INDIAN STATES Economy and Business Karnataka

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1 INDIAN STATES Ecoomy ad Busiess Karataka

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3 INDIAN STATES Ecoomy ad Busiess Karataka

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5 CONTENTS Executive Summary 5 Ecoomic Sapshot 7 The State Ecoomy 9 Ifrastructure 11 Social ifrastructure 11 Access ifrastructure 11 Idustrial ifrastructure 11 Commuicatios ifrastructure 12 State Policy 13 Idustrial Policy 13 Ifrastructure Policy 13 e-goverace 13 IT Policy 13 Biotech Policy 14 Tourism Policy 14 Busiess Opportuities 15 Key idustries 16 Exports 19 Ivestmet 19 Key Players 21 Doig Busiess i Karataka 26 Obtaiig approvals 26 Cost of settig up busiess 27 Cotact for iformatio 28 A report by KPMG for IBEF

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7 KARNATAKA PAGE 5 Executive Summary Karataka is Idia s eighth-largest state, both i terms of area ad populatio. Situated o the west coast of Idia, it is surrouded by Maharashtra, Goa, Adhra Pradesh, Tamil Nadu ad Kerala ad opes out to the Arabia Sea. The state is edowed with rich atural resources. It is best kow as Idia s IT powerhouse or the Silico State of Idia. Karataka is amog the leaders i ecoomic growth i the coutry. Employmet ad per capita icome levels are high ad almost the etire populatio has access to educatio ad health facilities. Although agriculture is the maistay of the populatio, the services ad idustrial sectors have show sigificat growth attractig major compaies from all over the world. Today, the services sector cotributes the maximum to the state s icome. Karataka s capital city, Bagalore, is kow as the IT Capital of Idia ad is the fourth largest techology hub i the world. I , Karataka s Iformatio Techology (IT) sector cotributed 36 per cet to the coutry s total software exports. Karataka s software ad BPO exports touched US$ 4 billio i , a 46 per cet jump over US$ 2.6 billio i Karataka possesses a vast pool of IT professioals ad some of the coutry s best academic ad premier research istitutios. The state is a prefered hub for R&D with several multiatioal ad domestic compaies. It has over 100 R&D orgaisatios. Karataka also has the highest umber of biotech compaies i the coutry. Karataka s ivestmet i ifrastructure is the highest amog all the states i the coutry ad several mega projects are uderway to upgrade its existig ifrastructure to world-class stadards. The state was first i Idia to set-up a Software Techology Park (STP) as early as Today, it has the coutry s best telecommuicatios ifrastructure esurig high badwidth coectivity to global destiatios. Karataka is focused o improvig its ivestmet climate. It has bee proactive i ivitig the private sector ad was amog the first to ivite private ivestmet i the educatio sector. With its ecouragig policies ad favourable eviromet, the state has attracted ivestors ad has see a steady icrease i Foreig Direct Ivestmet (FDI) iflow i recet years.

8 Idustrial Cetres i Karataka

9 KARNATAKA PAGE 7 A Ecoomic Sapshot Capital Bagalore Area (sq km) 191,791 Populatio (Cesus 2001, millio) 52.7 Literacy Rate (%) 67 NSDP (US$ billio) Per Capita Icome (US$) 390 Exports (US$ billio) 9.3 Natioal Highways Legth (km) 3,728 Iteratioal Port Magalore Iteratioal Airport Bagalore Domestic Airports Hubli, Magalore, Belgaum Key Idustries Iformatio Techology Electroics Biotechology Tourism Apparels Automotives Egieerig Aeroautics Mieral-based Agro-based Leather

10 Advatage Karataka Idia s largest producer of gold (90 per cet of Idia s productio) ad the sole producer of felspite Oe of the leadig producers of limestoe ad iro-ore i the coutry (producig 30 millio toes per aum) Accouts for 70 per cet of the total coffee productio i the coutry Highest share i IT exports from the coutry Highest umber of biotech compaies i the coutry

11 KARNATAKA PAGE 9 THE STATE ECONOMY Karataka s Net State Domestic Product (NSDP) stood at about US$ billio durig Betwee to , the state emerged as the leader i the coutry registerig a ecoomic growth of 8.1 per cet. I , the GSDP grew at a rate of 6.2 per cet. The state s per capita icome stood at US$ 390 i It has outperformed all other states i the growth of per capita icome, which stood at 5 per cet i as agaist the atioal average of 4.3 per cet. Services Agriculture Sectoral Cotributio to GDP 49.90% 24.50% 25.60% Idustry Source: Karataka Ecoomic Survey The agriculture sector is the maistay for 70 per cet of Karataka s populatio. Horticulture is the largest cotributor to the state s icome i the agriculture sector. Horticulture covers a area of 1.58 millio hectares i the state ad has a productio of 107 millio toes ( ). Karataka is oe of Idia s leadig states i idustrial developmet ad the sector cotributes 25.6 per cet to its GDP. So far it has attracted maufacturig ivestmet worth US$ 6,813 millio from several atioal ad iteratioal players ad has about 1,068 uits of large ad medium eterprises. Idustries that have set-up facilities i the state iclude egieerig, chemicals, electrical, electroic goods, food processig ad processig of platatio products like tea, coffee, rubber, cashew etc. The state is also a frot-ruer i the services sector, which cotributes the maximum to the state icome. Karataka s software exports, which stood at US$ 3.85 billio, accouted for 36 per cet of the coutry s total software exports. The growth of ew compaies has spurred the rise of employmet levels i the state, particularly i the software idustry, which attracts skilled IT professioals from various corers of the coutry. Karataka has the highest employmet rate i the urba sector amog all other states. Its workforce as a proportio of the total populatio stood at 45 per cet (Cesus 2001).

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13 KARNATAKA PAGE 11 INFRASTRUCTURE The Govermet is makig sustaied efforts to improve the ifrastructure i the state. Karataka s ivestmet i ifrastructure at US$ billio is the highest amog all states i the coutry ad the state has ivited private ivestmet i various sectors to esure the availability of ready-to-use facilities for the idustry. Social ifrastructure Educatio The literacy rate i the state stood at 67 per cet i Karataka is kow for its techology ad R&D based istitutios. It is estimated that 10 per cet of graduates i Idia are from Karataka. The state has actively ecouraged private participatio i this sector. It has 134 egieerig colleges ad 133 medical colleges, a majority of which belog to the private sector. Growth i umber of health cetres Health The health ifrastructure i the state has progressed over the years ad has helped improve the well-beig of the people. The life expectacy i Karataka is 66 years, well above the atioal average of 62 years. Access ifrastructure Karataka has 154,208 km of roads of which 65 per cet are surfaced. It has 3,728 km of atioal highways. The rail etwork i the state is spread over 3,192 km. I December 2004, aroud 227 road projects etailig a total ivestmet of US$ 2,610 millio were uder various stages of implemetatio. The US$ millio Bagalore-Mysore Corridor Expressway is the largest o-goig project i this sector. The state also iteds to set up a metro rail project i Bagalore at a cost of US$ millio. The state has a iteratioal airport at Bagalore ad domestic airports at Belgaum, Magalore ad Hubli. The state s port ifrastructure icludes a etwork of 10 ports icludig the New Magalore port, which is a all-weather seaport that ca hadle cargo vessels. The Sea Bird project of the Idia Navy ear Karwar has special facilities for exportig iro ore ad hadlig crude, coal, LPG ad other products. Idustrial ifrastructure 365 Primary health cetres Sub-cetres Source: Ecoomic Survey of Karataka Karataka is a exports hub. It has 270 exportig uits ad aother 65 are i the pipelie. Twety per cet of total exports from export-orieted uits (EOU) i Idia come from Karataka. To ecourage exports ad offer idustry appropriate icetives ad ifrastructure, the state has also approved Special Ecoomic Zoes (SEZs) at Hassa, Bagalore ad the coastal zoe.

14 Some of the other proposed idustrial parks i the state iclude: Bagalore Iteratioal with a ivestmet of US$ 235 millio A itegrated campus for the developmet of circuits & desigs with a ivestmet of US$ 41.5 millio A apparel park at Doddaballapura i Bagalore rural with a ivestmet of US$ 6.9 millio A state-of the-art iteratioal techology park with 1.5 millio sq ft built up area Six ew private techology parks with a built up area of 6 millio sq ft A electroic city at Bagalore ad Mysore STPs at Mysore, Hubli ad Magalore with high speed data commuicatios facilities A telecom kowledge SEZ with a ivestmet of US$ 9.1 millio The IT-corridor Project ad the Bio-corridor project, both of which are comig up i Bagalore Commuicatios ifrastructure The state has a strog commuicatios etwork ad the secod highest umber of Iteret subscribers i the coutry. The state was the first i the coutry to get the exteded facility of a iteratioal gateway ad etwork operatios cetre at its STPs The etire state is etworked through Optic Fibre Cable (OFC) Idividual satellite coectivity has bee provided to more tha 1,050 IT compaies. These have a iteratioal badwidth of 370 Mbps Last mile access is provided directly to customers i all major cities. The state is coected to all major submarie cables icludig the i2i submarie cable, which has a 8.6-terra byte capacity

15 KARNATAKA PAGE 13 STATE POLICY Karataka is kee to promote itself as the destiatio for domestic ad foreig ivestmet to catalyse idustrial growth. The State Policy aims to achieve a cosistet ecoomic growth rate of 8-9 per cet over the ext decade. Policy makers propose to create employmet opportuities through idustrial growth i the state ad several sectors have bee idetified as thrust areas. The state offers icetives such as tax exemptios for ivestmet i these sectors. These sectors are electroics, telecommuicatio, iformatics, precisio toolig ad tool room idustries, readymade garmets icludig leather garmets (excludig leather taig), uits maufacturig pollutio cotrol ad effluet treatmet plats, equipmet ad appliaces ad biotechology. Idustrial Policy It is committed to ecouragig private ivestmet i this sector. Oe of the major focus areas i ifrastructure is power. The Govermet plas to establish a corpus called Ifrastructure Developmet Fud of US$ 21 millio to primarily meet the ifrastructure eeds of idustry ad esure uiterrupted ad quality power. It will do so by establishig dedicated sub-statios i all idustrial areas ad by covertig 11 KVA feeders with more tha 50 per cet idustrial loads ito exclusive idustrial feeders/express feeders. e-goverace The State Govermet has take several iitiatives to streamlie procedures for ivestors i the state. These iclude: The State Govermet plas to establish a corpus called the Techology Upgradatio Fud of US$ 10.5 millio to ecourage techology upgradatio i idustries. The icetives offered iclude: Iterest subsidy to idustries, which avail loas from State Fiacial Corporatios for techology upgradatio ad moderisatio Assist compaies obtaiig ISO certificatio by bearig 50 per cet of the cost Offer special rage of cocessios to all ew idustrial uits irrespective of size i all four zoes of the state Exemptio o etry tax ad stamp duty for ew idustries i thrust areas Ifrastructure Policy Recogisig the crucial role played by ifrastructure i ecoomic developmet, the State Govermet has made ifrastructure developmet a priority. A sigle widow odal agecy called Karataka Udyog Mitra for ecessary clearaces A state-level sigle widow agecy to cosider ivestmet proposals up to US$ 10.5 millio A district-level sigle widow agecy to examie proposals up to US$ 0.63 millio IT Policy Karataka holds a pre-emiet positio i the field of iformatio techology. It was oe of the first i the coutry to aouce a IT Policy i Karataka s IT Policy focuses o usig e-goverace as a tool ad deliverig a govermet that is more proactive ad resposive to its citizes. I December 1999, the State Govermet created a special taskforce to prepare a actio pla to haress the power of IT to address core issues cocerig the state. The outcome was Mahithi - The Milleium IT Policy. Mahithi emphasises the importace of takig IT to the commo ma. The e-goverace projects that are beig implemeted i the state are:

16 Cetre for e-goverace: This will facilitate the use of iformatio techology for the commo ma ad provide techical support to state departmets Mukhya Vahii (Primary Vehicle): To develop a comprehesive database o Karataka for developig a sophisticated decisio support system for decisio makers Bhoomi (Lad): To aid farmers i establishig owership of lad, recordig the successio of owership, recordig agricultural crop details ad obtaiig loas from baks Nodai (Registratio): To make lad registratio simple ad easy Khajae (Treasury): To computerise treasuries all over Karataka Therige (Tax): To check evasio of taxes o certai commodities Reshme (Silk): To itroduce olie trasactios i the silk market Agricultural price iformatio: To esure that prices of commodities are easily available to farmers all over the state Police IT 2000: To ehace police itelligece Saarige (Trasport): To computerise all the trasport offices i Bagalore Muicipal corporatios: Itroduce a system to simplify paymet of property tax, issuace of birth ad death certificates ad grievace redressal Biotech Policy The State Govermet is committed to maitaiig Karataka s pre-emiet positio i the biotechology sector ad has a comprehesive Biotech Policy. To attract ivestmet i this sector, the State Govermet has outlied icetives for the biotechology idustry which iclude: Exemptio o paymet of etry tax o machiery, equipmet, capital goods ad costructio materials Up to 50 per cet exemptio o paymet of stamp duty ad registratio charges Cocessios for biotechology parks certified by the Departmet of IT ad Biotechology with a built up area of 50,000 sq ft Karataka is also committed to providig the right ifrastructure ad ehacig huma resources for the developmet of biotechology. The Govermet has established the Istitute of Bioiformatics ad Applied Biotechology i the Iteratioal Techology Park i Bagalore. It also plas to establish a biotech park at the Uiversity of Agricultural Scieces i Bagalore. This park will house research orgaisatios ad compaies. Some of the other istitutios i the state that promote biotechology are the Cetre for Huma Geetics, Istitute of Agri Biotechology ad Istitute of Bio-Iformatics ad Applied Biotechology. Karataka has also set up a biotech developmet coucil ad has a sigle-widow agecy to clear all biotech projects i order to ecourage ivestmet i the sector. Tourism Policy Karataka was amog the first states i the coutry to brig out a progressive Tourism Policy as early as Jue The Policy aims to promote tourismrelated activities to ehace employmet ad icomegeeratio amog all sectios of the society. I fact, the state has bee proactive i ecouragig private sector participatio i this sector. Some of the objectives of the Tourism Policy are: Promote eco-tourism to icrease awareess about the state s flora ad faua Promote tourism-related activities Develop travel circuits ad offer tourists more diversity Create ew tourism products that meet global stadards Tap the state s tourism potetial Market Karataka i atioal ad iteratioal markets Promote adveture sports/etertaimet activities ad highway tourism

17 KARNATAKA PAGE 15 BUSINESS OPPORTUNITIES There are several factors that affect evolutio of a idustry i a particular regio. The major factors impactig evolutio are: Policy proactiveess: The policy that a state govermet adopts towards a sector directly affects its attractiveess for further ivestmet. For example, for the IT sector, the Karataka Govermet has give may cocessios. This has prompted may IT majors, both domestic like Ifosys ad Wipro as well as multiatioals like Oracle, Hewlett-Packard to set up software developmet operatios i Karataka. Karataka s rich bio-diversity spurred the growth of biotech idustry i the state. Capability: Availability of good quality mapower is a must for all idustries to flourish. High literacy rates, the presece of good research orgaisatios ad some of the best academic istitutios esure that the state has well qualified mapower. This has bee a major factor eablig the success of Karataka i sectors like egieerig, IT/ITES ad biotech. Give its strog base of techical work force, kowledge-itesive idustries are gradually takig a lead positio i the state. Availability of atural resources: Certai idustries like agro-based idustries have a high depedece o availability of atural resources. Based o a assessmet of the above factors, some of the idustries with poteti al for ivestmet ad growth i the state of Karataka are illustrated below: Proactive Exclusive policy Biotech Ifrastructure IT & ITES Special icetives Special ifrastructure (SEZ, STPI, AEZ etc.) Policy Proactiveess Food Processig Auto Tourism Egieerig Moderate Chemicals/ Pharma Geeric policy icetives Sector Attractiveess Drivers Natural Resources Drive Capability Drive This is a qualitative assessmet to highlight relative attractiveess of differet sectors. A case by case aalysis is ecessary before ivestmet is made. Source: KPMG aalysis

18 Key idustries Agro-based About 70 per cet of Karataka s populatio lives i villages ad 71 per cet of the total workforce is egaged i agriculture, growig crops such as rice, millet, maize, pulses, oilseeds ad other cash crops. Coffee is the pricipal platatio crop followed by cashew ad cocout. Growth of productio of flowers ( 000 toes) Britaia, Nestle, Nissi, Pepsi, Coco-Cola, Heiz, amog others, have maufacturig facilities for food processig i the state. Iformatio techology ad telecommuicatios Karataka has bee the foreruer i the field of iformatio techology. With a IT Policy focusig o ifrastructure ad liberalisatio, the state has emerged as a leadig exporter of software products ad services. Bagalore, its capital city, has become the fourth largest techological hub i the world Growth of software exports (US$ millio) Source: Idia Horticulture Database 2002, Natioal Horticulture Board & Past Issue Horticulture accouts for over 40 per cet of the total icome derived from the state s agriculture sector, ad it cotributes 17 per cet to the state s GDP. Karataka is oe of the leadig producers of fruits ad vegetables i the coutry. Coffee from the state accouts for 70 per cet of the coutry s total productio Karataka exported US$ 184 millio worth of coffee i Karataka raks secod i the productio of flowers It produces 70 per cet of Idia s silk It is a leadig state i silk rearig ad productio of khadi Karataka offers several greefield opportuities for settig up agro-based idustrial activities icludig preservatio, processig ad packagig of food. Several multiatioal compaies like Uilever, Source: Reveues from the state s software sector costitute 35 per cet of the state s exports ad are steadily icreasig. Karataka also geerates 36 per cet of the coutry s total software exports. The state has about 1,156 software developmet uits with a total ivestmet of US$ 346 millio. I , 168 ew software firms ivested US$ millio i the state. This icludes a ivestmet of US$ 429 millio made by 110 overseas compaies. Apart from Bagalore, Karataka is also ecouragig software ivestmet i Magalore, Mysore, Hubli ad Belguam. Several global players like IBM, Hewlett Packard, Motorola, Siemes, Philips, LG, British Aerospace, ACER, Oracle, Soy, Hitachi, Lucet Techologies, Su Microsystems etc, have a presece i the state.

19 KARNATAKA PAGE Growth i umber of software compaies Biotechology Biotechology is oe of the key sectors i the state. Bagalore has the coutry s largest bio-cluster ad owes much of its success to the presece of a large umber of prestigious research istitutios. The state has close to 92 biotech compaies, about 50 per cet of the biotech compaies i the coutry Electroics Bagalore is kow as the Electroic City. With over 300 of the world s leadig electroics compaies located i Karataka, the state is a major player i the electroics ad telecommuicatios sectors i Idia. The idustry s turover of over US$ 1 billio accouts for 20 per cet of the atioal output. Karataka is also a major exporter of electroic products. The state is home to may global electroic giats like Sayo, Lucet, 3M, TYCO, NEC, Samsug, GE, Yokogawa Blue Star, British Telecom, amog others. Major Idia compaies i this field are BPL ad Tata Elxsi Growth of hardware exports (US$ millio) Source: Total ivestmet i the biotech sector i the state approximately is over US$ millio icludig US$ 30.5 millio of veture capital fudig. Karataka s atural biodiversity has attracted several domestic players ad MNCs to establish their facilities i the state. The Idia Istitute of Sciece ad the Natioal Cetre for Biological Resources provide research support to the state. Readymade garmets ad textiles Karataka has a sizeable presece i garmets ad textiles sector. The readymade garmet sector recorded exports worth US$ 860 millio i , the secod highest after electroics ad software sector. Leadig garmet brads maufactured i the state iclude Crocodile, Va Heuse, Arrow, Alle Solly, Lee, Lacoste, Levi Strauss, Tommy Hilfiger, amog others. Automobiles The state has ivited a wide rage of multiatioal players i the auto sector to set up facilities i the state. I , reveues from the state s auto sector stood at about US$ 604 millio. Ivestmet i the sector amouted to over US$ millio. Auto giats like Volvo, Toyota, Suzuki, Hitachi, Kometsu ad Tata Motors have established maufacturig facilities i the state. Reva, a idigeous maufacturer of electric cars ad the first of its kid i Idia, is also based i Karataka Source: Karataka Govermet Aeroautics Karataka has a well-developed aeroautics sector with a presece of may reputed domestic ad

20 Belgaum foudry cluster Belgaum i Karataka has a importat foudry cluster i the coutry with about 100 foudry uits that feed the state s automobile sector. The geographical spread of the cluster icludes Udyambag ad Macche idustrial areas. Belgaum is a source of high precisio, high volume ad ecoomical castigs with about 20 per cet of the foudry uits beig ISO 9000 certified. A majority of the uits i the cluster cater to automotive ad oil egies (31 per cet) ad pumps ad valves (21 per cet). The workforce i the cluster is over 10,000 ad the reveues geerated by this cluster exceeded US$ 21.5 millio. iteratioal players. Hidusta Aeroautics Ltd (HAL) ad Natioal Aeroautics Laboratories (NAL) are two state-owed orgaisatios i this sector that produce world-class products. The orgaisatios are ivolved i various activities i the areas of desig, developmet, maufacture ad maiteace of various aircrafts ad avioics. HAL has 14 maufacturig uits, which are supported by ie R&D cetres. The research facilities available i this sector are at par with world-class orgaisatios. Global corporatios like GE, Rolls Royce, BAE, Turbo Meca amog others have also set up facilities i the state. Egieerig Karataka has traditioally bee a hub for egieerig services idustries i the coutry. May state-owed compaies like Bharat Electroics Ltd, Bharat Earth Movers, Hidusta Machie Tools (HMT), Bharat Heavy Electricals are amog those preset i the state. HMT aloe has 16 maufacturig uits with 22 product divisios ivolved i maufacturig ad marketig machie tools, watches, tractors, CNC systems. MNCs like SKF, Igersoll Rad, Waltex, Durco, Wrigte, Goulds, Moog Cotrol, Yuke, are amog those that have maufacturig facilities i the state.

21 KARNATAKA PAGE 19 Tourism Karataka is a lad edowed with sceic beauty. It has bee steadily attractig ivestmet from compaies i the hospitality busiess with umerous compaies settig up hotels, beach resorts, eco-friedly resorts, golf courses, aero sports facilities ad amusemet parks i the state. The state s ew Tourism Policy is actively promotig ivestmet i this sector. The Govermet has decided to attract ivestmet i tourism with a host of ew plas icludig offerig govermet lad to etrepreeurs at 50 per cet of the market value to establish resorts. The jewellery sector recorded exports worth US$ 560 millio i The garmet sector accouted for exports worth US$ 860 millio i Iro ore ad mierals accouted for US$ 445 millio worth of exports i Cotributio of various sectors to exports i % 49% Mieral-based idustry The state is edowed with a rich mieral wealth ad cotais deposits of asbestos, bauxite, chromite, dolomite, gold, iro ore, kaoli, limestoe, magesite, magaese, ochre, quartz ad silica sad. Karataka is the sole producer of felsite i Idia ad a leadig producer of gold, mouldig sad ad fuchsite quartzite. Exports from this sector stood at US$ millio i Exports Karataka has bee cosistetly recordig a aual export growth of 25 per cet ad exports stood at US$ 9.33 billio i Electroics ad software lead the pack, accoutig for about 50 per cet of total exports from the state. Textiles cotributed 20 per cet, followed by chemicals, which grew 57 per cet i Other export highlights from the state iclude: 83 per cet growth of exports i , were from export-orieted uits at US$ 1,630 millio The state recorded its highest software exports at US$ 3.85 billio i March 2004 IT hardware exports stood at US$ 362 millio i Electroics & Computer Software Readymade Garmets Egieerig Iro Ore & Mierals Silk Products Others 2% 5% Ivestmet * 4% 9% Source: Govermet of Karataka Website Foreig Direct Ivestmet The state has bee proactive i ecouragig private participatio i various sectors. Karataka is the fourth largest recipiet of FDI i the coutry. I 2004, it attracted FDI to the tue of US$ 5.4 billio for 160 projects. Ivestor friedly policies have spurred the growth of MNCs i various sectors i the state. * Source: Projects Today as of February 2004: Projects Today classifies projects as ascet, plaig, partially completed ad uder executio. For the purpose of the above estimatio, acet ad plaig stage projects have bee aggregated.

22 FDI iflow from various coutries till for US$ billio. Of about 50 per cet of the total plaed ivestmet *, the power sector is attractig maximum foreig ivestors. 22% 24% Estimate of likely ivesmet i Karataka (US$ millio) 5% 5% 15% % 8% 14% Euro Issues Belgium U.S.A. Japa Mauritius NRIs Germay Others Egieerig ad Hardware Automotive ad Auto Acilliaries Chemicals, Petrochem ad Pharma Miig ad Mierals Irrigatio Source: Projects Today Source: Sice , whe FDI iflow i the state stood at US$ 3 millio, over the last decade FDI iflow ito Karataka has grow at a CAGR of 50 per cet. The aoucemet of its IT Policy, proved to be a turig poit for the state, which saw a iflux of foreig ivestmet of US$ 1.3 billio i Future ivestmet i Karataka Karataka s total ivestmets are close to US$ 22.8 billio of which ifrastructure accouts I additio to implemeted projects, may ifrastructure projects are i the pipelie. For example, Toyota Kirloskar, a subsidiary of Toyota Motors, plas to ivest about US$ 460 millio to maufacture passeger cars at Bidadi. Global IT compay, Cisco Systems plas to expad its operatios i the state with a ivestmet of about US$ 130 millio. Mobius Iteratioal Private Limited plas to ivest aroud US$ 650 millio i the tourism ad recreatio sector. * The projects that are above US$ 53 millio ivolvig foreig equity ad at various stages like plaig, ascet ad uder executio.

23 KARNATAKA PAGE 21 PROFILE OF KEY PLAYERS IN KARNATAKA ABB Idia ABB Idia is a leader i power ad automatio techologies. The compay has 8 maufacturig uits, 26 marketig offices, 8 service cetres ad 3 traiig cetres across the coutry. I 2003, ABB Idia s reveues stood at US$ 310 millio. To leverage Idia s itrisic techological stregths ad the vast pool of highly qualified software professioals, ABB has set up a global corporate R&D cetre i Bagalore, which focuses o idustrial IT developmet ad deploymet. It also helps maitai ad support a rage of software-itesive products ad parters with other ABB R&D cetres. This was the first such cetre to be established outside the US ad Europe. The cetre works o high-tech projects. ABB Idia employs about 3,400 people. Bharat Electroics Ltd (BEL) Bharat Electroics Ltd, established i 1954 with its corporate office at Bagalore, has ie uits i the coutry. It is egaged i desig developmet ad maufacture of sophisticated state-of-the-art electroic equipmets/compoets for the use of defece services, para-military orgaisatios ad other govermet users like All Idia Radio, Doordarsha, Departmet of Telecommuicatios, Police Wireless, Meteorological Departmet etc. BEL is also the premier idigeous source for professioal electroic equipmet. All of BEL s maufacturig facilities have bee accredited with ISO 9002/ISO I , BEL s turover stood at US$ 509 millio. Bosch Robert Bosch Idia Ltd is a wholly owed subsidiary of Robert Bosch GmbH, Germay. The compay is the software divisio of Bosch that develops software solutios for Bosch s uits i Europe, US ad Asia-Pacific. It also markets Bosch s gasolie systems divisio. The software divisio is ISO 9001 certified ad has attaied certified CMM level 4. Its other divisios are ISO 9002 certified. Britaia Britaia, a subsidiary of Groupe Daoe, is a leader i the orgaised biscuit market i Idia. Britaia s product portfolio comprises bread, biscuits, milk-products like butter, cheese, milk-based driks ad dairy whiteer. The compay has a domiat 48 per cet share i the biscuits market ad they accout for almost 84 per cet of the compay s sales. Britaia registered sales worth US$ millio i GE Idia GE Idia has a state-of-the-art R&D facility at Bagalore, which is the largest of its kid outside the US. Called the Joh F Welch Techology Cetre, it employs over 1,800 dedicated researchers. The Cetre has filed for over 185 patets, of which 12 have bee grated till date. The R&D cetre egages the Idia team with techology teams from GE busiesses worldwide for global projects i the core areas of GE s operatio. GE s reveues i Idia exceed US$ 1 billio ad the compay employs over 22,000 people across the coutry. Hewlett Packard Idia Ltd (HPIL) Hewlett Packard Idia Ltd, a wholly owed subsidiary of Hewlett Packard Compay, started operatios i Idia i I Bagalore, HP Idia has two back office groups Hewlett-Packard Idia Software Operatio (HP ISO) ad Global Digisoft, both of which udertake software developmet. HP Idia also set up HP Labs Idia i 2002 i Bagalore to geerate ICT iovatios for emergig ecoomies. HP s products iclude priters ad digital imagig equipmet, computers, storage equipmet, ad etworkig equipmet. HP holds the umber oe positio i the priter market i the coutry.

24 Himalaya Drug Compay Bagalore-based US$ 74.5 millio Himalaya Drug Compay was fouded i 1930 with a clear visio to brig ayurveda to society i a cotemporary form. Today, cosumers i over 60 coutries rely o Himalaya for their health ad persoal care eeds. Himalaya is the first ayurvedic facility to get Good Maufacturig Practises (GMP) certificatio i the coutry. They are the oly herbal pharmaceutical compay whose ayurvedic product, Liv 52 is registered as a Pharmaceutical Speciality i Switzerlad. Himalaya is oe of the chose compaies for a WHO sposored project to stadardise medically useful herbs. A advaced maufacturig facility was set up i Bagalore i 1975 that grew to become the corporate headquarters. I 1991, the compay moved its R&D cetre to Bagalore. The compay established a state-of-the-art ew maufacturig uit ad R&D cetre for ayuvedic medicie ad formulatios i 2003 at a cost of US$ 35 millio at Bidadi i Bagalore. Himalaya Drug compay is settig-up a ew factory at Bagalore o 200 acres of lad. Set to be operatioal by the ed of 2005, the uit will maufacture the etire product rage for the compay ad will house a itegrated R&D

25 KARNATAKA PAGE 23 laboratory. The uit will produce products from graulatio stage to fiishig. Hidusta Machie Tools (HMT) Hidusta Machie Tools was fouded by the Govermet of Idia as a machie tool maufacturig compay i Over the years the compay has diversified ito watches, tractors, machie tools, CNC systems ad bearigs. HMT comprises six subsidiaries uder the ambit of a holdig compay. It has two maufacturig uits i Karataka, at Tumkur ad Bagalore. The compay also imports machie tools. The compay has over 22,000 employees. IBM IBM Idia Ltd, a subsidiary of IBM Ic., has bee preset i Idia sice IBM offers ed-to-ed solutios to the customers from hardware to software, services ad cosultig. Idia is a importat market for IBM ad the compay has bee makig sigificat ivestmet i the coutry, particularly i Bagalore. Its facilities i Bagalore are: IBM Solutio Partership Cetre (oe amog 10 facilities worldwide), Liux Solutio Cetre (oe amog seve facilities worldwide), IBM Liux Competecy Cetre (oe amog four facilities i Asia), Idia Software Labs, Cetre for Advaced Studies, Egieerig ad Techology Service Cetre, Global Delivery Cetre ad Busiess Trasformatio Outsourcig Cetre. IBM Idia has a total workforce of over 15,000 employees icludig those i BPO services. Ifosys The US$ 1.06 billio Ifosys Techologies Ltd is oe of Idia s leadig IT services compaies based i Bagalore. Ifosys has a global presece i over 16 coutries. It provides cosultig ad IT services to cliets ad operates with a workforce of over 35,000 people. Ifosys is Idia s secod largest exporter of software services. The compay was certified ISO 9001/TickIT Certificatio i It attaied SEI-CMM Level 4 i 1997, ad SEI-CMM Level 5 - the highest ratig for IT services compaies, i I 2004, Busiess Week magazie rated it as oe of the World s Top 3 IT Compaies. Ifosys also wo Idia s Best Maaged Compay Award based o a study by Busiess Today ad AT Kearey i March Itel Itel Idia was established i 1988 i Bagalore. Today, Itel Idia is the oly Itel subsidiary to have most Itel divisios outside the Uited States. I 2003, Itel had a market share of about 90 per cet i the Idia computer chip market - over 3 millio uits aually. Itel s Idia operatios icludes the Itel Idia Desig Cetre which was set up i This is Itel s largest o-maufacturig site iteratioally

26 ad is ivolved i developig software ad desigig chip sets ad microprocessors. Itel also has a sizable sales ad marketig orgaisatio located i Bagalore. I Idia, Itel has over 2,000 employees. Motor Idustries Co Ltd (MICO) Motor Idustries Co Ltd, a member of the Bosch Group, Germay, was fouded i The compay is the coutry s largest maufacturer of diesel fuel ijectio equipmet ad amog the largest i the world. MICO also maufactures idustrial equipmet, auto-electricals, hydraulic gear pumps for tractor appliaces, electric power tools, packagig machies ad car audio systems. Oe of the compay s maufacturig facilities is located at Nagaathapura, ear Bagalore. I 2003, the compay reported a turover of over US$ 495 millio. The compay employs over 11,000 people across the coutry. Motorola Motorola Idia Electroics Ltd has a state-of-the-art software developmet facility at Bagalore. This facility produces a wide rage of high quality two-way radio products. Motorola s presece i Bagalore also icludes a sales office ad a research ad developmet cetre. Motorola has istalled Idia s first Public Mobile Radio Truk Service i Bagalore. It also maufactures Smartet Privacy Plus Radio Trukig equipmet at its facility i Bagalore. I , Motorola Idia reveues stood at US$ 350 millio. It employs about 2,000 people across its busiess uits. Oracle Oracle Idia Pvt Ltd, a subsidiary of Oracle Corporatio, the world s largest eterprise software compay was established i August 1993 with less tha 10 people. I 1994, it became the first major US software compay to establish a Idia Developmet Cetre i Bagalore to support its product developmet strategy for global markets. Curretly, Oracle s facilities i Bagalore iclude the Idia Developmet Cetre, the Iteratioal Support Cetre, Oracle Solutio Services Cetre ad a Global Fiacial Iformatio Cetre. Oracle is oe of the largest software multiatioal employers i Idia with over 6,900 employees. The compay is serious about ivestig i Idia ad Oracle Idia has the highest i R&D outside the US. Reva Reva makes Idia s first idigeously developed electric car that is both eco-friedly ad cost effective. The compay has a plat at Bommasadra Idustrial area i Bagalore with a capacity to produce 5,000 uits per aum. Reva maufactures ad exports three variats of the car. Reva has bagged the Thomas Alva Ediso Award for Iovatio ad the Dr M S Swamiatha Award for Eviromet Protectio i the year Reva has a workforce of about 800 people. Su Microsystems Su Microsystems Idia Pvt Ltd is a subsidiary of US$ 11.2 billio Su Microsystems Ic. I Idia, Su Microsystems has a presece i hardware (servers ad workstatios); software (operatig systems, applicatio developmet); data storage solutios ad services (assess, pla, desig ad implemet IT architecture). Texas Istrumets (TI) Texas Istrumets Idia, a subsidiary of Texas Istrumets, USA, started its operatios i Idia i It was the first MNC to set up a facility i Idia, ad the first to set up a R&D lab outside the US. It later set up its System-O-Chip Cetre of Excellece i Bagalore. TI is oe of the leadig suppliers of DSP-based semicoductor solutios globally. I Idia it has over 1,200 employees ad reveues of over US$ 100 millio. The Bagalore cetre is istrumetal i developig various solutios for the compay s products globally. TI Idia has bee awarded the highest umber of patets (225) for ay R&D cetre i the coutry.

27 KARNATAKA PAGE 25 Toyota Kirloskar Motor Pvt Ltd (TKM) Toyota Kirloskar Motor Pvt Ltd is a joit veture betwee Kirloskar Group ad Toyota Motor Corporatio. The compay is oe of the leadig automobile maufacturers i the coutry ad aims to occupy a leadig role i the developmet of Idia s automotive idustry. Its product rage icludes Qualis, Corolla, Camry ad Iova with variats. TKM s maufacturig plat is located about 40 km from Bagalore ad has a capacity of 45,000 uits per aum. The compay plas to expad it to 60,000 uits with a ivestmet of about US$ 27 millio. It employs close to 2,400 people ad i , the compay sold 43,077 vehicles. UB Group The UB Group is the world s secod largest ad Idia s largest spirits maufacturer. It ejoys over 60 per cet market share i the coutry ad has a portfolio of 130 brads. Its flagship brads are Bagpiper whisky, Hoeybee brady, Romaov vodka ad Kigfisher beer, amog others. The Group s busiess iterests also exted to other sectors icludig pharmaceuticals (Avetis), agro-busiess (Bayer), fertiliser sector (Magalore Chemcials & Fertilisers) ad more recetly the airlie idustry. Volvo Volvo is oe of the largest producers of heavy commercial vehicles i the world. The compay established its maufacturig facility for heavy commercial vehicles i Hoskote, ear Bagalore, i 1998, with a iitial ivestmet of aroud US$ 65 millio. This uit has a capacity of 4,000 uits per aum ad maufactures vehicles with a gross vehicle weight of over 16 toes. The compay recorded a turover of US$ 500 millio i Volvo plas to evetually develop its operatios i Idia ito a corerstoe for its global productio ad distributio systems. Volvo s Idia uit is oe of the oly two outside Swede to assemble gear boxes. Wipro Techologies The US$ 1 billio Wipro Techologies has over two decades of experiece i the IT busiess ad was the world s first PCM M Level 5 ad SEI CMM Level 5 certified IT services compay. Wipro provides IT solutios ad services to global corporatios worldwide. It is listed o the New York Stock Exchage. Wipro has bee raked as Idia s Most Valuable Compay by Idia s busiess magazie Busiess Today ad the seveth software services compay i the world by Busiess Week magazie. Wipro also has a presece i ITES, cosumer care, lightig ad healthcare.

28 DOING BUSINESS IN KARNATAKA Obtaiig approvals A idicative list of approvals with timeframe for settig up busiess i Karataka List of approvals ad clearaces required Departmets to be cosulted Estimated Time Take (days) Icorporatio of the compay Registrar of Compaies Registratio, IEM, Idustrial liceces District Idustrial Cetre for small scale, large ad medium idustries Allotmet of lad State Departmet of Idustries/State Idustrial Developmet Corporatios/ Ifrastructure Corporatio SINGLE WINDOW CLEARANCE Permissio for lad use Site evirometal approval No Objectio Certificate ad coset uder Water ad Pollutio Cotrol Acts Approval of costructio activity ad buildig pla State Departmet of Idustries, Departmet of Tow ad Coutry Plaig State Pollutio Cotrol Board ad Miistry of Eviromet ad Forests State Pollutio Cotrol Board Tow ad Coutry Plaig Authority The Karataka Udyog Mitra (state sigle widow clearace) clears ivestmet proposals i 40 days o a average. The sigle widow obtais all approvals ecessary for the ivestmet proposal withi the aforemetioed time. Sactio of power State Electricity Board Registratio uder state s Sales Tax Act ad Cetral ad State Excise Act Sales Tax Departmet, Cetral ad State Excise Departmets Source:

29 KARNATAKA PAGE 27 Cost of settig up busiess A idicative table o cost of settig up busiess i Karataka Maufacturig Lad (US$ / hectare) * 129,191.5 Labour cost (US$ / ma year) ** 1,522 Services Occupatio costs *** (US$ / sq ft / year) Employee Cost (US$ / ma year) **** Software developers 6,383 Team leads 14,893 Architects 21,276.5 Project maagers 31,915 Commo Heads Cost of capital ***** (Prime ledig rate, per cet) Electricity (US cets / kwh) ****** Metropolita area No metro area 8.7 * Lad cost has bee estimated by computig the average cost of lad at various Idustrial Parks i Karataka ** Source: *** Report o occupacy costs i Bagalore by real estate cosultig firm Cushma Wakefield **** KPMG aalysis o costig for a IT veture i Idia ***** Estimated by computig the average Prime Ledig Rates of promiet public sector, private sector ad foreig bak i Idia ****** Source: Note: Exchage rate used is INR 47 per US$

30 Cotact for iformatio State Govermet Website Karataka State Ivestmet ad Idustrial Developmet Corporatio (KSIIDC) Karataka State Ivestmet ad Idustrial Developmet Corporatio is wholly owed by the Govermet of Karataka ad has bee established with the mai objective to act as a catalyst for promotig idustrial growth i the state specially i the medium ad large-scale sectors. It is the desigated agecy of the State Govermet to pla ad promote idustrial ifrastructure developmet projects. Karataka State Ivestmet ad Idustrial Developmet Corporatio MSIL House No 36 Cuigham Road Bagalore Tel Fax ksiidc@bir.vsl.et.i Web Cofederatio of Idia Idustry (CII) Iformatio o markets ad opportuities for ivestmet i Karataka ca also be obtaied from Cofederatio of Idia Idustry which works with the objective of creatig a symbiotic iterface betwee idustry ad govermet. Cofederatio of Idia Idustry Souther Regio 98/1, Velacherry Mai Road Cheai Tel Fax cii.south@ciiolie.org Cofederatio of Idia Idustry State Office No 1086, 12 Mai, HAL 2d Stage Idiraagar Bagalore Tel / 545 Fax citiblore@touchtelidia.et Web

31 DISCLAIMER This publicatio has bee prepared for the Idia Brad Equity Foudatio ( IBEF ). All rights reserved. All copyright i this publicatio ad related works is owed by IBEF. The same may ot be reproduced, wholly or i part i ay material form (icludig photocopyig or storig it i ay medium by electroic meas ad whether or ot trasietly or icidetally to some other use of this publicatio), modified or i ay maer commuicated to ay third party except with the writte approval of IBE F. This publicatio is for iformatio purposes oly. While due care has bee take durig the compilatio of this publicatio to esure that the iformatio is accurate to the best of IBEF s kowledge ad belief, the cotet is ot to be costrued i ay maer whatsoever as a substitute for professioal advice. IBEF either recommeds or edorses ay specific products or services that may have bee metioed i this publicatio ad or does it assume ay liability or resposibility for the outcome of decisios take as a result of ay reliace placed o this publicatio. IBEF shall i o way, be liable for ay direct or idirect damages that may arise due to ay act or omissio o the part of the user due to ay reliace placed or guidace take from ay portio of this publicatio.

32 The Idia Brad Equity Foudatio is a public-private partership betwee the Miistry of Commerce & Idustry, Govermet of Idia ad the Cofederatio of Idia Idustry. The Foudatio s primary objective is to build positive ecoomic perceptios of Idia globally. Idia Brad Equity Foudatio c/o Cofederatio of Idia Idustry 249-F Sector 18 Udyog Vihar Phase IV Gurgao Haryaa INDIA Tel , Fax ajay.khaa@ciiolie.org Web August 2005