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Karnataka Lores

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  • The India Brand Equity Foundation is a public-private partnershipbetween the Ministry of Commerce & Industry, Government of India andthe Confederation of Indian Industry.The Foundations primary objective

    is to build positive economic perceptions of India globally.

    India Brand Equity Foundationc/o Confederation of Indian Industry

    249-F Sector 18Udyog Vihar Phase IV

    Gurgaon 122015 HaryanaINDIA

    Tel +91 124 501 4087, 4060 - 67 Fax +91 124 501 3873Email ajay.khanna@ciionline.org

    Web www.ibef.org

  • INDIAN STATESEconomy and Business

    Karnataka

    www.ibef.org

  • Published by

  • INDIAN STATESEconomy and Business

    Karnataka

    www.ibef.org

  • CONTENTS

    Executive Summary 5

    Economic Snapshot 7

    The State Economy 9

    Infrastructure 11Social infrastructure 11Access infrastructure 11Industrial infrastructure 11Communications infrastructure 12

    State Policy 13Industrial policy 13Infrastructure policy 13e-Governance 13IT policy 13Biotech policy 14Tourism policy 14

    Business Opportunities 15Key industries 16Exports 19Investment 19

    Key Players 21

    Doing Business in Karnataka 26Indicative list of approvals and clearances 26Cost of setting up business 27Contact for information 28

    A report by KPMG for IBEF

  • KARNATAKA PAGE 5

    Executive Summary

    Karnataka possesses a vast pool of IT professionalsand some of the countrys best academic and premierresearch institutions.The state is a prefered hub forR&D with several multinational and domesticcompanies. It has over 100 R&D organisations.Karnataka also has the highest number of biotechcompanies in the country.

    Karnatakas investment in infrastructure is the highestamong all the states in the country and several megaprojects are underway to upgrade its existinginfrastructure to world-class standards.The state wasfirst in India to set-up a Software Technology Park(STP) as early as 1991.Today, it has the countrys best telecommunications infrastructure ensuring highbandwidth connectivity to global destinations.

    Karnataka is focussed on improving its investmentclimate. It has been proactive in inviting the privatesector and was among the first to invite privateinvestment in the education sector.With itsencouraging policies and favourable environment,the state has attracted investors and has seen asteady increase in Foreign Direct Investment (FDI)inflow in recent years.

    Karnataka is Indias eighth-largest state, both in termsof area and population. Situated on the western coastof India, it is surrounded by Maharashtra, Goa,AndhraPradesh,Tamil Nadu and Kerala and opens out to theArabian Sea.The state is endowed with rich naturalresources. It is best known as Indias IT powerhouseor the Silicon State of India.

    Karnataka is among the leaders in economic growthin the country. Employment and per capita incomelevels are high and almost the entire population hasaccess to education and health facilities.

    Although agriculture is the mainstay of thepopulation, the services and industrial sectors haveshown significant growth attracting major companiesfrom all over the world.Today, the services sectorcontributes the maximum to the states income.

    Karnatakas capital city, Bangalore is known as the IT Capital of India and is the fourth largesttechnology hub in the world. In 2003-04, KarnatakasInformation Technology (IT) sector contributed 36 per cent to the countrys total software exports.Karnatakas software and BPO exports touched US$ 4 billion in 2003-04, a 46 per cent jump overUS$ 2.6 billion in 2002-03.

  • Industrial Centres in Karnataka

  • KARNATAKA PAGE 7

    An Economic Snapshot

    Capital Bangalore

    Area (sq km) 191,791

    Population (2001, million) 52.7

    Literacy rate (%) 67

    NSDP (US$ billion) 25.93

    Per capita income (US$) 390

    Exports (US$ billion) 9.3

    National highways length (km) 3,728

    International port Mangalore

    International airport Bangalore

    Domestic airports Hubli, Mangalore, Belgaum

    Key industries Information TechnologyElectronicsBiotechnologyTourismApparelsAutomotivesEngineeringAeronauticsMineral-based Agro-based Leather

  • Advantage Karnataka

    n Indias largest producer of gold (90 per cent of Indias production) and the soleproducer of felspite

    n One of the leading producers of limestone and iron-ore in the country(producing 30 million tonnes per annum)

    n Accounts for 70 per cent of the total coffee production in the country

    n Highest share in IT exports from the country

    n Highest number of biotech companies in the country

  • KARNATAKA PAGE 9

    THE STATE ECONOMY

    The agriculture sector is the mainstay for 70 per centof Karnatakas population. Horticulture is the largestcontributor to the states income in the agriculturesector. Horticulture covers an area of 1.58 millionhectares in the state and has a production of 107 million tonnes (2003-04).

    Karnataka is one of Indias leading states in industrialdevelopment and the sector contributes 25.6 per centto its GDP. So far it has attracted manufacturinginvestment worth US$ 6,813 million from severalnational and international players and has about 1068 units of large and medium industries. Industriesthat have set-up facilities in the state includeengineering, chemicals, electrical, electronic goods,food processing and processing of plantation productslike tea, coffee, rubber, cashew, etc.

    The state is also a front-runner in the services sector,which contributes the maximum to the state income.Karnatakas software exports, which stood at US$ 3.85 billion, accounted for 36 per cent of thecountrys total software exports.The growth of newcompanies has spurred the rise of employment levelsin the state, particularly in the software industry,which attracts skilled IT professionals from variouscorners of the country. Karnataka has the highestemployment rate in the urban sector among all otherstates. Its work force as a proportion of the totalpopulation stood at 45 per cent (Census 2001).

    Karnatakas State Domestic Product stood at aboutUS$ 25.93 billion during 2004-05. Between 1993-94to 2000-01, the state emerged as the leader in the country registering an economic growth of 8.1 per cent. In 2003-04, the GSDP grew at a rate of 6.2 per cent.The states per capita income stood at US$ 390 in 2003-04. It has outperformed all otherstates in the growth of per capita income, whichstood at 5 per cent in 2003-04 as against the national average of 4.3 per cent.

    Karnataka - Sectoral Contribution to GDP

    49.90%24.50%

    25.60%

    Services

    Agriculture

    Industry Source: Karnataka Economic Survey 2003-04

  • KARNATAKA PAGE 11

    INFRASTRUCTURE

    HealthThe health infrastructure in the state has progressedover the years and has helped improve the well-beingof the people.The life expectancy in Karnataka is 66 years, well above the national average of 62 years.

    Access infrastructure

    Karnataka has 154,208 km of roads of which 65 per cent are surfaced. It has 3,728 km of nationalhighways.The rail network in the state is spread over3,192 km. In December 2004, around 227 roadprojects entailing a total investment of US$ 2610 millionwere under various stages of implementation.The US$ 478.7 million Bangalore-Mysore CorridorExpressway is the largest on-going project in thissector.The state also intends to set up a metro railproject in Bangalore at a cost of US$ 844.7 million.

    The state has an international airport at Bangalore anddomestic airports at Belgaum, Mangalore and Hubli.

    The states port infrastructure includes a network of10 ports including the New Mangalore port, which isan all-weather seaport that can handle cargo vessels.

    The Sea Bird project of the Indian Navy near Karwarhas special facilities for exporting iron ore andhandling crude, coal, LPG and other products.

    Industrial infrastructure

    Karnataka is an exports hub. It has 270 exportingunits and another 65 are in the pipeline.Twenty percent of total exports from export-oriented units(EOU) in India come from Karnataka.To encourageexports and offer industry appropriate incentives andinfrastructure, the state has also approved SpecialEconomic Zones (SEZ) at Hassan, Bangalore and thecoastal zone.

    The government is making sustained efforts toimprove the infrastructure in the state. Karnatakasinvestment in infrastructure at US$ 15.73 billion is thehighest among all states in the country and the statehas invited private investment in various sectors to ensure the availability of ready-to-use facilities forthe industry.

    Social infrastructure

    EducationThe literacy rate in the state stood at 67 per cent in 2003-04. Karnataka is known for its technology and R&D-based institutions. It is estimated that 10 per cent of graduates in India are from Karnataka.

    The state has actively encouraged privateparticipation in this sector. It has 134 engineeringcolleges and 133 medical colleges, a majority of whichbelong to the private sector.

    Source: Economic survey of Karnataka

    Growth in number of health centres

    365

    Primary healthcentres

    Sub-centres

    14591677

    4964

    7793 8143

    1985

    1996

    2003-04

  • Some of the other proposed industrial parks in thestate include:

    n Bangalore International with an investment of US$ 235 million

    n An integrated campus for the development of circuits & designs with an investment of US$ 41.5 million

    n An apparel park at Doddaballapura in Bangalorerural with an investment of US$ 6.9 million

    n A state-ofthe-art international technology parkwith 1.5 million sq ft built up area

    n Six new private technology