Industry proposes, will the government dispose?

In fact, successive State governments have diligently continued a progressive policy of industrialisation and ensuring Karnataka, and in particular, Bangalore, fast emerge as as country’s hi-tech industrial destination.

However, much as governments may crow about the State’s unfettered progress has been singularly due to sustained and concerted efforts at creating ideal conditions for investments to thrive and succeed, the harsh reality is a different milieu altogether.
Yes, despite the government’s tall claims that its efforts have been backed by judicious and meticulous planning through well structured framework of policies to steer every sector of industrial spectrum, entrepreneurs in the state seriously beg to differ and disagree.

Slew of policies

Sure, right from Karnataka Industries (Facilitation) Act of 2002 to Karnataka Export Promotion Policy (2002-2007), Agro Food Processing Policy 2003, the newly announced revised Industrial as also Karnataka Tourism Policy and a slew of millennium policies on  IT, Biotech, BPO, Mineral Policy, Textiles Policy, SEZ, and being among first State to bring Industries Facilitation Act to ease environment for doing business in the State, much water has flown down over the years. For, despite policies being in place, the investment climate is far from being fine to attract industries to Karnataka and encourage existing ones to expand.

Precisely capturing this very big picture and putting things in right perspective is the Federation of Indian Chambers of Commerce & Industry (Ficci) & Konrad Adenauer Foundation (KAF) joint study on State Level Reforms — Increasing Investments in Karnataka. With competitiveness, catchword among the states and appropriate reforms, the key cornerstone for attracting investments into states, the Ficci study on Karnataka could not have come a day sooner.

Core concerns

The study, while lucidly capturing  varied views of the industrial spectrum of Karnataka, has also sought to identify their core concerns and steps that are imperative to mitigate them and provide the right impetus and impel Karnataka’s industrial growth. This engagement between policy makers, State’s administrative machinery, government and the stakeholders, the study notes, has been towards formulating the necessary groundwork for developing a blueprint for removing the impediments that act as a fetter in the way of higher investments coming into the State and its growth.

Despite the State clocking an annual average state domestic product growth rate of 7.50 per cent over the nine-year period 2002-03 to 2008-09, and is shade below the national average rate of 7.75 per cent, the State’s contribution to the national GDP, has, however, witnessed a marginal decline from 5.39 per cent in 2002-03 to 5.25 per cent in 2008-09.

And with the State’s policies, rightly so, skewed towards the new age IT, BT, BPO sectors & the like, and services sector constituting majority of State’s GDP, it is no wonder than that the industrial sector has shown marginal increase from 27.20 per cent in 2002-03 to 27.73 per cent in 2008-09. Furthermore, the manufacturing sector, reflecting the true state of things on policy framework and implementation front, has shown a decline in its contribution to the industrial sector, with its share coming down from 16.08 per cent to 14.60 per cent during the said period. The study succinctly captures the reasons and offers prescriptions to overcome them so that the State becomes the destination of choice for investments again.

Proactive industrial policy

While, according to the study, the respondents (64 per cent) were quite gung-ho about Karnataka as an atrractive destination for doing business and were indeed positive about State’s investment climate, a sizeable 42 per cent of companies observed that they faced difficulties in their day to day business operations and nearly 1/3rd of them stated that starting a business is difficult. Ironically, the Study Doing Business 2009 of World Bank ranks Bangalore at the 13th position amongst select 17 states of India. The State scored good in terms of its progressive and pro-active industrial policy as 59 per cent rated them as good.

Majority respondents, 55 per cent, also felt that the State’s labour laws are good and a whopping 71 per cent believe that access to finance is easy.

However, reflective of the several bottlenecks in terms of proper roads,  connectivity, traffic jams, congestion the State has scored dismal 18 per cent in terms of infrastructure facilities. No wonder, a large number of cleared projects with crores of rupees of promised investment either remained on the drawing boards or are progressing very slowly.

Power scenario

Likewise, once again painting a bleak picture on the power scenario, with its unscheduled load shedding, poor quality and high cost of power, 76 per cent felt that Karnataka’s that power situation is not good. Simiarly, on availability of trained manpower too, the score is just 38 per cent, with the core industries unable to find the right talent pool, as majority of them are absored by technology companies with both the domestic and major multi-nationals having made Bangalore their hub for global activity.

Reflecting the disconnect between policy provisions and actual implementation of stated policies, only 32 per cent is of the view that the government incentives for industry is good.

Lest, its boon becomes bane, the study, as a panacea to address these problems, has suggested that with existing industrial areas getting saturated and land prices rising fast, the State could do well to create land banks, subsidise KIADB to reduce land prices, amend lands for facilitating companies and individuals to buy agricultural land, ease process of conversion, rationalise cost of registration et al.

Separate power grids

On infrastructure front, it wants maintenance be passed onto large industry associations and in case of MSMEs, KIADB & KSSIDC take onus, setting up separate power grid for the industry, time bound plan for making state power surplus, upgradation of state highways and high traffic density corridors, improving connectivity to industrial growth centres etc., streamlining tax filing processes and rationalisation of entry tax., expeditious implementation of policies and incentive schemes, mechanism to ensure timely payment of dues to SMEs and insurance scheme for small entrepreneurs.

The State, which is amongst top five industrialised statescan surmount the summit, as also  meet GSDP growth target of 11.2 per cent envisaged by Planning Commission for Karnataka, if these issues are address on a pro-active and urgent manner, it notes. Well, the stakeholders have had their say. Will, the government, caught in the condundrum of its own political conflicts and maelstrom of survival strategms, cut time to pore over these problems and prescriptives to propel the State into high growth path of industrial progress, only time will tell. Until then, one can wish the industry and government God Speed!