It has been almost two and a half years since the Karnataka assembly election and the state had three chief ministers since then. First H D Kumaraswamy, whose party came to power in alliance with the Congress became chief minister but his government was able to sustain just for more than a year, and BS Yediyurappa broke the Congress to become the CM.
- As per the FDI report released by the Ministry of Commerce and Industry, the state has received 1.6 lakh crore rupees so far and 1.02 lakh crore rupees in the first half of the ongoing fiscal.
- The FDI received by Karnataka was 42 percent of the total FDI in the country in the first quarter of the ongoing fiscal year and in the second quarter, it reached 48 percent of the total.
- The huge investment in Karnataka shows that a BJP government in any state improves its attractiveness to investors given the good governance and conducive environment that the party delivers.
- Even in Private Equity/Venture Capital (PE/VC), Bengaluru is the second-largest destination after Delhi/NCR.
Later byelections took place and BJP came to power with a full majority in the state but Yediyurappa (77) could not remain in power for long given age constraints. In July last year, Basavraj Bommai, a protege of Yediyurappa, was appointed as CM and the decision has gone very well among the electorates of the states.
In the last one and a half years of the BJP government, the state has shown massive improvement in ease of doing business as well as socioeconomic indicators and became a favourite destination of foreign investors. As per the FDI report released by the Ministry of Commerce and Industry, the state has received 1.6 lakh crore rupees so far and 1.02 lakh crore rupees in the first half of the ongoing fiscal.
The FDI received by Karnataka was 42 percent of the total FDI in the country in the first quarter of the ongoing fiscal year and in the second quarter, it reached 48 percent of the total. The state has overtaken Maharashtra and Gujarat, which have been top FDI receivers for the last decade.
The state is receiving almost half of the FDI of the country alone while the rest is primarily divided between Maharashtra, Delhi, and Gujarat. Even in Private Equity/Venture Capital (PE/VC), Bengaluru is the second-largest destination after Delhi/NCR. In foreign portfolio investment, most of the companies that receive a large amount of money are Maharashtra (Mumbai) based.
So, one can safely deduce that Maharashtra, Karnataka, and Delhi/NCR are going to be the growth engines of the country for the next few decades. These top destinations will be complemented by Telangana, which is the biotechnology hub of the country.
Given the high growth of the biotechnology sector and the very proactive approach of the Telangana government in attracting new investment, Hyderabad will also be among the growth centres of the country. Gujarat and Tamil Nadu, the most industrialized and urbanized states of the country will come after these four growth hubs.
The sad part of India’s growth story is that except for Delhi/NCR, no other region/state is being able to emerge as the growth centre of the country despite many efforts from various governments. The efforts of the Yogi and Manoharlal Khattar governments are bringing investment in Noida and Gurgaon.
The Karnataka government has deployed many skilled professionals to attract investment in high-technology sectors of the state. “The largest inflow of FDI to Karnataka has been towards aerospace and defence manufacturing, agrotech, fintech, biotech, nanotechnology, electronics, drone technology, hospitality, food processing, hardware, and electronic system design and manufacturing (ESDM),” said Mruugesh Nirani, Minister of large and medium enterprises.
The huge investment in Karnataka shows that a BJP government in any state improves its attractiveness to investors given the good governance and conducive environment that the party delivers. “One of the first big investors for Karnataka were Toyota and Boeing for automobiles and aerospace,” said Former Karnataka chief secretary K. Ratna Prabha. “We moved towards setting up the country-specific industrial park like Japan industrial township in Tumakuru, Taiwan industrial park in Devanahalli. We offered more incentives in Tier-II cities to take industries out of Bengaluru. Hosting multiple delegations, visiting many countries to invite them to invest is all yielding results.”
The other states of the country, especially neighbouring Kerala, which has been dependent on remittance money despite its huge potential, should learn from the practices of the Karnataka government. Maharashtra government led by Uddhav Thackeray is destroying the state’s reputation as the preferred destination for investors and this is reflected in recent FDI as well as PE/VC investment. The BJP led governments can also learn from Karnataka’s practices of designing country-specific and industry-specific parks to attract foreign investment.