Karnataka the second preferred destination for investments in India: Assocham

A study conducted by the Associated Chambers of Commerce and Industry of India (Assocham) has revealed that 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. On the other hand, Gujarat has emerged as the top investment destination with an investment of Rs 13.35 lakh crore from 1,455 projects.

In its finding Assocham stated that “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 percent increase on a quarterly basis. The state has Rs 7.4 lakh crore worth of investments or 7.1 percent share of the total investments in the country.” Out of the Rs 9.1 lakh crore of investments engrossed by Karnataka, nearly 44 percent are in the manufacturing sector followed by 22.4 percent in services, 15 percent in power and 14 percent in real estate. The projects are in their different stages of implementation.

Investment flows into the manufacturing sector of the state marked a 107.8 percent 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 percent at Rs 2,03,916 crore. Investments in real estate and irrigation sectors witnessed 30.2 percent and 19.3 percent growth at Rs 1,26,370 crore and Rs 31,452 crore respectively during the same period.

Since 2000-01, the services sector has clocked an average growth rate of 9 percent and accounts for nearly 56 percent share of the state domestic product while industrial sector contributes 28.5 percent (with 9.3 percent growth) and primary sector 15.7 percent (with negligible growth). The average annual revenue deficit and fiscal deficit as share of state’s gross state domestic product (GSDP) works out as 0.1 percent and 3.2 percent respectively since 2000-01. The annual average revenue expenditure of the state as a percentage share of GSDP is 15.8 percent while, the corresponding figures of revenues is 15.7 percent.

The targets set under the Fiscal Responsibility and Budget Management Act require that each state should phase out the revenue deficit by 2008-09 and compress its fiscal deficit to 3 percent of GSDP. Thus, Karnataka could broadly achieve the targets, Assocham said. Though, it further stated that higher level of productive investments and the increased private sector’s investment results in higher growth. Therefore, the state has to eliminate the revenue deficit and reduce its fiscal deficit.

Assocham has also called for special focus on micro, small and medium enterprises (MSME) 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 and further streamlining single window clearances system which are essential elements of successful industrial policies.