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| D.S. Rawat , Secretary General ASSOCHAM Ravindra Sannareddy, Chairman , Southern Regional Development Council J. Crasta , Co- Chairman Southern Regional Development Council Asad Wasi , Director Southern Region Office |
Although, Karnataka has successfully attracted investment proposals worth about Rs 10 lakh crore in about 1,624 live projects, 43 per cent of these remain nonstarter while some initiative has been taken in 57 per cent of the projects, apex industry body ASSOCHAM said today.
According to the ASSOCHAM study, out of 57 per cent projects under implementation, majority are at the MOU stages and a lot more is needs to be done in facilitating the same.
With a share of over Rs 3.84 lakh crore, manufacturing sector accounted for lion’s share of 39 per cent of total live investments followed by services (24.6 per cent), real estate (15.2 per cent) and electricity (14.1 per cent), according to a strategy paper titled ‘Achieving Higher Growth in Karnataka’ released by The Associated Chamber of Commerce and Industry of India (ASSOCHAM).
The study was jointly released by Mr Ravi Sanareddy, Mr J. Crasta, chairman and co-chairman, ASSOCHAM Southern Regional Council and national secretary general, Mr D.S. Rawat.
“Attracting about Rs 9.75 lakh crore out of a total investments worth over Rs 137.7 lakh crore made across the country, Karnataka accounted for 7.1 per cent of total investments made by both government and private sectors in India as on December 2011,” said the study.
Besides, the private sector contributed about 55 per cent of the total investments attracted by the state and government sources accounted for the remaining 45 per cent, according to the ASSOCHAM paper.
Karnataka accounted for about 7.6 per cent of total investments made by all government sources while 6.7 per cent of total investments were made by all private sources across India.
Growing at a compounded annual growth rate (CAGR) of about 8.41 per cent, the state domestic product (SDP) of Karnataka grew from over Rs 166 lakh crore to over Rs 249 lakh crore between 2004-05 and 2009-10, according to the strategy paper prepared by the ASSOCHAM research bureau.
With an economic growth of 8.4 per cent CAGR between 2004-05 and 2009-10, Karnataka is lagging behind its regional peers of Andhara Pradesh (8.7 per cent), Kerala (8.7 per cent) and Tamil Nadu 9.7 per cent.
Services sector accounted for over 55 per cent of SDP of Karnataka in 2009-10 clocking a CAGR of over 10 per cent during the course of five years. Besides, the agriculture and allied activities contributed about 15 per cent of the SGDP thereby, registering a CAGR of about four per cent while industrial sector accounted for over 28 per cent and expanded by over eight per cent CAGR, said ASSOCHAM.
Manufacturing and construction emerged as the most significant industrial activities. Manufacturing output and construction activities each, recorded over 10 per cent growth rate during the five year period.
With a share of about 15 per cent in SDP, real estate, ownership of dwellings and business services emerged as the largest activity in the services sector followed by trade, hotels and restaurant (14.1 per cent), banking and finance (8.6 per cent). These sectors expanded by 11.3 per cent, 8.76 per cent and 16.04 per cent respectively.
Karnataka has been jostling with irregular and erratic power supply evidently as, normal and peak hour deficits were estimated respectively at 7.6 per cent and 7.3 per cent in 2010-11. Besides, demand of power has shot up significantly during the initial 11 months of 2011-12 as normal and peak hour deficits rose to 10.8 per cent and 18.4 per cent respectively.
ASSOCHAM has appealed for an improved power supply to industries, suggesting the state government to focus on low-cost energy generation and developing non-conventional sources of energy like solar, bio-gas, wind and nuclear to perk up the power supply scenario.
Though energy sector has attracted huge investments in the past, the major hurdle is completion and commissioning of these projects to realise their actual benefits. The state government must fix a definite timeline to achieve financial closure and operationalisation of existing projects.
Besides, ASSOCHAM has also suggested the state leadership to encourage PPP to leverage from the hydro power potential of the state to meet the energy needs. A comprehensive blueprint must be brought out for power sector development.
The state needs to see higher rate of completion of investment projects to live up to its image of a major investment destination in India, more so as the state had attracted investments worth about Rs 3.5 lakh crore with more than 400 MoUs being signed at an ASSOCHAM event ‘Advantage Karnataka: Global Investors’ Meet’ held in Bangalore in June, 2010.
The government needs to put special focus on micro, small and medium enterprises (MSMEs), thereby capitalizing on existing sectoral capacities, promoting industrial estates in backward regions based on a public-private partnership (PPP) model. Besides, the government should lure investors by offering tax exemptions, lucrative incentives, schemes and subsidies to encourage investments.
Long term financial needs of small and medium enterprises (SMEs) are not met by banks as they are risk averse. While Small Industries Development Bank of India (SIDBI) and state finance corporations are lending to small firms (projects involving upto Rs 10 crore outlay on plant and machinery) and large firms are raising money from the bond market.
ASSOCHAM suggests state level development finance institutes like the erstwhile state industrial development corporations be revived to boost MSME sector.
Karnataka should focus on cluster development to bring down costs, increase efficiency and speed up production in small and medium enterprises, said ASSOCHAM
Bureaucratic approvals, tax concessions, land acquisition issues, exit policies and environmental clearances are certain major determinants of corporate performance in the states. Karnataka needs to focus on these issues to realize its growth potential and enable entrepreneurs to set up industrial units across the state.
The state government must extend fiscal relief measures to knowledge based industries in wake of the recent downturn of the global economy. It is imperative to maintain Karnataka as a major hub of software development, consultancy, pharma, banking and financial services and others.
ASSOCHAM has suggested the government to maintain a futuristic view while addressing issues like economic slowdown, poor demand in realty sector, a prevailing sense of uncertainty vis-à-vis continuation of fiscal incentives in Direct Tax Code (DTC) regime and Goods and Services Tax (GST) regulations.
The government should also lay emphasis on maintaining the quality of workforce to propel the knowledge economy.
Karnataka government should also needs to work upon its public finance management to utilise its sources for productive activities and leveraging the same to attract large pool of private resources.
Considering the huge scope for development of commercial agriculture, agro based industries and agri-business in Karnataka, revival and maintenance of healthy agricultural growth is a pre-requisite for comprehensive development of the state, said ASSOCHAM.
There should be a definite roadmap to improve transport infrastructure, storage facilities, logistics, power, communication and marketing on an urgent basis. Besides, a comprehensive package of venture capital, credit, liberalization of controls, technology, training, marketing and management measures is needed to ensure continuous expansion of agri sector.
High quality education must be imparted right from the grass root levels. Besides, there is an urgent need to up-grade physical and social infrastructure throughout the state to create an investor friendly atmosphere. The state bureaucracy has a pivotal role in this regard, said ASSOCHAM.
The state government must roll out a strategy to use public funds exclusively for growth and development of primary sector including agriculture and development of secondary, tertiary sectors must be entirely left to the private sector, while restricting itself to the role of a regulator and facilitator.
ASSOCHAM has further offered the government to prepare a detailed roadmap for investment promotion and conducting invest-marts in the state.
Sourced From: ASSOCHAM Southern Regional Office
