How Karnataka received investments worth Rs 3.23 lakh crore and is attracting more

The total investments in Karnataka from FY19-23 stand at Rs 4.67 lakh crore.

Karnataka has seen a rise in investments from Rs 16,500 crore in 2018-19 to Rs 3.23 lakh crore in 2022-23. Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, plans to set up a manufacturing plant later this year in Karnataka. The proposal by Foxconn, entailing a total investment of about Rs 8,000 crore, has been approved by a high- level clearance committee of the state.

“The Foxconn plant will generate 50,000 jobs, and will be located at Doddaballapura and Devanahalli taluk, Bengaluru Rural. The investment is planned over 2023-27,” an official told Moneycontrol.

Also Read: iPhone maker Foxconn plans $700 million plant in Bengaluru

Also, the International Semiconductors Consortium (ISMC) is likely to file its investment application with Karnataka in H2 of FY24 after its application is approved by the Union government.

ISMC and Karnataka signed a Memorandum of Understanding last year for an investment of Rs 22,900 crore (~$3 billion), for which land in the Kochanahalli Industrial Area, Mysuru, has already been identified. “The incentive package has been cleared by the Karnataka government. The state will support successful grounding of the project,” the official said.

The state has already emerged as No. 1 on foreign direct investments (FDIs) during April 2021-March 2022, with Rs 1.76 lakh crore investments. It was ranked as ‘Best Performer’ in 2021 by the Department for Promotion of Industry and Internal Trade.

On the back of ease-of-doing-business reforms, investment promotion subsidies and global companies in the electronics and aerospace space evincing interest, the state is eying more investments.

“We have seen significant interest from companies in these sectors to set up businesses in Karnataka. We are holding discussions with them regarding the incentive packages. We may exceed Rs 3.23 lakh crore investments received last year. Thus, in FY24, we expect to see big investments coming to the state, along with the continued conversion of investment commitments received during Global Investors Meet 2022,” an official told Moneycontrol.

The total investments in Karnataka from FY19-23 stand at Rs 4.67 lakh crore.

Also Read: Vedanta-Foxconn selects Dholera SIR for India's first semiconductor facility

Incentives, subsidies, and looking beyond Bengaluru

The state, which will see assembly elections next month, has ensured an impressive increase in investments, especially in 2022-23, on the back of reforms and an investment promotion subsidy of up to 2.25 percent of annual turnover for 6-10 years.

Companies avail this subsidy up to 40-60 percent of the value of their fixed assets. The subsidies for tier 2 and 3 cities are higher to promote investments beyond Bengaluru.

The state is now in talks with global players in the aerospace and defence, e-mobility, electronics system design and manufacturing and R&D sectors.

The Karnataka Industrial Policy 2020-25 focuses on providing incentives based on the investment size and location of the project. After realising the need to promote employment-generating industries, the state came up with the Karnataka Employment Policy 2022-25, which provides additional incentives over and above the ones offered under the industrial policy to high employment-generating investors.

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Big investments in last five years

Karnataka has seen some big investments in the last five years, including Rs 9,000 crore from Epsilon, Rs 6,002 crore from Exide, Rs 4,100 crore from Toyota, Rs 51,865 crore from ACME Cleantech Solutions, Rs 45,000 crore from Avaada Ventures, Rs 40,148 crore from JSW Green Hydrogen and Rs 34,040 crore from Petronas Hydrogen.

“The enhanced ease-of-doing-business environment, with affidavit-based clearance (time-bound clearance), has helped draw investments so that any approved project can start the next day without waiting for downstream approvals. The special incentives package for electronics, semiconductors, solar cells, and Karnataka subsidies amount to 25-30 percent of the investment amount. The initiative of a product-specific industrial cluster programme – the FMCG cluster in Dharwad, toys cluster in Koppal, bulk drugs park in Yadgir and electric vehicles cluster in Ramanagara – will also help,” S Selvakumar, Principal Secretary, Commerce and Industries, Karnataka, told Moneycontrol on Friday.

The state is now working on a GIS-based system for providing information on regulatory compliances and quick identification of land parcels by investors,” Gunjan Krishna, Commissioner, Commerce and Industries, Karnataka, told Moneycontrol.