Karnataka is one of the more
industrialized states in India and is the fifth largest contributor to India’s
manufacturing GDP. It is most known for its IT sector, the state has
manufacturing capacity in electronics, garments, aerospace and defense,
automobiles, biotechnology, and steel production.
Karnataka is pushing for
industrial growth in regions beyond the city of Bangalore, its central
technology and innovation hub. As it seeks to increase investment in
manufacturing, development of large scale industrial infrastructure and
incentives for Small and Medium Enterprises (SMEs) will be key components of
this push.
As Karnataka plays catch up with
other major manufacturing hubs, it is focusing on large scale industrial
infrastructure development to encourage foreign investment. The state has
40,000 acres in its land bank on which it seeks to build crucial industrial
infrastructure.
Karnataka is at the forefront of
developing National Investment and Manufacturing Zones (NIMZs) which are giant
industrial townships that will promote world-class manufacturing activities.
The state will set up NIMZs in four districts: Tumkuru, Bidar, Kolar, and
Kalburgi.
Karnataka’s 2014-19 industrial
policy states that, in line with the central manufacturing policy, Karnataka’s
government will develop NIMZs as integrated industrial townships with
state-of-the art infrastructure, land use plans based on zoning, and skills
development facilities. These measures should attract investors who are
normally hesitant of India’s poor infrastructure and difficult land acquisition
regulations.
Small and large manufacturers
will be operating together in NIMZs. This setup will allow for easy
collaboration between businesses within a strong value chain, will help reduce
costs and lead time, achieve economies of scale and encourage technology
transfer.
NIMZs provide a wide number of
benefits to businesses including low interest loans and investment subsidies,
government purchase preference, fifty percent government support for
international patent filing expenses, single window clearance, tax exemptions
including exemptions from capital gains tax, and incentives for companies to
buy green technology. Green technology acquisition for SMEs will be provided
for by a technology acquisition fund out of which SMEs will be given access to
a patent pool of up to INR 2 million (US$ 32,000).
In order to encourage more
investment by SMEs, Karnataka will provide a number of incentives, including
reduction in cost of setting up business, increased fiscal benefits, and
guaranteed land. Starting April 1, 2015, the state will cut application fees
for setting up industries by 50 percent. The current rates range from INR
30,000 to INR 3,000,000 (US$ 480 – US$ 48,000). Additionally, Karnataka’s Chief
Minister Siddaramaiah has proposed double fiscal incentives for SMEs.
The Karnataka state industrial
policy 2014-19 sets aside a minimum of 20-30 percent of allocable land for
industrial development to SMEs. Karnataka is also working with the central
government to increase the number of SME incubation centers in the state. This
month it was announced that the number of SME incubation centers in the state
would be raised from four to 10. The central government will be opening 500
incubation centers across the country.
Karnataka is a major
manufacturing hub in the defense and airspace industry. It is also pushing for
the development of second and third tier cities in the IT sector. Karnataka’s
IT policy offers incentives and exemptions to facilitate existing and new firms
to set up software or hardware development centers in tier-2 and tier-3 cities
such as Belgaum, Gulbarga, Hubli, Mangalore and Mysore. The incentives include
stamp duty exemption, concessions in power tariffs and exemption from state
labor laws under the Industrial Employment Act.
Karnataka is one of the most
industrialized and business-friendly states in India. It is further strengthening
its industrial capacity by being at the forefront of NIMZ development in India
and by providing multiple incentives to manufacturers. These measures will make
Karnataka a leader in manufacturing and will help place the state in the center
of the Make in India campaign.
Source: india-briefing
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