Column : Karnatakas manufacturing deficit

Written by Darlington Jose Hector | Updated: Jun 12 2012, 17:58pm hrs
For Karnataka chief minister DV Sadananda Gowda, the state-sponsored Global Investors Meet (GIM) may have come at a good time. The two-day event has taken away some of the media attention from BJPs political woes in the state. Investments to the tune of R6 lakh crore have been promised. Not that anyone is buying into such fantasies. Last time too, such astronomical figures were quoted but very few investments were actually realised. The chief minister has his predecessor BS Yeddyurappa breathing down his neck all the time and the GIM must have given him some space to stretch himself.

On Wednesday, Gowda said the idea was to attract significant investments in the energy and infrastructure sectors. Over 80 Fortune 500 companies are said to be participating, though it was tough to arrive at that number on last count. Large business houses like the Aditya Birla Group, JSW and Suzlon announced large investments in the state during the event. Signing up for a high-speed train network with the Japanese is part of the agenda as well. Setting up an aerospace park is another project on the anvil. The states industries minister, Murugesh Nirani, has said that most of the investments will be made in cluster-based industries such as plastic, packaging, aerospace and pharmaceuticals. He said the expectation was that 70% of the proposed investments will be made over the next five years.

We now seek to replicate our success in the services sector in the manufacturing sector, said Sadananda Gowda during the GIM. The state plans to increase its expenditure on infrastructure from the current 3.2% of gross state domestic product to nearly 9% during the 12th Five Year Plan. Now, Karnataka has always dreamed of developing its manufacturing prowess along the lines of Tamil Nadu. But the task has not proved to be easy. The industry still does not think the state has the wherewithal to pull off a manufacturing coup. The state needs to develop its ports to stand any chance of emulating its software success in the manufacturing arena. Land acquisition too has been a major bottleneck for successive governments. As Infosys founder NR Narayana Murthy said, the state needs to learn how to take development beyond Bangalore. Karnataka needs to walk a long way to emerge as an industrial hub and, to achieve this, the state government has to work harder in terms of providing infrastructure and educational institutions in the tier II and III cities, Murthy said on Thursday.

Investments into the manufacturing sector looked whopping at least on paper during this years GIM. The GVK group has signed MoUs to develop merchant power plants at an investment of R29,000 crore; Suzlon Energy has signed an expression of interest to develop 2,500 MW of new wind power capacity at an investment of R20,000 crore. Jindal Steel announced a R6,090 crore investment in its steel and cement plants. Tata Steel has announced a R30,000 crore investment into a steel plant in Haveri district in Karnataka. All these are sparkling numbers, but the state may need to move quickly and clear the hurdles for the investors.

The fact is that Karnataka has been an investment magnetespecially in the new economy areafor many years. But the focus on development has been on the back-burner for a few years now. Ever since the glory days of former chief minister SM Krishna, the state has not seen a consistent policy aimed at attracting investments. Successive governments have been plagued by political controversies and scams, allowing for little time for anything worthwhile. These events have sullied the image of the state, though it is still considered one of the more progressive destinations in the country. Bangalore is still considered as the fourth-largest tech cluster in the world after Silicon Valley in the US, Boston and London. The state accounts for a third of the countrys software technology park units and has the highest number of R&D centres in the country.

But Sadananda Gowda does not have the charisma of a Krishna. He is not a technocrat and may end up being a passing phase in Karnatakas political history. But if he were to be a smart operator, he would know how to kick on from here. If he can pull off some of these investments and roll them on to the ground, he would be doing the BJP a big favour. The Yeddyurappa government had come into power in Karnataka aiming to emulate Narendra Modis success in Gujarat. But the script has not gone quite that way. But the fact that many companies are still coming forward to announce investments in the state shows that Gowda can still turn it around, if he shows enough will. But that is an unlikely event, his constant smile notwithstanding.

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