts, idea validation,

advisory and legal support85.

GoK has a goal of hosting at least 20,000 start-ups by 2020. The last four months of 2016 saw

nearly 20 firms register with Karnataka's Startup Cell every day. From just 27 startups

registered in 2013, the number reached to 2,397 as of December 201686.

b. Karnataka Single Window Committee: Karnataka Udyog Mitra (KUM) has been appointed

as a “single point of contact" in the state for project proposal with investments more than

INR0.15 billion. Investors can contact KUM to know more about advantages offered by the

state and can learn about project identification process, suitable and available location in the

state, human resources, approvals required, procedures involved, etc.87

KUM works on the model of a Single Window Clearance mechanism. KUM will liaise between

investors and the various government departments for assistance in land identification, land

84 Source: http://www.elevate.bengaluruite.biz/elevate100/index.php 85 Source: http://www.elevate.bengaluruite.biz/elevate100/index.php 86 Source: https://timesofindia.indiatimes.com/trend-tracking/20-startups-register-every-day-in-karnataka/articleshow/56613112.cms 87 Source: http://www.ebizkarnataka.gov.in/indexd1c0.html?q=content/welcome

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allocation, power, water, environmental clearance, etc. to ensure smooth and timely

implementation of projects.

Projects with investments between INR0.15 to 5 billion will be cleared by the State Level Single

Window Clearance Committee (SLSWCC), chaired by the Minister for Large and Medium

Scale Industries, Government of Karnataka. If the investment is above INR5 billion, it will be

cleared by the State High Level Clearance Committee (SHLCC), chaired by the Chief Minister,

GoK.

From 2010-11 to Dec 2014, 1,763 projects have been approved by the state level single

window clearance committee and state high-level clearance committee with an investment of

INR1.3 trillion88.

c. Aerospace and Defense Centre of Excellence (CoE) in Karnataka:

The Centre of Excellence (CoE) is an initiative of the Government of Karnataka (KBITS),

Visvesvaraya Technological University (VTU) and Dassault Systèmes.

The first two batches of total 50 students are undergoing a one-month long foundation

course.

The CoE will ensure that the competitive advantage of Karnataka as the aerospace hub is

retained and strengthened further.

The response from students has been excellent; it has received close to 160 registrations

for a 25 seat capacity per batch89.

Karnataka can maintain its leadership role in aircraft manufacturing and MRO activities

due to its relatively low cost manufacturing services in Asia and Middle East. Bengaluru

Aerospace SEZ (BASEZ), available adjacent to the Aerospace Park, which would enable

that goods and services produced are fully exempted from tax. The state can also maintain

its leadership in supply-chain services for the sector as Bengaluru has a number of top

companies in IT/ITES and electronics hardware, many of them being a part of the supply

chain to the Aerospace sector90.

d. Karnataka New-Age Incubation Network (NAIN) programme

GoK has selected 19 engineering and non-engineering colleges across the state for

funding under NAIN programme.

88 Source: http://dcmsme.gov.in/dips/state_wise_dips/state_profile_karnatka_11316.pdf 89 Source: http://www.cio.in/media-releases/dassault-syst%C3%A8mes%E2%80%99-announces-centre-excellence-aerospace-defense-karnataka 90 Source: http://www.investkarnataka.co.in/assets/downloads/aerospace-policy.pdf

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Objective of this programme is to helping the educational institutions in nurturing an

ecosystem for promoting innovation and entrepreneurship in Tier 2 and 3 cities.

By 2020, GoK aims to include 50 educational institutions under this programme91.

e. Incentives for MSMEs involved in the manufacturing of electric vehicle and its

components92

The micro level units can avail an investment promotion subsidy of over 25 per cent of the

value of fixed assets, for a maximum amount of INR1.5 million.

Small enterprises will be given an investment promotion subsidy of over 20 per cent of the

value of fixed assets, for a maximum amount of INR4 million.

The medium manufacturing enterprises will be given a subsidy of INR5 million on the

investments.

Also the MSMEs can avail a capital subsidy up to 50 per cent of the cost of setting up of

Effluent Treatment Plant (ETP), with a cap of INR5 million.

The government will also be providing 100 per cent exemption on tax on the electricity

tariff for the initial period of five years for the MSMEs.

91 Source: http://www.ictsds.karnataka.gov.in/nain/uploads/NAIN%20Application%20and%20Elibility.pdf 92 Source: http://www.investkarnataka.co.in/assets/downloads/Karnataka-State-Electric-Vehicle-&-Energy-Storage-Policy-2017.pdf

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f. Some of the start-up friendly initiatives taken by GoK

September 2017: Approved Electric Vehicle and Energy Storage Policy 2017 – The

Electric Vehicle policy of Karnataka is aimed at making the state a hub for the production

of alternative fuel vehicles, and bolstering the ‘Make In Karnataka’ initiative93.

July 2017: Announced plans to set up Startup Coast in Karnataka – Geared towards

facilitating entrepreneurship, the coast would include two innovation centres, five

incubation hubs in colleges, a 100-seater workspace in Mangaluru and 20 to 30 tinkering

labs in schools.

May 2017: Started an INR97.5 million (US$1.5 million) fund for agritech startups; INR107.3

million (US$1.65 million) for 26 biotech startups – The Department of Agriculture,

Government of Karnataka spearheaded the initiative to bolster growth in agritech and

biotech segments94.

g. GoK offers 5 per cent extra investment subsidy for women entrepreneurs

To promote women entrepreneurs, Karnataka’s new Industrial Policy 2014-19 offers

additional 5 per cent investment promotion subsidy.

The government has given a 75 per cent exemption on stamp duty in Zone 4 that includes

cities like Bengaluru, Mysuru and Mangaluru. It has offered a 100 per cent exemption in

the Hyderabad-Karnataka zone which includes districts like Ballari, Kalaburgi and Bidar. It

has also lowered registration charges at the rate of 50 paise per INR1,00095.

Women entrepreneurs trained by Centre for Entrepreneurship Development of Karnataka

(CEDOK) and other recognised institutions will be provided with low-interest startup loans

on flexible repayment schedule. Reimbursement of the cost of preparation of project

reports to the extent of INR0.2 million per unit is also available96.

h. Karnataka Industrial Policy 2014-19

During 2014-17, 1823 projects have been approved by the State Level Single Window

Clearance Committee/State High Level Clearance Committee, with an investment of INR

3.34 Lakh Crore Investment, generating employment to 8.98 lakh persons.

During 2014-17, 1.89 Lakhs employment in large industry sector and 12.30 Lakhs

employment in MSME Sector i.e., totally 14.19 Lakh employment has been generated.

Efforts towards development of Industrial Corridors:

93 Source: http://www.investkarnataka.co.in/assets/downloads/Karnataka-State-Electric-Vehicle-&-Energy-Storage-Policy-2017.pdf 94 Source: https://globalhealthi.com/2017/05/10/india-invests-biotech-startups/ 95 Source: http://www.investkarnataka.co.in/assets/downloads/industrial-policy.pdf 96 Source: http://www.investkarnataka.co.in/assets/downloads/industrial-policy.pdf

35

o Chennai-Bangalore-Chitradurga Industrial Corridor (CBCIC) and Bangalore-Mumbai

Economic Corridor (BMEC) would be expedited on the lines of Delhi-Mumbai Industrial

Corridor (DMIC) with the support of Government of India.

o Government is establishing Tumkur Industrial Node in 9,629 acres at Vasanth

Narasapura, Tumkur under Chennai – Bengaluru – Chitradurga Industrial Corridor.

o In association with Government of India, the State Government is establishing Machine

Tool Park in an extent of 540 acres at Vasantha Narasapura Industrial area, Tumkur

with a project cost of Rs. 425 Crores.

o State Government is developing Japanese Industrial Township at Vasanth

Narasapura, Tumkur in an extent of around 500 acres in consultation with JETRO to

promote Japanese Investments in the State.

Karnataka is giving focus for Labour intensive sectors like Toy Manufacturing, Mobile

Phones, Tablets, Electronic Components and assemblies etc. and also to create more

employment in manufacturing sector.

Government is establishing 6 Exclusive Women industrial parks in the state:

o Harohalli Industrial Area, Kanakapura

o Kudithini Industrial Area, Bellary

o Gamangatti Industrial Area, Dharwad

o Nandur – Kesartegi Indl. Area, Kalburgi

o Thandya Industrial Area, Mysore

o Canara Industrial Area, Mangalore

2.3 Gap analysis (Challenges and Opportunities)

State of Karnataka offers advantages like cost competitiveness, access to large talent pool, and

location specific advantages. These advantages make this state a global/regional hub for

manufacturing and for maintenance, repair and overhaul (MRO) activities. However, Karnataka faces

a number of challenges as described below:

Challenges:

a) Infrastructure Adequacy and Quality97: Though the state of Karnataka is well-connected

with other states, there is still a need of improved infrastructure. Infrastructure projects in

pipeline need to be executed fast with high quality. Some of the notable requirements are listed

below:

Decongesting major cities like Bengaluru by creating Special Investment Regions

97 Source: http://resurgentindia.com/wp-content/uploads/research/INDUSTRY/KAR%20MFG%2018%2012%2015.pdf

36

Providing sufficient water and power supply in Tier-II, Tier-III cities and other remote

locations.

Speeding the work on establishment of Industrial Corridors in the state

Fund mobilization and shortage of manpower constraints for state bodies like

Karnataka Industrial Area Development Board (KIADB) and Karnataka State Small

Industries Development Corporation Ltd (KSSIDC).

4 /6 lane highways and arterial roads.

While infrastructure facilities have improved as compare to earlier, there is a need to do more

and develop more robust infrastructure - availability of land, quality power and water. GoK has

addressed these issues in 2014-19 Industrial policy, but it will take time to implement the plans

and resolve the infrastructure issues.

b) Land Issues: Key land issues faced by companies in the state of Karnataka range from slow

machinery leading to time and cost overruns on projects to lack of optimal utilization of

available funds.

The entire process of availability of land for a project and the time taken from land

allotment to signing of absolute sale deeds varies from 3 years to 5 years.

Also, in the state, land allotted for Industrial activities are used for other purpose (i.e.,

Real Estate purpose). The state has available land locked in some of existing industrial

areas and releasing this land can solve the issue of obtaining more land for upcoming

projects. However, this will require increased Floor Area Ratio (FAR) from 1.0 to 3.0

and average ground coverage will be increased from 45-50 per cent to 70 per cent.

GoK has addressed land issue in 2014-19 industrial policy and to enhance land availability for

the manufacturing sector, the state government through KIADB plans to acquire 40,000 acres

of land (8000 acres every year) across the State for meeting industrial requirements during

the policy period98.

c) State Policies and Regulatory Issues: Improving the ease of doing business is a key agenda

for the state of Karnataka; and it could be done through streamlining the processes and

reducing the time taken for approvals. Projects are getting delayed due to time required for

different approvals from state Government and it makes the projects unviable for

foreign/domestic investors. Though, Karnataka has already implemented single window

clearance mechanism, it needs to be efficient. Some of the processes which require attention

98 Source: http://resurgentindia.com/wp-content/uploads/research/INDUSTRY/KAR%20MFG%2018%2012%2015.pdf

37

are: screening only post land allotment, set time for different divisions to provide opinions,

implementation of online project monitoring system, etc. As per a Grant Thornton report, 246

out of 751 large projects proposed under Global Investor Meet (GIM) 2012 pending at various

State departments.

d) Manpower Issues: For the manufacturing sector, one of the biggest challenges is employing

and retaining local skilled manpower. Manufacturing sector cannot employ women workforce

for night shift (7 pm to 6 am) and it creates a challenge for employers.

e) Lack of Training/ Skill Development Infrastructure: Though the state has a number of

vocational and skill development centres, availability of sector-specific skill development

institutes is very limited. Actions such as opening sector-specific training institutes,

implementing Labor Market Information System and PPP could help to resolve the challenge.

f) Special focus on Ministry of Micro, Small & Medium Enterprises (MSMEs): MSMEs are

very important for the state and they produce a varied range of products and services to fulfill

the market needs. According to a report published by Resurgent India and ASSOCHAM India,

in 2015 only 4 out of 208 clusters got funding from MSME Ministry99. GoK needs to addresses

issues such as availability of finance, modern technology, providing marketing and promotion

support to MSMEs, amongst others. Government has planned to resolve the issue under the

Industrial Policy 2014-19.

Opportunities:

a. PPP Model: The GoK is focusing on PPP model to expand the manufacturing and service

industry in the state. Projects based on PPP model are already started in aerospace section.

The development of Greenfield airports at Shimoga, Bijapur, Hassan and Gulbarga through

the PPP model provides opportunities to companies to make investments in aerospace field

in Karnataka100.

GoK is also planning Horticulture parks, Agri Logistic hubs, Pharma special economic zone

(SEZs) and technology parks under PPP model101.

b. Dedicated Aerospace Policy to Attract More Investment and Companies: As of now,

Karnataka is the first state to have a dedicated aerospace policy along with two exclusive

99 Source: http://resurgentindia.com/wp-content/uploads/research/INDUSTRY/KAR%20MFG%2018%2012%2015.pdf 100 Source: http://www.investkarnataka.co.in/assets/downloads/aerospace-policy.pdf 101 Source: http://pbdindia.gov.in/sites/default/files/ps_pdf/9/Invest%20Karnataka.pdf

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aerospace parks in Belagavi and Bengaluru. The park in Bengaluru will also house InfoTech

companies working in aerospace and defence technologies102.

GoK has allotted 610 acre of Government land at Gubbi in Tumakuru District to Hindustan

Aeronautics Limited (HAL) to establish the Light Utility Helicopter facility. This project is

supposed to act as an announcer to attract aerospace SMEs to Tumakuru. Other aerospace

projects planned in the state include Bangalore Aerospace Park at Devanahalli, MRO centres

at BIAL and Mysore, and a defence manufacturing cluster at Managaluru. The state had

received 33 project proposals at ‘Invest Karnataka’ meet in 2016. The proposals are worth

around INR145.2 billion with the potential to generate over 10,000 jobs.

State Government in partnership with Government of India (GoI), National Skill Development

Corporation (NSDC), and Bangalore Chambers of Industry and Commerce (BCIC) have

proposed to set up India’s first Multi-Skill Training Institute for Aerospace and Aviation.

c. Development of National Investment and Manufacturing Zones (NIMZs): Karnataka is one

of the leading states in terms of developing National Investment and Manufacturing Zones

(NIMZs) which are giant industrial townships that will promote world-class manufacturing

activities. GoK plans to set up NIMZs in following four districts: Tumkuru, Bidar, Kolar, and

Kalburgi. Karnataka’s 2014-19 industrial policy states that, in line with the central

manufacturing policy, GoK will develop NIMZs as integrated industrial townships with state-of-

the art infrastructure, land use plans based on zoning, and skills development facilities. These

measures should attract investors who are normally hesitant of India’s poor infrastructure and

difficult land acquisition regulations103.

e. Benefits of hyperloop technology104:

In November 2017, Virgin Hyperloop One announced its partnership with the GoK to

conduct its preliminary study to understand hyperloop’s feasibility and economic impact in

the region.

The preliminary study is intended to analyse the applicability and benefits of hyperloop

technology, identifying high priority routes within the State based on demand analysis and

socio-economic benefits, and inform the Government of Karnataka in any future decision

to progress to the full project stage.

102 Source: http://www.investkarnataka.co.in/assets/downloads/industrial-policy.pdf 103 Source: http://www.investkarnataka.co.in/assets/downloads/industrial-policy.pdf 104 Source: http://bwcio.businessworld.in/article/Virgin-Hyperloop-One-signs-MoU-with-Government-of-Karnataka/20-11-2017-132143/

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d. Joint Venture/Partnering Opportunities with SMEs – Investors and foreign companies can

join SMEs through joint venture partnership to access the market.

Regional Disparities:

Bengaluru is country’s hottest IT destination. However, Bengaluru city's economic success

is creating a number of problems such as poor infrastructure, traffic congestion, poor water

quality and housing shortages.

To resolve these issues, GoK should start concentrating on investments in other cities

rather than Bangalore. Investment should be made in the fields of automobile component,

readymade garments, hardware and software, tourism, etc. To decongest Bangalore,

towns around the city such as Tumkur, Hoskote, Chikkaballapura and Ramanager needs

to be developed.

Industrial development needs to expand into rural areas, small cities and other Tier-II and

Tier-III cities in the state. Some of the potential cities and districts are:

Davangere: Also known as the Manchester of Karnataka, textile sector is dominant in

the district and it is set to grow along with food processing sector that provides the

highest employment in the district. It has high potential to emerge as an Aerospace

hub due to various incentives and announcements made in Karnataka Aerospace

Policy 2013-23. It is also identified as one of the 8 districts where Wind energy

generation plant will be set up by the state government105. GoK needs to focus on

improved infrastructure and skill development in Davangere to make it an attractive

destination for investors.

Udupi: Udupi has a strong banking sector owing to the incorporation presence of

major players like Vijaya Bank, Canara Bank, Corporation Bank and Syndicate Bank

in the district. The district is a largest grower of cashew nuts and has 108 kilometers

of coastal line supported by 1500 mechanized fishing fleets106. A fish park and cashew

park could be developed in the district to potentially utilise the resource and empower

job creation.

Belagavi: Belagavi is extremely well positioned, being equidistant from Mumbai,

Bangalore and Hyderabad and just about 100 kilometers to the Western coastline,

near Goa. It houses India's first notified Aerospace Precision Engineering and

Manufacturing SEZ center107. Improved power and water supply situation with PPP

105 Source: http://www.investkarnataka.co.in/district-profiles-davangere 106 Source: http://www.investkarnataka.co.in/district-profiles-udupi 107 Source: http://www.bangaloreite.biz/BuzzingBelagavi/

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model can make it a great place for industrial investments. GoK needs to emphasise

on sector-specific vocational training to provide skilled labour in the district.

Karwar: Karwar is an agricultural region and its economy derives mainly from growing

rice, groundnuts and vegetables. Sericulture, horticulture and fishing are the other

primary industries. Similar to Udupi, a fish park and cashew park could be developed

in Karwar to potentially utilise the resource and empower job creation.

Mysuru: The cultural capital of Karnataka, Mysuru is an emerging IT hub with 2nd

largest software exports in the state. GoK is focusing on Mysru district to attract IT

investments. A Proposed IT park along with the established STPI with 1,374 units –

the second largest in the state ensures high focus to this district. The sector is set for

growth as Global Education Centre by Infosys, with a capacity to train 13,500

professionals and an IT Park with an estimated cost of INR1.5 billion is added to

augment it. A proposed textile park with Artisan clusters and silk clusters is set to

drive the world famous Mysore Silk. Specific agro processing units with value chains

for value added food products is a potent opportunity108.

Mangalore: Known for its architectural marvels, temples, churches and pristine

beaches, the city attracts tourists throughout the year. Improved infrastructure and

focus on tourism sector could make it a great place for investment. Mangalore is one

of the largest exporters of coffee in India. One of the thriving industries in the city is

the automobile leaf spring business. In addition, three special economic zones

(SEZs) are being set up in the city with IT companies such as TCS, Wipro and Lotus

estimated to invest up to INR30 billion, creating 67,000 jobs over the next three years

(2016-19)109.

Shivamogga (Shimoga): Shivamogga (Shimoga) has both Jog falls - the highest

waterfall in India and Agumbe known as the Chirapunji of South India because it

receives the highest rainfall in South India. Shivamogga (Shimoga) is the leading

industry sector in terms of investments and income generated both in Agriculture and

Food Processing segment. Proposal for Maize Food Park, Proposed Animal Feed

Unit with an investment of INR0.25 billion are on the anvil. Also, two Rice Mills

Clusters in Shikaripura and Shivamogga Taluk present here augment the sector

profile in the region. GoK needs to focus on sector-specific skill development in

Shimoga to make it an attractive destination for investors.

Other cities: Some other places which can be developed further are Hubli-Academia

hub; Chittradurga-DRDO, Allied Agro projects, Belgaum-Aerospace, etc.

108 Source: http://www.investkarnataka.co.in/district-profiles-mysuru 109 Source: https://www.outlookindia.com/outlookmoney/earn/in-a-league-of-its-own-408

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2.4 Good practices and emerging trends in the sector

a. 3D Printing: It is an emerging manufacturing technology which uses digital models to create

products by printing layers of materials. As a number of mega projects are coming up, 3D

printing technology might offer huge potential to Indian manufacturing’s sector. Indian IT major

Wipro in collaboration with EOS manufactured India’s first additive manufacturing engineered

component for ISRO’s GSAT19 communications satellite launch in June 2017110.

Case Study: 3D Printing Puts Fixtures into Gear for MAHLE111

3D printed cars, airplane components and medical devices get the lion’s share of industry

headlines. But global manufacturers like MAHLE, a leading automotive parts supplier, have

found the technology offers tremendous value beyond those on the front page.

This project demonstrates the tremendous manufacturing and business value 3D printing

offers projects of all shapes and sizes. Companies like MAHLE who are eager to learn and

further implement 3D printing into their manufacturing process are giving themselves a

competitive advantage.

b. Industrial Internet of Things (IIOT) and Industry 4.0: With the rise of IoT in consumer tech,

manufacturing sector has also started implementing this new network of sensors and actuators

for data collection, monitoring, decision making and process optimisation over internet

infrastructure.

110 Source: https://www.ibef.org/download/Manufacturing-October-2017.pdf 111 Source: https://www.stratasysdirect.com/case-studies/3d-printing-automotive-fixtures-mahle/

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Data is a huge component of this whole setup and Indian companies have a lot of potential in

this area with many large companies already betting on big data and analytics. As an example,

Indian Railways will be rolling out locomotives with solutions like remote diagnostics and

proactive predictive maintenance and these trains will be part of a wider ecosystem connected

to industrial internet.

Case Study: Production line at Bosch Rexroth reduced costs and achieved zero product

failures by adopting Industry 4.0112

This case study explores how Bosch Rexroth adopted Industry 4.0 technology on its own

production line in Homburg Germany, to become more competitive through manufacturing at

lower costs with increased flexibility, and higher quality standards.

c. Emergence of zero-fuel aircraft: According to a report published by Technavio on the global

aerospace nanotechnology market for 2017-2021, currently, there is an increasing interest in

the commercial and civil sectors for using zero-fuel aircraft in applications such as agriculture,

aerial photography, 3D mapping, wildlife protection, and provision of internet access in remote

places. The initiative is nurturing the global aerospace and defense industries to embrace a

long-term development strategy of zero-fuel aircraft concept, thereby driving market growth113.

112 Source: https://dc-gb.resource.bosch.com/media/gb/trends_and_topics_7/industry_4_0/homburg_case_study/BOR1305_-_Homburg_Case_Study_04_AW.pdf 113 Source: http://www.businesswire.com/news/home/20170228005131/en/Top-3-Emerging-Trends-Impacting-Global-Aerospace

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3 Future of Manufacturing Sector in Karnataka

3.1 Vision of the Future for Manufacturing Industry in Karnataka

Primary objective is to develop Karnataka as a competitive and

attractive destination for manufacturing industry that stimulates an

overall industrial development and create large employment

opportunities for youth

44

Projected growth114:

Growth % Extrapolated growth %

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

2019-20

2020-2021

2021-2022

2022-2023

2023-24

2024-25

Manufacturing 7.6 3.2 3.2 6.4 6.7 7.1 7.4 7.8 8.2 8.6 9.1 9.5 10.0

Service 8.4 8 8.9 10.4 8.5 9.2 10.1 10.9 11.9 13.0 14.1 15.3 16.7

Please note:

1. For manufacturing sector, the data has been extrapolated based on average

growth from 2012 to 2016.

2. 2016-2017 information wasn’t available for the complete year, hence

extrapolated.

3. For service sector, the data has been extrapolated based on average growth

from 2012 to 2017.

4. Assuming no major change in the government policy.

5. Assuming no major change in the economic policies, labor conditions, etc.

114 Source: http://planning.kar.nic.in/docs/Economic%20Survey%20Reports/ES_16-17/English.pdf; http://des.kar.nic.in/docs/Economic%20Survey%202015-

16_English%20Final.pdf

Trend Line for next 7 years

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

Manufacturing Service

45

3.2 Key goals and Strategic Interventions

1. Enhance the contribution of manufacturing sector to the State GDP from

present level of 16.87% to 20%

Strategic Interventions

• Enhance design and innovation capacity to achieve international competitiveness.

Penetrate into rural market in Karnataka

• Promotion to Global OEM’s into the cluster for focused development of Tier 1 and Tier

2 Ancillaries

• Re-engineer policies and directives to support wide-spread manufacturing growth in

the state

• Fast track development of industrial corridors in the state

• Enhance Automobile, Machine Tools and Engineering design and innovation capacity

to achieve international competitiveness. Penetrate into rural market in Karnataka

• Improve infrastructure and create independent Township Authority model like ELCIA

and Bidadi Industries association

• Create an eco-system comprising infrastructure, education and R&D to make the state

a conducive hot spot for aerospace industry

• Enhancing Power and Water Supply Infrastructure connectivity to industries. Water

supply through rain water harvesting should be mandated in all industries.

2. Create employment opportunities for 15 lakh persons

Strategic Interventions

• Creating Brands in Districts through identifying Local entrepreneurs and promoting

clusters ( Top 10 Clusters in various districts) viz Chennapatna Toy Cluster to be

promoted like Lego brand

• Reverse Market linkages by adoption of Communities and SHG’s by Industry,

Government agencies and Private institutions- Identification of Pilot Projects ( Top 10

projects in satellite towns)

• Exploring innovative models to promote entrepreneurs who can provide Service to

Industry and locals E.g. Taxi Service, Tourist guides etc. at Mysuru

46

• Cluster based localized industrial zones can be created in districts such as Kodagu’s

Ayurvedic products, tourism and homemade food products etc.

• Sector-aligned Vocation Training Courses for Youth

• Koushalya Karnataka needs to be aligned to Central Government schemes

• Local industries that are micro and small could be encouraged to provide employment

opportunities.

• Providing Market-Ready Labour from rural, Tier-II and Tier-III cities

• Educational/ Training Institutes should increasingly play the role of incubation centres

to empower students across local industry specific skillsets. Incubation centres should

include a launch pad for startups and entrepreneurs as well.

3. Build strong public private partnerships in the manufacturing sector to

achieve high growth and attract more investment

Strategic Interventions

• PPP model for infrastructure projects in Tier-II and Tier-III cities can speed up the

process and provide world-class infrastructure for Smart Cities for Top 5 Cities as

identified under Smart Cities Challenge project

• Joint Projects through Multilateral funding agencies to create Industrial Zones and

Clusters which are world-class viz Thirungrea Automotive Cluster in Germany

• Strong Bilateral partnerships in creating Shared Infrastructure facility for MSMEs in

Manufacturing and Engineering ( Plug and Play model )

• Create top 5 Clusters for Manufacturing beyond Bangalore- Hubbali- Dharward,

Belgaum, Tumkur, Mangalore, Shimoga

4. Improving Ease of doing Business

Strategic Interventions

• Paperless approvals and online process without repetitive submissions and referrals to

departments , penalty for inability to revert within a fixed timeframe and minimal

interface from Government Departments

• Convergence of Departments by Champion Officers

• Capacity Building of Government employees with a focus on Customer Centricity,

Sense of pride and ability to translate action on ground

47

• Timely feedback and Customer satisfaction Surveys from Industry and Inter

Departmental Stakeholders

• All gram panchayats need to have a technically sound IT employee to provide

information on all industries and allied sectors.

5. Strengthening sector-specific vocational skills

Strategic Interventions

• Work with State Private agencies/ Training Partners and earmark Vocational Training

Centres in Sunrise Skills of the future with a vision to target 2 Lacs Apprentices per

year

• To identify Skill Programmes ( In house of Companies and State driven) with a specific

outcome to create jobs to beneficiary companies in Manufacturing and Services

Industry

• To have a District level Skills competition which culminates at a State and National

level or participation in International World Skills Competition with a view to attach

importance to Skills in India

• To run Sector Specific Skill projects with local associations in a Project mode with

Monthly targets and budgets accordingly

6. Increasing focus on MSMEs

Strategic Interventions

• Separate department for MSMEs

• Providing Incentives to MSMEs and giving an impetus to creation of 4 lacs additional

Units by 2025

• Disbursal of loans by Funding agencies like SIDBI, MSME Ministry and other private

agencies – Approx 1 Lac Crore upto 2025

• Incentives for technology Upgradation and Technology transfers to enhance

competitiveness and capabilities

• Tie up with Industry Mentors for handholding and capacity building through

institutionalized mechanisms

• C&I Department to institutionalize a Buyer Seller meet Annually with a view to create

business and promote MSMEs

• Cluster development approach can enhance the productivity and competitiveness as

well as capacity building of MSMEs.

48

• MSMEs need to be educated about pollution mitigation technologies and techniques

• Encourage use of renewable energy to mitigate power shortage issues in small

industries

7. Increasing focus on Traditional Industries

Strategic Interventions

• Creation of textile specific infrastructure in the state such as Mega Textile Parks

• Augment Power loom infrastructure by addition of high-tech looms

• Supporting traditional varieties of weaving by producing niche products. Support in

branding support, infrastructure facilities, upgradation of skills etc.

• Increased R&D in textile sector to create new techniques of value-addition in the sector

Other Possible Strategies to achieve the Goals

a) Improving Ease of Doing Business Ranking

In 2016 ranking, Karnataka slipped from ninth to 13th position in the ‘Ease of Doing

Business’ report. Whereas, competitive states Andhra Pradesh and Telangana jointly

topped the charts while Gujarat slipped to third position115.

The state needs to improve ease of doing business ranking for start-ups favorable

ecosystem and ensuring availability of manpower. To improve the ranking, following areas

need to be addressed: implementation of online services, delivery of services, time taken

for approving building plans, construction plans and other sanction plans by the Urban

Development; and number of procedures involved in registration of properties in the

Revenue Department116.

Government can improve venture capital fund (VCF) for startups and provide funding to

budding industrialists. Also, a “buddy culture” can be created among industrialists to

promote ease of doing business.

Since land acquisitions are lengthy and hinder ease of doing business, development of

multi-level centers for PPP, startups, and SMEs which incorporate plug and play facilities

would help in ease of doing business.

115 Source: https://economictimes.indiatimes.com/news/economy/indicators/karnataka-expresses-reservations-over-ease-of-business-ranking/articleshow/55211003.cms 116 Source: http://www.thehindu.com/news/cities/bangalore/Karnataka-tops-in-investments-but-plummets-in-ease-of-doing-business/article16091397.ece

49

The higher ranking will help the state to attract investments and improve business climate.

b) Separate Department for MSMEs in Manufacturing Sector

Karnataka needs to create a separate department for MSME to focus on this sector such

as, in Tamil Nadu.

The key pressures for MSMEs that needs to be addressed include: quality improvements,

limited finances, technology transfer, marketing and promotion amongst others.

c) Strengthening of single window system

According to Industrial Policy 2014-19, Single Window Clearance mechanism will be made

more effective so that most of clearances / approvals are accorded at the time of approval

by State High Level Clearance Committee (SHLCC) / State Level Single Window

Clearance Committee (SLSWCC) / District Level Single Window Clearance Committee

(DLSWCC). Efforts will be made to accord all the required approvals within a specified

time of 45 days117.

However, Tamil Nadu which is a competitor for Karnataka in terms of manufacturing

industry has fixed a 30-days deadline to clear the business projects118.

Karnataka should speed up the process to compete with other states and also needs to

provide facilities like screening only post land allotment, prescribed time for various

divisions to furnish opinions, online project monitoring system etc.

d) Using PPP model to create world-class infrastructure facilities in Tier II and Tier III cities

Tier II and Tier III cities of Karnataka has good talent and has some excellent educational

institutes. GoK is also promoting towns such as Belagavi, Mysuru, Hubballi– Dharwad,

Mangaluru Yadgir, Hassan119, etc, to investors. However, lack of connectivity and non-

availability of industry-ready talent restricts the escalation of global business from there.

PPP model for infrastructure projects in these cities can speed up the process and provide

world-class infrastructure. Improved infrastructure in these cities can give a boost to state’s

economy and industrial sector.

e) Cluster based development

Cluster development approach can enhance the productivity and competitiveness as well

as capacity building of Micro and Small Enterprises (MSEs). GoI has also adopted cluster

117 Source: http://kctu.kar.nic.in/Karnataka%20Industrial%20Policy%202009-14%20English.pdf 118 Source: http://tnsinglewindow.com/ 119 Source: http://www.aeromag.in/articlesingle.php?article=11

50

based approach for the development of MSEs120 and this approach has been quite

successful in the National and International field for developing small-scale industries.

GoK also needs to focus on cluster approach to improvise industrial development in Tier-

II and Tier-III cities along with leading manufacturing hubs in the state.

Cluster based localized industrial zones can be created in districts such as Kodagu’s

Ayurvedic products, tourism and homemade food products.

Establishing and departmentalizing 3 major regional tourism hotspots - Karavali

Karnataka, Mysore Karnataka and Hyderabad Karnataka. Additionally, Sector Specific

tourism (Educational, Adventure, Beach, Religious & Cultural, and Wellness), Medical

tourism, Tourism based UG courses to support PG course, Support and Simplification of

cruise tourism and re-establishing connectivity to Lakshadweep

f) Providing Market-Ready Labour from rural, Tier-II and Tier-III cities

According to NSDC report, it is expected that the state is likely to generate demand of 8.47

million people between 2012 and 2022 (cumulative for 10 years). Sectors such as tourism,

agriculture, travel and hospitality, tourism, construction, IT & ITES, healthcare, etc. are

expected to generate high demand. According to the report, in the state, 85.6 per cent of

the labour force is either unskilled or minimally skilled. About 6.5 per cent of the labour

force is semi-skilled, 4.3 per cent is skilled and the remaining 3.6 per cent is highly skilled

labour force121.

Skill development is the need of the hour. The state requires vocational and life skill training

programs for youth in rural, tier-II and tier-III cities to bridge the skill gap issue.

Sector specific vocational training centre needs to be provided.

Construction helpers should be provided with training institutes in each taluk of Dharwad

with the help of their local employment and entrepreneurship. Such training institutes

should have certification and course from major construction companies across the state.

Providing skills based training for unemployed youth along with the assistance to set up

self-employment for the youth belonging to socially and economically backward

communities.

Government institutes should instate technical education curriculum which is more aligned

with industry demands.

120 Source: http://www.dcmsme.gov.in/mse-cdprog.htm 121 Source: http://www.i3s.net.in/uploads/pdf/Resources/Karnataka/District_wise_skill_gap_study_for_the_State_of_Karnataka.pdf

51

Educational/ Training Institutes should increasingly play the role of incubation centres to

empower students across local industry specific skillsets. Incubation centres should

include a launch pad for startups and entrepreneurs as well.

State Government needs to align training to National Employability Enhancement Mission

(NEEM) training as per the Central Government. It is learn-earn program.

Koushalya Karnataka needs to be aligned to Central Government schemes.

GTT (Global Talent Track) and ITI (Industrial Training Institute) need to be upgraded with

modern market-ready technology and machinery to make the youth employable with

ready-to-go skills.

Through the Innovation and incentives provided to corporations for skill development

provided; the government can create an ecosystem to ensure sufficient employment

opportunities to the unemployed and life-long skilling opportunities to the existing

workforce.

g) Focus on electronic-Governance (e-governance) in Karnataka

The main objective of e-governance is to provide government services at the door steps

of citizens and investors. GoK has been an innovator in utilising information technology for

better governance. GoK has been a leader in implementing e-Governance initiatives in the

country. Some of the e-Governance projects implemented by GoK include:

computerization of land records (Bhoomi) and treasury operations (Khajane)122. However,

a lot of improvement is still required as mentioned below:

All the services in the government can be made as paperless as possible by

providing better broadband connectivity.

All the administrative services and agriculture need to be supported and

streamlined by creating applications and proper software.

Training can help such services to be carried out. All gram panchayats need to

have a technically sound IT employee to provide information on all industries and

allied sectors.

E-market encouraged wherein skilling requirements can be listed in

websites/dashboards. Government to facilitate a better e-window for all such

requirements so that skilled labour can render services based on such requests

arising from the website-dashboards.

Also, citizens are to be educated about the benefits and advantages of e-

governance and its authentication.

122 Source: https://www.karnataka.gov.in/e-governance/Documents/DPAR(e-Gov)STRATEGY.pdf

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h) Addressing Job Loss Issues

The Karnataka government’s recent approval to allow the formation of the State’s first IT

union could hamper job creation but, could force the industry to look at alternatives to

layoffs123. Industry watchers believe that this move by the government of encouraging

unions will not solve the problem of job loss.

The state needs to roll out a new incentive policy where the industries are given financial

support on the basis of number of jobs created rather than amount of investment. This

progressive approach would result in the creation of more jobs.

Skilled labour should be made available basis skillset rather than reservation based.

In order to reach a goal of IT and ITES employment of 150,000 by the end of 2025 from a

current figure of 15,000, panel recommended the following:

o Invite & facilitate 3 mega IT industries, providing the companies with Government-

sponsored IT parks

o 300,000 square feet (minimum 3000 seats) plug and play co-sharing space

o BPO Hub - voice and non-voice

o Establishment of ESDM incubation Center, with 50,000 square feet for working and

50,000 square feet for hardware & software development with an area of 100 acres for

IT entrepreneurs.

o Develop IT ecosystem, provide encouragement and support in increasing the number

of patents; and increasing the connectivity through Air to Europe and US.

i) Rural Area Empowerment through Tourism in Karnataka

Karnataka is home to several forts, architectural marvels and is blessed with a rich cultural

heritage. GoK needs to promote Karnataka as a preferred tourism destination at state,

national and global levels.

PPP model could be applied for tourism related infrastructure at tourist destination.

Leasing of touristic places, which attract maximum tourist activities, on 20 years lease

should be given to private players to develop, maintain and promote such locations.

Tax to be waived off for holiday packages would enable increased foot falls.

Basic infrastructure, better tourist awareness, and basis sanitation facilities are required

for Srirangapatna, Pandavapura, Shimsha, and Kokkarebellur. Tourists to be fed with

road-maps, guides and other should be aided with apps specific to Mandya tourism. All

123 Source: http://www.thehindubusinessline.com/info-tech/industry-sees-red-as-karnataka-gives-green-signal-to-it-union/article9951529.ece

53

these tourist places to be promoted along with Mysore tourism to attract more tourists and

get better foreign foot fall.

A helpdesk in the form of an application or e-guidelines can be set up to guide all tourists

in the district. In addition, all colleges can offer a master degree in tourism. All railway

stations and bus stations need to display all tourist areas / spots in the district and related

information on travel, distance and the significance of the place.

Chitradurga Fort needs to have a ropeway for tourists to access the hill. Boating centres

could be set up in Vani Vilas Sagara to attract tourism. Chandravali to Vanake Obavvana

Kindi could offer a sky-walk experience to improve tourism in the area.

j) Rain Water Harvesting as a mandatory practice for industries to deal with water supply

issues

A number of cities in Karnataka are facing serious water issues, including Bengaluru,

Chikkaballapur, Tumakuru, Ramanagaram and Kolar. Multiple industries relying on water

as an input in the production process, including textile processing, construction and hydro-

power, have been severely impacted by the ongoing water scarcity.

To deal with water issues, GoK needs to take crucial steps. Some of the suggested

solutions are:

Water supply through rain water harvesting should be mandated in all industries,

along with treated water which could be made available to all the industries.

Tertiary water up to 50 MLD (Million Litres per day) should also be introduced as

back-up alongside water storage in every industrial area.

All industries in Karnataka need to be 100 per cent rain water harvesting compliant

by 2025, fulfilling a mandatory provision.

k) Investment in Renewable Energy to deal with power supply issues

Small industries across Karnataka are dealing with power shortage and an increase in

power tariffs. There is a need for 24x7 power availability at all industrial areas.

Wind power and solar power are growing very slowly in Karnataka compared to

competitive states like Tamil Nadu and Gujarat.

Solar power plants and wind mill power plants need to cater to all the power requirements

and transmission, which could be carried out with the help of Karnataka Power

Transmission Corporation Limited (KPTCL).

l) Focusing on local industries

54

Local industries that are micro and small could be encouraged to provide employment

opportunities. Food industry could be given importance as it is a local industry.

Ancillary industries could be encouraged by concentrating on the nearby taluks and

villages that help create employment in such areas.

Ancillary industries can be set up closer to mega industries for a cluster approach. Better

connectivity in the form of 10-lane roads to Devanahalli, Malur, Narasapur and to the state

capital is required as per the panellists.

Better infrastructure could be provided to all such rural-based industrial areas.

m) Industrial Waste Management and Enforcement in Karnataka

In 2013, the Karnataka State Pollution Control Board (KSPCB) launched door-to-door

collection of hazardous waste from industrial units in the city124. However, the challenge

remains same as not all the industrial units and small enterprises have proper facility to

dispose the waste.

Mysuru which is growing as a potential IT hub lacks facilities for industrial waste

management. With the government recently establishing a new industrial area spread over

2,000 acres at Immavu and Adakanahalli close to Mysuru, the city can expect greater

traction in industrial development, which will also result in increase in waste generation125.

MSMEs need to be educated about pollution generated by them and how the waste can

be minimized. Also, proper facilities for storing hazardous waste are required for MSMEs.

GoK needs to make it compulsory for industrial units to manage the waste efficiently.

Recycling and reduction at source practices must be followed by industries, wherever

possible.

n) Decongesting Bengaluru and Developing Industrial Corridors away from the city

GoI has planned some new industrial corridors like Chennai-Bangalore Industrial Corridor

region and Mumbai-Bengaluru corridor to support the manufacturing industry. On the

similar lines, GoK is planning to develop a new city at Kolar Gold Fields by converting

around 12,000 acres land held by the defunct Bharat Gold Mines126. However, these plans

need to be implemented soon and in a proper way to decongest Bengaluru city. It will also

help to promote tier-II and tier-III cities in the state.

124 Source: http://www.thehindu.com/todays-paper/tp-national/tp-karnataka/kspcb-to-pick-up-hazardous-waste-from-industries/article4300629.ece 125 Source: http://www.thehindu.com/news/national/karnataka/stakeholders-to-hold-meet-on-industrial-waste-management/article8247077.ece 126 Source: http://www.livemint.com/Politics/rOOqQYUkqGxSHc3twZ7ZWI/Karnataka-looks-to-develop-satellite-cities-to-decongest-Ben.html

55

Karnataka can look at State Industries Promotion Corporation of Tamil Nadu (SIPCOT)

project from Tamil Nadu, where incentives are given to build corridors away from Chennai.

On the same line, GoK can build corridors away from Bengaluru. For example, a corridor

between Bangalore and north Karnataka can be build.

Need to build integrated townships and an entire eco system to take carbon footprints out

of Bangalore. In a research done by scientists from the Indian Institute of Science

(Bengaluru), the University of Melbourne, Australia and Chang'an University, China, it was

found that Bengaluru has 43.83 per cent commute emission which was second only to

Hyderabad's 56.86 per cent127. IT employees travelling to work and back over long periods

are key reason for increased CO2 level in Bengaluru. Integrated township will reduce

travelling for employees and would help in reducing the carbon emission,

Development of small towns and tier-III cities into IT hub could also help to reduce the

carbon footprint in the city. Fibre Grid up to the village level can be established to outgrowth

economic development and to provide Integrated Services to the Citizens.

o) Technology Disruptions

Recent technologies which can be used to improve infrastructure in the state are:

Fiber-Optic Cable – Fiber optics is a technology that uses glass (or plastic) threads

(fibers) to transmit data. A fiber optic cable consists of a bundle of glass threads, each of

which is capable of transmitting messages modulated onto light waves. Rising demand for

higher bandwidth and faster speed connections for a variety of industrial and residential

purposes can be fulfilled with fiber optic transmission. Fiber optics has several advantages

over traditional metal communications lines128:

o Fiber optic cables have a much greater bandwidth than metal cables. This means that

they can carry more data.

o Fiber optic cables are less susceptible than metal cables to interference.

o Fiber optic cables are much thinner and lighter than metal wires.

o Data can be transmitted digitally (the natural form for computer data) rather than

analogically.

Hyperloop Technology – Hyperloop, an idea from Tesla CEO and SpaceX Founder Elon

Musk, boasts of a transportation system which proposes to propel a pod-like vehicle

through a near-vacuum tube at nearly 1,100 km per hour and above. The Andhra Pradesh

Economic Development Board has already signed a Memorandum of Understanding with

Hyperloop Transportation Technologies (HTT) which proposes Hyperloop connectivity

127 Source: http://bangaloremirror.indiatimes.com/bangalore/others//articleshow/51591411.cms? 128 Source: http://www.webindiasolutions.com/importance-of-optical-fiber-cable-in-modern-communication/

56

between the city centres of Vijaywada and Amravati129. The Karnataka government is

working on a feasibility study with Virgin Hyperloop One; launches COE for AI and Data

Sciences in partnership with IBM, Intel, and Nasscom130.

Simulator for cloud computing infrastructure and modeling – Cloud Computing aims

to deliver reliable, secure, fault-tolerant, sustainable and scalable infrastructure for hosting

Internet-based application services. To model and schedule the different applications and

services for cloud infrastructure system is a tremendous challenging task which requires

different load and energy performance. This problem could be solved by a simulation

framework that provides simulation, power to manage services and modelling of cloud

infrastructure. CloudSim is one of the companies providing such services131.

p) Some other points to make Karnataka the Next Generation State

Develop employment opportunities in low-skill labour-intensive manufacturing sector. For ex.:

agro-processing, garments, leather, etc.,

Sector-aligned Vocation Training Courses for Youth,

Right-to-Health for all citizens,

Early Childhood Development - Focus on antenatal care, institutional deliveries and

immunization,

Developing Productive cities through efficient urban planning, waste treatment, disaster

resilience & civic service delivery,

Developing satellite towns and cities around Bengaluru,

Making use of emerging technologies like additive manufacturing, big data analysis, robotics,

artificial intelligence, genomics and synthetic biology are likely to provide jobs and growth in

future, and

Increasing women workforce participation.

3.3 Targets

S No. Key Performance Indicator 2017 2022 2025

1 GSDP 159 $Bn 230 $Bn 302 $Bn

129 Source:http://www.news18.com/news/tech/hyperloop-transportation-technologies-bags-first-project-in-india-by-andhra-pradesh-govt-1511575.html 130 Source: https://yourstory.com/2017/11/hyperloop-karnataka-priyank-kharge-bengaluru-tech-summit/ 131 Source: http://www.cloudbus.org/cloudsim/

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S No. Key Performance Indicator 2017 2022 2025

2 Per capita Income 2300 $ 3200 $ 4200 $

3 FDI ranking of state 2 Top 3 Top 3

4 Ease of doing business 13 Top 3 Top 3

5 State Manufacturing GSDP contribution - 16.87% 20%

6 Employment Opportunities (Job Creation) 1391000 1475000 1500000

7 Manufacturing growth % - 9.1 10.0

8 Services growth % - 14.1 16.7

9 Industrial growth % - 12% p. a. 12% p.a.

10 New Industrial Areas 30000 acres

11 24/7 power supply infrastructure for industrial

areas

- 80% 100%

12 24/7 water supply through treated water to all

major industrial areas near Tier-I and Tier-II

cities

- 80% 100%

13 Mega Textile Parks - - 4

14 Investments in Textile Sector - - 30000 Cr

15 New Hi-tech Power Looms - - 10000

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3.4 Forward and Backward Linkages

S No Forward

Linkage

Description

1 Agriculture • Increased investments, including through enhanced international

cooperation, in rural infrastructure, agricultural research and

extension services, technology development etc. to enhance

agricultural productive capacity

2 Health • Substantially reduce the number of deaths and illnesses from

hazardous chemicals and air, water and soil pollution and

contamination by deploying adequate pollution control and waste

treatment strategies

3 Water Quality • Improve water quality by reducing pollution, eliminating dumping

and minimizing release of hazardous chemicals and materials,

halving the proportion of untreated wastewater and substantially

increasing recycling and safe reuse

4 Water

Resource

Management

• Substantially increase water-use efficiency across all sectors and

ensure sustainable withdrawals and supply of freshwater to

address water scarcity and substantially reduce the number of

people suffering from water scarcity

5 Per capita

economic

growth and

productivity

• Sustain per capita economic growth with industrial development.

Achieve higher levels of economic productivity through

diversification, technological upgrading and innovation, including

through a focus on high-value added and labour-intensive sectors

6 Job creation • Promote development-oriented policies that support productive

activities, decent job creation, entrepreneurship, creativity and

innovation, through formalization and growth of micro-, small- and

medium-sized enterprises

• Achieve full and productive employment and decent work for all

women and men, including for young people and persons with

disabilities, and equal pay for work of equal value

59

S No Backward

Linkage

Description

1 Infrastructure

and Energy

• Develop quality, reliable, sustainable and resilient infrastructure,

including regional and inter-state connectivity infrastructure and

utility infrastructure to support industrial development, with a

focus on affordable and equitable access for all

2 Finance • Increase the access of small-scale industrial and other

enterprises, to financial services, including affordable credit, and

their integration into value chains and markets

3 Skilling, R&D • Enhance scientific research, upgrade the technological

capabilities of industrial sectors, encouraging innovation and

substantially increasing the number of research and development

workers and public and private research and development

spending

4 Planning • Develop positive economic, social and environmental links

between urban, per-urban and rural areas by strengthening

national and regional development planning

5 Waste

Management

• Achieve environmentally sound management of chemicals and all

wastes throughout the life cycle, in accordance with agreed

standards of pollution boards, and significantly reduce their

release to air, water and soil in order to minimize their adverse

impacts on human health and the environment

6 Ease of Doing

Business

• Fast track implementation of EoDB reforms as per DIPP Reforms

Action Plan for the state. Adopt and implement investment

promotion regimes

7 PPP • Encourage and promote effective public-private society

partnerships in industrial development

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4 Future of Tourism Sector in Karnataka

4.1 Vision of the Future for Tourism Sector in Karnataka

4.2 Key goals and Strategic Interventions

1. Increase tourism contribution to GSDP from current 14.8% to 20%

Strategic Interventions

Increase spend per user by cross selling new tourism products at destinations such as

water sports, river cruise, MICE etc.

Increase stay duration per user by providing attractive tourism infrastructure and creating

tourism circuits that encourage tourists to visit all attractions on the route

Increasing promotional activity to attract high-value clientele such as foreign tourists and

MICE

61

Greater adoption of ICT-based initiatives to for right targeting of tourism products and

services

Creating incentives to attract domestic and foreign investments into the sector for

development of new destinations, products, services, and infrastructure

2. Make Karnataka one of the two top states in India in terms of domestic

footfalls

Strategic Interventions

Leveraging the diversity of tourism products available in the state to create circuits around

themes such as heritage, culture, pilgrimage, rural, adventure, and eco-tourism

Positioning Karnataka as a preferred tourism destination at the state and national level

through branding and promotional activities such as Theme of the Year

Organize travel marts and exhibitions to attract more tourism promoters and operators to

the state and engage multiple stakeholders in the development of tourism in Karnataka

3. Provide about 6.5 million tourism industry jobs in the state

Strategic Interventions

Encourage increased CSR spending from the private sector for development of tourism

through activities such as skill development and sustainability programs

Create a rich tourism startups ecosystem by providing professional and policy support

Making tourism an aspirational career choice by enhancing training and professional

education with necessary infrastructural support and programs such as tourism

apprenticeship program

Creating a academia-industry-government interface for skill development of service

providers

4. Build a world class tourism infrastructure to position Karnataka as a world

class tourism destination

Strategic Interventions

Development of infrastructure to ensure last-mile connectivity to all significant tourism

destinations and providing adequate facilities for communal and public transport

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Ensuring adequate support infrastructure such as wayside amenities, accommodation

facilities, tourist information centers, public convenience facilities etc. to meet the needs of

tourists

Building a world class tourism information database with analytical capabilities for up to

date market information for identifying areas and opportunities for interventions

4.3 Targets

S No Key Performance Indicators Current 2022 2025

1 Increase in the Tourism Contribution to

State GDP

14.8%*

(2015-16)

17% 20%

4 Number of of UNESCO World Heritage

Sites

2 + 1

(shared)

4 6

5 State Rank for Domestic tourist footfalls 5 2 2

6 State Rank for International tourist

footfalls

>10 6 3

7 Share of Foreign Tourist Arrivals in the

State

1.9% 4% 6%

* Karnataka Knowledge Commission Report