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Industrial Development & Economic Growth in Karnataka

March, 2018

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.

Between 2011-12 and 2016-17, the GSDP of the state grew at a Compound Annual Growth Rate (CAGR) of 13.33 per cent to US$ 175.8 billion and the net state domestic product (NSDP) grew at a CAGR of 12.11 per cent to US$ 158.6 billion.

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.

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. Exports of electronics and computer software from the state reached US$ 62.66 billion in FY17.

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. Belagavi airport was inaugurated in September 2017 after its modernisation was completed at a cost of US$ 18.67 million.

In October 2017, the government approved setting up of a new industrial park in Harohalli. The proposed multi-product industrial park will be built by Karnataka Industrial Areas Development Board (KIADB) on an area of about 904.86 hectares with an investment of US$ 242.8 million.

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 September 2017, the state government passed the ‘Karnataka Electric Vehicle and Energy Storage Policy 2017’. Electric Vehicles manufacturing in Karnataka is expected to attract investments worth US$ 4.82 billion and create 55,000 jobs. Also, a new 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.

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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