Growth Sector Industrial Development

Growth Sector Industrial Development

Current Scenario Textile 4% Karnataka is the IT hub of India & home to the 4th largest technology cluster in the world. The state has 26 operational, 51 notified SEZs and 62 formal approval SEZs as of September 2017. In 2016-17, Karnataka s GSDP grew by 16.38 per cent. The services sector, contributes to 63 per cent to the GSDP, grew at 8 per cent. Manufacturing sector in Karnataka comprised 24 per cent of Gross State Domestic Product in 2016-17 Karnataka has one of the best manufacturing process ratio of 2.63 with a maximum value of goods being converted into finished goods valuing over INR20 billion. The SME landscape in Karnataka is dominated by textile followed by the food and beverage industry. The Karnataka state industrial policy 2014-19 sets aside a minimum of 20-30 percent of allocable land for industrial development to SMEs. Sector-wise Operational SEZs in Karnataka (as on July 2016) Electronics/hard ware and Softwware/ITeS 4% Aerospace and Industry Pharmaceuticals 4% 4% Multi Product 4% Precision, Engineering Product 4% Hi-tech engineering products and related services 4% Biotechnology 4% IT/ITeS 68% FDI 4th highest FDI in the country Cumulative Investments of about US$ 22.4 billion till March 2017 Source: Department of Commerce, Ministry of Commerce and Industry Karnataka MSME Contribution in Industrial Growth 40 lakh people employed in 2017-18 6 lakh MSME units registered in the state 54k Women MSME units Annual Survey of Industries Ranked 4 th among all India States/ Union Territory Total Persons Engaged 7.02% Output 6.71% GVA- 6.17% IIP Growth Rates (Manufacturing) 2015-2016 (Base Year 2004-05) Karnataka National 2.34 2.0

Key Sector Initiatives Single Window clearance for projects under Karnataka Facilitation Act, 2002 through online portal. (www.ebizkarnataka.gov.in) including registrations and approvals of 15 line departments. Information Wizard-a detailed Guide to Investors on setting up of Industrial Enterprise providing holistic information on infrastructure, registrations, approvals, etc. on Single Window portal. Invest Karnataka Forum established on par with Economic Development Board of Singapore to promote Brand Karnataka globally and to attract investments to the State. Timelines fixed for providing most of the industry related services under Karnataka Guarantee of Services to Citizens Act (SAKALA ACT). Karnataka Elevate 100 Scheme for Start-ups Aerospace and Defense Centre of Excellence (CoE) in Karnataka Karnataka Single Window Committee Karnataka New-Age Incubation Network (NAIN) programme Incentives for MSMEs involved in the manufacturing of electric vehicle and its components GoK offers 5 per cent extra investment subsidy for women entrepreneurs Electric Vehicle and Energy Storage Policy 2017

Karnataka Industrial Policy 2014-19 Key Highlights and Achievements During 2014-17, 1823 projects have been approved by the State Level Single Window Clearance Committee/State High Level Clearance Committee, with an investment of INR 3.34 Lakh Crore Investment, generating employment to 8.98 lakh persons. During 2014-17, 1.89 Lakhs employment in large industry sector and 12.30 Lakhs employment in MSME Sector i.e., totally 14.19 Lakh employment has been generated. Efforts towards development of Industrial Corridors: Chennai-Bangalore-Chitradurga Industrial Corridor (CBCIC) and Bangalore-Mumbai Economic Corridor (BMEC) would be expedited on the lines of Delhi-Mumbai Industrial Corridor (DMIC) with the support of Government of India. Government is establishing Tumkur Industrial Node in 9,629 acres at Vasanth Narasapura, Tumkur under Chennai Bengaluru Chitradurga Industrial Corridor. In association with Government of India, the State Government is establishing Machine Tool Park in an extent of 540 acres at Vasantha Narasapura Industrial area, Tumkur with a project cost of Rs. 425 Crores. State Government is developing Japanese Industrial Township at Vasanth Narasapura, Tumkur in an extent of around 500 acres in consultation with JETRO to promote Japanese Investments in the State. Karnataka is giving focus for Labour intensive sectors like Toy Manufacturing, Mobile Phones, Tablets, Electronic Components and assemblies etc. and also to create more employment in manufacturing sector. Government is establishing 6 Exclusive Women industrial parks in the state: Harohalli Industrial Area, Kanakapura Kudithini Industrial Area, Bellary Gamangatti Industrial Area, Dharwad Nandur Kesartegi Indl. Area, Kalburgi Thandya Industrial Area, Mysore Canara Industrial Area, Mangalore Regional spread of Industrial Activity in the state

Industrial Corridors Potential Industrial Corridors A Inter-state corridor Karnataka- Maharashtra 1 Karnataka- Telangana 2 Karnataka- Pradesh Andhra 3 Karnataka- Tamil Nadu 4 Karnataka- Kerala 5 Karnataka- Goa 6 B Intra-state corridor Bengaluru-Mandya- Mysuru-Chamrajnagar 1 Chitradurga-Bellary- Gulbarga-Bidar 2 Dharwad-Koppal-Raichur 3 Bengaluru-Hassan-Mysuru 4 Chitradurga-Haveri-Karwar 5 Tumakuru-Shimoga- Honnavar 6 Raichur-Bagalkot-Belgaum 7 Agro processing clusters

Sub-sector Scenario Heavy Manufacturing Manufacturing MSMEs and Traditional Services Automobile & Engineering Aerospace & Defense Pharma Healthcare Textiles Food Processing MSMEs Tourism Construction BFSI Retail Automobile and Engineering Aerospace and Defense Pharma and Healthcare Food Processing Textiles Karnataka is the 4th largest state in automotive production. Contributes 8.5 per cent to the overall automobile sector of the country. Provides employment to more than 55,000 workers. The engineering segment is the fastest growing sector of the state, which grew at a CAGR of 14.22 per cent between 2010-11 and 2015-16. Karnataka attracts 65 per cent of Aerospace investments in the country. In 2016, Karnataka approved amendments to the Karnataka Aerospace Policy 2013-23 to provide special incentives for development of MRO sector. Of all aircraft and helicopters available with the nation s Defense Services, 67 per cent originates from Karnataka. State s Pharmaceutical industry generated INR80,000 million in revenue contributing 8 per cent of the country s total revenues. Global healthcare company GlaxoSmithKline Ltd is investing INR10 billion in a new state-of-the-art pharmaceutical unit in Karnataka. As of 4 October 2017, the state has 12,568 active health institutions out of total 12,990 health institutions in the state. The state consists of 7 food parks, a spice park and has a seafood park. A rice technology park is on its way to establish. Food Processing sector in the State has witnessed a steady growth. The export of agriculture and processed food in the state grew at a CAGR of 22.96 per cent between 2010-11 & 2015-16. Sector contributes five per cent of India's GDP. Second largest employment generating sector in India. It is the only industry generating huge employment for both skilled and unskilled labour Karnataka is a major apparel sourcing destination for the global market. The state accounts for 20% of the national garment production. Textile Policy offers various incentives for investments in the textile sector In 2016-17 (up to September 2016) 32.50 million meters of handloom textiles was produced in Karnataka

Growth Drivers Growing international investments Cumulative FDI inflows in the state from April 2000 to June 2017 were recorded at INR1,609.8 billion. Rich talent pool Preference for Goods Manufactured Locally Proximity to other Automobile Clusters Karnataka is termed as the Knowledge Capital of India Availability of a large, highly skilled workforce is Karnataka s greatest asset State Government has amended the Karnataka Transparency in Public Procurements Act (KTPP) to reserve 350 times (products) for exclusive manufactures of MSME and SSIs. Karnataka s proximity to the Western and Southern auto clusters in the country makes it an attractive destination for investors. Opportunities PPP Model Dedicated Aerospace Policy Development of NIMZs Benefits of Hyperloop Technology Joint Venture & Partnering Opportunities The GoK is focusing on PPP model to expand the manufacturing and service industry in the state. Projects based on PPP model are already started in aerospace sector. Karnataka is the first and only state so far to have an aerospace policy as well as two exclusive aerospace parks in the state. GoK has proposed to set up India s first Multi-Skill Training Institute for Aerospace and Aviation. Karnataka is at the forefront of developing National Investment and Manufacturing Zones (NIMZs) to promote world-class manufacturing activities. Virgin Hyperloop One has announced its partnership with the GoK to conduct its preliminary study to understand hyperloop s feasibility and economic impact in the region. Investors and foreign companies can join SMEs through joint venture partnership to access the market.

SDG s Linked Sector Vision Build a prosperous Karnataka through inclusive, sustainable and balanced industrial development thereby creating large employment opportunities. G1 G2 G3 G4 G5 G6 G7 Enhance the contribution of manufacturing sector to the State GDP from present level of 16.87% to 20% Create employment opportunities for 15 lakh persons in core manufacturing, pharma and health care Build strong public private partnerships in the manufacturing sector to achieve high growth and attract more investment Improve ease of doing business rank top the ranking chart Strengthening sector-specific vocational skills Increasing focus on MSMEs Increasing focus on Traditional Industries

1. Enhance the contribution of manufacturing sector to the State GDP from present level of 16.87% to 20% Enhance design and innovation capacity to achieve international competitiveness. Penetrate into rural market in Karnataka Promotion to Global OEM s into the cluster for focused development of Tier 1 and Tier 2 Ancillaries Re-engineer policies and directives to support wide-spread manufacturing growth in the state Fast track development of industrial corridors in the state Enhance Automobile, Machine Tools and Engineering design and innovation capacity to achieve international competitiveness. Penetrate into rural market in Karnataka Improve infrastructure and create independent Township Authority model like ELCIA and Bidadi Industries association Create an eco-system comprising infrastructure, education and R&D to make the state a conducive hot spot for aerospace industry Enhancing Power and Water Supply Infrastructure connectivity to industries. Water supply through rain water harvesting should be mandated in all industries. 2. Create employment opportunities for 15 lakh persons Creating Brands in Districts through identifying Local entrepreneurs and promoting clusters ( Top 10 Clusters in various districts) viz Chennapatna Toy Cluster to be promoted like Lego brand Reverse Market linkages by adoption of Communities and SHG s by Industry, Government agencies and Private institutions- Identification of Pilot Projects ( Top 10 projects in satellite towns) Exploring innovative models to promote entrepreneurs who can provide Service to Industry and locals E.g. Taxi Service, Tourist guides etc. at Mysuru Cluster based localized industrial zones can be created in districts such as Kodagu s Ayurvedic products, tourism and homemade food products etc. Sector-aligned Vocation Training Courses for Youth Koushalya Karnataka needs to be aligned to Central Government schemes Local industries that are micro and small could be encouraged to provide employment opportunities. Providing Market-Ready Labour from rural, Tier-II and Tier-III cities Educational/ Training Institutes should increasingly play the role of incubation centres to empower students across local industry specific skillsets. Incubation centres should include a launch pad for startups and entrepreneurs as well.

3. Build strong public private partnerships in the manufacturing sector to achieve high growth and attract more investment PPP model for infrastructure projects in Tier-II and Tier-III cities can speed up the process and provide world-class infrastructure for Smart Cities for Top 5 Cities as identified under Smart Cities Challenge project Joint Projects through Multilateral funding agencies to create Industrial Zones and Clusters which are world-class viz Thirungrea Automotive Cluster in Germany Strong Bilateral partnerships in creating Shared Infrastructure facility for MSMEs in Manufacturing and Engineering ( Plug and Play model ) Create top 5 Clusters for Manufacturing beyond Bangalore- Hubbali- Dharward, Belgaum, Tumkur, Mangalore, Shimoga 4. Improving Ease of doing Business Paperless approvals and online process without repetitive submissions and referrals to departments, penalty for inability to revert within a fixed timeframe and minimal interface from Government Departments Convergence of Departments by Champion Officers Capacity Building of Government employees with a focus on Customer Centricity, Sense of pride and ability to translate action on ground Timely feedback and Customer satisfaction Surveys from Industry and Inter Departmental Stakeholders All gram panchayats need to have a technically sound IT employee to provide information on all industries and allied sectors. 5. Strengthening sector-specific vocational skills Work with State Private agencies/ Training Partners and earmark Vocational Training Centres in Sunrise Skills of the future with a vision to target 2 Lacs Apprentices per year To identify Skill Programmes ( In house of Companies and State driven) with a specific outcome to create jobs to beneficiary companies in Manufacturing and Services Industry To have a District level Skills competition which culminates at a State and National level or participation in International World Skills Competition with a view to attach importance to Skills in India To run Sector Specific Skill projects with local associations in a Project mode with Monthly targets and budgets accordingly

6. Increasing focus on MSMEs Separate department for MSMEs Providing Incentives to MSMEs and giving an impetus to creation of 4 lacs additional Units by 2025 Disbursal of loans by Funding agencies like SIDBI, MSME Ministry and other private agencies Approx 1 Lac Crore upto 2025 Incentives for technology Upgradation and Technology transfers to enhance competitiveness and capabilities Tie up with Industry Mentors for handholding and capacity building through institutionalized mechanisms C&I Department to institutionalize a Buyer Seller meet Annually with a view to create business and promote MSMEs Cluster development approach can enhance the productivity and competitiveness as well as capacity building of MSMEs. MSMEs need to be educated about pollution mitigation technologies and techniques Encourage use of renewable energy to mitigate power shortage issues in small industries 7. Increasing focus on Traditional Industries Creation of textile specific infrastructure in the state such as Mega Textile Parks Augment Power loom infrastructure by addition of high-tech looms Supporting traditional varieties of weaving by producing niche products. Support in branding support, infrastructure facilities, upgradation of skills etc. Increased R&D in textile sector to create new techniques of value-addition in the sector

S No. Key Performance Indicator 2017 2022 2025 1 GSDP 159 $Bn 230 $Bn 302 $Bn 2 Per capita Income 2300 $ 3200 $ 4200 $ 3 FDI ranking of state 2 Top 3 Top 3 4 Ease of doing business 13 Top 3 Top 3 5 State Manufacturing GSDP contribution - 16.87% 20% 6 Employment Opportunities (Job Creation) 1391000 1475000 1500000 7 Manufacturing growth % - 9.1 10.0 8 Services growth % - 14.1 16.7 9 Industrial growth % - 12% p. a. 12% p.a. 10 New Industrial Areas 30000 acres 11 12 24/7 power supply infrastructure for industrial areas 24/7 water supply through treated water to all major industrial areas near Tier-I and Tier-II cities - 80% 100% - 80% 100% 13 Mega Textile Parks - - 4 14 Investments in Textile Sector - - 30000 Cr 15 New Hi-tech Power Looms - - 10000

Forward and Backward Linkages Agriculture Infrastructure Job Creation Health Water Quality Forward Water Resource Management Economic Growth and productivity PPP EoDB Energy Backward Planning Waste Management Finance Skilling, R&D S No Forward Linkage Description 1 Agriculture Increased investments, including through enhanced international cooperation, in rural infrastructure, agricultural research and extension services, technology development etc. to enhance agricultural productive capacity 2 Health Substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination by deploying adequate pollution control and waste treatment strategies 3 Water Quality Improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse 4 Water Resource Management 5 Per capita economic growth and productivity Substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity Sustain per capita economic growth with industrial development. Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors

S No Forward Linkage Description 6 Job creation Governance Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, through formalization and growth of micro-, smalland medium-sized enterprises Achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value S No Backward Linkage Description 1 Infrastructure and Energy Develop quality, reliable, sustainable and resilient infrastructure, including regional and inter-state connectivity infrastructure and utility infrastructure to support industrial development, with a focus on affordable and equitable access for all 2 Finance Increase the access of small-scale industrial and other enterprises, to financial services, including affordable credit, and their integration into value chains and markets 3 Skilling, R&D Enhance scientific research, upgrade the technological capabilities of industrial sectors, encouraging innovation and substantially increasing the number of research and development workers and public and private research and development spending 4 Planning Develop positive economic, social and environmental links between urban, per-urban and rural areas by strengthening national and regional development planning 5 Waste Management 6 Ease of Doing Business Achieve environmentally sound management of chemicals and all wastes throughout the life cycle, in accordance with agreed standards of pollution boards, and significantly reduce their release to air, water and soil in order to minimize their adverse impacts on human health and the environment Fast track implementation of EoDB reforms as per DIPP Reforms Action Plan for the state. Adopt and implement investment promotion regimes 7 PPP Encourage and promote effective public-private society partnerships in industrial development

Growth Sector : Tourism Current State Assessment 20% Increase contribution to State GDP by 2025 Total Tourist Footfalls 2016 13.30 crore Contribution to GSDP 14.8% Visitor Exports Direct Employment INR 1,24,930 crore 20 lakh Annual employment growth rate 7% Number of UNESCO Heritage sites 3 (Hampi, Pattadakal, parts of Western Ghats) Number of Heritage monuments 507 centrally protected monuments Ranking Domestic footfalls 4 th (2015) Ranking Foreign footfalls 9 th (2015) Awarded 3 rd best State/UT under Comprehensive Development of Tourism category by MoT, GoI With over 13 crore tourists, 2016 saw an 10% growth over last year in total tourist arrivals According to Karnataka tourism policy 2015-20, it is envisaged that INR 54,000 Cr investments will be made during 2015-20 period (more investment expected from private sector or under PPP) which can generate around 30 lakhs employment As per WTTC 2016 report, Karnataka tourism contributes ~ 8% to India s total tourism GDP (assuming tourism share of 14.8% GSDP in 2015) Bengaluru became the first Indian city to have its own logo Karnataka Tourism Vision Group was created in 2013 which identified clusters of tourism interest 5 Sun, 1 2 3 4 Urban Tourism Heritage Nature & Wildlife Wellness & Spiritual Sea & Sand This region has been the most popular one in Karnataka for long. It also has the highest number of rooms in multiple locations. Bangalore- Mysore-Ooty is one of the oldest circuits in Southern India. Hampi has been gaining fame as one of the greatest destinations in India. Along with the other ancient locations around Hampi, it has become Karnataka s top destination for Inbound tours Western Ghats is a biodiversity hotspot with potential to be developed as a regulated tourism area in lines with Botswana s Gorilla Tourism. Karnataka has the largest population of Asian Elephants and tigers Medical and wellness tourism has already made substantial headway, primarily in Bangalore. Karnataka already has highly developed individual Spiritual Sites. However, sites need to be connected and developed further to The coastline of Karnataka extends over 300 km. However, significant efforts & investments are needed to build world class beaches comparable to international destinations like Maldives & Mauritius MAJOR CONCERNS Competition from other states Tourism infrastructure and connectivity Qualified skilled labor shortage

Growth Sector : Tourism Current State Assessment SWOT Analysis STRENGTHS WEAKNESSES 1. The state enjoys the presence of wonderful locations and destinations across all tourism themes 2. Karnataka has a rich and unique heritage and cultural identity 3. Carrying capacity of most destinations has not reached saturation levels 4. Bengaluru, the origin hub for most visitors, is well connected to the rest of the country and has India s third busiest airport 5. The state has a progressive tourism policy which encourages private partnership and ICT use OPPORTUNITIES 1. Not all tourist destinations have adequate last-mile connectivity 2. Basic tourism infrastructure toilets, wayside amenities, trained guides - need improvement 3. Promotion and marketing of Karnataka destinations could be better 4. Need for increased participation from the private sector in promoting the Karnataka Tourism brand 5. Lower rail density as compared to other southern states. Road infrastructure is excellent, however road travel to far flung places is not too attractive THREATS 1. Karnataka has all tourism products except snow. Branding and promotions of Karnataka tourism can propel it to become the leading tourism state in India 2. It has 2 nd highest number of centrally protected monuments after Uttar Pradesh. With its strength in Heritage products, it can be positioned as a leading heritage tourism destination in India 3. Bengaluru is a globally recognized city and can leverage this position to attract more foreign tourists to Karnataka 4. As Bengaluru is the innovation capital of India, Karnataka can reap maximum benefits from tourism technology start ups in India 1. Competition from other states, mainly the other southern states - Kerala, Andhra Pradesh, Telangana and Tamil Nadu and from Goa 2. Competition from other international destinations such as Sri Lanka 3. A career in tourism in not perceived as attractive for many students

Growth Sector : Tourism By 2026, the number of people employed in the Tourism Industry shall surpass the IT Industry in the state SDG s Linked Sector Vision To make Karnataka one of the top two states in the country in terms of domestic footfalls by creating a world class tourism infrastructure, thematic circuits, sustainable tourism practices, encouraging private partnerships and investments by providing a conducive business environment, branding and positioning Karnataka Tourism nationally and internationally and becoming one the largest direct and indirect employment generator sector in the state G1 Increase tourism contribution to GSDP from current 14.8% to 20% G2 Make Karnataka one of the two top states in India in terms of domestic footfalls G3 Provide about 6.5 million tourism industry jobs in the state G4 Build a world class tourism infrastructure to position Karnataka as a world class tourism destination

Growth Sector : Tourism Vision 2025 1. Increase tourism contribution to GSDP from current 14.8% to 20% Increase spend per user by cross selling new tourism products at destinations such as water sports, river cruise, MICE etc. Increase stay duration per user by providing attractive tourism infrastructure and creating tourism circuits that encourage tourists to visit all attractions on the route Increasing promotional activity to attract high-value clientele such as foreign tourists and MICE Greater adoption of ICT-based initiatives to for right targeting of tourism products and services Creating incentives to attract domestic and foreign investments into the sector for development of new destinations, products, services, and infrastructure 2. Make Karnataka one of the two top states in India in terms of domestic footfalls Leveraging the diversity of tourism products available in the state to create circuits around themes such as heritage, culture, pilgrimage, rural, adventure, and eco-tourism Positioning Karnataka as a preferred tourism destination at the state and national level through branding and promotional activities such as Theme of the Year Organize travel marts and exhibitions to attract more tourism promoters and operators to the state and engage multiple stakeholders in the development of tourism in Karnataka 3. Provide about 6.5 million tourism industry jobs in the state Encourage increased CSR spending from the private sector for development of tourism through activities such as skill development and sustainability programs Create a rich tourism startups ecosystem by providing professional and policy support Making tourism an aspirational career choice by enhancing training and professional education with necessary infrastructural support and programs such as tourism apprenticeship program Creating a academia-industry-government interface for skill development of service providers 4. Build a world class tourism infrastructure to position Karnataka as a world class tourism destination Development of infrastructure to ensure last-mile connectivity to all significant tourism destinations and providing adequate facilities for communal and public transport Ensuring adequate support infrastructure such as wayside amenities, accommodation facilities, tourist information centers, public convenience facilities etc. to meet the needs of tourists Building a world class tourism information database with analytical capabilities for up to date market information for identifying areas and opportunities for interventions

Growth Sector : Tourism Key Performance Indicators Current 2022 2025 Increase in the Tourism Contribution to State GDP 14.8% 1 (2015-16) 17% 20% Number of of UNESCO World Heritage Sites 2 + 1 (shared) 4 5 State Rank for Domestic tourist footfalls 5 2 2 State Rank for International tourist footfalls >10 6 3 Share of Foreign Tourist Arrivals in the State 1.9% 4% 6% Note 1 Karnataka Knowledge Commission Report