Election uncertainty hit investments in Karnataka

The flow of investment proposals into Karnataka has almost halved in the first half of the calendar year 2018 owing to uncertainty in the recent state elections.

Till June 2018, the state had got investment proposals worth Rs 77,007 crore, down 45% on year on year (YoY) basis, data available with Department of Industrial Policy and Promotion (DIPP) reveals. In 2017, till June, the state had seen investment proposals amounting to Rs 1.41 lakh crore.

“It may be because of elections this year. During those days, both ministers and state officials were busy in election preparation. Plus the long model code of conduct is a problem,” Industries Minister KJ George told DH.

Even though Karnataka, like previous years, is topping all the 29 states in terms of investment proposals, second-placed Gujarat with Rs 47,064 crore seems to be catching up fast with the southern state, unlike the previous year when it lagged far behind.

While on the national level, the investment proposals have grown by a negligible 0.1% to Rs 2,56,340 crore, yet Karnataka has seen the second highest decline in the percentage terms among the major states. Telangana with decline of 72% has seen the highest decline among major states in the investment interests. In absolute terms, Karnataka has seen a decline of investment intenstions by Rs 63,676, the highest in the country.

Experts attribute this to the uncertainity surrounding the elections, along with aggressive marketing by neighbouring Andhra Pradesh and national investment climate for this steep fall,

"Yes, the uncertainity with election would have certainly played role in it. But, we have seen lot of investments going to neighbouring state of Andhra Pradesh due to their aggressive campaign. Also, most of the investments come to Bengaluru in Karnataka. So, the lack of good infrastructure also plays role in it," Govind Rao, Member Fourteenth Finance Commission said.

In first half 2018, Karnataka contributed 30% of the tolal investment proposals investments in the country, down from 54.9% in first half of 2017.

Historically, most of the investment intentions into the state have been flowing in the months of April and May.

However, this year Karnataka witnessed one of the most fiercely fought elections in recent times.

After a high-intensity campaign for six months, the Bharatiya Janata Party (BJP), which considered the state as its gateway to South India, fell eight seats short of the majority. Seizing this opportunity, Indian National Congress-- offered support to regional party Janata Dal-Secular (JDS).

After Governor Vajubhai Vala invited the BJP to form the government, first giving them two weeks times to prove majority, the Congress took the battle to Supreme Court in a rare post-midnight hearing. After a suspense of 12 days, with allegations flying thick from both sides, JDS’ HD Kumaraswamy took oath as Chief Minister on May 24, 2018.

Implementation issues persist

On the implementation part, though the state has seen doubling of implementation in the first half of 2018, the state saw projects worth Rs 4,286 crore being implemented, up 221% from Rs 1,337 crore implemented till June 2017. However, the amount is a minuscule part of the proposals that the state has been receiving. Also, the implementation is 42% lower than 2016 levels when it saw projects worth Rs 7,371 get operational till June 2016.

However, in a good news for state, Apple Inc’s Taiwanese contract manufacturer Wistron Corp would be investing Rs 3,000 crore to set up a greenfield smartphone manufacturing plant in Karnataka. The plant is expected to generate 10,000 jobs in the state.