Industrial Policy 2020-25 - A Clarion Call for Futuristic Karnataka

Posted By : Editor

While unveiling the Karnataka Industrial Policy 2020-25 in October, the Chief Minister B S Yediyurappa said that Karnataka is the favored choice of investors and is home to 400 of the Fortune 500 companies in the world. Factual analysis shows that the state is currently ranked second in terms of FDI investments for the period ending June 2020 in India. Karnataka has attracted investment worth Rs.1.38 lakh crores, the highest in the country which would create 70,000 direct employments in the state. The new industrial policy aims to make sure Karnataka emerges as a global industry leader in priority sectors such as Advanced Manufacturing, Research & Development, and Innovation. The policy also has recognized thrust areas to create an ecosystem for an inclusive and sustainable development trajectory in the state. The Industrial Policy 2020-25 is indisputably a clarion call for the inception of Futuristic Karnataka

Realizing that now is the time to change gears and embark onto a path of radical and strategic reforms to place Karnataka, a land of immense opportunity and innovation, on the global value chain map, the state government led by Chief Minister B S Yediyurappa has unveiled the Industrial Policy 2020-25. The policy is yet another initiative by the NDA government to enhance Karnataka’s stature as one of the leading hi-tech-industrialized states in the country that is in the forefront of investments. The policy will woo domestic investors to invest in the state and set the ground ready to create large-scale employment opportunities.

The policy envisages to retain Karnataka's position as a global manufacturing hub and to achieve higher and sustainable industrial growth through capital infusion, technology transfer, world class industrial infrastructure, skill up-gradation and benchmarking of policies and practices to best global standards. The new policy is expected to facilitate greater investments in advanced manufacturing, research and development (R&D), and innovation and aims to create at least 2 million jobs. 

Jagadish Shettar, Minister for Large and Medium Scale Industries and Public Enterprises, has said that the new industrial policy in intended to promote the development of tier-2 and tier-3 cities in Karnataka, pivot the state to rank third in merchandise exports in the next five years, and maintain a yearly industrial growth rate of 10 percent. It will give a tremendous boost to the critical growth enablers such as thriving ecosystem, highly skilled and talented workforce, empowering institutional & policy environment favourable business climate and robust infrastructure thereby raise Karnataka’s manufacturing prowess.

“The vision is to make Karnataka, an integral part of the global supply chain. The focus of the policy is to ensure easy access to factors of production such as land, skilled labour, finance, and ease of doing business. The policy aims to boost productivity, create good jobs and increase the purchasing power of the people throughout our state with investment in infrastructure, skills and innovative technologies. The new policy will help the state emerge as a global leader in Advanced Manufacturing, Research & Development, and Innovation and to create an ecosystem for an inclusive, balanced and sustainable development of Karnataka,” Yediyurappa said.

Objectives and Strategies

The highlight of the objectives of the new policy is to attract investments worth Rs. 5 Lakh crore and create employment opportunities for 20 Lakh people. Karnataka aims to reach 3rd position in merchandise exports in the next five years and maintain an industrial growth rate of 10 per cent per annum. The policy stands committed to provide an enabling ecosystem for technology adoption and innovation.

Karnataka's current strength in international competition is largely based on the strength of its industry. As a pioneer in industrial development, the state government aims to raise mid-to-long term growth potential through a commitment to innovative growth. This encompasses strategies in support of industrial infrastructure, innovation, the new industrial revolution and the digital economy.

In order to achieve these objectives the policy presents a slew of strategies and the most important among them is to promote sustainable, balanced, and inclusive industrial growth. The provisions for enabling employment generation and increase labour market flexibility through regulatory labour reforms receive importance in the policy. The policy urges to create strategic tie-ups for the emergence of Karnataka as the Knowledge and R&D Hub.

Focus on development and promotion of the MSME Sector and facilitation of availability of industrial land are considered inevitable to place Karnataka in the forefront of India's international trade. By showcasing Karnataka as the "Factory of the Future"- Industry 4.0 the government focused on engaging with various stakeholders to develop sector specific skill development strategy. Through the creation on an environment that enhances ease of doing business in the state, the government aims to attract private investment in development of integrated/ multi/ sectoral industrial parks and flatted factories.

Highlights of the policy

Export Promotion Policies

Karnataka reaffirms its strong commitment towards export promotion to push economic growth and create jobs. Concrete steps will be taken to take exports on a higher growth trajectory by considering strategies more holistically and synergizing export promotion with industrial growth. The main focus will be on strengthening export infrastructure and logistics and increase participation in international trade fairs.

Global Market Intelligence reports will be prepared by VTPC in association with trade-related associations/Export Promotion Councils/FIEO to increase exports through geography-specific and product-specific strategies. The state will continue to confer the Annual Export Awards for export excellence in the State and encourage existing and new exporters. A Strategic Implementation Unit, which will act as an advisory body for export promotion, shall be constituted under the Chairmanship of Commissioner for Industrial Development- State Export Commissioner for export-related inter-departmental Coordination and implementation of the strategy.

Industrial Zones and Special Investment Regions

The policy categorizes Karnataka’s into zones - industrially-backward districts come under Zone-1 and Zone-2 while more industrially-developed districts are classified under Zone-3 and Zone-4. Urban centers Bengaluru and Mysuru come under Zone-4. Incentives will be rolled out to direct greater investment to the industrially backward districts.

The policy aims to enact the Special Investment Region (SIR) Act to create, operate, and regulate such investment regions in the state. Special investment regions would have an area of about 100 sq.kms. and be categorized as industrial townships. The first such region or SIR will comprise Dharwad, Gadag, Haveri, and Belagavi districts of Karnataka. Another SIR is being planned comprising Shivamogga, Davanagere, Chitradurga, and Chickamagaluru districts as well as Kalaburagi, which is in the Kalyana Karnataka district (previously known as Hyderabad-Karnataka region).

Subsidies for MSMEs and Major Sectors on Focus

The policy envisages production turnover-based subsidies for micro, small, and medium-sized enterprises (MSMEs) to give a fillip to industrial innovation. The investment promotion subsidy will be based on 10 percent on turnover each year for a period of five years and limited to 20 to 30 percent of value of fixed assets (VFA). Other incentives include – exemption from stamp duty and concessional registration charges; reimbursement of land conversion fee; tax exemption on electricity tariff for MSMEs; and power subsidy for MSMEs.

The policy has identified prime focus sectors for instilling growth and investments. They are automobiles and auto components, pharmaceuticals, medical devices, engineering and machine tools, knowledge-based industries, logistics, renewable energy, aerospace, defense, and electric vehicles.