It’s worth investing in Karnataka

Prime Minister Narendra Modi’s visits to various countries appear to have paid economic dividends which are evident from the investments coming into India.

To supplement the prime ministerial economic diplomacy, several States have sought to showcase their strengths as ideal investment destinations. The two States that recently concluded their investor meets to attract capital and technology were Andhra Pradesh and Karnataka.

That said, the World Bank’s latest survey on Ease of Doing Business ranks India 130th which only suggests that many hurdles exist on the investment front.

Over the years, political instability, besides a regime change in the interregnum have all contributed to a lack of focus on infrastructure development at a consistent pace that has affected Karnataka’s progress.

For instance, the South Korean steel major Posco exited Karnataka in 2013 for Odisha because it had to deal with three chief ministers, under the erstwhile BJP rule and then a Congress regime. Karnataka also lost the Tata Nano project at Dharwad in October 2008 as an alternative to Singur, West Bengal.

Perhaps, the Tata’s were wary of land-related legal wrangles over the proposed 1,000 acres for the proposed project site, as the district was the birthplace of farmer’s cooperative movements in Karnataka.

Similarly, the Hero Motor Corporation also avoided investment in Karnataka and chose a neighbouring State in 2014 for other reasons is another case in point.

Inadequacies in infrastructure includes problems with the power supply, something which the State government has recently assured investors at the 2016 meet that Karnataka will become a power surplus State from this July.

Also, Bangalore has yet to streamline its solid waste management systems and evolve a suitable model for other urban centres to follow. Success on this front would be perceived as an index of political will and bureaucratic efficiency to be able to deliver would impress investors.

States drive economic reforms today, which compels them to compete with each other to attract investments. This would generate jobs and boost their respective economies.

Karnataka’s competitors are Tamil Nadu, Maharashtra and Andhra Pradesh, besides other North Indian counterparts. These States appear to have got their act together to attract industrial investments and have developed a business-friendly image, while Karnataka has yet to strengthen its credentials on this score. Karnataka enjoys an edge over its southern and northern peer competitors because it is an industrial State. It is home to the highest number of public sector undertakings in the country; besides a dozen defence research laboratories and the oldest science laboratory Indian Institute of Science. It is the first State to privatise higher education in the country and therefore has over 200 engineering colleges whose graduates are necessary to implement industrial initiatives.

Also, the Karnataka Lok Ayukta is a fairly unique anti-corruption watchdog in the country that has some successes to its credit. Besides the State is among the first nationally to have a separate department for e-governance in 2003.

Apart from Bangalore being the Silicon Plateau, it is also the aeronautics, bio-technology, electronics and machine tools capital of India. While these are strengths they are also weaknesses because Karnataka minus Bangalore only dilutes the State’s political, economic and social importance on the national canvas.

For instance, over the past decade various foreign heads of state like the UK, Singapore and China, visited Bangalore first to discuss business with the state-owned Hindustan Aeronautics Ltd and IT major Infosys which are based here — and then proceeded to New Delhi. Today, all the IT majors are present in Bangalore. Besides, over 700 of the 871 multi-national companies which have their R&D centres in India, are located in the Karnataka capital.

Barring a handful of Karnataka’s 28 other districts which have some level of manufacturing industry — the bulk of them are renowned for agriculture and horticulture. The government therefore appears keen to ensure an equitable distribution of industry.

India which featured among the “Fragile Five” till two years ago, along with Indonesia, Turkey, Brazil and South Africa – emerging market economies overly dependent on erratic foreign investment to energize their economies — has now acquired an image of a positive investment destination.

To leverage this pro-investment policy environment the States need to combat corruption on a war footing, promote speedy decision making styles of work supported by agile bureaucracies.

The writer is an associate professor at Christ University, Bangalore