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There are several factors that affect evolution of an industry in a
particular region. The major factors impacting evolution are:
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Policy proactiveness: The policy that a state government adopts
towards a sector directly affects its attractiveness for further
investment. For example, for the IT sector, the Karnataka Government has
given many concessions. This has prompted many IT majors, both domestic
like Infosys and Wipro as well as multinationals like Oracle,
Hewlett-Packard to set up software development operations in Karnataka.
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Availability of natural resources: Certain
industries like agro-based industries have a high dependence on availability of
natural resources. Karnataka's rich bio-diversity spurred the growth of biotech industry in the
state.
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Capability: Availability of good quality manpower is a must for all
industries to flourish. High literacy rates, the presence of good research
organisations and some of the best academic institutions ensure that the state
has well qualified manpower. This has been a major factor enabling the success of
Karnataka in sectors like engineering, IT/ITES and biotech. Given its strong
base of technical work force, knowledge-intensive industries are gradually
taking a lead position in the state.
Based on an assessment of the above factors, some of the industries with
potential for investment and growth in the state of Karnataka are illustrated
below:
This is a qualitative assessment to highlight relative attractiveness of
different sectors.
A case by case analysis is necessary before investment is made.
Source: KPMG analysis
Key industries
Agro-based
About 70 per cent of Karnataka's population lives in villages and 71 per cent
of the total workforce is engaged in agriculture, growing crops such as rice,
millet, maize, pulses, oilseeds and other cash crops. Coffee is the principal
plantation crop followed by cashew and coconut.
Source: Indian Horticulture Database 2002,
National Horticulture Board & Past Issue
Horticulture accounts for over 40 per cent of the total income derived from
the state's agriculture sector, and it contributes 17 per cent to the state's
GDP. Karnataka is one of the leading producers of fruits and vegetables in the
country.
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Coffee from the state accounts for 70 per cent
of the country's total production
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Karnataka exported US$ 184 million worth of coffee in 2001 -02
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Karnataka ranks second in the production of flowers
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It produces 70 per cent of India's silk
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It is a leading state in silk rearing and production of khadi
Karnataka offers several greenfield opportunities for setting up agro-based
industrial activities including preservation, processing and packaging of food.
Several multinational companies like Unilever, Britannia, Nestle, Nissin, Pepsi, Coco-Cola, Heinz, among others, have
manufacturing facilities for food processing in the state.
Information technology and telecommunications Karnataka has been the forerunner in the field of information
technology. With an IT Policy focusing on infrastructure and liberalisation, the
state has emerged as a leading exporter of software products and services.
Bangalore, its capital city, has become the fourth largest technological hub in
the world.
Source: www.karnataka.com
Revenues from the state's software sector constitute 35 per cent of the
state's exports and are steadily increasing. Karnataka also generates 36 per
cent of the country's total software exports.
The state has about 1,156 software development units with a total investment
of US$ 346 million. In 2003-04, 168 new software firms invested US$ 522.3
million in the state. This includes an investment of US$ 429 million made by 1 10
overseas companies. Apart from Bangalore, Karnataka is also encouraging software
investment in Mangalore, Mysore, Hubli and Belguam.
Several global players like IBM, Hewlett Packard, Motorola, Siemens, Philips,
LG, British Aerospace, ACER, Oracle, Sony, Hitachi, Lucent Technologies, Sun
Microsystems etc, have a presence in the state.
Source: www.karnataka.com
ElectronicsBangalore is known as the Electronic City. With over 300 of the world's
leading electronics companies located in Karnataka, the state is a major player
in the electronics and telecommunications sectors in India.The industry's
turnover of over US$ 1 billion accounts for 20 per cent of the national output.
Karnataka is also a major exporter of electronic products.
The state is home to many global electronic giants like Sanyo, Lucent,
3M,TYCO, NEC, Samsung, GE, Yokogawa Blue Star, British Telecom, among others.
Major Indian companies in this field are BPL and Tata Elxsi.
Source: Karnataka Government
BiotechnologyBiotechnology is one of the key sectors in the state. Bangalore has the
country's largest bio-cluster and owes much of its success to the presence of a
large number of prestigious research institutions. The state has close to 92
biotech companies, about 50 per cent of the biotech companies in the country.
Total investment in the biotech sector in the state approximately is
over US$ 217.6 million including US$ 30.5 million of venture capital funding.
Karnataka's natural biodiversity has attracted several domestic players and MNCs
to establish their facilities in the state.The Indian Institute of Science and
the National Centre for Biological Resources provide research support to the
state.
Readymade garments and textilesKarnataka has a sizeable presence in garments and textiles
sector. The readymade garment sector recorded exports worth US$ 860 million in
2003-04, the second highest after electronics and software sector.
Leading garment brands manufactured in the state include Crocodile, Van
Heusen, Arrow, Allen Solly, Lee, Lacoste, Levi Strauss, Tommy Hilfiger, among
others.
AutomobilesThe state has invited a wide range of multinational players in the auto
sector to set up facilities in the state. In 2003-04, revenues from the state's
auto sector stood at about US$ 604 million. Investment in the sector amounted to
over US$ 413.1 million.
Auto giants like Volvo, Toyota, Suzuki, Hitachi, Kometsu and Tata Motors have
established manufacturing facilities in the state. Reva, an indigenous
manufacturer of electric cars and the first of its kind in India, is also based
in Karnataka.
AeronauticsKarnataka has a well-developed aeronautics sector with a presence of many reputed domestic
and
Belgaum foundry cluster
Belgaum in Karnataka has an important foundry cluster in the country with
about 100 foundry units that feed the state's automobile sector. The
geographical spread of the cluster includes Udyambag and Macche industrial
areas. Belgaum is a source of high precision, high volume and economical
castings with about 20 per cent of the foundry units being ISO 9000 certified. A
majority of the units in the cluster cater to automotive and oil engines (31 per
cent) and pumps and valves (21 per cent). The workforce in the cluster is over
10,000 and the revenues generated by this cluster exceeded US$ 21.5 million.
international players. Hindustan Aeronautics Ltd (HAL) and National
Aeronautics Laboratories (NAL) are two state-owned organisations in this sector
that produce world-class products. The organisations are involved in various
activities in the areas of design, development, manufacture and maintenance of
various aircrafts and avionics. HAL has 14 manufacturing units, which are
supported by nine R&D centres. The research facilities available in this
sector are at par with world-class organisations. Global corporations like GE,
Rolls Royce, BAE, Turbo Meca among others have also set up facilities in the
state.
EngineeringKarnataka has traditionally been a hub for engineering services industries in
the country. Many state-owned companies like Bharat Electronics Ltd, Bharat
Earth Movers, Hindustan Machine Tools (HMT), Bharat Heavy Electricals are among
those present in the state. HMT alone has 16 manufacturing units with 22 product
divisions involved in manufacturing and marketing machine tools, watches,
tractors, CNC systems. MNCs like SKF, Ingersoll Rand, Waltex, Durco, Wrigten,
Goulds, Moog Control, Yuken, are among those that have manufacturing facilities
in the state.
TourismKarnataka is a land endowed with scenic beauty. It has been steadily
attracting investment from companies in the hospitality business with numerous
companies setting up hotels, beach resorts, eco-friendly resorts, golf courses,
aero sports facilities and amusement parks in the state.
The state's new Tourism Policy is actively promoting investment in this
sector.The Government has decided to attract investment in tourism with a host
of new plans including offering government land to entrepreneurs at 50 per cent
of the market value to establish resorts.
Mineral-based industryThe state is endowed with a rich mineral wealth and contains deposits of
asbestos, bauxite, chromite, dolomite, gold, iron ore, kaolin, limestone,
magnesite, manganese, ochre, quartz and silica sand. Karnataka is the sole
producer of felsite in India and a leading producer of gold, moulding sand and
fuchsite quartzite. Exports from this sector stood at US$ 198.2 million in
2003-04.
Exports
Karnataka has been consistently recording an annual export growth of 25 per
cent and exports stood at US$ 9.33 billion in 2003-04. Electronics and software
lead the pack, accounting for about 50 per cent of total exports from the state.
Textiles contributed 20 per cent, followed by chemicals, which grew 57 per
cent in 2003-04.
Other export highlights from the state include:
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83 per cent growth of exports in 2003-04, were
from export-oriented units at US$ 1,630 million
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The state recorded its highest software exports at US$ 3.85 billion in March
2004
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IT hardware exports stood at US$ 362 million in 2003-04
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The jewellery sector recorded exports worth US$
560 million in 2003-04
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The garment sector accounted for exports worth US$ 860 million in 2003-04
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Iron ore and minerals accounted for US$ 445 million worth of exports in 2003-04
Source:
Government of Karnataka Website
Investment
Foreign Direct InvestmentThe state has been proactive in encouraging
private participation in various sectors. Karnataka is the fourth largest
recipient of FDI in the country. In 2004, it attracted FDI to the tune of US$
5.4 billion for 160 projects. Investor friendly policies have spurred the growth
of MNCs in various sectors in the state.
Source:
www.kumbangalore.com
Since 1991-92, when FDI inflow in the state stood at US$ 3 million, over the
last decade FDI inflow into Karnataka has grown at a CAGR of 50 per cent.The
announcement of its IT Policy, proved to be a turning point for the state, which
saw an influx of foreign investment of US$ 1.3 billion in 1998-99.
Future investment in KarnatakaKarnataka's total investments are close to US$ 22.8 billion of which infrastructure accounts
for US$ 15.73 billion. Of about 50 per cent of the total planned investment*,
the power sector is attracting maximum foreign investors.
Source:
Projects Today
In addition to implemented projects, many infrastructure projects are in the
pipeline. For example, Toyota Kirloskar, a subsidiary of Toyota Motors, plans to
invest about US$ 460 million to manufacture passenger cars at Bidadi. Global IT
company, Cisco Systems plans to expand its operations in the state with an
investment of about US$ 130 million. Mobius International Private Limited plans
to invest around US$ 650 million in the tourism and recreation sector.
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