Karnataka to roll out its first dedicated MSME policy

Peenya, one of Karnataka’s largest industrial estates, spans 40 sq km and hosts around 5,000 small-scale and a few large and medium-scale industries

Karnataka will soon launch a dedicated policy for the micro, small and medium Enterprises (MSME) sector.

The state’s Industries and Commerce Department, through the Karnataka Council for Technological Upgradation (KCTU), recently floated a tender to appoint a consultant to draft the new policy. It will include a comprehensive package of incentives and concessions to promote MSME development across the state.

Officials said the consultant will study the MSME landscape in Karnataka and benchmark the state's approach against the policies of Gujarat, Telangana, Maharashtra and Tamil Nadu—states known for their robust MSME ecosystems. “This is the first time a dedicated policy is being formulated specifically for the promotion of MSMEs,” a senior government official told Moneycontrol.

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MSMEs are widely recognised as key drivers of economic growth and job creation in India. “In Karnataka, the sector plays a major role in socioeconomic development by offering employment to a wide cross-section of society,” the official said.

Industry welcomes move

The move has been welcomed by industry associations. “We’ve long been asking for a separate MSME policy in Karnataka,” said MG Balakrishna, president of Federation of Karnataka Chambers of Commerce and Industry (FKCCI).

“A dedicated policy would allow better-targeted benefits for micro and small enterprises,” he said, noting that smaller firms face greater challenges in dealing with rising wages, electricity costs and regulatory fees. “Larger companies can absorb compliance costs, but micro units cannot. These enterprises are among the highest job creators but face the harshest financial pressures,” he pointed out.

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Policy blueprint

According to officials, while various schemes exist to support MSMEs, there is now a clear need for a standalone policy that offers more targeted interventions. The consultant will be tasked with reviewing the impact of Karnataka’s recently launched Industrial Policy 2025–30 on MSMEs and preparing a detailed report on its outcomes.

The consultant will also assess bottlenecks in implementation and recommend corrective actions. The study will include both domestic and international components, examining successful MSME policies in other states and in countries where MSMEs form a strong part of the economy.

“This global analysis will help Karnataka identify the right interventions to ensure Indian MSMEs can compete globally,” the tender document states. The draft policy will outline the vision, mission, strategies, expected outcomes and annual targets for investment and job creation. It will also feature an incentive package designed to be competitive with the best national and international standards.

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Stakeholder consultations

Once the draft is prepared, it will be circulated among various government departments, industry bodies and leading MSME stakeholders for feedback. The consultant will conduct at least four divisional-level and two state-level meetings to gather inputs and refine the draft accordingly before submitting it for government approval.

The final policy is expected to address major challenges facing MSMEs, such as land availability, high power costs, labour laws, access to credit and market connectivity. It will also propose new schemes and recommend structural reforms to strengthen MSME governance in the state.

This initiative comes after Karnataka unveiled its Industrial Policy 2025–30 on February 11, targeting a 12 percent annual growth rate in manufacturing, attracting Rs 7.5 lakh crore in investments, and creating 20 lakh jobs by 2030. That policy also acknowledged the growing role of artificial intelligence and automation in industry and, accordingly, rationalised employment thresholds to better reflect evolving production processes.

Meanwhile, Karnataka will host ‘Uthpadhana Manthana’, a two-day conference on May 30–31 in Bengaluru, to chart a roadmap for becoming a global manufacturing hub. Chaired by Industries Minister MB Patil, the event will bring together CEOs and startups for discussions across six key sectors. It aims to shape policy and investment strategies to accelerate industrial growth and competitiveness.

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