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FKCCI Ofce Bearers interact with Mr. Siddaramaiah,

Honble Chief Minister of Karnataka on issues relating to industrial

policy, attracting investments to Karnataka at his Residence

NOVEMBER 2014Estd. 1916FKCCI JOURNAL

MYSORE

COMMERCE

gtd

Business magazine from Federation of Karnataka Chambers of Commerce & Industry, BangalorVolume XXXV November 2014 Issue 11 Rs. 20

Karnataka New Industrial Policy targets Rs 5 lakh crore investment

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In this issue

Features

Presidents Desk 4

Editors Desk 5

Spotlight 6

FKCCIs China Visit Yields US$ 1Billion+Investment 7

The way forward - rebooting Economy 10

Karnataka industrial policy targetsRs 5 lakh crore investment 11

A Holistic Industrial Policy-Aimed at MovingFrom Red Tape to Red Carpet: FKCCI 12

Karnataka Government to spend Rs.700crore to x roads in Bangalores IT Pockets 14

The next round of economic reforms 22

Financial inclusion is an evolution 27

Make in India has caught the imaginationof India and foreign investors 28

vPgAzzUjPU 34

FKCCI @ Work 42

Business magazine from Federation of Karnataka Chambers of Commerce & Industry, Bangalore

Federation House, K.G. Road

Bangalore - 560 009. Karnataka

Phone : 080 - 22262355 / 6, 22262157

Fax : 080 - 22251826

E-mail : president@fkcci.in

Website : www.fkcci.org

Federation of Karnataka Chambers

of Commerce & Indust ry

Editorial Board

President

S. Sampathraman

Senior Vice President

Tallam R Dwarakanath

Vice President

M.C. Dinesh

Imm. Past President

R. Shivakumar

Secretary General

Sudarshan Tirunarayan

SecretaryM. Lokaraj

Articles in English and Kannada, not exceeding

2000 words may be mailed to President, FKCCI,

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Volume XXXV November 2014 Issue 11

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Industrial Policy 13

Registration of Properties 15

Labour Law 15

Aerospace Industry 16

Import duty for Rubber 20

Tumkur Food Park 20

Rural BPOs 21

Reviews New Indt. Policy 21

Indian oil reners 23

Make in India 24Smart Cities 25

New Monetary Policy 26

Economic Growth 26

SMEs as different verticals 29

Coal Sector 29

Embrace China, not USA 30

Internet Revolution 31

Health 32

Achiever 33

Photo Feature 36

Intellectual Property 46Transfer Pricing 47

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Narendra Modi dividend may push

up growth, economy set to grow by6.4% in 2015-16 World Bank

S. Sampathraman

President

Karnataka has launched the new

Industrial Policy 2014-2019

and the policy looks vibrant with

growth initiative in terms of jobs

skill development and incentivesand simplication of approvals.

The policy is aimed towards

the inclusive development

and growth of Industries in the

State of Karnataka encouraging

women entrepreneurs in setting

up the industries in exclusive

industrial areas. The creation of

quality infrastructure focusing

on provision for comprehensive

facilities and with a thrust on

Human Resource and Skill

Development and upgradation

is a positive step in growth

verticals and expected to

enhance the industrial growth

and also in attracting fresh

investments for the state.

Dear Members,

A Modi dividend could lift Indias economic growth to 6.4% in 2015-16, the World Bank

has said, referring to a possible boost to the animal spirits of entrepreneurs due to the

coming to power in May 2014 of a government perceived to be more market-friendlythan the previous one.

The Indian economy, 80% of the (South Asia) regions output, is set to grow by 6.4%

in 2015-16 after 5.6% in 2014-15. India is beneting from a Modi dividend, noted

the World Banks bi-annual report, South Asia Economic Focus. Apart from the rather

unusual personalisation of the sources of Indias economic growth, the report is

otherwise along conventional lines.

Chinas Growth Will Slow to 7.2%

The World Bank calls for structural reforms and prudent macroeconomic management

for a better medium-term outcome. The Modi effect is denitely playing out as far as

capital inows are concerned. Ination needs to trend downwards, but the external and

scal positions look very promising,

The current years growth could turn out to be higher than the 5.6% estimated by

the World Bank. As far as Indias giant neighbour is concerned, the World Bank hasestimated that Chinas growth will slow to 7.2% next year, a cut from the 7.5% estimated

in April this year. The bank also does not see any threat for India because of the likely

withdrawal of US monetary stimulus over the rest of 2014 and 2015, as the economy

is now stronger in terms of its ability to manage current account.

Indias economic growth will accelerate to touch the 7% mark in 2016-17, according

to the report, which took note of recent policy measures undertaken. These include

liberalisation of foreign direct investment in railways and defence, disbanding of the

Planning Commission and its replacement by an economic advisory body, nancial

inclusion as well as actions to simplify land acquisition and reform labour laws.

Indias economy turned around sharply in the rst quarter of 2014-15 to grow at 5.8%,

bucking the dismal sub-5% growth of the last two years. Indias growth performance

remains strong vis-a-vis emerging market peers, the World Bank said. Private

investment is expected to pick up thanks to the new governments business orientation

and declining oil prices should boost private sector competitiveness, it added. TheModi Dividend is coming out from the positive sentiment, as reected in the stock

market.

All economic indicators look positive, aided by the base effect and actual recovery in

some areas. But there is a lot of resolution shown by the government in areas like scal

decit and current account decit. We expect economy to see an all round recovery

soon.

Progressive thinking with a positive attitude to support the trade and industry is the

need of the hour and the blocks are being laid now for larger vision share for the state

to occupy the top slot in the country.

S. Sampathraman

Presidents Desk

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The turning point in the state

M C Dinesh

Vice President

The clarity and the path are

visible and is expected to have

the wide reach in short span.

The direction and the delivery

approach is showcased by these

in redening the objectivespushing beyond the stagnated

boundaries.

The industry and trade

expectations are high and the

new strategic capabilities is

expected to mark the beginning

for such an evolution. The

commitment and the passion is

the business agenda for the next

ve years making the impossible

possible. The support is sought

from the governments for these

in this entrepreneurial journey.

Dear Members,

The launch of the new industrial policy 2014-2019 is expected to propel the required

momentum for the state to grow faster towards industrialization leaping into the nextphase is put into place in the right time. The government both at the centre and the

state are stable and is expected to be very growth oriented helping the industry and

trade to glitter in terms of growth and social distribution of wealth.

Karnatakas new industrial policy will set the new trend to accelerate the growth to 20%

every year leading to creation of nearly 15 lakhs jobs in the state.

The entrepreneur temperament with complimentary and supplementary efforts of the

state government, I have no hesitation to believe that with the new industrial policy,

the Karnataka will attract an investment 5 lakh crores. What is more satisfying to see

that the state government is also gearing itself for making infrastructure as one of the

top most priorities in its agenda so as to create an environment for the growth and

development of the industries.

For the rst time I have seen a sense of a satisfaction from all the stake holder on the

industry policy just laid by the state government more so from the small and medium

enterprises.

The clarity and the path are visible and is expected to have the wide reach in short

span. The direction and the delivery approach is showcased by these in redening the

objectives pushing beyond the stagnated boundaries.

The industry and trade expectations are high and the new strategic capabilities is

expected to mark the beginning for such an evolution. The commitment and the

passion is the business agenda for the next ve years making the impossible possible.

The support is sought from the governments for these in this entrepreneurial journey.

This news letter has undergone some changes to make it more informative in all thefronts with articles covering on economy trade industry banking and hope you enjoy

reading all these articles.

I would like to thank the editorial team who toiled to put all these together, many of our

clients who have advertised in this make it to look authentic in all respects.

Wish all the members and readers a very happy prosperous deepavali.

Sincerely Yours

M C Dinesh

Vice President

Editors Desk

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What needed in FDI today .

Commitment to Change the mindsetapital connectedness is calculated from measures of

foreign direct investment (FDI) and foreign portfolio

equity investment into the stock market of the

country concerned. Indias decent performance on

capital connectedness is primarily on account of the huge money

that has come into the Indian stock market from abroad in the

last decade and big outward FDI flows in the form of overseas

acquisitions by Indian corporates.

The government, faced with an unsustainable current account

deficit (CAD), has been trying to encourage FDI into the country

to firm up the rupee. The effects of foreign direct investment onlocal firms in developing and transition countries

suggests that foreign investment robustly

increases local productivity growth.

In the case of India, if the governments

goal is to grow the economy faster,

then its important to recognise the

necessity of FDI. There is no point

in being cagey in its efforts to

attract FDI. The naysayers should

recognise that FDI hasnt harmed

other countries that have attracted

FDI, including Japan, South Korea,

Mexico and China. For the last 10

years, global FDI net inflows havetotalled nearly $15 trillion and even

countries with populations that are

fractions of Indias are making noticeable

contributions to that figure. Brazil, with a

population less than a fifth of Indias, has seen

$461 billion in FDI net inflows in the last

decade, while Turkey, nearly one-20th Indias

size, has seen $135 billion in FDI.

India offers only a hesitant welcome

to FDI. It seeks investment in several

industries, including manufacturing,

construction, telecommunications and

financial services, but not in others like multi-

brand retail.Growth results from domestic investment from savings,

from productivity improvements and from foreign investments.

Countries like China that have grown rapidly in recent decades

have taken advantage of all three sources of economic growth.

India, on the other hand, has tried to achieve growth without

much FDI.

However, Indias approach to growth is like bringing a knife to

a gunfight its destined to fail relative to other countries growth

strategies, which take advantage of FDI. To transcend from 5-7%

growth to 10-12% growth as projected, FDI is essential.

Often, regulation allows only a minority investment for fear

of losing domestic management control. For example, FDI in

insurance companies is permitted up to 49% with restrictions

on voting rights to ensure that

management control of an insurance

firm doesnt shift to a foreign entity.

Concern of loss of management

control is of much less importance

compared to sacrifice of economic

growth. Considering the potential of FDI to spur growth, Indias

ambivalence toward FDI is completely misplaced. If India wants

to accelerate growth, it is imperative that the country attracts

FDI in large, really large amounts.

To put Indias track record in attracting FDI in an internationalcontext, its been at best a trickle compared to FDI into

countries like Mexico and China. In the last 10

years, Mexico has attracted $247 billion

of FDI net inflows and China $2 trillion,

compared to Indias $229 billion.

From the standpoint of an average

citizen, the comparison is worse because

Mexico is far less populous than India or

China. What matters to an average citizen

is per-capita investment. On a per-capita

basis, FDI net inflows for Mexico, China

and India are $2,017, $1,531 and $183,

respectively. No wonder the per-capita

GDP of Mexico is $10,300, China$6,800 and India $1,500.

So how much FDI would be needed to

make a meaningful difference in Indias

economic growth rate? What is the effect

of FDI on growth? Each 1% increase in

FDI adds about 0.4% to a countrys GDP

growth. So, to boost GDP growth by about

2%, India will need FDI of about 5% of

GDP. Put another way, at the current level

of GDP of almost $2 trillion in India, about

$100 billion of FDI is required to boost

GDP growth by 2%.

For a massive increase in the growth rate by

4% to GDP, $200 billion of FDI would be needed this is abouteight times the level of GDP India currently attracts in FDI. Also,

as the economy expands, the dollar amount of FDI will have to

grow proportionately. Obviously, this becomes a challenge. For

China, its already a challenge to attract ever-growing sums of

FDI that would enable China to sustain a high rate of growth.

Chinas growth rate should continue to taper off and become

modesta life-cycle phenomenon.

Proclamations of a simplified or streamlined process for FDI

into India are not enough to attract investment. Real changes and

commitment, as well as incentives to states and bureaucrats for

actually receiving FDI, are needed. The mindset has to change

to judging the success of FDI policies on the basis of amount of

investment attracted.

Sudarshan Tirunarayan

Secretary General

C

Spotlight

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hat do business delegates from India talk about

on a long flight to China? China versus India!

Team FKCCI led by Sampathraman, President,

comprising me, M.C. Dinesh, Vice-President, and

others on the flight to Kunming, Yunnan Province, China, were

likewise engaged in a similar bout of intellectual gymnastics, but

the twist in the story was in what we ended up discussing on our

return flight to Bangalore, viz. Not India versus China, but India

AND China!

That, in short, defined the success of our 4-day tryst with China,from September 24-28, undertaken at the behest and Invitation

extended by the Governor of Yunnan.

The China visit was a blockbuster success for the FKCCI and

Karnataka and so the story deserves to be told as it unfolded.

* * *

We arrived at Kunming airport - and the very

first mile of our journey took our breath away.

Instantly, everything seemed to be working

with clockwork precision: The hosts picking us at

the airport, taking us in a chauffeured car, and

chaperoning us with tail cars in tow, to our destination, a seven-

star hotel.Kunming, the capital of south-west Yunnan province of the

Peoples Republic of China, revealed itself, bit by tantalizing bit,

beckoning us to bask in its charms. Aptly described as the City

of Eternal Spring, it has an eternal smell of flowery flagrance

about it, and naturally so, because it is the chief producer of

fresh flowers. Reminiscing about Kumming reminded me of

what Napoleon once said of China: Let China sleep, for when

China wakes up, she will shake the world. And how she has. No

other country, no other economy, at no other time in history, has

invested nearly half of its entire GDP.

Our first visit on the first day in Kunming was a meeting with

SUNPA Chairman and his team at their Telemedicine Center.

SUNPA has 5000 medical specialists, 50 000 physicians, 700

professional technicians and 700 operational sites!

Telemedicine giant eyes Karnataka

Mr Liu Yong, MD, Chairman, SUNPA Group, and his team,

impressed us deeply with their profound interest and knowledge

about the industry landscape of Karnataka. our hosts quickly

sized up the status of FKCCI as the first and most predominant

stakeholder in any business tie-ups with our State on their radar.

Incidentally, my own interactions with the Chinese in the

past and at Kunming, had revealed that when it comes to doing

business, no one does the homework better than them.

While conversing with the SUNPA team about their investment

plans, I casually intervened and told them, There may be a few

small problems here and there, but you know better than anybody

FKCCIs China Visit Yields US$ 1 Billion+InvestmentYunnan to set up Industrial Park near Bangalore AND in Kunming Exclusively for Indian Companies

- M.C. Dinesh ,Vice President, FKCCI

W

September

24

that in your Chinese language, the word for problem and

opportunity is the same !

It was an ice-breaker moment! Soon, they quickly got around

to sharing with us their plans to set up a R&D center for software

and also open a slew of Telemedicine Centers in Karnataka.

In terms of numbers, Yunnan Sunpa spoke of investing between

Rs.300-500 crore in the telemedicine segment, and anchoring

Chinese-led investments of around $1 billion in the state.

With a sense of Mission Accomplished, we visited a few R&D

and manufacturing centres in Kunming, and the Kunming Haikou

Industrial Park. We also got to know of the Dounan Flower

Market in suburban Kunming, said to be the largest in China with

daily sales of US$300,000 from the 2 million sprays of flowers.

The dinner that day showed us why the Chinese are perfecthosts. The multi-course spread would have made a mogul blush,

with one particular dish said to be costing as much as several

thousand dollars Phew!!

Not surprisingly, we slept like a baby that night.

* * *

Today is the critical part of our visit, said

Sampathraman giving a pep talk to all of us, Our

Chief Minister has reposed a lot of faith in us and

the next few hours are going to test our hard-sell

tactics to the hilt. The Chinese are smart operators

and so let us remember, the game is about prescription, not just

September

25

Special Report

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description. We have to exploit the long tail and not look at just

one blockbuster success.

Rejuvenated and recharged by his words, we were off for our

meeting with the Development and Reforms Commission Officials,in a clean-as-a-whistle SUV chauffeured with tail cars in tow like

state guests!

The Yunnan Council Vice-Chairman, the political head of the

province along with other senior officials from the Development

and Reforms Commission, received us warmly and without wasting

much time, took the agenda ahead, viz. fostering greater and

better business and cultural ties between Yunnan and Karnataka.

The iron is hot, and its the perfect time to strike, Sampathraman

whispered to me, and we went for the jugular, giving a quick

presentation on the iconic status of Bangalore as Indias - and

the worlds - IT hub, and on Karnatakas established status as

one of the most progressive and industrially advance states of

the country. We also pointedly recalled the good vibes that the

Chinese delegation enjoyed during their visit to the FKCCI whentheir interest in collaborating with Karnataka was first kindled.

True to their renowned business acumen, the Chinese responded

with the formalizing of a brilliant proposal that was a win-win for

both Yunnan and Karnataka, viz. Set up a Bangalore Kunming

Technology Park in Yunnan for Indian IT and ITeS companies

to touch base with the local Chinese market, complemented by

an Industrial Park to be set up near Bangalore exclusively for

Chinese companies wishing to invest in Karnataka.

The Yunnan government intends to invest around 100-250

acres of land for the Industrial Park, which is to be facilitated by

the Karnataka government along with supply of water, power and

good road connectivity. The industrial park promoters expressed

their confidence of the Industrial Park attracting $1 billion

investment in four to five years from various verticals like foodprocessing, electronics, fertilizer and telemedicine sector.

The latest development on this front is, besides Bangalore, the

state government is exploring possibilities of allocating land for

new investors in Tumkur, Gauribidanur, Kolar, Mulbagal, among

other locations. A trade delegation from Yunnan Province will

soon arrive in Bangalore to hold further discussions on this with

the state government.

A series of high-level meetings were held with the Yunnan

Development and Reforms Commission officials, viz. the

Director, Deputy Director, Director of High Technology Reforms

Commission, etc, followed up by a meeting with the Directors of

Changgong New Area Administration Committee. We also took

this opportunity to felicitate the Director Mr XILIANG WANG.Later we went on a tour of the Industrial Parks, viz. the Kunming

Information and Industrial Park, the Kunming Medical Treatment

and Industrial Park for Healthcare, the Cultural Tourism

Industrial Park, the Dounan International Flower Industrial

Park and the Ecotourism Industrial Park, and also the site of the

proposed KUNMING BANGALORE TECH PARK earmarked for

Indian companies. The government has already put up display

Two to Tango

Advantages from Bangalore Kunming TechnologyPark in China:

Invitation for Indian IT and ITeS companies to gain

foothold in China.

IT Park developed by China within 4 kms from the

new international Airport at Kunming.

Assistance provided for land building, low interest

finance Lease, Rent subsidies.

Opening of Chinese Market for their Services.

Advantages from Industr ial Park near Bangalore:

Industrial Park to come up in around 100-250 acres

to house at least 20-25 companies.

Increased FDI inflow from Chinese investment with

assured investment of US$ 1 billion from Yunnan

Province companies.

R&D Centres for various sectors, Healthcare and

Telemedicine Centres, fertilizer plant near a port,

to be set up by Chinese companies. Possible areas

of cooperation in diverse sectors such as IT/BT, high

tech R&D & Healthcare.

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boards clearly showing that it is earmarked for Indian companies.

Visiting this site revealed to us a text book example of Chinese

precision in planning and project management.

* * *

Starting your day sipping tea is a mundane

daily chore, right? Wrong! Not in Kunming! We

discovered this at our charming little hotel - and

there is history wrapped in this little ritual too.

Like everywhere else in China, the Yunnan

Province has its own quaint tea drinking ceremony. While we

didnt get to actually take part in one, we got a taste of it sipping

our morning tea, in a tea set that seemed so perfectly made that

even this inanimate part seemed to animate the tea in it.

Mr Long Jiang, the DG of Science & Technology, Yunnan, and

his colleagues listened raptly to our showcasing Karnatakas

traditional prowess in science & technology, and expressed theirkeenness to collaborate and engage with us in the areas of latest

scientific techniques and cutting edge technologies, agriculture,

horticulture, chemicals and fertilizers, bio-technology and other

related areas. Responding to our invitation, Mr Long Jiang said

he will very soon (in November) be leading a high-level business

delegation to Bangalore, to take up the collaboration forward.

I have to confess here that we were able to strike an excellent

rapport with our hosts. Maybe one should credit this to the soft

touch of our President! When I gently told him this, he laughed

and then added on a more serious note, Actually, the credit should

be given to our CM because our hosts see us as his ambassadors.

All the officials we engaged with, right from the Director

General, Province of Yunnan China; Director & President of

China Development Bank (CDB), Chairman and Vice-Chairmanof Yunnan Development and Reform Commission, Director

General of the Technology Park, and Mayor of Kunming City,

clearly showed their serious intent on investing in Karnataka and

over and above that, seemed to be eager about setting the ball

rolling at the earliest.

A word about going round Yunnan on-the-go. With lush green

valleys nestled amidst rustic and rugged lines of peaks, the

mountains seem like they are singing a soundless song in thousand

September

26

September

27

voices weaving ancient melodies in the frosty air. And on this, letme add my own two-bit about the dinner that followed.

* * *

It was a Saturday and as befitting the occasion,

we were all caught up in a bit of the weekend

spirit! The Chinese say, the journey of a thousand

miles begins with a small step. Well, our own

journey of a thousand miles ended with a small -

but unforgettable - weekend experience!

Kunming has a thousand touristy spots and we had picked two

among them - the Stone Forest and the Dianchi Lake. As it turned

out, we had chosen right, though making the choice was akin to

finding a needle in a haystack!Located in the east of Kunming City, Yunnan Province, Stone

Forest is a unique natural phenomenon. Thousands of differently-

styled giant stones scattered in random fashion give it the

appearance of a deep and serene forest.

The crescent-shaped lake is serenaded by mountainous peaks

on all its sides and its shoreline is equal to the distance all the way

from Bangalore to Nanjangud - about 163 km in all!

Winding up our final day in China at the Dianchi Lake was

a perfect end to a dream tour - literally and metaphorically.

For in the outcome of this lies the realization of the dreams of

Karnatakas future economic growth.

* * *

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The way forward - rebooting Economy

he sharp decline in corporate investment rate has

attracted much attention. The decline has been

attributed to many factors.

The weakening of investment sentiment is traced to

certain policy decisions and more particularly to the one relating

to the retrospective application of tax changes.

This particular decision has weighed heavily on the corporate

sector. Strong efforts are needed to allay unnecessary fears.

Rebuilding confidence has to be an important part of policy. Asecond reason attributed is the tight monetary policy.

Given the high level of inflation, the monetary authorities

had little choice. It is overlooked that in a period of declining

ratio of household saving in financial assets, higher fiscal deficit

automatically puts pressure on interest rate.

As inflation comes down, the monetary authorities may have

greater room for relaxing.

A decline in the efficiency of the use of capital is evident.

With an investment rate of around 30 per cent of GDP and

an incremental capital output ratio of 41 which has been the

observed ratio in the recent past, the growth rate should have

been around 7-5 per cent.

On the other hand, the actual growth rate turned out to be below

5 per cent. Obviously, this implies a steep rise in the incremental

capital-output ratio.

This may be because projects have not been completed in time

or complementary investments have not been made.

T

Economy

The fact that even today saving and investment rates are at high levels despite having declined from a

much higher level reassures us that if we are able to nd ways to complete projects speedily,

we shall be able to usher in rapid growth in income even in the short run.

A delay in the completion of projects will mean that output is

not flowing even after significant amount of investment has been

made on a project.

The delay in the generation of output out of investment made in

one sector may also be caused by the lack of adequate investment

in related or complementary sectors.

For example, an increase in capacity creation in the power

sector must be matched by appropriate increases in investment in

the coal sector. In adequate output out of investments could also

be due to non-availability of critical inputs.

Many power plants, for example, remain idle because of the

non-availability of gas. An early completion of projects will also

demand certain policy decisions.Issues relating to environment and land acquisition have

assumed greater urgency.

Obviously we cannot ignore environmental concerns but we

need to work out a suitable compromise between the compulsions

of growth and concerns for environment.

The fact that even today saving and investment rates are at high

levels despite having declined from a much higher level reassures

us that if we are able to find ways to complete projects speedily,

we shall be able to usher in rapid growth in income even in the

short run. This should enable us to grow between 7 and 7.5 per

cent in the short run.

However, only a return to higher levels of saving and investment

can take us back to the growth rate of 9 per cent.

Given the high level of inflation, the monetary

authorities had little choice. It is overlooked

that in a period of declining ratio of household

saving in financial assets, higher fiscal deficit

automatically puts pressure on interest rate.As inflation comes down, the monetary

authorities may have greater room for

relaxing. A decline in the efficiency of the use

of capital is evident. With an investment rate of

around 30 per cent of GDP and an incremental

capital output ratio of 41 which has been the

observed ratio in the recent past, the growth

rate should have been around 7-5 per cent.

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arnataka aims to attract

investment worth Rs.5 lakh

crore in the next five years

under a new industry policy.

The policy is targetting an industrial

growth rate of 12 per cent annually and

seeks to enhance the contribution of

manufacturing sector to the state GDP

from 16.87 per cent to 20 per cent.

The New Industrial Policy for 2014-

19 was at a function here released by

Karnataka Chief Minister Siddaramaiah

who said it will contribute for the

economic development and employmentgeneration in the state.

The policy proposed to form at least

five industrial areas every year over an

area of 5,000 to 8,000 acres, he said.

In order to encourage large

investments across the state, the policy

has adopted a very liberal location based

fiscal incentive package, Siddaramaiah

said.

It also proposes net VAT plus CST

based interest free loans for a longer

duration and higher ceiling limits.

Anchor industries and focussed sector

will get enhanced package with a ceiling

limit of 125 per cent of the fixed assets

created, he added.

The policy also gives special attention

to MSMEs by proposing almost double

the fiscal incentives as compared to the

previous policy, Siddaramaiah said.

It focuses on encouraging

entrepreneurs belonging to SC and STs,

minority community, backward classes

and ex- servicemen.

Women also have been given special

attention to induce them to take up more

and more industrial ventures not only fortheir livelihood but also for providing

employment opportunities to others,

Siddaramaiah said.

Two exclusive industrial estates and

areas for women entrepreneurs and a

reservation of five per cent in all the

industrial estates/areas for women

entrepreneurs had been proposed in the

policy.

The policy also provides adequate

attention to Hyderabad Karnataka

region with a view to create a strong

industrial base with equitable allocation

K

Karnataka industrial policy targets

Rs 5 lakh crore investment

The policy proposed to form at least ve industrial areas every year over an area of 5,000

to 8,000 acres. The proposed industrial corridors are expected to become the engines of

economic and industrial development over a period next 10 to 15 years.

of funds for overall development of the

region.

It provides for all energy projectsincluding renewable energy projects to

be treated as industry and will be eligible

for all incentives as any other industry,

Siddaramaiah said.

The policy proposes to associate with

Union Government in implementing

the Chennai-Bangalore-Chitradurga

Industrial Corridor (CBCIC) and

Bangalore Mumbai Economic Corridor

(BMEC) with the help of external

assistances from Japan and United

Kingdom, he said.

In order to take the maximum benefit

from industrial corridor, the state hasproposed four more industrial corridors,

which will be located in Dharwad-

Koppal-Raichur, Chitradurga-Haveri-

Karwar, Raichur-Bagalkot-Belgaum

and Tumkur-Shimoga-Hassan sectors,

Siddaramaiah said.

The proposed industrial corridors

are expected to become the engines of

economic and industrial development

over a period next 10 to 15 years, he

said.

The policy aims at balanced growth

moving beyond Bangalore with conscious

effort to reach out the nook and cornerof the state and also aims at addressing

issues of concerns of the industries, the

Chief Minister said.

He said that after taking charge of

this department five state high-level

clearance committee meetings had been

conducted and proposals worth more

that Rs.50,000 crore approved.

Special package of incentives and

concessions have also been announced

for mega industries, he said.

- Source - PTI

Cover Story

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ri. S. Sampathraman, President, FKCCI reacting

to the launch of the New Industrial Policy 2014-19has welcomed the policy as most progressive and

a key driver of employment and innovation with a

clear direction in making Karnataka the brand

propelling and to be the key state in the country

scaling growth to new horizons. The policy

unveiled has innovative features that will make

the state a leader in the country.

He said attracting investment is dependent on

providing the right environment to run a business

efficiently. Administrative and procedural issues

which result from regulatory and institutional

arrangements play an important role in attracting

investments and the simplification procedures

like e-filing and status on online are some of the good features.The policy unveiled has come at the right time considering the

Make in India concept of the Central Government.

The assurance from the Chief Minister that he is industry

friendly has sent the right signals to investors in the State and

abroad. The policy aims at holistic development of the State and

looks beyond Bangalore with equitable distribution of industries

all over State.

The growth projected at 12% looks achievable considering the

State as the investment destination followed by creation of new

employment is a industry friendly step as it benefits the creation

of wealth and employment.

The immediate necessity of provision of creation of quality

infrastructure is relevant considering the current demand and is a

A Holistic Industrial Policy - Aimed at

Moving From Red Tape to Red Carpet: FKCCI

positive step ushering in attracting fresh investments.

The declaration of large industrial areas and estates in

townships is expected to ease the congestion and the development

of the same under PPP mode is unique leading to faster growth

pace.

The focus on sector industries development as public utilities isa booster much awaited for the growth of the industry in the state.

The constitution of MSME facilitation councils is appreciated

as the same is expected to meet the long demand of the trade

fraternity.

Reduction of road tax and registration tax in order to

encourage manufacture and use of green hybrid and electrical

vehicles is expected to move towards the concept of GREEN

ENVIORNMENT is a fresh buoyant idea in combating the

pollution.

The need to consider all the power projects, including renewable

energy, as manufacturing industries is expected to give a fillip to

renewable energy sector.

The special emphasis to increase the capacity utilization of ports

in the state is expected to boost the export trade opportunitiesand making the ports thereby as the gate way to the world.

The establishment of knowledge corridors and the proposed

offer to non-resident Kannadiagas to invest in

state is welcome as the same is expected to bring

in the overseas fund for the development.

The tax related incentives for mega investments

and the incentive of interest free loans in the

form of retention of VAT collected for 10 years,

exemptions in stamp duty, entry tax, shows the

keenness of the government to revive investments

in the state. All industry subsidies have been

increased substantially. There is a separate

policy for MSMEs.

But, land prices are higher compared to other states. Thisincreases cost of doing business. 99 years lease deed needs major

amendments which the Additional Chief Secretary has promised

to do. MSME should get land upto 2 acres on Lease cum Sale

basis.

The proposal to abolish trade license as promised by the Chief

Minister is a welcome measure. Total abolition needs to be

considered for all Industries and Trade covered by Factories Act

and Shop & Establishments Act.

The policy pronouncements made by the Honble Chief Minister

is in tune with the growth agenda in placing the state in the top

investment destinations in the country. Much remains to seen on

the process of implementation as rightly said by Honble Minister

S.R. Patil.

S

The assurance from the Chief Minister that he is industry friendly has sent the right signals to

investors in the State and abroad. The policy aims at holistic development of the State and

looks beyond Bangalore with equitable distribution of industries all over State.

The immediate necessity

of provision of creation of

quality infrastructure is

relevant considering the

current demand and is a

positive step ushering in

attracting fresh investments.

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he new industrial policy (2014-19) unveiled by theState government recently has been welcomed by

local stakeholders, but there is scepticism regarding

the implementation of some of the provisions.

A major demand of Mysore industrialists to bring local

industrial areas under Industrial Township Authority has been

approved in the policy. But, the key issue of amending the law to

implement the provisions of the policy remains.

Suresh Kumar Jain of Mysore Industries Association (MIA)

told The Hindu that the new policy has proposed to declare large

industrial estates in the State as Industrial Township Areas

and this includes the industrial areas in Mysore. However, the

implementation of the proposal calls for amendment of section

364-A of the Karnataka Municipalities Act 1964, and establish

industrial township authorities to manage the local industrialestates. This may take years though the policy document has

enunciated in clear terms its constitution, Mr. Jain said.

If implemented, it will obviate the need for local industries

to pay tax at multiple points and the township authority will be

entrusted to collect the taxes. Besides, it will also be obliged to

improve the civic infrastructure in the industrial areas. Though

the industries pay taxes to the local bodies, the revenue collected

is not ploughed back for developing industrial land. There have

been instances of local industrial associations collecting funds to

repair road or install street lights, Mr. Jain said.

If notified, Hootagalli, Metagalli, Belwadi and Hebbal will

come under the industrial township authority and will be out of

purview of the local bodies. This will accelerate provision of civic

amenities to the industrial estates, which are now languishing inneglect.

The MIA has also welcomed the new policy guideline which

facilitates the entry of private players into industrial area

development. This is an acknowledgement that the Karnataka

Industrial Area Development Board (KIADB) has failed to take

up development works like roads, sanitation and provision of

drainage, Mr. Jain said.

A facilitation council for Micro Small and Medium Enterprises

(MSMEs) at Mysore has been welcomed. Local stakeholders say

this helps in redressal of grievances regarding delayed payments

to MSMEs by the government.

arnataka government has come up with a newindustrial policy that aims to grow other cities in the

state, increase the push for local manufacturing and

also generate Rs.400,000 crore worth of software

exports by 2020.

The policy, which has been in the works since last November

aims to address the slowdown faced in the IT sector that in turn

has impacted job creation over the last few years. To achieve this

stated objective, the Karnataka government is rolling out the red

carpet to corporates to form Public Private Partnerships (PPP)

across all industries from IT to toy manufacturers.

The policy has a stated objective of growing at 12 per cent

every year, powered by manufacturing and also has an eye on

creating around 15 lakh jobs in the state. We had already

thought of a manufacturing policy much before the centre and arelooking at getting investments of Rs.5 lakh crore by 2019, said

CM Siddaramiah.

The policy is also looking at building infrastructure for

promoting industries, an issue which all the business associations

have been vocal in their meetings with the government authorities.

Five industrial areas every year, covering an area of 5000-8000

acres, with the support of power and water in these regions will

be provided, he added.

The Karnataka government is also looking at PPP in establishing

this industrial zones. There were goodies for the Micro, Small and

Medium Enterprises (MSME), which contributes 8 per cent of

Indias GDP. Special attention has been given to MSMEs and

we propose to double the fiscal incentives when compared to the

previous policy, Siddaramiah said. Also, the government hasearmarked 22.5 per cent of allotable land to SC-ST entreprenuers

and two exclusive industrial estates for women entreprenuers and

a reservation of 5 per cent has been proposed.

Stating cateogorically that many mining-related projects,

which got a nod in the earlier Global Investor Meet have been

stalled for a lack of clear policy of the state with regard to mining,

said Siddaramaiah.

The government has also proposed industrial corridors all over

the state and also laid emphasis on ease of doing business, such

as reducing inspections, online submission of forms to boost the

investment morale in the state.

T K

Stakeholders welcome

new industrial policy

Karnatakas new

industrial policy aims toboost local manufacturing

- Source - Business Line - Source - Business Line

A facilitation council for Micro Small and Medium

Enterprises (MSMEs) at Mysore has been

welcomed. Local stakeholders say this helps

in redressal of grievances regarding delayed

payments to MSMEs by the government.

The policy is also looking at building infrastructure

for promoting industries, an issue which all the

business associations have been vocal in their

meetings with the government authorities.

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ll those living on the outskirts of Bangalore might

soon see their roads get a facelift. Karnatakas

Siddaramaiah government wants to shift the

focus a little bit away from core Bangalore areas,

and improve the condition of major roads and important link

roads in the outer areas of the city by spending Rs.700 crore

on them.

Some of the areas that will benefit from this approach

will be information technology pockets of Bommanahalli

and Mahadevapura besides Dasarahalli, KR Puram,

Rajarajeshwarinagar, Yeshwanthpur, Byatarayanapura,Yelahanka, the Bangalore South assembly segment, and

parts of Anekal.

Last year, we had spent more on the roads in the core

areas. This time we want to improve the conditions of roads

in the peripheral areas that are within the Bruhat Bangalore

Mahanagara Palike (BBMP) limits, Transport Minister

Ramalinga Reddy, who is also overseeing Bangalore affairs,

told Economic Times. This will help improve roads in places

like Electronic City that have large presence of IT firms,

and Peenya which has several industries. Chief Minister

Siddaramaiah has directed the finance.

More funds for parks & footpaths

The funds, according to the transport minister,will be released under the Chief Ministers

Nagarothana project.

We will use another Rs.300 crore for

improving other facilities like parks,

playgrounds and footpaths all over the

city.

The government, Reddy said, has

set up a high-power committee under

the chairmanship of Additional Chief

Secretary D Satya Murthy. Once the

Cabinet approves release of funds,

the road revival proposal does not

have to go before the BBMP council.

The committee will straightawayapprove it paving way for tendering

of projects.

The roads on the peripheral

city areas have been

damaged, and had

invited lot of

media

criticism. We want to give a facelift to them. We want to

complete the work by April-May next year, well before the

onset of monsoon, Reddy said.

The government is also spending Rs.200 crore on the Tender

SURE (Specifications for Urban Road Execution) project in

12 important roads, and another Rs.600 crore on making

six major corridors including the one between Whitefield and

MG Road, signal free. We will complete both Tender SURE,

and signal-free projects by mid-2015, Reddy said.

Signal-free Corridor in WestThe BBMP has taken up an eight-lane signal free corridor

connecting the western parts of the City with the central

business district at a Rs.115 crore cost of the corridor will

help residents of areas such as Rajaninagar, Mahalaxmi

Layout, Basaveshwara Layout and Vijayanagar reach KR

Circle within minutes. The project involves use of some

railway land, and hence got delayed.

This project will take about 18 months to complete,

Reddy said.

After DV Sadananda Gowda took over as the railway

minister, he directed the railway authorities to clear

all hurdles for this project.

A

Karnatakas Siddaramaiah government to spendRs.700 crore to fix roads in Bangalores IT Pockets

State Business News

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egistration of properties is among the top three

revenue generators for the state, and the government

is keen to tap this revenue source.

The state treasury received Rs.6,100 crore from

stamp duty and registration charges during the last fiscal, and

two-third of this came from registration of properties. With new

guidance values in place, the government expects to raise an

additional Rs.2,000 crore.

Realtors unhappy: The real estate industry is obviously not

amused. Realtors said increasing guidance values to bring them

on par with market values in one go would scare away prospectivebuyers, especially from the middle-income group, as properties

will become unaffordable.

This revision is uncalled for. The market is still recovering

from last years sluggish growth. We thought the new government

would offer some solace, but its only coming up with a deterrent,

The realtors are not against increasing guidance values, but

concerned about how it is evaluated. The government doesnt

have a scientific way to fix guidance value as it simply goes by

the thumb rule of satisfying the state treasury. It would be wise

to take the current market situation and bank rates and other

factors into consideration, before deriving the guidance value for

each area.

However, revenue officials said current market values are

R

Revised value will

fetch Rs.2K cr more

ri S. Sampathraman, President FKCCI welcoming

the recent proposed amendment exempting the small

factories from the labour law purview said that the

recent draft amendment announced by the Labour

Ministry will protect the small industries from the cumbersomelegal procedures including the industrial disputes act and

minimum wages act.

Small factories will heave a sign of relief as unions cannot

force unnecessary closure of the unit on frivilious grounds. This

has been a bane for the SSI units as many units have closed the

operations due to the unethical tactics of the labour unions.

The exemption on inspections and the allotment of identification

number eases the administrative hassles and the reforms in

this regard is well appreciated. The proposed amendments are

expected to be compatible and beneficial to the labourers in the

present scenario in the industrial sector. The improved safety of

workers and doubling the provision for overtime are welcome

features.

S

FKCCI welcomes proposed

amendment exempting small

factories from labour law perview

This revision is uncalled for. The market is still recovering from

last years sluggish growth. We thought the new government

would offer some solace, but its only coming up with a deterrent.

The exemption on inspections and the allotment of

identication number eases the administrative hassles

and the reforms in this regard is well appreciated.

about 30-60% higher than guidance values in Bangalore. We

are aiming to bring it to a standard 30%.

Realty primer: Theres a huge difference between the guidance

value and market value of property in several areas of Bangalore,as also in other major cities and towns of the state. The central

valuation committee has been continuously working to bridge the

gap.

On paper, most properties are transacted at the guidance value,

which money changes hands at the higher market value.

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Aerospace industry - A review

ndia, with its growing aircraft fleet size, strategic

location advantage, rich pool of engineering

expertise, and lower labour costs has huge potentialto be a global MRO hub.

At present, Airlines operating in India get nearly 90% oftheir MRO done abroad, mainly due to cost advantages resulting

from the comparatively high tax burden, cumbersome operatingprocedures, and the inadequate MRO service facilities available

in India.Indias current MRO market size is estimated to be around

USD 750 million. As per Boeing itself, the market is expectedto grow at 7% CAGR for the next 7 years to reach USD 1.2billion by 2020. With the fleet size likely to double by 2020, the

need for a strong domestic MRO industry is critical and not justdesirable.

A strong MRO industry could achieve the fo llowing

benets in next 10 years:

Create thousands of Jobs for Aerospace engineers and other

professionals. Save and earn foreign exchange by attracting national and

international carriers to Indian MROs. Reduce dependency of Indian carriers on other countries for

their MRO requirements.

With the induction of more aircraft in India every yearand the existing ones getting aged, the opportunities for

employments, saving in foreign exchange, and the revenueearned by taxes will increase every year.

Make India an attractive MRO hub in this part of the world.

Central Government, State Governments, and various other

agencies imposed taxes and levies on the Indian MRO industry

at various points in time without considering the overall impactof these on the development and growth of the industry.

At present Domestic scheduled carriers outsource most oftheir MRO activity to thirdparty service providers outside the

country. Its a matter of major concern that Indian carriers findit more cost effective to fly empty aircrafts and crew to overseas

MRO hubs for maintenance of their fleet. At present, Indian

MROs are mainly equipped for Line maintenance. We need tobuild more sophisticated facilities and upskill our workforce to

do the heavy maintenance work which is mostly outsourced now.Very recently even Air India, like all private Indian carriers

started depending on MRO facilities located in South Asia, SouthEast Asia, and the Middle East. MRO business worth nearly

USD 450 million has been estimated to be outsourced by thescheduled carriers to other countries in FY 12. This is a colossal

loss of revenue, employment, and loss of revenue through taxesto the government which also foregoes the corporate tax on the

profits of these overseas MRO service providers.

In the absence of a welldeveloped MRO base in India, thereare currently around 40 overseas MRO providers approved by

the Directorate General of Civil Aviation (DGCA) to conduct

Iwork on Indianregistered aircrafts, in locations such as the UK,Germany, France, Romania, Jordan, Israel, the UAE, Sri Lanka,

China, Singapore, Malaysia and Australia, while the plans bysome of the large global MRO players to set up base in India are

yet to materialize.

Recommended initiatives that could boost the Indian

MRO industry:

Review the collective implications of various taxes imposed

by the Central and State Governments especially VAT on

MRO industry. Review the procedural hurdles faced by MROs in importing

spares, using the services of foreign experts, creation of

necessary infrastructure etc. and address issues immediatelyto put Indian MROs on the growth trajectory.

Review the Aircraft maintenance engineering courses

available in India for their suitability in meeting the skill

sets required by the industry. Encourage setting up of comprehensive MRO facilities in

India to take care of the growing requirements of aircrafts

operating in India.The government would earn significantly larger revenues from

the multiplier effect of MROs, generation of local employmentand the growth of ancillaries. The State government would

earn VAT on every rupee spent by employees on consumptiongoods plus get a share of the income tax, excise duty, and

service tax paid by such employees to the Central government.Every incremental job yields incremental revenue for the State

government.

Some of the positive measures taken by the government

over the past few years:

Extension of time period for consumption/installation of

parts, and testing equipment imported for Maintenance,Repairs and Overhaul (MRO) of aircraft by MRO units from

3 months to one year. MRO industry for the rst time is allowed to go in for ECB.

The Royalty charged by the AAI, from MRO, reduced from

36.3% to 13%. Testing equipment can now be imported duty-free by the

MROs.While the above measures have helped the industry, it

needs more support to capitalize on the enormous businessopportunities available.

Some of the important corrective measures suggested

are:

Review of the VAT charged on MROs with a view on the

sustainability of the business when VAT is paid along with

other taxes and levies. States should consider extending benets like exemption

from State electricity duties, Stamp Duty, land benefits, etc.

Indias current MRO market size is estimated to be around USD 750 million. As per Boeing itself, the

market is expected to grow at 7% CAGR for the next 7 years to reach USD 1.2 billion by 2020.

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to attract MROs. Review of the Service tax imposed on MRO industry

considering the fact that when MRO work is done abroad,

the Airlines need not pay any tax at all. Airline industry is primarily a service industry, thereby, full

Cenvat credit for MRO activities should be extended to the

airlines without any restriction since airlines, at times maynot be in a position to claim full credit.

Rationalize the Customs duty exemption on import of MRO

tools and consumables: The existing Customs exemption

covers only parts and testing equipment for MRO operations. Review of royalty charged by AAI on MRO: The Airports

Authority of India (AAI) charges 13% royalty from IndianMROs, which renders them uncompetitive. This is over and

above the rents that MROs pay to AAI for use of the airport

premises. A royalty over the rent is only making IndianMROs more uncompetitive.

Simplify and standardize the Customs requirement toproduce certificates from end-user airlines for import of

aircraft parts: Under Customs law, MROs are grantedexemption from Customs duty for import of aircraft

spares, subject to submission of requisite documents inthe prescribed manner to the satisfaction of the Customs

authorities. While importing spares, Customs authorities at

different airports have varying requirements of documents,many of which are tedious and impractical.

Customs should allow 24x7 clearance of aircraft parts at six

major airports: Unlike for air cargo at major airports, the

Customs department has fixed working hours for clearingaircraft spares. This further leads to delays in custom

clearance which is critical in quick turnaround especially in

situations like AircraftonGround (AOG). A 24x7 windowfor custom clearance of aircraft spares would go a long way. Distinguish MRO as a separate category through amending

Aircraft Rules: MROs have been clubbed with Ground

Handling Agencies (GHA) for security and other relatedprocedures at the airport. There is no distinction made

between these two very distinct services. This causesavoidable issues related to airport passes, etc. and

subsequently delays. MRO, by definition, should be declareda separate category by the Government, through amendment

of Aircraft Rules, 1937. Accord infrastructure status to MRO industry: The MRO

is an integral part of the airport infrastructure. The

government may consider extending tax benefits on lines of80IA to MRO.

Encourage airports to support MRO as a strategic activity:

The MRO facility has to be located at the airport itself -

theres no choice! The Government should take a holisticview and should ensure that adequate space is mandatorily

allocated at Indian airports for MRO. Else certain airportoperators may take a narrow view of the same and allocate

precious airport land for other commercially attractive

activities. Globally, all major airports have dedicated MROhubs that also lead to higher revenues for the airport by way

of higher aircraft movements and hangar rentals. Provide SEZ status to MRO hubs: The government should

encourage Indian airport operators and Indian carriers topartner with MRO providers and develop Aerospace Parks

at the airports. These Parks could be dedicated for MRO

and aerospace manufacturing activities with unrestrictedaccess to the runways. The government should accord

Special Economic Zones (SEZ) status for such Parks, treatgoods and services produced therein as deemed exports

and provide full tax exemptions. Develop globally competitive skills and capabilities: Given

the industry challenges, not many MRO players in India

possess globally competitive endtoend capabilities. Veryfew players have global certifications from USAs Federal

Aviation Administration (FAA) or European Aviation SafetyAgency (EASA) or UAEs General Civil Aviation Authority

(GCAA) to undertake heavy maintenance works on Airbusand Boeing jets. The Government of India may consider

reimbursing 3050% of the cost of obtaining global

certifications as an incentive to the industry.

Finally:

A strong MRO industry is critical to the growth of the

aviation sector in India. It produces employment, andrevenue to the government through taxable outcomes.

India has a huge potential to be a global MRO hub due to

its growing aircraft fleet size, strategic location advantage,rich pool of engineering expertise, and lower labour costs. It is a matter of major concern that Indian carriers nd

it more cost effective to fly empty aircrafts and crew to

overseas MRO hubs than to get them serviced in India.This is because Indian aircrafts can simply fly to competing

countries, buy spares and get the maintenance done, and flyback, without paying any taxes to the Indian government.

A coordinated effort by the government, airlines, airports

and the Indian MROs to strongly promote the Indian MRO

industry is the need of the hour. Civil Aviation Ministry mayappoint a Inter Ministerial Group to support the MROs in

facing the challenges and capitalize on the opportunities

available.India, with its growing aircraft fleet size, strategic location

advantage, rich pool of engineering expertise, and lower labourcosts has huge potential to be a global MRO hub.

At present, Airlines operating in India get nearly 90% oftheir MRO done abroad, mainly due to cost advantages resulting

from the comparatively high tax burden, cumbersome operatingprocedures, and the inadequate MRO service facilities available

in India.

Indias current MRO market size is estimated to be aroundUSD 750 million. As per Boeing itself, the market is expected

to grow at 7% CAGR for the next 7 years to reach USD 1.2billion by 2020. With the fleet size likely to double by 2020, the

need for a strong domestic MRO industry is critical and not justdesirable.

At present Domestic scheduled carriers outsourcemost of their MRO activity to third party service

providers outside the country. Its a matter of

major concern that Indian carriers nd it more

cost effective to y empty aircrafts and crew to

overseas MRO hubs for maintenance of their eet.

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arnataka is becoming one of Indias most dynamic

states! The State government is positioning

Karnataka as a major investment destination for a

range of industries that include IT, auto, steel and

aerospace.

While Karnatakas economy largely depends on agriculture

with 71 percent of the population engaged in farming, the State

has become a key contributor to industrial growth given the

presence of several industries, such as aerospace, manufacturing,

electronics, software, biotechnology, small and medium scale

industries, etc. To embark upon balanced regional development,

the State government plans to utilize infrastructure initiatives to

help further boost growth and employment.

Bangalore, referred to as Indias Silicon Valley, accountsfor approximately 38 percent of Indias software exports. The

software industry is expected to generate USD 20 billion by

2010. Karnataka earned USD 17 billion (INR 74,929 crore)

from software exports last fiscal (2008-09) as against INR

60,800 crore the previous year, registering a 23 percent growth

in rupee terms and 21.5 percent in dollar terms.

Another industry that the State Government is focusing on

is the aerospace sector. This industry continues to draw large

investments in the aerospace sector as it prepares to meet

rising global demand. The sector will see robust growth due to

a combination of positive macroeconomic factors, the presence

of aerospace skill and expertise, favourable Government policies,

and domestic and global aerospace majors investment and

K

Karnataka

Aerospace Industry

Karnataka as an AerospaceHub - Advantages

Aerospace players are looking to

Karnataka to be an aerospace hub for

manufacturing and for MRO activities.

The Government-funded Indian Space Research Organization

is headquartered in Bangalore, and shares good synergies

with other rms operating in aviation and aerospace sector.

ith the establishment of Hindustan Aeronautics

Limited (HAL) in Bangalore in 1940, Karnataka

has come to be regarded as a pioneer in the

aerospace industry. The State is positioned as anaerospace destination due to the activities of numerous aerospace

companies and PSUs engaged in manufacturing, design and

development, and Maintenance, Repair and Overhaul (MRO). In

addition, several educational, scientific and technical educational

institutions are fostering domain expertise in IT, engineering and

design skills that can be leveraged by aerospace majors.

Presence of scientic and technical institutes

The presence of scientific and academic institutions, suchas the Indian Institute of Science and Indian Institute of

Management, enable the development of well qualifiedtechnical experts who can be absorbed into aerospace majors

operations. (Almost 1,500 acres are being provided to the

W

expansion plans in the State. Aerospace players are looking to

Karnataka to be an aerospace hub for manufacturing and for

MRO activities and are -

Entering into joint ventures with overseas players

Establishing captive R&D and manufacturing centers

Providing components, landing gear, IT design and

outsourcing services, etc. to global aerospace majors

Establishing Special Economic Zones to harness the States

inherent advantages

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Indian Institute of Science to set up its second campus in the

Chitradurga district.) The city also boasts of other prestigious

colleges and research institutions.

Deep aerospace expertise

The Karnataka UdyogMitras paper entitled Aerospace

Industry in Karnataka (March 2010) puts forth that most

of the development of Indias aerospace sector has beenconcentrated in Bangalore. The CII report entitled Vision

2015: KarnatakaA Global Aerospace Hub supports this

by saying that the establishment of HAL in Bangalore in

December 1940 by WalchandHirachand and the Maharajaof Mysore heralded the beginning of Karnatakas aerospace

industry. Other important organisations include - Indian Institute of Science and Council for Scientic

Industrial Research that offers opportunities in researchand training for aeronautical graduates.

The Government-funded Indian Space ResearchOrganization is headquartered in Bangalore, and shares

good synergies with other firms operating in aviation andaerospace sector.

The Aeronautical Society of India formed a platform where

engineers, industrialists and professionals could work

together for the industry. Major aerospace organisations are located around

Bangalore, including HAL, National Aerospace Laboratories

(NAL), QuEST Global, Taneja Aerospace and Aviation

Ltd, Dynamatic Aerospace, Air Works India EngineeringPvt. Ltd., The Society of Indian Aerospace Industries and

Technologies, etc. An existing supply chain ecosystem has

been developed by these organizations.

Indias agship aircraft manufacturing and aviation researchorganizations are located in Karnataka, including: Hindustan Aeronautics Limited (HAL)

National Aeronautical Laboratory (NAL)

Aeronautical Development Agency (ADA)

IT expertise and skill sets

Since independence in 1947, Bangalore has developed into

one of Indias major economic hubs and is today known asthe Silicon Valley of India. Karnataka boasts the presence of

major IT companies such as HCL, Infosys, Tata Consultancy

Services, Wipro, QuEST, etc. Karnataka-based professionals

have developed deep IT domain experience. Bangalore is theworlds fourth-largest technology cluster.

Manufacturing expertise

Bangalore is a leader in heavy manufacturing due to thepresence of PSUs, software companies, aerospace companies,

telecommunications companies, machine tools manufacturers,

heavy equipment manufacturers, defence establishments,

etc. Bangalore serves as headquarters to several publicmanufacturing heavy industries such as HAL, NAL, Bharat

Heavy Electricals Limited (BHEL), Bharat Electronics

Limited, Bharat Earth Movers Limited (BEML) and Hindustan

Machine.

Proximity to vendor base

There are approximately 2,000 small and medium enterprises

focused on component manufacturing, tooling and testing

equipment, and assembling. These companies meet the demandof HAL, NAL and ISRO in addition to global aerospace firms.

Government support

The State Government is investor-friendly and has simplied

procedures and fast tracked approvals through Single

Window Mechanism. Companies can also receive assistance from Karnataka

UdyogMitra. The Government is building airstrips and helipads in almost

all districts. Karnataka is one of the most progressive states in terms of

the business environment for international investors.

Opportunity for related services

Bangalore operates one of Indias busiest airports as reported

in the CII report entitled Vision 2015Karnataka: A Global

Aerospace Hub. As such, there is tremendous potential foractivities in MRO and ground handling, and the manufacture

of ground support equipment.

Other advantages

Bangalore has a location advantage in terms of talent

availability in IT, engineering and aerospace, proximity

to industrial hubs like Pune, Hyderabad and Chennai, and

connectivity to road, rail and air. Fairly peaceful multi-cultural State that embraces different

cultures. Favorable climate, congenial environment for private

investors, cosmopolitan lifestyle, excellent health care andeducation facilities.

This industry continues todraw large investments in the

aerospace sector as it prepares

to meet rising global demand.

The sector will see robust

growth due to a combination of

positive macroeconomic factors,

the presence of aerospace

skill and expertise, favourableGovernment policies, and

domestic and global aerospace

majors investment and

expansion plans in the State.

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ubber growers in Karnataka have urged the Centre to

increase the import duty on natural rubber to 75 percent from the existing 20 per cent.

To discuss various issues related to rubber growers

in Karnataka, a State-level conference of rubber growers will be

held at Puttur in Dakshina Kannada district on September 5.

Price crash

Addressing presspersons, Gopalakrishna Bhat, president of the

organising committee of the conference, said the price of natural

rubber has come down from Rs.220 a kg in August 2012 to

Rs.128 a kg now. One of the reasons for the crash is the import

duty on natural rubber.

He said the import duty on rubber is 20 per cent or Rs.30 a kg,

whichever is lower. Such a low entry barrier leads to the import

of poor quality rubber into the country, affecting the prospectsof domestic rubber growers. The government should increase the

import duty to 75 per cent, he said.

Rise in imports

Giving details about the import of natural rubber into the

country, Bhat said India imported 81,545 tonnes of natural

rubber in 2008-09, which rose to 3.25 lakh tonnes in 2013-14.

The country imported 1.61 lakh tonnes in the first three

months of 2014-15. Around 42,500 tonnes of natural rubber was

imported in August 2014 alone, Bhat said.

Going by the current trend, the country would import around

4-6 lakh tonnes during 2014-15, he added.

Stating that the annual demand for rubber is around 15 lakh

tonnes in the country, Bhat said one-third of it is met by syntheticrubber and the remaining by natural rubber.

The country produces around 8.4 lakh tonnes of natural rubber

against the demand of 10 lakh tonnes, he said.

Planters bodyN Sharath Bhandary, president of the Rubber Producers

Association, Puttur, said rubber planters in Karnataka do not

have an organisation to take up their issues.

The conference of rubber growers in the State at Puttur is

expected to form All-Karnataka Rubber Planters Association,

he added.

ngineering solutions company Rinac India has

announced the completion of an Integrated Food

Park at Tumkur in Karnataka.

The food park was commissioned by the Future

Group at an overall cost of Rs.18.6 crore and the project wasinaugurated by the Prime Minister Narendra Modi.

The Food Park is the first of its kind, and a state-of-the-art

facility with farm to fork capability. The park offers facilities

for dry and wet processing with collection centres and fruit &

vegetable processing centres under the same roof, Rinac India

said in a statement.

The park has been established in the 9,000 sq meters and

comprises of pressurised fruit ripening chambers, packing,

grading facilities, ready-to-eat processing facility, quick freezer,

chill and frozen Warehouse, pulp storage area and other facilities

also, the statement added.

This facility is compliant with global industry certifications

such as US Food and Drug Administration (FDA) and Good

manufacturing practices (GMP).The Food Park has been set up as a public-private participation

venture by our Future Group and the Centre and the Karanataka

Government. The Food Park will act as the back-end kitchen and

Farm-to-Fork link for the Groups food business, Future Group

Chairman Kishore Biyani said.

Rinac an integrated engineering solutions company deals in

warehouses, rack assisted storage, mezzanine assisted storage

and others.

The company is currently in the process of executing another

two food parks and six integrated cold chain projects across the

country.

R

E

Rubber growers in Karnataka

seek hike in import duty

Work on food park at

Tumkur in Karnatakacompleted: Rinac

- Source - Business Line - Source - Business Line

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he Govt of Karnataka is drafting a new Rural

BPO Policy in tandem with stakeholders such as

industry body Nasscom and rural BPO majors such

as DesiCrew Solutions Pvt Ltd and RuralShores

Business Services Pvt Ltd.

We will be presenting the Rural BPO Policy that we are

preparing with inputs from all stakeholders to the Cabinet for

approval very soon. The policy will help to revive Rural BPOs

said Tanusree Deb Barma, Director, Directorate of IT&BT. She

told reporters at an event to announce the decision to co host ITE.

biz with CeBit India.She said, of the 36 Rural BPOs that were given incentives

to start operations by the State, only five are functional today,

because the rest were unable to sustain the cost of operations

after the government incentives ran out.

Bangalore ITIR project ready for take off

The Bangalore Information Technology Investment Region

(ITIR), which has not taken off since it was announced a few

years ago, is all set to take shape with the State Govt convening a

meeting to take the project forward.

We convened an important meeting to discuss the ITIR

project which is spread across 10,500 acres of land near the

Kempegowda International Airport and have made up our mind

to complete the ITIR project as per schedule. We have alreadygiven in-principle approval to 30 companies that have registered

for the ITIR and are processing hundreds of applications from

companies who want to register for the same. We are targeting to

complete I Stage of ITIR by 2020 and II Stage by 2032. When

ready, the ITIR will generate 40 lakh jobs (direct and indirect),

today Karnatakas IT industry already employs 40 lakh people

said S R Patil, Minister for IT, BT, S&T, Govt of Karnataka.

He said the State is targeting to produce $40 billion worth

of electronics locally, which constitutes 10 per cent of the $400

billion import bill on electronics that the country will incur from

electronic imports by 2020.

T

Karnataka drafts policy on

rural BPOs; Cabinet nod soon

- Source - Business Line

President FKCCI

reviews newindustrial policy

The creation of quality infrastructure focusing on

provision for comprehensive facilities and with a

thrust on Human Resource and Skill Development.

TheNewIndustrialPolicy

2014-19approvedbythe

Karnatakacabinetwould

helpintheinclusive

developmentandgrowth

ofIndustriesintheState

ofKarnataka.-S Sampathrama

n

Sampathraman, President, Federation of Karnataka

Chambers of Commerce and Industry (FKCCI) has

said that the New Industrial Policy 2014-19 approved

by the Karnataka cabinet would help in the inclusive

development and growth of Industries in the State of Karnataka.

In a statement to media in Bangalore, Sampathraman said

the policy also encourages women entrepreneurs in exclusiveindustrial areas. The creation of quality infrastructure focusing

on provision for comprehensive facilities and with a thrust on

Human Resource and Skill Development and upgradation is a

positive step in growth verticals and expected to enhance the

industrial growth and also in attracting fresh investments, he

added.

Members of the FKCCI have said that the new policy highlights

some areas wherein the PPP model for the establishment of

Industrial areas are given encouragement followed by ease on

allotment of land for Industrial Development through KIADB.

Government originally came out with a change in the policy of

allotting land only on lease basis for 30 years period, said a

member.

S

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ndia has a new political

geography providing

economic reformers a unique

opportunity

The Narendra Modi governmenthas taken many welcome steps in the

past few days. Diesel prices have been

freed. Gas prices have been increased

to attract the private investment that is

essential for India to reduce its energy

dependency. There have been small but

important steps towards labour market

reforms. The coal ordinance could

be an initial move towards eventual

denationalization. Direct cash transfers

to consumers of subsidized liquefied

natural gas are back. There is some

discussion on how to restructure the

rural jobs scheme.There is a pattern here. The Modi

government seems to be using its political

capital judiciously. The focus does not

seem to be on the sort of dramatic

reforms that many had expected after

the national elections. The new gas price

is clearly a compromise, and rightly so

since a doubling of gas prices would

have given a price shock to an economy

in which inflation has just begun to drift

down. The changes in the labour laws

will help loosen the grip that inspectors

have on factories but they are still far

from easing hiring and firing. Yet, the

direction is clear.

The recent flurry of policy decisions

comes at a time when there were

questions being raised whether Modicould actually convert his impressive

rhetoric into action. The splendid rally in

equities that began after the first opinion

polls showed Modi in the lead had

begun to lose momentum. The research

reports published by various investment

banks over the weekend suggest that the

financial markets have once again begun

talking about a reforms push.

The first budget of the Modi

government lacked policy direction.

Much of the initial work done by the new

government was administrative, with

projects being rescued from the policyquagmire that the previous regime left

behind. The work done in the first few

months should be seen as the first stage

of getting the Indian economy back on

track. But that alone could never have

sufficed. The recent policy decisions

should then be seen as the next stage. The

finance minister is out of hospital, a new

team is in place in his ministry and two

important state elections are over. The

months leading to the next budget should

hopefully see more policy changes.

Modi has often said that change

The next round of economic reforms

National Business News

The recent urry of policy decisions comes at a time when there were questions being raised

whether Modi could actually convert his impressive rhetoric into action.

I

is possible only if the states partner

with New Delhi. Many areas that need

policy attention are constitutionally the

responsibility of the states. A new report

by Neelkanth Mishra of Credit Suisse

points out an interesting fact: the election

results from Maharashtra and Haryana

mean that the Bharatiya Janata Party

(BJP) now rules states that collectively

account for nearly half of the total outputof the Indian economy. The Congress

controls states that account for barely a

tenth of Indian gross domestic product.

Modi has the political opportunity to

push through reforms in at least the most

important states in terms of economic

dynamism if not political heft.

A look at the political map of India

shows an interesting new geography:

the old divide between the northern

and southern states seems to have been

replaced by a new alignment of western

versus eastern states. The BJP is now

the main political force along almost the

entire western half