Karnataka India’s second preferred investment destination: Assocham

June 16th, 2011 - 11:08 pm ICT by IANS  

Bangalore, June 16 (IANS) The Association of Chambers of Commerce and Industry (Assocham) Thursday ranked Karnataka as India’s second top destination in attracting investments after Gujarat, with 1,528 projects valued at Rs.9.1 trillion ($203.1 billion) till December 2010.

“Though Gujarat emerged as top destination by attracting investments worth Rs.13.34 trillion from 1,455 projects, Karnataka got 73 more projects over the past five years, with 44 percent of the investment in the manufacturing sector, 22.4 percent in services, 15 percent in energy and 14 percent in real estate,” Asscoham president Dilip Modi told reporters here, quoting from a recent study conducted by the chambers.

Assocham chief economist C.S. Rao told IANS from New Delhi that the study did not take into account investment proposals that were made five years ago but were not implemented.

“There is a gestation period for various projects for implementation. If projects valued above Rs.100 crore do not take off even five years after they were proposed and approved for execution, we do not consider them as investment. Similarly, for projects less than Rs.100 crore, the timeline is three years,” Rao clarified.

In the post-recession period, Karnataka ranked top with new projects valued at Rs.4.7 trillion from March 2009 to December 2010, registering a growth of 8.4 percent on a quarterly basis.

Noting that the southern state had diverse projects worth Rs.7.4 trillion at various stages of execution since April 2009, Modi said Karnataka accounted for 7.1 percent share of the total investments in the country.

“Investments in the manufacturing sector shot up 108 percent in 12 months to Rs.4 trillion by December 2010 from Rs.1.9 trillion in December 2009, while the services sector accounted for 77 percent or Rs.2.3 trillion, real estate 30 percent (Rs.1.3 trillion and irrigation projects 19 percent or Rs.31,452 crore,” Modi recalled.

According to Rao, some states opted for fiscal incentives over developing infrastructure to attract private capital. The efficacy of such fiscal incentives in promoting development is limited but the resultant revenue foregone is significant.

“In the long-term, incentives will not increase flow of private investments, as investors go to states that have good infrastructure, flexile labour laws and transparent administrative rules,” Rao asserted.

The study has suggested the state government to focus on micro, small and medium enterprises to capitalise on the sectoral capacities.

The state should promote industrial estates in backward regions through the public-private partnership mode with special incentives.

“Power is a major bottleneck in the state due to shortage and poor quality of supply. Major power projects are yet to be completed and commissioned to realise the benefits of the investments made in the energy sector. Definite timeline to achieve financial closure and operationalise the proposed projects is imperative,” the study noted.

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