Karnataka has been a prominent industrial state within India, for which a number of Karnataka Government Schemes concerning the boosting of the manufacturing sector have been put in place. The innovative and progressive policies coupled with the emphasis on infrastructure development have been key in making Karnataka one of the most investment-friendly states in the country. Karnataka Development Programs and Karnataka Welfare Initiatives also enhance the industrial scenario in the state by supporting the development of various areas such as electronics and pharmaceuticals, automobiles, and aerospace industries.
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The Karnataka Industrial Policy 2020-2025: A Strategic Approach to Growth
Under the Karnataka Government Schemes, the notable one is the Karnataka Industrial Policy 2020-2025, which in essence is an ambitious plan sought at turning Karnataka into a manufacturing hub of global standards. This policy aims at creating a conducive environment for carrying out business activities by providing radical changes in policies regarding land, labour and doing business. It further adds that the creation of such opportunities has been on the agenda for both domestic and overseas investors.
Key Objectives of the Karnataka Industrial Policy
The Karnataka Government Schemes within this policy are aimed at realizing the following objectives:
- To mobilize investments of up to INR 5 Lakh Crore
- To generate employment for 20 Lakh people
- To attain higher and sustainable industrial growth
- To enhance productivity and the purchasing capacity of the populace
- To upgrade the industrial infrastructure and ecosystem in general
Focus Areas
Karnataka Development Programs lays special attention towards growth of various sectors, among them, are:
- Automobiles & auto components
- Pharmaceuticals & medical devices
- Engineering & mechanic tool
- Aerospace and Defense
- Electric Vehicles
- Knowledge-based creative industries
The policy intends to be in support of the country’s vision of making India a global hub for manufacturing and allied services.
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Special Incentives for the Manufacturing Sector
As a progressive administration, the government of Karnataka has come up with various Karnataka Government Schemes aimed at promoting the manufacturing investments, particularly in the backward areas. These incentives are designed to be appropriate for small, medium, and large enterprises.
Investment Promotion Subsidy
Among the many Karnataka Government Schemes is the Investment Promotion Subsidy that has been one of the most effective in promoting investments. Adjustment to this subsidy is done based on investment value and turnover as well for other auxiliary concerns:
- Micro Concern: 25-30% of VFA margin capped from INR 2-2.5 million
- Small Scale Enterprises: 20-25% of VFA margin range between INR 9-10 million
- Medium Enterprises: Turning 2.5% yearly for 5-6 years, 35-40% of VFA
- Large/Ultra Mega Enterprises: a range of percentage of yearly turnover for 6-10 years against 40-60% of VFA
Further, many other supportive incentives in the form of power, subsidies, availing stamp duty exemption, and electricity tariff subsidy assist the manufacturers in the state of Karnataka.
Support for MSMEs in Karnataka
The Karnataka Welfare Initiatives also provide a great deal of assistance with respect to Micro Small and Medium Enterprises (MSMEs) through various initiatives whose focus is on enhancing their infrastructure and market linkages. Accordingly, the government is also responsive towards creating enabling environment for MSMEs through the following measures:
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Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
This scheme offers collateral-free loans to MSMEs exceeding Rs. 1 Crore; hence the credit is easily accessible since there is no need of placing any property or asset as security.
Credit Linked Capital Subsidy Scheme (CLCSS)
The respective banks available for support under this scheme, will provide MSMEs a 15% capital subsidy (up to Rs. 15 lakh) on investment in eligible plant and machinery, which enhances the ability of these banks’ institutions to grow.
Public Procurement Policy
This policy implies that 20% of each financial year’s procurement from Central Government Ministries, Departments, and PSUs must be procured from MSEs so that small scale business gets a captive market.
Electronics System Design and Manufacturing (ESDM) Initiatives
To promote the Electronics System Design and Manufacturing (ESDM) Sector, several programs have been introduced by the state as part of its Karnataka Development Programs. These programs are meant to provide investment in electronic manufacturing and further improve the position of Karnataka as a region of the global electronic economy.
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ESDM Incentives Package
The state’s incentives for the ESDM sector are attractive in nature on investment subsidies ranging between 25 – 30 % of the investment value. This is one of the conspicuous Karnataka Government Schemes designed to revamp the electronics sector.
Electronics Manufacturing Clusters
In addition, the ESDM sector, Karnataka is creating specific manufacturing clusters around the city of Bengaluru. These clusters will have modern infrastructure such as:
- Test facilities
- Component libraries
- Technical support
- Product mentoring and design services
Industrial Cluster Development Programme
Karnataka Development Programs approach incorporates the formation of industrial clusters, drawing on successful international experiences such as that in China. This initiative includes two particularly important clusters:
- Mobile Phone Components Manufacturing in Chikkaballapura
- ICB/PCB Manufacturing Units in Mysuru
The clustering concept here intends to promote industry interaction, sharing of knowledge and efficient use of resources.
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Skill Development Initiatives
In order to meet its manufacturing goals, the government of Karnataka has engaged in various Karnataka Welfare Initiatives in order to guarantee a pool of qualified people. One such initiative is the KDEM Talent Accelerator whose objective is to expand the skills development in the state.
Talent Accelerator Program
To ensure an appropriate supply of manpower in the manufacturing based industries, the Karnataka Digital Economy Mission (KDEM) partners with different organizations such as the Department of Higher education, skill development corporation authority and Visvesvaraya Technological University (VTU). The program aims to:
- Activate and develop the already available talent pool
- Work with educational institutions on the enhancement of the existing skill development intervention
- Generating new jobs in employment sector in Karnataka
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Ease of Doing Business in Karnataka
The Karnataka government has made several strides, particularly through the Karnataka Development Programs in seeking to make the country a more business friendly region. Among these reforms, there are:
- A ‘single-window’ clearance for all necessary approvals and clearances.
- The policies and procedures have been parameterized for easy accessibility.
- Incentives and benefits to businesses are facilitated in a quicker manner.
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Conclusion
With the Karnataka Government Schemes, Karnataka Development Programs, and Karnataka Welfare Initiatives, the state has turned herself as a forerunner as regards the encouragement of both Industries and Investments. The state’s commitment on developing an enabling business environment, avail financial assistance and developing human capital has already laid the foundation for Karnataka as a manufacturing destination on the global map.
With the provision of effective incentives, improved infrastructure and with an emphasis on specific sector growth, Karnataka will continue to position itself to lead the industrial transformation of the country. If you are of the view of making investments in the manufacturing sector, Karnataka offers an ideal combination of opportunities and enabling factors for success
