Political instability sours business sentiment in Karnataka

Political instability has been one of the main reasons why business sentiment has taken a beating in Karnataka. But with a new Chief Minister in place the second replacement following Yedyurappa's infamous exit post the illegal mining scam, the question is are things going to change for the better? Or will this constant flux make India Inc more cautious about investing in the state, reports CNBC-TV18's Vineetha Athrey.

All eyes are now on Karnataka's new CM Jagadish Shettar. But considering this is the third change of guard the state has seen in the last one year alone, companies doing business in Karnataka are worried. This political instability could disturb the economic climate in the state.

Kiran Mazumdar-Shaw, chairman and managing director of Biocon says, "There's bound to be concern, nervousness, anxiousness in terms of whether there's going to be continuity and stability."

HV Harish, vice president of Bangalore Chamber of Commerce says, "When there's a change at the political leadership, there's change at bureaucratic level also. So industry will have to start afresh with new individuals. That wastes a lot of time in starting again from the beginning and that's a concern for industries."

India Inc is worried about what could follow from this political reshuffle delays in clearances and uncertainty in the continuation of policies and reforms being just some of the concerns. Moreover with the state Economic Survey for 2011-12 reporting a near 50% drop in the industrial growth from 6.1% in the previous year to 3.6%, the industry feels that the state government should address these concerns immediately.

SD Shibulal, chief executive officer at Infosys says, "There's definite focus on reforms that is required, focus on decision making and infrastructure is required. Issues with respect to trade deficit need to be addressed in order for investors to have more confidence."

"If you can assure investors that their investments are secure and they are delinked from political shenanigans then these concerns will be addressed," says Shaw.

To be fair, the government has been taking some initiatives with the state arranging high profile investment forums like the recently held GIM 2012 to attract both domestic and foreign investors. But industry leaders say Karnataka needs to do more to convince investors and prevent a further drop in business sentiments, by urgently sending out strong signals reaffirming its commitment to new and existing businesses as well as undertaking measures to keep corruption at bay.