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Tackle red tape, power shortage, state told

State ranks high on many indicators, but concerns remain

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Our Bureau Bangalore
Last Updated : Feb 06 2013 | 9:09 AM IST
The World Bank, which in 2004 surveyed the more industrialised states in the country, said power shortage and corruption rank as the top two problems in Karnataka, according to the survey.
 
The state ranked high compared with other states surveyed on "investment climate indicators", the bank said. But, some 200 firms quizzed in the state pointed to power shortage and bureaucratic red tape as important hurdles to business, the bank said.
 
At an interaction here on the bank's survey, organised by the Confederation of Indian Industry, Michael Carter, the bank's director for India, said, "encouraging private sector investment was one of three important areas of our country strategy". In this context, "there remains much to be done" in Karnataka, he said.
 
The composite cost of power and loss of output due to power outages or surge in grid supply was amongst the highest for firms in Karnataka. This had serious implications for competitiveness and hence investment and location decisions, economists at the bank who worked on the survey said.
 
The state was one of five "more industrialised" states, in which the bank was trying to "move from diagnostics to implementation" (of policies that worked towards encouraging entrepreneurship), Carter said.
 
On most indicators, such as "the number of days it took to start a business in the state", Karnataka ranked amongst the top 4-5 states, the bank concluded in two reports. These were the India Investment Climate Assessment (ICA) 2004, and Doing Business Report 2005.
 
Some of the findings were also part of a recent paper, Reform in Business Regulatory Framework - Experiences and Challenges in five Indian States.
 
In several indicators Karnataka set the benchmark for the rest of the states in the country. The state scored well in terms of out-of-state investor perception as well as in its success in attracting foreign direct investment (FDI), the economists said.
 
At the country level, Carter said, India had made impressive progress in liberalising its economy but the legacy of excessive regulation still had a hold on growth: The current levels of regulation were a hindrance to the 8 per cent plus growth rate that India wanted for itself, Carter said.
 
Private sector performance "continues to be constrained by a range of bottlenecks." Private investment averaged around 15 per cent of gross domestic product (GDP) in the 1990s - somewhat below the average for low income countries and below the level necessary to accelerate growth to a sustainable 8 per cent a year, it said.
 
The investment was largely financed from domestic savings. As a share of GDP, FDI in India stood at under one per cent in 2002-03, compared with four per cent in China and between two per cent and three per cent in many emerging market economies, the bank said.
 
Indian manufacturers have become more competitive over the past decade and exports have grown. But the share of Indian manufacturing exports in world exports stood at 0.7 per cent in 2000, against China's share of four per cent.
 
The survey included 1,860 firms across the country. In Karnataka, of the 200 firms, 80 per cent were from small and medium business sector. In addition to Bangalore, they were also chosen from Mysore, Mangalore and Hubli-Dharwad.
 
K K Misra, chief secretary of Karnataka, said industrial dispersion in Karnataka must be promoted and we must remember Bangalore is not Karnataka. He added that despite good infrastructural facilities at Hassan, industrial investment was not forthcoming.
 
Gokul Ram, principal secretary commerce and industries, goverment of Karnataka highlighted the significant growth in the industrial and services sector in Karnataka in the past 4-5 years.
 
He said the state planned to promote cluster-based industrial development, accelerate setting up of sector specific special economic zones, focus on physical infrastructure development and implement the range of business deregulation measures to improve the state's investment climate.

 
 

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First Published: Jun 23 2005 | 12:00 AM IST

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