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Industrial Development & Economic Growth in Karnataka

October, 2017

Karnataka is one of the fastest growing states in India. The natural resources, policy incentives and infrastructure in the state favour investments in the IT/ITeS, biotechnology, engineering, electronics, automotive, textiles, agri and food-processing sectors.

Karnataka's favourable policies have encouraged industries to set up their research and development (R&D) centres in the state. The state has about 401 R&D centres, the most in India. Around 400 of the Fortune Global 500 companies outsource their IT services to firms in Bengaluru.

The state contributed 7.54 per cent to the Gross State Domestic Product (GSDP) of India in 2015-16. Between 2004-05 and 2015-16, the GSDP of the state grew at a Compound annual growth rate (CAGR) of 13.93 per cent to US$ 156.23 billion and the net state domestic product (NSDP) grew at a CAGR of 14.19 per cent to US$ 142.9 billion.

Karnataka is the IT hub of India and home to the fourth largest technology cluster in the world. Karnataka has 47 IT/ITeS SEZs, three software technology parks and dedicated IT investment regions. The exports of IT and electronic products from the state reached US$ 10.38 billion by the end of December 2015. Exports of IT and electronic products accounted for 38 per cent share in India's IT and electronic products exports and 52.89 per cent share in Karnataka’s overall exports as of December 2015.

Karnataka is making significant investments in industrial infrastructure, such as setting up industrial clusters and SEZs and public-private partnership (PPP) projects to provide an impetus to further industrial development.

The following are some of the major initiatives taken by the state government to promote Karnataka as an investment destination:

  • The state offers wide range of fiscal and policy incentives for businesses under the Karnataka Industrial Policy, 2014-19.
  • 12 biotechnology finishing schools are scheduled for development under the Millennium Biotech Policy.
  • In the 2016-17 budget, the state Government allocated US$ 551.32 million for the improvement of rural roads in the state.
  • The establishment work of a gas-based power plant in Yelahanka is estimated to be initiated during 2016-17 by the state government. Further, KPCL is expected to create a 200 MW solar power plant during 2016-17.
  • A 300-acre SEZ has been created in Belgaum to develop a precision engineering and manufacturing supply chain ecosystem, which would be a great driver for manufacturing industries.
  • The start-ups warehouse set up by the state government in association with National Association of Software and Services Companies (NASSCOM) has attracted 170 start-ups.
  • Under the New Textile Policy 2013-18, the government plans to invest US$ 1,650 million in the textile sector. The policy offers various incentives for investments in the textile sector; these include credit linked capital subsidy, entry tax reimbursement and power subsidy.
  • In 2015, the state Government of Karnataka has announced plans to set up an Information Technology Investment Region (ITIR) near the Kempegowda International Airport (KIA) and proposed an investment of US$ 2.35 billion.
  • The Government of Karnataka had approved the establishment of food parks in six districts - Bengaluru rural, Tumkur, Shimoga, Davangere, Bijapur and Belgaum. These parks are in advanced stages of implementation.


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