SOCIO ECONOMIC SNAPSHOT

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1 SOCIO ECONOMIC SNAPSHOT

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3 TITLE Socio Economic Snapshot YEAR February, 2016 AUTHORS COPYRIGHT Strategic Government Advisory (SGA), YES BANK No part of this publication may be reproduced in any form by photo, photoprint, microfilm or any other means without the written permission of YES BANK Ltd. This report is the publication of YES BANK Limited ( YES BANK ) and so YES BANK has editorial control over the content, including opinions, advice, statements, services, offers etc. that is represented in this report. However, YES BANK will not be liable for any loss or damage caused by the reader s reliance on information obtained through this report. This report may contain third party contents and third-party resources. YES BANK takes no responsibility for third party content, advertisements or third party applications that are printed on or through this report, nor does it take any responsibility for the goods or services provided by its advertisers or for any error, omission, deletion, defect, theft or destruction or unauthorized access to, or alteration of, any user communication. Further, YES BANK does not assume any responsibility or liability for any loss or damage, including personal injury or death, resulting from use of this report or from any content for communications or materials available on this report. The contents are provided for your reference only. DISCLAIMER The reader/ buyer understands that except for the information, products and services clearly identified as being supplied by YES BANK, it does not operate, control or endorse any information, products, or services appearing in the report in any way. All other information, products and services offered through the report are offered by third parties, which are not affiliated in any manner to YES BANK. The reader/ buyer hereby disclaims and waives any right and/ or claim, they may have against YES BANK with respect to third party products and services. All materials provided in the report is provided on As is basis and YES BANK makes no representation or warranty, express or implied, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title or non infringement. As to documents, content, graphics published in the report, YES BANK makes no representation or warranty that the contents of such documents, articles are free from error or suitable for any purpose; nor that the implementation of such contents will not infringe any third party patents, copyrights, trademarks or other rights. In no event shall YES BANK or its content providers be liable for any damages whatsoever, whether direct, indirect, special, consequential and/or incidental, including without limitation, damages arising from loss of data or information, loss of profits, business interruption, or arising from the access and/or use or inability to access and/or use content and/or any service available in this report, even if YES BANK is advised of the possibility of such loss.maps depicted in the report are graphical representation for general representation only. YES BANK Ltd. Nikhil Sahni Senior President Government Banking & Strategic Government Advisory Registered and Head Office CONTACTS 9 th Floor, Nehru Centre, Dr. Annie Besant Road, Worli, Mumbai Tel : Fax : Northern Regional Office 48, Nyaya Marg, Chanakyapuri New Delhi Tel : Nikhil.Sahni@yesbank.in Website :

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5 Karnataka is one of the most industrially advanced states in India, driven by its entrepreneurial spirit, innovative outlook and a stable, approachable Government. These attributes have made it the fastest growing states in India, propelling the country s growth to greater heights. Foreword Karnataka is known to be the centre of the hi-tech industry with multiple firms in robotics, semiconductor chip design, nano technology and advanced materials. The best and the largest global companies across sectors have their R&D and innovation centres here. The state encapsulates a powerful combination of thriving ecosystem, highly skilled and talented workforce, great technical expertise, relentless innovation and a huge scalability. Together with outstanding social infrastructure and a cosmopolitan culture makes Karnataka the best state to live in and to do business. Over the years, Invest Karnataka - Global Investors Meet has transcended all boundaries and provided a platform for best minds to congregate, network, share expertise & knowledge and conduct business. This has enabled Karnataka to become the most preferred investment destination in the country. I wish to assure all stakeholders of the complete support and commitment by Government of Karnataka towards facilitating and grounding investments. It gives me an immense pleasure to showcase the strengths and potential of the state at INVEST KARNATAKA 2016 and I very cordially welcome you to Karnataka. Shri Siddaramaiah Hon ble Chief Minister of Karnataka

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7 Karnataka is one of the most progressive states possessing a vibrant and productive industrial ecosystem. Be it manufacturing, research or a startup, you can bank on our human resource which is admittedly the best and the most disciplined that India has to offer. Karnataka has been a pioneering state in having witnessed the dawn of modern industry in India. The state hosted Asia s oldest hydroelectric project and the country s first electric street lights. Today, it maintains the lead by housing more than 100 global research centres of iconic industrial houses. It is undisputed hub of Digital India as well as home to top quality manufacturing enterprises. Foreword I cordially invite you to participate in INVEST KARNATAKA 2016, a mega opportunity to invest in our state and reap rich dividends. The event will give a detailed picture of the ease of doing business in our state. It will also provide an opportunity to network with thousands of satisfied investors who have prospered by reposing their faith in Karnataka. You will see firsthand how we have cut red tape and broadened our red carpet. The 3 days that you spend with us have the potential to change your life as well as thousands of those people of our state who could become partners in your prosperity. Shri R V Deshpande Hon ble Minister for Large & Medium Industries & Tourism Government of Karnataka

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9 KARNATAKA One State, Many Opportunities is one of the leading industrial states in India with its varied mineral resources and strong manufacturing capabilities. The state has played a major role in the country s development, moving to the forefront in 1970s. The establishment of premier government organizations like Hindustan Aeronautics Limited (HAL) in 1940 and Indian Space Research Organization (ISRO) in 1969 had created a strong foundation to growth. In the 1980s, came the IT revolution, which the state pioneered and gradually evolved as the national leader in the field of Information Technology, which it proudly still maintains. Karnataka has the largest share of IT exports from India, with a contribution of about 40%. In the last 2 years, the state has been successful in attracting investments worth 1.2 Lakh Crore and generating 2.4 Lakh jobs with a major thrust on promoting MSME sector within the state. As of FY 2014, Karnataka is the fifth largest state economy in India, contributing to 5.7% of India s Gross Domestic Product. Karnataka is largely a service driven economy with the Services sector contributing to 65% to the state GSDP. Tourism is also a crucial sector with the state being ranked among the top 3 most visited states in India by domestic tourists in The state is also termed to be the Knowledge Hub of Asia with its leading position in education and R&D institutions. However, it is noteworthy that Karnataka is one of the few states that also boasts of an vibrant Manufacturing sector that includes large & niche sectors like Aerospace & Defence, Automobiles, Machine Tools, Mining, Textile and Food Processing among others. Karnataka is also known for its strong infrastructure - excellent network of Roads across the state, well connected Rail network, a major sea port at Mangaluru and six functional airports across the state. The Renewable Energy potential is also the second highest in India. Bengaluru, the capital city of the state also proudly known as the Silicon Valley of India, the Start-up Capital of India and rated among the most liveable cities in India. It is the only city in India that is ranked among the Global top 20 Start-up Ecosystems, reflecting its strong virtues as a place to live & thrive. The other regions of the state are also on a fast paced growth trajectory with strong growth potential in each of the five zones identified & supported by the Industrial Policy This commendable effort towards promoting holistic development in the state complemented with strong Government and efficient Governance, will significantly contribute towards positioning Karnataka as the Dragon of India s Economy INVEST KARNATAKA 2016 is a milestone event for the state in its journey towards developmental leadership and an opportunity to further consolidate Karnataka s growing economy. As a proud partner of Invest Karnataka 2016, to I am pleased to present the YES Bank Knowledge Report Karnataka A Socio-Economic Snapshot, which highlights the socio-economic profile of Karnataka, the current state of its infrastructure, resources with a snapshot of key sectors in the state. I m sure, this report will be a useful reference for the investor community. I Wish the Hon ble CM, Shri Siddaramaiah, Minister for Large & Medium Scale Industries & Tourism, Shri RV Deshpande and the entire leadership team of the state the very best for huge success of Invest Karnataka Thank You, Sincerely, Rana Kapoor Managing Director & CEO Chairman Foreword

10 Contents 1. Introduction...19 Karnataka An Overview...20 Demographic Profile...20 Institutional Setup in Karnataka Economy of Karnataka...23 Gross State Domestic Product (GSDP) Analysis...24 Fundamental Analysis of GSDP of Karnataka...26 Primary Sector...26 Secondary Sector...27 Tertiary Sector...28 Fiscal Indicators...28 Investment Flows Infrastructure & Related Resources in Karnataka...31 Advantage Karnataka...32 New Initiatives for Infrastructure Project...36 Roadways...36 Railways...38 Port...38 Airports...40 Urban Infrastructure Power...42 Telecommunications...45 Human Resources A Socio-Economic Snapshot

11 4. Sector Snapshot in Karnataka...47 Agriculture & Food Processing...49 Industrialization in Karnataka Manufacturing...52 Aviation/ Aerospace Industry...52 Automotive Industry...53 Machine Tools Industry...54 Drugs and Pharmaceuticals Industry...54 Textile Industry...54 Technology...55 IT, Electronics & ESDM Industry...55 Biotechnology Industry...57 Smart Township...57 Tourism Industry...59 Startup Industry Annexure...61 Annexure 1: District Map of Karnataka...62 Annexure 2: Road Network Map of Karnataka...63 Annexure 3: Rail Network Map of Karnataka...64 Annexure 4 : Industrial map of Karnataka Auto & Auto Component...65 Annexure 5 : Industrial map of Karnataka IT Clusters in Karnataka...66 Annexure : Reference...67 A Socio-Economic Snapshot

12 List of Tables Table 1: Table 2: Table 3: Socio- Economic Profile of Karnataka State...20 Institutional Profile of Karnataka...21 Fiscal Indicators of Karnataka...29 Table 4: Twelve Key Areas for Transformation as per Vision Table 5: Comparison of road length, density and growth rate...37 Table 6: Comparative Analysis of Rail Tracks among Southern States as on Table 7: Table 8: Table 9: Major Port-wise capacity utilization during (Million Tonnes)...39 Peak Power demand & supply trend - South India and UT to (in MW)...44 Comparative Analysis of Trends Aggregate Technical and Commercial...44 (AT&C) Losses - Southern India (%) Table 10: Exports from Karnataka from to (in INR Crore)...48 Table 11: Data on Cultivation Area and Production in Karnataka A Socio-Economic Snapshot

13 List of Figures Figure 1: District-wise population of Karnataka in Figure 2: Trends in GSDP of Karnataka (INR Lakh Crore) Figure 3: Trends in Contribution of Various Sectors to Karnataka GSDP Figure 4: Trends in Growth Rates of Various Sectors of Karnataka GSDP Figure 5: District-wise Distribution of GSDP for Karnataka in Figure 6: Trends in Primary Sector output of Karnataka at Constant Prices of ( INR 000Crore) Figure 7: Trends in Industrial Sector output of Karnataka Figure 8: Trends in Services Sector output of Karnataka Figure 9: Revenue and Fiscal Deficit of Karnataka as a Percentage of GSDP Figure 10: Ranking of states in India based on Cumulative FDI inflows from April 2000 to September 2015 (INR Crore) Figure 11: FDI inflows in Karnataka (INR Crore) Figure 12: Classification of Road in Karnataka for the year Figure 13: Break-up of National Highways in Karnataka for the year Figure 14: Trends in Traffic Handled at Major Ports in South India for the year to (Million Tonnes) Figure 15: Share of Top 10 Indian Airports by Passenger Traffic in the year Figure 16: Share of Top 10 Indian Airports by freight movement in the year Figure 17: Trends in Total Passenger Traffic (million) at Bengaluru Airport for the year to Figure 18: Trends in Total Freight Movement (in 000 Tonnes) at Bengaluru Airport for the year to Figure 19: Break up of installed power capacity in Karnataka based on source of generation and the ownership as on Nov 2015 Figure 20: Category wise consumers of power as on March 2014 (in %) A Socio-Economic Snapshot

14 List of Figures Figure 21: Trends in Demand-Supply of Peak (MW) in Karnataka for the year to Figure 22: Trends in Transmission & Distribution Losses and AT&C Losses in Karnataka from to Figure 23: Comparative Analysis of Tele-density in South India Figure 24: Comparative Analysis of Literacy rate in Karnataka in 2001 and Figure 25: Incremental HR Availability for the period for Karnataka Figure 26: Trends of Industrialization in Karnataka to Figure 27: Index of Industrial Production of Karnataka to Figure 28: IT Exports from Karnataka (INR Crore) Figure 29: Shortlisted Smart Cities Map of Karnataka Figure 30: Trends in Domestic and Foreign Tourist arrival in Karnataka (in Millions) A Socio-Economic Snapshot

15 Abbreviations ADA AEZ AT&C CAGR DFC DRDO EOI ESDM FDI FRBMA GSDP GTRE HAL HKADB ICT IIMB IMTP IISc ISRO IT ITeS ITI JNNURM JNNSM KBITS KIADB KIT KPDC KTPP MIS Aeronautical Development Agency Agri Export Zone Aggregate Technical and Commercial Compounded Annual Growth Rate Dedicated Freight Corridor Defense Research and Development Organization Expression of Interest Electronic System Design and Manufacturing Foreign Direct Investment Fiscal Responsibility and Budget Management Act Gross State Domestic Product Gas Turbine Research Establishment Hindustan Aeronautics Limited Hyderabad Karnataka Area Development Board Information and Communications Technology Indian Institute of Management Bengaluru Integrated Machine Tool Park Indian Institute of Science Indian Space Research Organization Information Technology Information Technology Enabled Services Industrial Training Institute Jawaharlal Nehru National Urban Renewal Mission Jawaharlal Nehru National Solar Mission Karnataka Biotechnology and Information Technology Society Karnataka Industrial Areas Development Board Karnataka Infrastructure Transformation Karnataka Pharmaceutical Development Council Karnataka Transparency in Public Procurements Management Information System A Socio-Economic Snapshot

16 Abbreviations MOU MRO MT MW MU NAC NAL NASSCOM NIMHANS NMPT PPP SWA SEZ UIDSSMT UIG ULB Memorandum of understanding Maintenance, Repair and Overhauling Metric Tonne Mega Watt Million Units Notified Area Councils National Aerospace Laboratories National Association of Software & Services Companies National Institute of Mental Health and Neuro Sciences New Mangalore Port Trust Public Private Partnership Single Window Agency Special Economic Zone Urban Infrastructure Development Scheme for Small and Medium Towns Urban Infrastructure & Governance Urban Local Body 16 A Socio-Economic Snapshot

17 Karnataka at a Glance 01 th 5 largest economy with a growth rate of 7%. 02 rd 3 highest in India in terms of FDI (cumulative FDI of INR 96,151 Crores from April 2000 to September 2015) 03 th 7 most Urbanized states in India 04 nd 2 highest in India in terms of Renewable Energy potential 05 Largest producer of Coffee. Produces 70% India s total coffee 06 Largest producer of silk in India. Produces 65% of national raw silk. 07 rd 3 most visited place by domestic tourists 08 Home to 60% of India s Biotech companies; contributing 26% of revenue from this sector nationally. 09 th Bengaluru is the 4 largest technology cluster in the world. It contributes 40% of India's total IT exports (MIT) 10 st 1 state in India to introduce the Animation and Visual Effects, Gaming and Comics (KAVGC) Policy. 11 nd 2 largest hub of semi-conductor companies globally. 12 st 1 state in India to have a dedicated Aerospace Policy. Attracts 65% of India s total investment in this sector 13 th 4 highest in terms of automobile production in India. 14 th 14 highest producer and th 10 highest consumer of Machine Tools globally 15 Largest number of Startups in India. 36% startups operate from Bengaluru. 16 Largest Bio-diversity in India 17 Highest degree of openness to exports (47% vs National average of 24%) in the country. 18 Contributes to 13% of India s overall exports ,000 acres of land bank available % of India's R&D centres based in Karnataka. Highest in the Country A Socio-Economic Snapshot

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19 Introduction 01 A Socio-Economic Snapshot

20 1. Introduction Karnataka An Overview Karnataka is the eighth largest state in India with 30 districts encompassing an area of 192,000 Sq. Km. In Karnataka emerged as the fifth largest state economy in India with a Gross State Domestic Product of INR 344,105 Crore ( Constant Prices). Some of the important sectors of Karnataka include Defense & Aerospace, Manufacturing, IT, BT, Agri-business and Textiles. Source: YES Bank Analysis Table 1: Socio-Economic Profile of Karnataka Area 192,000 Sq. Km 8 th largest in India Capital City Bengaluru 5 th largest metro in India Population Million 9 th largest state population in India Population Density 319 Sq. Km 13 th highest density in India GSDP in (Const Prices) INR 344,105 Crore 5 th largest state economy of India Per Capita Income (at Current Prices) INR 84, th highest in India (for ) Above National average of Rs 39,904 (for ) Urbanization 38.57% 7 th highest urbanized state in India Human Development Index th highest in India Literacy rate 75.60% Above the National average of % Poverty 20.91% Below the National Average of 21.92% Demographic Profile The population of Karnataka has grown from 52.7 million in 2001 to million in 2011, a decadal growth of 16%. Bengaluru Urban district tops the population chart with 15.76% of state s population, followed by Belgaum and Mysuru. 20 A Socio-Economic Snapshot

21 Kodagu Bengaluru Rural Chamarajanagar Gadag Ramanagara Chikmagalur Yadgir Udupi Chikkaballapura Koppal Uttara Kannada Kolar Haveri Chitradurga Bidar Shimoga Hassan Mandya Dharwad Bagalkot Raichur Davanagere Dakshin Kannada Vijayapura Bellary Gulbarga Tumkur Mysuru Belgaum Bengaluru Figure 1: District-wise population of Karnataka in ,519 0,923 1,020,791 1,064,570 1,082,636 1,137,961 1,174,271 1,177,361 1,255,104 1,389,920 1,437,169 1,536,401 1,597,668 1,659,456 1,703,300 1,752,753 1,776,421 1,805,769 1,847,023 1,889,752 1,928,812 1,945,497 2,089,649 2,177,331 2,452,595 2,566,326 2,678,980 3,001,127 4,779,661 9,621,551 Population 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 Source: Census Population, 2011; YES Bank Analysis Institutional Setup in Karnataka Karnataka has 28 Lok Sabha seats at the Parliament and 224 Legislative assembly constituencies. The Government of Karnataka provides services through 38 departments and 87 governmental agencies i.e. public service organizations, statutory corporations and co-operative societies. The institutional profile of the State is shown in the below table. Table 2: Institutional Profile of Karnataka Districts 30 Revenue Divisions 4 Talukas 176 Municipalities & Corporations 219 Zilla Panchayats 30 Gram Panchayats 5,631 Taluka Panchayat 176 Lok Sabha Constituencies 28 Assembly Constituencies 224 Source: Karnataka State Profile; YES Bank Analysis Urban Local Bodies: Karnataka has a total of 219 Municipalities and Corporations. Rural Local Bodies: Karnataka has about 27,397 Inhabited Villages, 347 Towns, 30 Zilla Panchayats. A Socio-Economic Snapshot

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23 Economy of Karnataka 02 A Socio-Economic Snapshot

24 2. Economy of Karnataka Gross State Domestic Product (GSDP) Analysis Karnataka is the fifth largest State Economy in India for FY with a GSDP of Rs 344,105 Crore ( constant prices), with a Y-o-Y growth of 7.05% (INR 321,455 Crore in FY , Refer Figure 2) Karnataka has contributed an average of about 5.58% to India s economy for the period to , with a compounded annual growth rate (CAGR) of 6.81%. Sectoral contribution in FY Agriculture & Allied Sectors 14.72%, Industrial sector 26.16% and Services sector 59.12% vis-a-vis18.70%, 30.28% and 51.02% respectively in The Services sector has the largest share in the state economy from to as shown in Figure 3. Figure 2: Trends in GSDP of Karnataka (Unit: INR Lakh Crore) GSDP in INR Lakh Crore % 12.60% % % % % % % % 7.16% 7.05% 6.08% 6.00% 3.69% 4.00% 1.30% 2.00% 0.00% GSDP Growth Rate Source: Ministry of Statistics and Program Implementation (MOSPI), Govt. of India; YES BANK Analysis 24 A Socio-Economic Snapshot

25 Figure 3: Trends in Contribution of Various Sectors to Karnataka GSDP % 26.16% 59.12% % 26.84% 58.09% % 27.60% 57.65% % 29.37% 55.35% % 29.53% 53.50% % 29.70% 54.21% % 30.53% 53.80% % 31.11% 52.49% % 31.60% 51.96% % 29.69% 51.70% % 30.28% 51.02% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Contribution in Percentage Primary Secondary Tertiary Source: Ministry of Statistics and Program Implementation (MOSPI), Govt. of India; YES BANK Analysis Figure 4: Trends in Growth Rates of Various Sectors of Karnataka GSDP Growth Rate 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% % 16.17% 17.05% 13.75% 12.00% 12.37% 10.49% 9.78% 9.53% 9.43% 9.92% 7.28% 8.94% 10.53% 8.37% 10.84% 5.14% 4.07% 8.71% 7.% 4.36% 2.43% 4.20% 3.11% 4.54% 2.27% 2.05% -0.31% % -1.46% -6.63% Primary Secondary Tertiary Source: Ministry of Statistics and Program Implementation (MOSPI), Govt. of India; YES BANK Analysis The regional distribution of GSDP (based on constant prices of in the year and census of 2011) depicts that Bengaluru Urban district, has the major share of state GSDP at over 32%. The top 5 districts contributing about 50% to Karnataka s GSDP are Bengaluru Urban (32.12%), Belgaum (5.70%), Dakshin Kannada (5.17%), Mysuru (4.88%) and Bellary (3.91%) as shown in Figure Of the 30 districts, contribution of 18 districts is below 2%, indicating the concentration of major economic activity in only a few districts of the state and majorly in Bengaluru Urban, which contributes to about a third of the total state economy. A Socio-Economic Snapshot

26 Uneven growth across the state can trigger migration of rural population to growing urban centers for livelihood opportunities. Figure 5: District-wise Distribution of GSDP for Karnataka in 2011 Yadgir Chamarajanagar Gadag Chikkaballapura Kodagu Bidar Haveri Koppal Raichur Chikmagalur Chitradurga Ramanagara Mandya Uttara Kannada Kolar Bagalkot Vijayapura Gulbarga Davanagere Hassan Udupi Shimoga Bengaluru Rural Tumkur Dharwad Bellary Mysuru Dakshin Kannada Belgaum Bengaluru Urban 0.78% 0.96% 1.13% 1.13% 1.27% 1.42% 1.47% 1.47% 1.67% 1.74% 1.82% 1.88% 1.91% 1.98% 1.% 2.00% 2.07% 2.36% 2.37% 2.40% 2.41% 2.54% 2.54% 3.45% 3.47% 3.91% 4.88% 5.17% 5.70% 32.12% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% Population in Percentage Source: Ministry of Statistics and Programme Implementation, Government of India Fundamental Analysis of GSDP of Karnataka Primary Sector The main constituents of the Primary sector include Agriculture, Forestry & Logging and Fishing. Agriculture contributes about 85% of the primary sector, followed by Forestry and Logging at 12%. Karnataka is principally dependent on south west monsoon for irrigation. 26 A Socio-Economic Snapshot

27 Figure 6: Trends in Primary Sector output of Karnataka at Constant Prices of (Units: INR 000 Crore) % 12.37% 9.92% 9.43% 4.54% 4.07% 2.43% 2.27% % -6.63% % 15.00% 10.00% 5.00% 0.00% -5.00% % Growth Rate Primary Growth Rate Source: Ministry of Statistics and Program Implementation (MOSPI), Govt. of India; YES BANK Analysis Secondary Sector The principal constituents of the Secondary (industrial) sector include Manufacturing, Construction, Electricity, Gas & Water supply and Mining & Quarrying. Manufacturing contributes about 58-63% of the Secondary sector. The manufacturing sector in Karnataka consists principally of Aerospace, Automotives, Electronics, Engineering Products and Textiles. 9 9 Manufacturing GSDP in Karnataka has increased by about 75% in the past decade from INR 30,5 Crore in FY to INR 52,521 Crore in FY , a CAGR of 5.03% Figure 7: Trends in Industrial Sector output of Karnataka Contribution to Industrial GSDP 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 7% 8% 6% 6% 4% 7% 7% 7% 6% 7% 7% 28% 31% 29% 31% 29% 30% 32% 33% 33% 33% 33% 14% 13% 14% 13% 13% 12% 12% 12% 13% 12% 12% 47% 45% 49% 46% 49% 48% 46% 46% 47% 47% 46% 4% 3% 3% 4% 4% 3% 3% 1% 1% 1% 1% Electricity, Gas & Water Supply Construction Manufacturing-Unregistered Manufacturing-Registered Mining & Quarrying Source: Ministry of Statistics and Program Implementation (MOSPI), Planning Commission, Govt. of India; YES BANK Analysis A Socio-Economic Snapshot

28 Tertiary Sector The principal constituents of the Services sector include Railways, Storage, Communication, Trade, Hotels and Restaurants, Banking & Insurance, Real Estate, Ownership & Dwellings, Business services, Public Administration & other services. This sector has a strong CAGR of 8.25% from INR 85,068 Crore to INR 203,438 Crore in the period to Karnataka has 38 Notified SEZs 1 in the state, 4 th highest in India, led by Maharashtra (52), Tamil Nadu (45) and Telangana (42) % 0.9% 1.0% 1.1% 0.9% 1.0% 1.0% 1.2% 1.2% 1.2% 1.2% 8.5% 8.4% 8.4% 8.6% 8.2% 8.1% 7.8% 7.8% 8.2% 8.6% 8.6% 4.8% 4.8% 4.9% 5.0% 5.1% 5.1% 4.5% 4.3% 4.3% 4.0% 3.8% Figure 8: Trends in Services Sector output of Karnataka 20.1% 21.4% 23.1% 24.0% 26.4% 25.5% 25.6% 27.0% 27.4% 28.1% 27.2% 17.3% 17.1% 16.5% 16.2% 15.4% 15.9% 14.8% 14.1% 13.5% 12.4% 12.0% 27.3% 26.9% 26.3% 25.7% 24.7% 25.5% 26.6% 26.0% 25.9% 25.3% 25.4% 5.4% 5.3% 5.6% 5.5% 6.0% 6.2% 7.2% 7.1% 7.1% 7.3% 7.8% 15.7% 15.0% 14.2% 13.8% 13.3% 12.7% 12.5% 12.5% 12.5% 13.0% 14.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Railways Storage Trade, Hotels & Restaurants Real Estate, Ownership of dwellings and Business Service Other Service Transport by other means Communication Banking & Insurance Public Administration Source: Ministry of Statistics and Program Implementation (MOSPI), Planning Commission, Govt. of India; YES BANK Analysis Fiscal Indicators Karnataka has been successful in maintaining fiscal dynamics. The State s financial performance has improved after enactment of the Karnataka Fiscal Responsibility Act Fiscal deficit reduced from a higher level of 5.38% in to an estimated level of 2.83% in , whereas the revenue deficit decreased from 3.01% to 1.38% in during the same period. The State has been maintaining revenue surplus and fiscal deficit within the limit of 3% of GSDP each year since thus meeting the Fiscal Responsibility and Budget Management Act (FRBMA) targets. 1 Department of Commerce, Ministry of Commerce and Industry, Government of India 28 A Socio-Economic Snapshot

29 Table 3: Revenue and Fiscal Deficit of Karnataka as a Percentage of GSDP Fiscal Indicators (INR Crores) RE BE Own Tax Revenue 38,473 46,476 53,745 62,603 68,554 76,445 Own Non-Tax Revenue 3,358 4,087 3,966 4,031 4,465 5,206 State s Own Revenue 41,831 50,563 57,711 66,634 73,019 81,651 Total Central Transfers 16,375 19,243 20,456 22,907 35,888 34,709 Share in Taxes and Duties 9,506 11,075 12,647 13,808 15,410 24,790 Grants 6,869 8,168 7,809 9,0 20,478 9,919 Total Revenue Receipts 58,206 69,806 78,167 89, , ,360 Total Revenue Expenditure 54,034 65,115 76,293 89, , ,450 Revenue Surplus/Deficit 4,172 4,691 1, Capital Outlay 15,093 17,321 16,581 17,642 19,938 21,297 Fiscal Surplus/Deficit (10,688) (12,300) (14,507) (17,092) (19,034) (20,220) Outstanding Liabilities 114, , , , , ,815 GSDP (current prices) ,237 Revenue Surplus/ (Deficit) as a % of GSDP 1.10% 1.08% 0.36% 0.06% 0.02% NA Fiscal Surplus/ (Deficit) as a % of GSDP -2.81% -2.83% -2.78% -2.84% -2.78% NA Source: State Budget Documents of Karnataka Figure 9: Revenue and Fiscal Deficit of Karnataka as a Percentage of GSDP 1.50% 1.00% 0.50% 0.00% -0.50% -1.00% -1.50% -2.00% -2.50% -3.00% -3.50% 1.10% 1.08% 0.36% RE -2.81% -2.83% -2.78% -2.84% 0.02% 0.06% RE -2.78% Revenue Surplus/ (Deficit) as a % of GSDP Fiscal Surplus/ (Deficit) as a % of GSDP Source: YES Bank Analysis Investment Flows The total Foreign Direct Investments (FDI) from April 2000 to September 2015 in Karnataka stands at INR 96,151 Crore, 3rd highest in India after Maharashtra and New Delhi as shown in Figure 10. FDI inflows in Karnataka has increased by 280% from to as shown in Figure Department of industrial Policy & Promotion, Ministry of commerce & Industry, Government of India A Socio-Economic Snapshot

30 Figure 10: Ranking of states in India based on Cumulative FDI inflows from April 2000 to September 2015 (Units: INR Crore) Maharashtra 374,471 New Delhi Karnataka Tamil Nadu Gujarat 60,700 96,151 95, ,1 Andhra Pradesh 52,727 West Bengal 19,272-50, , , , , , , ,000 in INR Crores Source: Department of Industrial Policy and Promotion, Government of India; YES BANK Analysis Figure 11: FDI inflows in Karnataka (Units: INR Crore) , ,422 14, , (upto September 2015) Source: Department of Industrial Policy and Promotion, Government of India; YES BANK Analysis 30 A Socio-Economic Snapshot

31 Infrastructure & Related Resources in Karnataka 03 A Socio-Economic Snapshot

32 3. Infrastructure & Related Resources in Karnataka Strong Economy Advantage Karnataka Fifth largest economy in India growing at a CAGR of 6.81% with the industrial sector contribution of 26.16%. Vibrant Industrial Base The state is a leader in Aerospace, Information Technology, Electronics, Startups, Agro & Food Processing and Textiles Presence of 26 export SEZs First state to introduce Aerospace Policy, Renewable energy Policy, IT Policy, Biotechnology Policy More than 90,000 acres of land bank available out of which 40,000 acres have been notified for industrial purpose Sector specific SEZs for IT, Textile, Aerospace, Engineering, Food Processing Technology Hub The fourth largest technology cluster in the world as per MIT Contributes to 40% of India's Software and electronic products exports and 60% of Karnataka's overall exports. Has 47 IT/ITeS SEZs and three technology parks 32 A Socio-Economic Snapshot

33 Advantage Karnataka contd... Strong Knowledge Economy Being the fourth largest skilled workforce in the country, having 6.6% of India's employment in industry sector Presence of top national institutes like Indian Institute of Science (IISc), Indian Institute of Management Bengaluru (IIMB), National Institute of Mental Health and Neuro Sciences (NIMHANS) 44 universities, 4,519 pre-university colleges, 206 engineering colleges and 293 polytechnics, 47 medical colleges and 38 dental colleges Strong Tourism Growth Third most visited place by domestic tourist in 2014 Presence of three World Heritage Sites 320 km coastline Infrastructure Upcoming Mega infrastructure projects like Chennai Bengaluru Industrial Corridor and Bengaluru Mumbai Economic Corridor Development of six smart cities under the National Smart Cities Mission A Socio-Economic Snapshot

34 For further growth of the state in a phased manner the state government has devised a Karnataka Vision 2020 which aims to propel a holistic growth and development of all sectors in the state. The summary of the proposed development for each sector is outlined below: Table 4: Twelve Key Areas for Transformation as per Vision Rural Development Increase rural income through greater viability of agriculture and allied services and improving quality of rural infrastructure. Sustainable and efficient utilization of water resources. Agriculture growth rate target of 3-4% from the present 0.8%. 2 Skill Development for Job Oriented growth 3 Developing Karnataka as a Knowledge Society Already a pioneer in the education sector with top national level institutes like Indian Institute of Science (IISc) and Indian Institute of Management, Bengaluru (IIMB), the state aims to introduce skill development courses in the secondary level itself. Upgrade ITIs through Public Private Partnership. The target set for 2020 for access to skill training institutes has been set as 100%. Focus on increasing quality in school education and higher education. Karnataka is set to achieve the target of 100% in Gross Enrollment Rate (Secondary) by Number of Universities in Karnataka to reach a level of Improving Access and availability of Quality Healthcare The state aims to increase the health care sector budget allocation to 8%. Increased healthcare financing, governance, capacity building and strengthening research and delivery systems to be focused on. 5 Sustainable Industrialization and Urbanization Development through area based approach with urban corridors as the hubs of industrial activities. Thrust on development of Tier I and Tier II cities. 6 Women Empowerment Enhance opportunities and empower women across economic, social and political spheres. 34 A Socio-Economic Snapshot

35 7 Economic Parity of Poor and Backward Classes Enabling economic and educational empowerment of backward classes and vulnerable groups. 8 Infrastructure Ensuring energy security for the state by Boosting productive potential of the economy with adequate infrastructure like corridor development, international logistics and warehousing hubs in PPP mode. Core road network (NH+SH) to reach to a level of 40,000 km. 9 Tourism Development Preservation and promotion of history, arts and crafts Overall physical tourism infrastructure to grow by 9% by 2020 to support the growing tourism. 10 Leadership in Science & Technology and Knowledge based industries Leveraging on the existing high-tech and R&D strengths Target of 40% share of country s total exports from technology and knowledge based industries 11 Sustainability of State s Environment and Natural Resources Increase the geographical area of the state under forest cover to 33% from the present 16.7%. Steps to reduce air pollution Sustainable mining to be promoted 12 Improve Governance through Participation and Decentralization Exploit potential created by e-governance to improve service delivery levels at the grassroots. All districts to have district plans by 2020 Target of 60% share of own source of revenue to total revenue among ULBs (excluding Bengaluru) Source: Karnataka Vision 2020 A Socio-Economic Snapshot

36 New Initiatives for Infrastructure Project With the recent budget announcement and new policy initiatives, it is evident that large scale infrastructure projects are proposed across sectors like Highways, Ports, Airports, Urban Transport, Tourism Infrastructure, Industrial Infrastructure & Power among others. The Infrastructure Policy 2007 of Karnataka emphasizes on creating a conducive environment to facilitate and encourage Public Private Partnership in the state. A Single Window Agency (SWA) under the chairmanship of the Chief Secretary has been set up approve PPP projects from INR 15 Crore up to INR 100 Crore. Projects above INR 100 Crore are recommended to the State High Level Clearance Committee under the chairmanship of the Hon ble Chief Minister for approval. The draft Karnataka Infrastructure Bill 2011 proposes to establish a Karnataka Infrastructure Authority to act as the nodal agency to the government in the development of PPP policies and programs, identify projects and ensure their conformance to the state objectives, to co-ordinate between concerned department/ agencies of the government for infrastructure development. The Chief Secretary will serve as the Chairperson of the authority. Industrial infrastructure projects require land available at the earliest. Therefore the Government of Karnataka constituted the Karnataka Industrial Areas Development Board (KIADB) to proactively identify land for industrial development. Given the special status to the Hyderabad Karnataka region during the year 2013 under Article 371 J of the Constitution of India a Hyderabad Karnataka Area Development Board (HKADB) has been formed to improve the infrastructure facilities on a priority basis in this region and addresses key social and economic infrastructure gaps. The Government has also notified the Karnataka Transparency in Public Procurements (KTPP) Act, 19 to facilitate project preparation, structuring, financing and efficient procurement. The Government has also established the Infrastructure Development Corporation (Karnataka) Ltd. to conduct studies, hire experts / consultants, prepare feasibility studies, capacity building, undertake research and training, etc. To overcome the project development issues and to build sustainable infrastructure projects in the state, the Government of Karnataka has designed Karnataka Infrastructure Transformation 1 (KIT-1) with project shelf development, PPP institutionalization, initial capacity building, MIS updating and sector inventory and profile preparation. Roadways The Total Road Length in Karnataka as of 2013 is 305,448 Km 3. CAGR of about 2.67% for the period 2009 to 2013 is the fourth highest next to Maharashtra, Tamil Nadu and Andhra Pradesh in progressive states in India. Karnataka Road density 4 (per 100 Sq Km of area) is Km as of Ministry of Road Transport & Highways, GoI 4 Ministry of Statistics and Programme Implementation, GoI 36 A Socio-Economic Snapshot

37 State Table 5: Comparison of Road length, density and growth rate Geographical Area (Sq Km) Source: Ministry of Road Transport & Highways (MORTH), Government of India *Erstwhile AP Road Length (kms) CAGR Road Density (Km / 100 sq.km) Tamil Nadu 1,30, , , , , , % 176. Andhra Pradesh* 2,75, , , , , , % Karnataka 1,91, , , , , , % Gujarat 1,96, , , , , , % Maharashtra 3,07,713 3, , , , , % Out of the total 3.05 Lakh kms road length in Karnataka, the Highway Department (NHAI) maintains 25,170 km. National Highways form 1.5% of the State s Road whereas State Highways form 6.9%. Rural roads form the major share in the classification of the roads with a share of 53.7%. PWD Roads, Urban Roads and other Project Roads form 16.5%, 14.2% and 7.4% respectively of the total roads in the State. Out of the total length of National Highways and State Highways in Karnataka, single lane forms the major share with 72%. Multi lane and double lane constitute to 6% and 22% respectively. Figure 12: Classification of Road in Karnataka for the year Figure 13: Break-up of National and State Highways in Karnataka for the year % 7.4% 1.5% 6.9% 6% 16.5% National Highways State Highways 22% Single Lane PWD Roads Two Lane Rural Roads Urban Roads 72% Multi lane 53.7% Project Roads Source: Ministry of Road Transport and Highways, Govt. of India; YES BANK Analysis Source: Ministry of Road Transport and Highways, Govt. of India; YES BANK Analysis As per the Budget , under the Namma Grama Rashte Scheme, the State Government proposed to develop 3,855 km of roads in the state at a project cost of INR 2,676 Crore. Also in the tribal sub plan and special component program, the government has allocated INR 615 Crore for construction of concrete roads in the state. A Socio-Economic Snapshot

38 Port Railways The South Western Railway Network of the Indian Railways is headquartered in Hubli. The zone encompasses railway routes passing through Karnataka and parts of Tamil Nadu, Andhra Pradesh, Goa & Maharashtra. The Total Rail track Length in Karnataka as of March 2014 is 3281 Km 5. The South Western Railway Network is divided into Three Divisions each headquartered at Hubli, Bengaluru and Mysuru. The proposed Chennai Bengaluru industrial corridor offers a tremendous opportunity for a dedicated freight corridor on the lines of DFC project between Mumbai & New Delhi. Karnataka stands third in rail density (km of rail length / 1000 sq.km of area) among all the southern states after Tamil Nadu and Kerala. Table 6: Comparative Analysis of Rail Tracks among Southern States as on 2014 State Area(Sq. Km) Route Km Rail Density (Km/1000sq.km) Andhra Pradesh 275,045 3, Tamil Nadu 130,058 4, Karnataka 191,791 3, Kerala 38,363 1, Source: Indian Railways Statistics; YES BANK Analysis The state government has agreed to set up Rail Coach factory in the Kolar district on cost sharing basis sharing 50% of the total construction cost. Bengaluru Metro Rail Corporation is in the process of development of Metro Rail in the Bengaluru city. Reach 1 (Baiyapanhalli to MG Road 6.7 km) and Reach 3 (Shampige Road to Peenya 10.3 km) of the Phase I construction has been commissioned; Phase II project has been approved by the Centre and State Government. Karnataka has only one major port namely New Mangalore Port Trust, in addition to 12 minor ports of which the NMPT is controlled by the Government of India. The other 12 minor ports are under the control of the State Government 6. Among the minor ports Karwar, Malpe and Old Mangaluru Ports handle significant volumes of cargos. 5 Ministry of Railways, GoI 6 Directorate of Economics and Statistics, Government of Karnataka 38 A Socio-Economic Snapshot

39 The present capacity of New Mangalore Port is MT as on 31 st March Comparatively, Chennai port is 86.04MT. Cochin is MT and Visakhapatnam is MT. NMPT has a capacity utilization of 47.02%. The capacity utilization of Mangalore port is the fifth highest in among the major ports in South India Figure 14: Trends in Traffic Handled at Major Ports in South India for the year to (Million Tonnes) Source: Ministry of Shipping, Govt. of India; YES BANK Analysis Source: Ministry of Shipping, Govt. of India; YES BANK Analysis Vizag Ennore Chennai Tuticorn Cochin New Mangalore Port Trust Table 7: Major Port-wise capacity utilization during (Million Tonnes) Port Capacity Traffic Capacity Utilization (%) Chennai Visakhapatnam Tuticorin New Mangalore Ennore Cochin ALL PORTS Mangalore port handled 5.9% of cargo during the first quarter of and showed a decline of in overall traffic by 9.1% during the same period. The Karnataka Minor Ports Development Policy of 2014 has been implemented by the state government with an objective: To increase the share of Karnataka state in the export and import sector. To handle 5-10% of India s total cargo in Karnataka. To enhance potential of ports with public and private participation. The government has proposed to upgrade and modernize six out of twelve minor ports in the state which includes Belekeri, Manki, Tadadi, Honnavar, Pavinakere and Malpe ports. A Socio-Economic Snapshot

40 Airports Karnataka has a total of six airports which also includes two international airports at Bengaluru and Mangaluru and the other domestic airports include Mysuru, Belgaum, Hubli and Hassan. Bengaluru handles 3 rd highest traffic in India, in terms of total passenger (both domestic & international) and 4 th highest in total freight traffic (both domestic & international) Figure 15 & 16 shows the share of top 10 Indian airports in the year in terms of total passenger movement and total freight movement respectively 7. Figure 15: Share of Top 10 Indian Airports by Passenger Traffic in the year % 7% 3% 3% 3% 29% 11% 10% 26% Delhi Mumbai Chennai Bengaluru Kolkatta Hyderabad Ahmedabad Goa Pune Source: Airports Authority of India; YES BANK Analysis Figure 16: Share of Top 10 Indian Airports by freight movement in the year % 3% 0% 1% 12% 6% 30% 13% 30% Delhi Mumbai Chennai Bengaluru Kolkatta Hyderabad Ahmedabad Goa Pune Source: Airports Authority of India; YES BANK Analysis 7 Press Information Bureau, Go 40 A Socio-Economic Snapshot

41 20.00 Figure 17: Trends in Total Passenger Traffic (million) at Bengaluru Airport for the year to Traffic in millions Domestic International Total (in Million) Source: Airports Authority of India; YES BANK Analysis Figure 18: Trends in Total Freight Movement (in 000 Tonnes) at Bengaluru Airport for the year to Freight in 000' Tonnes Source: Airports Authority of India; YES BANK Analysis Domestic International Total (in '000 Tonnes) Bengaluru airport was the country s first Greenfield international airport conceived under PPP mode with 13% shareholding by State Government, 13% by the Government of India and the rest 74% by private promoters. Minor airports at Shimoga, Kalaburagi, Vijayapura, Hassan and Bellary are being developed under PPP mode and in principle approval from Ministry of civil Aviation, Government of India has been obtained. Development of Hubli airport is in progress to upgrade it to cater to larger aircrafts. Urban Infrastructure Karnataka is the 7 th most urbanized state in India with about 38.6% of total population living in urbanized areas. The state accounts for 8.25% of India s urban population. Karnataka has 219 Municipalities and Corporations. A Socio-Economic Snapshot

42 Power The municipal corporations of Karnataka include the cities such as Bengaluru, Hubli- Dharwad, Mysuru, Kalburgi, Mangaluru, Belgaum, Davanagere, Bellary, Tumkur, Shimoga and Vijayapura. Out of the above mentioned corporations Mangaluru, Shivamogga, Devanagere, Hubli- Dharwad, Belgavi and Tumkur have been shortlisted for the Smart Cities scheme. Twenty-seven cities and towns with a population of over 1 Lakh in Karnataka, are covered under the Atal Mission for Rejuvenation and Urban Transformation program 8 Bengaluru and Mysuru have been covered under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). As of August 2014, a total of 26 out of 54 sanctioned projects under UIG (Urban Infrastructure & Governance) of JNNURM were completed in the state at an approved cost of INR 4,053 Crore. These projects were related to traffic, transit management, transport facilities, roads and flyovers, water supply and solid waste management Similarly, as of March 2014, under the Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT) of JNNURM, 17 projects were completed out of 71 sanctioned projects allocated for 53 towns. These projects were for development of water supply, sewerage, storm drainage systems, solid waste management and road development in the state. 11 The total installed power capacity in Karnataka is MW 12 as of November Coal, Renewable Energy and Hydro form the bulk of the installed capacity with share of around 42%, 30% and 23% respectively State and the private sector own the bulk of the generation assets at 86% of the total installed capacity. 8 Ministry of Urban Development, GoI 9 Ministry of Urban Development, GoI 10 Ministry of Urban Development, GoI 11 Ministry of Urban Development, GoI 12 Central Electricity Authority, Ministry of Power, GoI 42 A Socio-Economic Snapshot

43 Figure 19: Break up of installed power capacity in Karnataka based on source of generation and the ownership as on Nov 2015 Installed Capacity 30% 42% 14% 23% 3% 2% 0% 43% 43% State Private Central Coal Gas Diesel Nuclear Hydro MNRE Source: Central Electricity Authority; YES BANK Analysis Figure 20: Category wise consumers of power as on March 2014 (in %) 5% 36% 4% 2% 3% 20% 18% 12% Domestic Industries Water Works & Sewage Pumping Public Lighting Commercial IP Sets LT Industries Others Source: Economic Survey of Karnataka Figure 21: Trends in Demand-Supply of Peak (MW) in Karnataka for the year to Demand (in MW) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000-8,549 8,761 9,223 9, ,815 6, ,458 5,612 5,558 5,959 5, (up to Dec 2014) Demand (MW) Supply (MU)) Supply (in MU) Source: Economic Survey of Karnataka A Socio-Economic Snapshot

44 Table 8: Peak Power demand & supply trend - South India and UT to (in MW) State Demand Supply Surplus/ (Deficit) Demand Supply Surplus/ (Deficit) Demand Supply Surplus/ (Deficit) Demand Supply Surplus/ (Deficit) Andhra Pradesh 14,054 11,972-2,082 14,582 11,630-2,952 14,07 13, ,3 11,791-3,202 Karnataka 10,545 8,549-1,6 10,124 8,761-1,363 9,940 9, ,772 8,137-2,635 Kerala 3,516 3, ,578 3, ,671 3, ,742 2,557-1,185 Tamil Nadu 12,813 10,566-2,247 12,736 11,053-1,683 13,522 12, ,773 12, Source: Central Electricity Authority; YES BANK Analysis Table 9: Comparative Analysis of Trends Aggregate Technical and Commercial (AT&C) Losses - Southern India (%) State Andhra Pradesh Karnataka Kerala Puducherry Tamil Nadu Source: CRISIL Research; YES BANK Analysis in Percentage Figure 22: Trends in Transmission & Distribution Losses and AT&C Losses in Karnataka from to T&D Losses AT&C Losses Source: Economic Survey, Karnataka, Power deficit has been a major issue historically for Karnataka, because of its dependence on hydro power. To counter the problem the state is planning to increase the power production from thermal plants and is hoped to be power surplus by July Karnataka is the first state in India to come out with a Renewable Energy Policy. Karnataka s Renewable Energy Policy aimed at renewable energy capacity addition of 6600 MW by The state is in the process of formulation of Renewable Energy Policy A Socio-Economic Snapshot

45 Karnataka launched The Karnataka Solar Policy for a focused development of solar energy under the Government of India s Jawaharlal Nehru National Solar Mission (JNNSM) launched in 2010 setting a target to achieve a national capacity of 34,152 MW of solar power by The state has targeted to achieve 2,000 MW of solar generation by 2021, encourage PPP in this space, and promote solar roof top generation and technologies. Telecommunications India has a total subscriber base of million, with wireless subscriber base forming the major share of million and wireline subscriber base of million, as on June Karnataka has a total subscription of million, forming 6% of the total share in all Indian Circles. The State has a Wireless Subscriber base of Million (eighth highest share of 5.9%, next to AP, Bihar, Madhya Pradesh, Maharashtra, Rajasthan, Uttar Pradesh and Tamil Nadu) and Wireline subscriber base of 2.1 Million (fifth highest next to Delhi, Kerala, Tamil Nadu and Mumbai Circle). Tele-Density (no of connections per 100 people) in Karnataka is fifth highest in India, next to New Delhi, Himachal Pradesh, Tamil Nadu and Punjab and second highest among Southern states, while the overall tele-density in India is Figure 23: Comparative Analysis of Tele-density in South India Andhra Pradesh Karnataka Kerala Tamil Nadu Tele-density (no. of connections per 100 people) Source: TRAI 13 Telecom Regulatory Authority of India A Socio-Economic Snapshot

46 Human Resources 9 9 As per 2011 census, Karnataka ranks 14th with the overall literacy rate of 75.6%% having improved from 66.64% in The male & female literacy rates were 82.47% and 68.08% respectively Figure 24: Comparative Analysis of Literacy rate in Karnataka in 2001 and 2011 Persons Males Females 66.64% 75.60% 76.10% 82.47% 56.87% 68.08% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% Source: Census 2011; YES Bank Analysis Literacy Rate According to the National Skill Development Corporation the incremental Human Resource requirement for the period for Karnataka is about 8.47 Million. Maximum demand will be from sectors such as Tourism, Travel & Hospitality; Agriculture and allied; Building, Construction & Real estate; IT & ITES; Transportation, Logistics, Warehousing and Packaging; Healthcare and Education services. Availability of about 8.16 Million workforce is estimated from 2012 to 2022 indicating a skill gap of around 0.31 Million workforce. Figure 25: Incremental HR Availability for the period for Karnataka Highly Skilled 54 Semi-skilled 3218 Skilled 1,435 Minimally skilled Source: National Skills Development Corporation; YES BANK Analysis HR Availability in Thousands 46 A Socio-Economic Snapshot

47 Sector Snapshot in Karnataka 04 A Socio-Economic Snapshot

48 4. Sector Snapshot in Karnataka Karnataka is one of the most industrialized states in the country and historically has been a major exporter of silk, coffee, spices, silk, jewellery and handicrafts. The last two decades saw a significant growth in Karnataka s exports of software services, electronics, garments and food processing products. In Karnataka s export constituted 12.37% of national exports. Merchandise forms a share of 6% and software exports constituted about 40% of the national exports. The state has also shown a significant growth in exports as a percentage of GSDP, increasing from 7.5% in to 47% in The table below gives an overview of major exports from Karnataka. Table 10: Exports from Karnataka from to (in INR Crore) Commodity Electronics & Computer Software Readymade Garments Petroleum & Petroleum Products Engineering Iron Ores & Minerals (including granites) Silk Products Coffee Products Basic Chemicals, Pharmaceuticals and Cosmetics Agriculture and Processed Food Products Gem and Jewellery Cashew and Cashew Kernels Handicrafts Leather Products Chemicals and Allied Products Marine Products Plastic Goods A Socio-Economic Snapshot

49 Commodity Spices Wool & Wool Products Miscellaneous and Others Total 1,65,523 2,18,837 2,58,368 2,90,418 3,13,570 Source: Visvesvaraya Trade Promotion Centre Agriculture & Food Processing Karnataka is a major producer of spices, flowers, fruits and vegetables in the country. Karnataka is the fourth largest producer of pulses in the country with a contribution of around 10%. It is the highest coffee producing state in India. About 71% of national coffee output comes from Karnataka. Coffee exports from Karnataka stood at INR 4,973 Crore in constituting 96% of coffee exports from India. The production of coffee is concentrated in Hassan, Chikkamangaluru, Kodagu and Mysuru districts. Karnataka has the presence of seven National level research institutes in Agriculture and Horticulture sector. It has four dedicated food parks in Malur (Kolar), Navanagar (Bagalkot), Hiriyur (Chitradurga) and Jewargi (Gulbarga) and one food processing SEZ in Hassan. A Socio-Economic Snapshot

50 The overall export of agriculture & processed food products, coffee, cashew & cashew kernels and spices from Karnataka amounted to INR 8,987 Crore in Exports are made to Belgium, France, USA, Australia, Canada, Spain, South Korea and Sri Lanka. Karnataka is a major contributor to the total national production of spices like vanilla, cinnamon, tamarind, chilli and ginger. In the spices export from Karnataka stood at INR 1,126 Crore contributing 7.5% to all Indian spice exports. The major spice growing areas in the state include Madikeri and Mangaluru. The state government has proposed to set up Spice Parks in Kushalnagar and Haveri to boost exports. Karnataka is the 3rd largest producer of raw cashew in the country after Kerala and Goa. Cashew and Cashew Kernel exports from Karnataka stood at INR 1,505 Crore, contributing to 27% of its total export from India for The only state in India to grow Rose Onion, which has also been registered as a geographical indication of the state. The exports of rose onion have witnessed significant growth subsequent to the establishment of the Agri Export Zone (AEZ) for Rose Onion in Karnataka. Table 11: Data on Cultivation Area and Production in Karnataka Cultivation Area (L.ha) Production (L.MT) Crop * * Cereals Pulses Total Food Grains Oilseeds Cottons(L.Bales)# Sugarcane(Cane) Tobacco Total Source: Economic Survey of Karnataka , , *Revised Estimates of Agriculture Department # 1 Bale = 178 kg The State Government has formed a Vision Group for this sector to develop the overall vision of the agriculture sector in Karnataka. The government has also proposed the formation of a Micro Irrigation Policy for efficient use of water and for preserving micro nutrients in the soil. The State has launched Krishi Bhagya Scheme to support rain deficient farmers in 5 major dry agro climatic zones covering 129 talukas of 25 districts in the state at an expenditure of INR 500 Crore. Karnataka Agriculture price Commission has been established to recommend appropriate support price on scientific basis for agriculture and horticulture crops. During , a total provision of an amount of INR.3883 Crore has been made for the Agriculture sector. 50 A Socio-Economic Snapshot

51 Industrialization in Karnataka Karnataka has created a forte in the fields of Aerospace & Defense, Automobiles, Information Technology, Bio-Technology, Electronics and Textile industries. Karnataka has always been a preferred destination for the investors due to a favorable business climate, excellent infrastructure for trade and investment, better law and order maintenance, industrial relations and healthy socio-economic reforms. It is pertinent to note that the Global Investors Meet organized in 2012 saw a total value of investment MOUs/ ROIs/EOIs signed at around INR 7.2 Lakh Crore. The State ranks 4th in terms of capital invested, number of workers employed, 8th in terms of number of registered factories and 4th in terms of gross industrial output. The industrial GSDP of Karnataka grew at a CAGR of 5.40% from the year to ( constant prices). 9 9 In the period to , the number of factories has increased by 40%, while the capital infusion has grown at the compounded annual growth rate (CAGR) of 10.86% and the value of output has grown at CAGR of 12.09%. Figure 26: Trends of Industrialization in Karnataka to ,000,000 40,000,000 30,000,000 20,000,000 10,000,000-22,581,276 23,325, ,669,455 9,638, , , ,451 8, No. of factories (nos) No.of employees (nos) Fixed Capital (Rs lakhs) Value of output (Rs lakhs) Source: Results of Annual Survey of Industries, Central Statistical Organization; YES BANK Analysis A Socio-Economic Snapshot

52 Figure 27: Index of Industrial Production of Karnataka to Mining Manufacturing Electricity Source: Economic Survey of Karnataka Manufacturing Aviation/ Aerospace Industry Karnataka produces more than a quarter of the country s aircrafts and spacecrafts with top R&D centres on aerospace located here. The state is home to marquee organizations like Hindustan Aeronautics Limited (HAL), Indian Space Research Organization (ISRO), Defense Research and Development Organization (DRDO), National Aerospace Laboratories (NAL), Aeronautical Development Agency (ADA), Boeing Research and Technology Centre, Airbus Engineering Centre, DRDO Gas Turbine Research Establishment (GTRE). The state attracts about 65% of country s investment in this sector. The state is positioned as the Aerospace Hub of India due to concentration of wide range of activities starting from manufacturing, design & development to Maintenance, Repair and Overhauling (MRO) being carried out in the state. The state has proposed for the establishment of an Aerospace Institute in the capital city of Bengaluru. In the defense aviation sector 26% FDI is permitted with prior government approval and in the civil aviation sector 100% FDI is permitted under automatic route for Greenfield airport 52 A Socio-Economic Snapshot

53 projects and 74% FDI under automatic route for existing projects. 100% FDI is allowed for Maintenance & Repair organizations, flying training institutes and technical training institutions. The country s first aerospace SEZ was developed in Belgaum, Karnataka in November, The Government of Karnataka has earmarked 984 acres of exclusive industrial area and sector specific SEZ for Aerospace industries. Karnataka is the first state in India to draft a dedicated Aerospace Policy for this sector. The state intends to be the aerospace hub in Asia by 2018 and one of the top global aerospace and MRO destination by The Aerospace Policy 2013 emphasizes long term growth of this sector and hence divided the growth into two phases: Phase I (Growth phase: ) and Phase II (Consolidation phase: and beyond). The policy aims to attract investments of INR 60,000 Crore in the policy period, generating direct employment for One Lakh people and enhance the contribution of aerospace sector towards increasing the share of industry in the state s GDP from 30% to 32%. Within this sector MRO is emerging as a major segment. Around 1000 acres of the Devanahalli Aerospace SEZ has been devoted for expansion by companies including MRO. The Aerospace industry in Karnataka is expected to attract USD 5 Billion by 2017 and create highly skilled jobs. AeroIndia is an International Aerospace and Defense Exhibition organized by the Ministry of Defense is biennially held at Bengaluru. It started in the year 16 and the 10th edition of AeroIndia was held in February Automotive Industry Karnataka stands 4th in India in terms of Automobile production with revenues of USD 604 Million. The industry has grown at a CAGR of 15% in Karnataka from 2009 to Toyota Kirloskar, Volvo, TVS Motors, Tata Marcopolo, L&T Komatsu, Mahindra Reva, BOSCH, Siemens, JK Tyres and Bosch India are the major players having operations in Karnataka. There are three auto clusters, one industrial valve cluster and one auto component cluster in the state located at Bengaluru, Ramanagara, Kolar, Shimoga, Dharwad and Belgaum. The state is soon to come up with a dedicated Automobile Policy. As per the final draft of the Industrial Policy , the state is exploring to set up major auto parks in Dharwad, Kolar and Bidadi and smaller auto parks in Belgaum, Shimoga, Mysuru and Gulbarga. 9 9 The state government is also in the process to set up the Karnataka Automobile Research & Innovation Centre on PPP mode with state funding of up to 50% of the cost. This would act as an incubation centre and encourage entrepreneurship in this sector. A Socio-Economic Snapshot

54 German auto components maker Bosch Ltd has opened its new factory at Bidadi, near Bengaluru, its fifth manufacturing plant in Karnataka. To strengthen Bosch s research and development in areas including mobility and healthcare thereby driving innovation for India-centric requirements, the company has also signed a memorandum of understanding (MoU) with Indian Institute of Science (IISc), Bengaluru. Honda has its largest two wheeler manufacturing plant in the world at Narsapur in Kolar. Machine Tools Industry As per the 2015 Gardner Business Media survey India stands 14 th in production and 10th in the consumption of machine tools in the world. Machine tools production in India has increased to INR Crore during from INR 3481 Crore compared to registering the annual growth of 22%. Bengaluru alone produces 60% of the machine tools of India in terms of value, which is estimated at INR 2,160 Crore Country s first Integrated Machine Tool Park (IMTP) is being planned in Karnataka near Bengaluru. Drugs and Pharmaceuticals Industry Karnataka is one of the fastest growing states in the country in terms of Pharmaceutical sector and ranks tenth in pharmaceutical manufacturing. It exports around 40% of its produce and generated INR 8,000 Crore revenue in There are about 221 formulation units and 74 bulk drug unit in the state. The state has exclusive Pharma Industrial Areas and Pharma SEZ at Hassan & Yadgir. Karnataka is a leader in Bio-pharmaceutical manufacturing. The Pharmaceutical Policy 2012 focuses on developing this sector with an emphasis on promoting big players in the state. The policy also sates establishment of Karnataka Pharmaceutical Development Council (KPDC) which will act as a single point of contact for this sector and a Vision Group on Pharmaceutical that will guide the Government on various strategies and actions required to be initiated for rapid and healthy growth of pharmaceutical sector in the State. GlaxoSmithKline Pharmaceuticals Ltd (GSK) is setting up the world s largest Greenfield tablet manufacturing facility in Vemgal in Kolar district, Karnataka, with an estimated investment of INR 1,000 Crore. The facility covering an area of 50 acres will be fully operational in 2017, employing about 250 people and is expected to produce more than 8 billion tablets and 1 billion capsules a year. Textile Industry The state is the largest silk producer in the country and 65% of national raw silk production comes from Karnataka and its silk exports constitute 24% of the total silk exported from India. Silk production in the state was 9,645 MTs in and 8,547 MTs in A Socio-Economic Snapshot

55 Exports of Silk products from Karnataka accounted to INR 554 Crore in About 20% of national garment production is done in Karnataka and hence, known as the Garment Capital of India. As of , Karnataka has 2,880 textile manufacturing units and 5,560 readymade apparels unit. Exports of Readymade garments from Karnataka amounted to Rs Crore in Textile parks are located at Doddaballapur, Kalburgi, Tumkuru and Bellary. The State government has earmarked 1000 acres of land in Yadgir in North Karnataka to set up a dedicated textile park and is also planning to bring up smaller textile parks in different districts of Karnataka like Vijayapura, Bellary and Chamarajanagar. Karnataka is the first state in the country to launch the textile policy - the Javali Neethi (Textile Policy) The broad objectives of the policy are: Attracting INR 10,000 Crore of investment in the sector Enabling employment opportunities to 5 Lakh people. The policy aims at attracting INR 8,000 Crore of investment in this sector by 2018 and creating four Lakh of employment in the state. The state has one operational SEZ for the textile sector, located in Hassan and a Garment Training and designing Centre at Bellary. Technology IT, Electronics & ESDM Industry Karnataka is the fourth largest technology cluster in the world after Silicon Valley. It houses around 2500 IT companies contributing to around INR 1.8 Lakh Crore of export. The Software and Electronics industry is one of the largest contributors to exports in Karnataka. In FY15 electronics and software exports for Karnataka amounted to INR 194,020 Crore. 9 9 The IT sector contributes to around a quarter of the state s GSDP and accounts for approximately 40% of the country s IT exports and 62% of Karnataka s overall exports. A Socio-Economic Snapshot

56 Figure 28: IT Exports from Karnataka (Units: INR Crore) Amount in INR Crore , , , , Karnataka Electronics & IT Exports (Rs Crores) Source: Vishvesvaraya Trade Promotion Centre The state has 47 IT/ITeS SEZs, three software technology parks and dedicated IT investment regions, more than 85 chip design houses and about 370 R&D centres. First in the country to bring out the Information and Communications Technology Policy (ICT) and also the first state in the country to introduce the Animation and Visual Effects, Gaming and Comics (KAVGC) Policy to give a boost to investment in Animation, Visual Effects Gaming and Comics. Karnataka i4 (IT, ITeS, Innovation Incentives) Policy provides for the Department of IT BT & ST, Government of Karnataka to act as a Single Window Agency for all IT, ITeS, Startups, Animation, Gaming, Computer Graphics, Telecom, BPO, KPO and other knowledge based industries. For investments less than INR 100 Crore approvals would be granted by the committee headed by the Minister for IT BT & ST and above INR 100 Crore decisions would be taken by a committee headed by the Hon ble Chief Minister. Other highlights of the policy are: Employment linked Incentivization of Land Allotment (E-LILA) outside Bengaluru Urban and Rural districts. Land allotment for IT/ ITeS/ Animation/ Computer Graphics Imagery (CGI) industries at concessional rates. Karnataka is also the hub of ESDM sector and happens to the first state in the country to have an ESDM policy. Two Brownfield ESDM Common facilitation centers in Bengaluru and Mysuru are being set-up. Karnataka Semi Conductor Policy 2010 aims to promote Karnataka as the semi conductor design hub in the country. Bengaluru is the hub for electronics industries. The upcoming new electronics investment destinations are Hassan, Mangaluru, Mysuru, Tumkur and Shimoga. Bengaluru is the second largest hub of semi-conductor companies in the world. Around 80% of the revenue of this sector comes from Bengaluru alone. Karnataka Biotechnology and Information Technology Society (KBITS) have established a fund called Karnataka Semi- Conductor Venture Capital Fund (KARSEMVEN) of INR Crore to support companies in this sector. 56 A Socio-Economic Snapshot

57 Information Technology Investments Region (ITIR) is a joint initiative of the Government of India and the State Government to attract investments in the IT/ITeS sector with a proposed investment of USD 20 Billion by 2030 having an employment potential of 255,000 direct jobs and 857,000 indirect jobs. Biotechnology Industry India is among the top 12 biotechnology destinations in the world and the Indian biotechnology sector is the second largest in Asia (after China). Also known as the Biotech Capital of India, Karnataka s contribution in the country s revenue from this sector is 26% and is home to more than 60% of India s biotech units leveraging from the presence of many primer life sciences institutes in the state like Indian Institute of Science (IISc), National Centre for Biological Science and Jawaharlal Nehru Centre for Advanced Scientific Research. The biotech revenue contribution to Karnataka s export was USD 530 Million. 226 out of a total of 800 bio-tech companies are present in Karnataka. Karnataka has more than 226 biotech companies functioning from the state. Some of the players include BIOCON, AstraZeneca India, Jubilant Life Sciences Limited, GlaxoSmithKline Pharmaceuticals Limited. To reinforce its position in the BT sector & encourage new investments Karnataka was the first state to have launched its Biotech Policy in The Millennium Biotech Policy II was launched in 2009 to further boost the industry. The broad objectives of the policy are: Creating specific like bio parks in areas of agriculture, marine biotech and animal husbandry. Increasing the quality of human resource in the industry by supporting specific educational and research institutions. Provide special fiscal incentives to the companies in this sector. A 106 acres state of the art Bio Tech Park, Bengaluru Helix has been set up in Bengaluru to give a special attention to the sector. The State Government is also planning to establish a Biotech Incubation Centre to promote and support startups in the biotech sector. A Vision Group on Bio Technology has been constituted to advise the government on policy initiatives. Mrs. Kiran Mazumdar Shaw, a pioneer in this industry is the Chairperson of this group. Smart Township 9 9 Six cities of Karnataka have been shortlisted for the Smart Cities Scheme of the Central Government, the project to develop 98 smart cities across India. These include Mangaluru, Hubli Dharwad, Devanagere, Tumkur, Shivamogga and Belagavi. A Socio-Economic Snapshot

58 Figure 29: Shortlisted Smart Cities Map of Karnataka Source: Visvesvaraya Trade Promotion Centre Mangaluru - Mangaluru is a major for Information Technology and outsourcing companies outside the capital city of Bengaluru. It is also the export hub for Coffee accounting 75% of India s coffee export. Hubli-Dharwad - Hubli Dharwad is one of the 49 metropolitan clusters selected by McKinsey & Company as growth hotspots in India. It is an important industrial centre with more than 3,000 small scale industries including being a textile hub for Karnataka. Valves and Machinery form the major exportable item from this area. Shivamogga - It is one of the mineral rich districts in Karnataka. Software, ITES, rice mills cane and bamboo industries form the major clusters. Auto component, foundry units, engineering units are coming up in the district. Tumkur - Identified clusters at Tumkur include printing cluster, handloom clusters and power loom clusters. The major exportable items from Tumkur are services software, gerkins, transformers & radiators, precision components, aircraft parts. Devanagere - It is an agricultural district due to the presence of large number of cotton mills and sugar mills. Sugar and cotton yarn form the major part of exportable items. There are 920 micro services enterprises in the district. Belgavi - Belgavi is proposed to be the second capital of Karnataka. It ranks second to Bengaluru in terms of overall exports from Karnataka. It is the major producer of milk in the state and has the highest number of sugar factories in Karnataka. Valves, pumps & its accessories, machine component form the major exportable items. The state government has submitted Smart City proposals to the Centre for Davangere, Tumkuru, Hubli-Dharwad, and Shivamogga. Already a pioneer in the technology front Karnataka has an added advantage in development of smart townships. 58 A Socio-Economic Snapshot

59 Tourism Industry Karnataka ranked 3rd in terms of domestic tourist arrivals and 9th in foreign tourist arrival in Total Tourist arrival in Karnataka has grown consistently since 2009 to 2014 at a CAGR of 23.79%. 9 9 The state is home to three World Heritage Sites. Hampi, Pattadakal and the Western Ghats of Karnataka are the ones and three more popular groups of monuments have entered the UNESCO s World Heritage tentative list. These include monuments and forts of the Deccan Sultanate at Gulbarga, Bidar and Bijapur, monuments of Srirangapatna island town and sacred ensemble of the Hoysalas series including Belur and Halebid. Figure 30: Trends in Domestic and Foreign Tourist arrival in Karnataka (in Millions) Domestic Tourist Footfalls (in Million) Domestic Foreign Source: Ministry of Tourism, Govt. of India; YES BANK Analysis A Socio-Economic Snapshot

60 The Tourism Policy has assigned industry status to the tourism sector and hosts plenty of incentives and concessions for this sector. It focuses on development of tourism in the state with a special emphasis on infrastructure development on PPP mode. This sector has a Vision Group on Tourism, which advises the government on various strategies and policy initiatives for the development of tourism in Karnataka. Golden Chariot, the only luxury train of southern India is from Karnataka. It is the winner of Asia s Leading Luxury Train award in Startup Industry Bengaluru, the capital city of Karnataka is known as the Startup Capital of India and is a host for more than 4500 startups. As per 2015 Global Startup Eco-system Ranking by Compass, Bengaluru has a overall ranking of 15 th position, four steps ahead of its previous ranking on 19 th position. It stands 10 th in terms of performance, 6 th in term of funding, 20th in market research, 17 th in talent and 12 th in terms of startup experience. 36% of Indian startups are from Karnataka. Most Startups in Bengaluru employ people. Some of the major players include Filpkart, Ola, Redbus, Myntra, and Big Basket. The National Association of Software & Services (NASSCOM) has set up two startup warehouses in Bengaluru. The state has launched its dedicated Startup Policy which aims to: Stimulate the growth of 20,000 technology startups, including 6,000 product startups by To generate 6 Lakh direct and 12 Lakh indirect employment in this sector. Mobilize INR 2,000 Crore of funding for startups. 9 9 Karnataka has three incubation centres, all in Bengaluru and has plans to set up additional centres. 60 A Socio-Economic Snapshot

61 Annexure 05 A Socio-Economic Snapshot

62 Annexure 1: District Map of Karnataka Source: MapsofIndia.com 62 A Socio-Economic Snapshot

63 Annexure 2: Road Network Map of Karnataka Source: MapsofIndia.com A Socio-Economic Snapshot

64 Annexure 3: Rail Network Map of Karnataka Source: MapsofIndia.com 64 A Socio-Economic Snapshot

65 Annexure 4: Industrial Map of Karnataka Auto & Auto Component Clusters in Karnataka OEMs Auto Component Manufacturers Source: Government of Karnataka A Socio-Economic Snapshot

66 IT Clusters in Karnataka Source: Government of Karnataka 66 A Socio-Economic Snapshot