Superpower State

Karnataka has evolved into one of Indias most dynamic States thanks to, among other things, a vibrant industrial base.

in BangaloreInternational Tech Park,

KARNATAKA prides itself as the State of Opportunity. It is Indias eighth largest State in terms of geographical size (191,791 square kilometres) and ninth in terms of population (53 million as per the 2001 Census), thus accounting for 5.8 per cent of the countrys land area and 5.3 per cent of its population. The size, population and economy of the State make it seem like a mid-sized country. Karnataka has over the years evolved into one of Indias most dynamic and progressive States. It is, according to the State Department of Industries and Commerces roadshow catchline, the ultimate destination for the international investor.

One of the fastest growing States in the country, Karnataka contributes about 5.5 per cent of Indias gross domestic product (GDP). The State boasted an average real economic growth rate of 7.4 per cent in the 1990s, and was also the only State to record a growth rate in excess of 8 per cent during the second half of the 1990s. Today the State has a Gross State Domestic Product (GSDP) of Rs.1,94,008.82 crore ($48 billion approximately), a GSDP growth rate of 13.6 per cent over the previous year and an impressive industrial growth rate of 14 per cent. Literacy stands at 67.04 per cent.

The far-sighted, progressive attitude of the governments of the Mysore Maharajas in pre-independent India provided a model for the States of the Indian Union in matters both political and social. The Representative Assembly of Mysore dates back to 1887, when even the Presidencies did not have such bodies. Mysore is part of present-day Karnataka.

Karnataka has a long history of industrialisation. Mysore, which was fortunate to be under the able administration of dewans such as Sir M. Visvesvaraya (who famously said: Industrialise or perish), Sir K. Seshadri Iyer and Sir Mirza Ismail, is synonymous with industrialisation. In 1902, Indias first hydroelectric power station was commissioned at Shivanasamudram, mainly to power sugar mills; in 1905 Bangalore became the first city in the country to be electrified. The trend of industrialisation continued in the early years after Independence with the Union government establishing a number of mega industries such as Bharat Heavy Electricals Limited, Bharat Electronics Limited, Hindustan Aeronautics Limited, Indian Telephone Industries and Bharat Earth Movers Limited in the State capital, Bangalore.

Today Karnataka has a strong and vibrant industrial base, which combines the intrinsic strengths of the large public sector undertakings, large and medium privately owned industries, and a very wide and dispersed small-scale sector. Not only has the State demonstrated its strength in a very wide spectrum of industries in the old, new and sunrise economies but it has in recent times emerged as the knowledge and technology capital of the country, with Bangalore globally recognised as the Silicon Valley of Asia. It has also successfully implemented several industrial and technological initiatives.

The Kudremukh Iron

Today, Karnataka is among the top five industrial States of the country, spearheading domestic industrial growth in key high-tech sectors such as telecommunications, electronics, information technology (IT), precision engineering, steel, sponge iron, sugar mills, manufacturing, automobiles, cement, automobile components, machine tools, readymade garments, biotechnology, and agro industries including food processing. Its strong base of large and medium-scale industries has also given room for the promotion of a vibrant small-scale sector, which provides considerable employment opportunities.

The State is the undisputed leader in knowledge-based and technology-driven industries such as IT, biotechnology, electronics, telecommunications, pharmaceuticals and aerospace. All this has earned it the distinction of being the most techno-savvy State in the country.

Karnatakas pre-eminent position on the industrial and business map of India is based on a number of factors. The States rich natural resources, pleasant industrial climate, diverse topography, varied soils and a 320km-long coastline give it an enviable advantage. A number of its cities, including Mysore, Bangalore and Belgaum, are known for their salubrious climate. It has a strong resource base of highly educated people, thanks to an extensive educational infrastructure comprising renowned schools, colleges, institutes of higher learning, and research and development (R&D) centres.

Not surprisingly, Karnataka is recognised as a centre of learning: at present it has 12 universities, 98 engineering colleges, 107 medical colleges, 916 arts & science colleges, over 100 R&D centres, 184 polytechnics and 188 industrial training and other training institutions. It produces the largest number of doctors, nurses and medical technicians in the country. Its labour force is highly skilled, disciplined and hardworking. Successive State governments have aided the development process by implementing development-oriented, investor-friendly policies that encourage public-private partnership.

Although the government is criticised when it comes to implementing quickly and qualitatively the much-needed infrastructure projects, Karnataka is gearing itself for regular investments in this sector.

Many infrastructure projects such as the Bangalore International Airport at Devanahalli, Bangalore Metro Rail, Bangalore-Mysore Expressway, upgradation of minor airports and development of minor seaports, upgradation of existing roads and laying of new ones on a build, own, transfer (BOT) and a build, own, operate and transfer (BOOT) basis, and setting up of one export promotion and six food processing industrial parks, a Special Economic Zone (SEZ) in Hassan, a jewellery park in Karwar, and apparel parks at Bangalore and Bellary, are under way.

There are also plans to open a 1,000-acre (1 acre = 0.4 hectare) aerospace components manufacturing hub near Devanahalli. While 500 acres would go into the setting up of an SEZ, the remaining land will house companies that will sell their products and services in the domestic market too. Officials in the State Industries and Commerce Department claimed that investments to the tune of $2 billion, including $1 billion from a leading aerospace company in the United States, could be expected for the hub. There are already 20 enquiries for permission to start operations at the hub. What is primarily holding up the project is the issue of compensation for the land. While farmers/owners are demanding Rs.2 crore an acre as compensation, the government is prepared to pay only around Rs.50 lakh.

Good rail connectivity

Since a number of aerospace companies are located in Bangalore, the State would like to cash in on this advantage by starting the hub as early as possible.

The State has a wide network of roads (3,536 km of national highways and 10,021 km of State highways), 3,041 km of rail tracks, 20 seaports, and six airports. Besides expanding some of the existing airports, greenfield airports are planned at Hassan, Bijapur, Shimoga and Gulbarga.

Investments in the State have come from almost every big name in the business world. Over 150 multinational companies (MNCs) have registered their presence in Karnataka. Among them are Volvo, Toyota, Intel, General Motors, Dell, Nestle, Rolls-Royce, Alcatel, General Electric, SAP Labs, Philips, Cisco Systems, Sony, Texas Instruments, Britannia, Qwest, Ericsson, Huawei Technologies and Hewlett Packard.

The strong MNC presence resulted in the State attracting Rs.4,750 crore worth of approved foreign direct investment (FDI) during 2006-07; this is the second highest FDI among all States and accounts for 17.57 per cent of all FDI flow into the country. Says Dr. Rajkumar Khatri, Commissioner for Industrial Development and Director of the Department of Industries and Commerce: Overall, between August 1991 and March 2007, Karnataka approved 2,726 FDI proposals totalling an FDI of $6,123.56 million (Rs.24,869 crore). This amounts to 8.65 per cent of the total FDI that has come into India, and the third highest (after Maharashtra and the national capital territory of Delhi) among all States.

Indian companies have not been far behind. The presence of the Tatas, the Jindals, Mangalore Refineries and Petroleum Limited (MRPL), Infosys and Wipro indicates the welcoming nature of the business environment in Karnataka. Exports from Karnataka rose to Rs.1,05,850.24 crore during 2006-07 an increase of 29 per cent over the previous year. Of this, IT products and services accounted for Rs.56,478.16 crore, with petroleum and petroleum products making up for Rs.11,602.25 crore. While gems and jewellery totalled Rs.7,799 crore, basic chemicals, pharmaceuticals and cosmetics accounted for Rs.1,839 crore.

Karnataka was also the cradle of the banking sector in the country. As many as seven of the countrys leading banks Canara Bank, Syndicate Bank, Corporation Bank, Vijaya Bank, Karnataka Bank, Vysya Bank and the State Bank of Mysore have their origins in the State, with the first five having their roots in the coastal districts of Udipi or Dakshina Kannada. The districts, sandwiched as they are between the Western Ghats and the Arabian Sea, did not have an atmosphere conducive to industries. Early entrepreneurs, therefore, took to selling financial services. Even today, much of the regions infrastructure and industrial development have been underwritten by these banks.

THE CENTRAL FOOD

Modern banking was introduced into the region in 1868 when the Presidency Bank of Madras (which was started in 1843) opened a branch to cater to the needs of British firms which exported plantation produce. In 1921, this bank became part of the Imperial Bank of India, the precursor of the State Bank of India. Today, while the State Bank of Mysore, Canara Bank, Vijaya Bank and Vysya Bank have relocated their headquarters to Bangalore, Corporation Bank, Syndicate Bank and Karnataka Bank have their headquarters in Mangalore or in neighbouring Manipal.

Though many, if not all, of these banks started with the intention of serving the needs of a particular community or profession primarily agriculture over the years they became catalysts of growth for all communities and the entire region. Most were nationalised during the first or second rounds of nationalisation of banks in 1969 and 1980 respectively. If nationalisation was the first instance when these banks underwent a major rethink of policy, liberalisation and the consequent changes in the financial sector in the 1990s forced them to rework their strategies.

While the new changes have their advantages such as increased autonomy, they have also meant more pressure on the banks to churn out higher profits. They have also meant competition from multinational banks.

Besides banks and a whole spectrum of industries, Karnataka is also home to prestigious institutions such as the Indian Space Research Organisation set up in 1972; the National Institute of Mental Health (NIMH) and the National Institute of Mental Health and Neurosciences (NIMHANS), which provide training and services in the areas of psychiatry, neurology and neurosurgery; the Central Power Research Institute; the National Tuberculosis Institute; and the Indian Institute of Science.

Karnataka also boasts of world-class health facilities. Patients from a number of countries visit hospitals in Bangalore and to a lesser extent Belgaum for treatment at affordable prices.