Karnataka has emerged as the preferred destination after Gujarat for industrial investments. The state has witnessed second highest amount of investment to the tune of Rs 9.1 lakh crore from 1,528 projects in the last decade, a study conducted by the Associated Chambers of Commerce and Industry of India (Assocham) has revealed.
Gujarat has emerged as the top investment destination with an investment of Rs 13.35 lakh crore from 1,455 projects, the study said.
Releasing the findings of the study, here today, Dilip Modi, President, Assocham said, “In the post-recession economic recovery, Karnataka has been ranked on top with new projects worth Rs 4.7 lakh crore during March 2009 and December 2010, marking a 8.4 per cent increase on a quarterly basis. The state has Rs 7.4 lakh crore worth of investments or 7.1 per cent share of the total investments in the country.”
Out of the Rs 9.1 lakh crore of investments attracted by Karnataka, nearly 44 per cent are in the manufacturing sector followed by 22.4 per cent in services, 15 per cent in power and 14 per cent in real estate. The projects are in their different stages of implementation, the chamber said.
Investment flows into the manufacturing sector marked a 107.8 per cent jump in 2010 at Rs 3,99,682 crore by December 2010 compared to Rs 1,92,319 crore received as of December 2009. The investments in the services sector registered a healthy growth of 76.5 per cent at Rs 2,03,916 crore. Investments in real estate and irrigation sectors witnessed 30.2 per cent and 19.3 per cent growth at Rs 1,26,370 crore and Rs 31,452 crore respectively during the same period.
Some states have opted for fiscal incentives over developing infrastructure for attracting private capital. The efficacy of such fiscal incentives in promoting development is very limited but the resultant revenue foregone is significant.
The Assocham study said these incentives in the long term will not increase flow of private investments as investors go to states that have good infrastructure, flexile labour laws and transparent administrative rules.
“Karnataka must reduce the unproductive subsidies,” the study said.
Making some suggestions to the state government, Assocham called for special focus on micro, small and medium enterprises and capitalizing on the existing sectoral capacities. The state should promote industrial estates in backward regions in public private partnership mode by announcing special incentives.
“Power is a growth bottleneck in Karnataka. Both availability as well as the quality of available power is serious concerns. Major power projects are yet to see completion and commissioning in order to realize the actual benefits of these investments. It is essential to fix ‘definite time line’ for achieving financial closure and operationalisation of the projects,” the Assocham study said.
