R.V. Deshpande, Minister Of Industries & Tourism, Government Of Karnataka

He has been the longest serving industries minister of Karnataka and he is on a mission to get his state on the top investors’ list. In a conversation with The Dollar Business, R.V. Deshpande, Minister of Large & Medium Industries, talks about his priorities and agenda to make Karnataka the go-to destination for industries across sectors.

Interview by Shivani Kapoor | January 2016 Issue | The Dollar Business

TDB: Ever since you took charge as Karnataka’s Industries minister, what have been your efforts to attract investments? In your third innings, what are your top priorities?

R.V. Deshpande (RVD): I was previously a minister with the same portfolio between 1994 and 2004. Three months back, I was handed back charge of the same office. Our top priority is getting investments. It’s as simple as that. Today, every state is hungry for investments that can help create jobs, create wealth in the hands of the people and hence wealth in the treasury of the state, thereby bringing prosperity. Without investments, no state can flourish. You will find more global investors meets happening in every state and we welcome that. Investments should come; that is our thrust. Next in our priority list is bringing transparency, making quick decisions and ease of doing business. This apart, our focus is on upgrading infrastructure. Infrastructure is the key to development. We are trying to build roads, flyovers, and connect backward regions to main cities. However, we have a lot more left to be done. There are concerns regarding power. We have adequate power, but during droughts, we face problems because of our dependence on hydroelectric sources. Karnataka is focusing on additional power generation and will be adding more than 2000 MW of power by June-July 2016. Besides, we are increasing our non-conventional power capacities in solar, wind power and biomass. So from availability of power perspective, growth of manufacturing in Karnataka should be a natural step forward.

TDB: Bengaluru is hailed as the ‘Startup Capital’ of India and houses more than half of India’s start-ups. Now you plan to establish a Startup Council that will ideate and release a Startup policy. Tell us more about this initiative.

RVD: We are leaders in startups. There are large number of startups in the state spread across regions like Dharwad, Udupi, Mangalore, Belgaum and Bangalore. We are the first state in the country to introduce a ‘Startup policy’. Today, startups are not restricted to IT, they are spread across pharma, defence, manufacturing, tourism, etc. We have thought of this unique, industry-driven startup policy where we would be creating an investment fund of about Rs.500 crore along the lines of SIDBI.

The idea is to support those who have good ideas which they want to turn into reality. We will have experts who can look into the problems faced by startups and accordingly help them with solutions, as well as vet their ideas and take a call on whether they deserve funding from the council. The Startup Council would provide support to them. We are talking about initial stage startups. A startup policy for this is on the anvil, and this is work-in-progress.

TDB: Karnataka is the leader in IT/ ITeS. How is your government encouraging the sector?

RVD: As far as IT is concerned, we are leaders in the world. Karnataka ranks as the 4th most innovative cluster globally behind Silicon Valley, Boston and London. We are the largest exporters of software in the country accounting for about 40% of India’s software exports. We have unique IT policies to promote the sector. Plus we have incentives and concessions. But only incentives and concessions won’t help the industry unless they have access to good infrastructure and human resource, and this is something that Karnataka has been able to provide.

TDB: Do you feel Karnataka is facing stiff competition from neighbouring states of Maharashtra, Andhra Pradesh and Telangana in attracting investors?

RVD: When I am told that Andhra and Telangana would drain capital out of Karnataka by offering huge incentives, I tell them investments won’t go anywhere. We are not against concessions and incentives as we too have them in our policy. Today, investors have become careful in choosing a destination before investing. They are concerned about fiscal incentives but that is not their priority. There are other factors than incentives that are much more important.

TDB: What factors are your referring to? And in which areas does Karnataka have an edge to attract more investments than its neighbouring states?

RVD: A progressive outlook, good infrastructure and a rich human resource are prime factors to win investor attention. And Karnataka leads everywhere, be it the IT sector or startups or even research and development. We have the largest number of R&D centres in the country, and we are the biotech and aerospace hubs. These are strengths that cannot be replicated overnight. IT and aviation are our strengths. Defence again can be our strength since we have R&D.

TDB: You seem particularly confident that ‘minds at work’ in your state is superior to those found elsewhere in India. Is that so?

RVD: Most industry captains of India are in Karnataka. We have the global tech cluster. Why is this so? The biggest reason is human resource. Human resource is the biggest strength of Karnataka. In IT alone, 1.3 million people are working. Whether anyone wants to go to aviation, R&D, defence or manufacturing, they have no choice but to be in Karnataka.

Then there are other reasons besides just HR. The state has skilled manpower and good law and order. Also, we have developed clusters. For steel – it’s Bellary; cement – Gulbarga; automobile – Dharwad and Bangalore; IT – Mangalore and Mysore. So you see, clustered growth and development has taken place in Karnataka which you won’t find in any other state in India. We have a stable government and unique policies for all sectors.

TDB: How has been the response to the call for ‘Invest Karnataka 2016’?

RVD: Karantaka was the first state in the country to start the global investors meet in 2000. In this, we lead the country. Now the Central government is also encouraging foreign investments, be it in agriculture, horticulture, trade or industry. Those who have invested in Karnataka have received rich dividends. So far, the response to the ‘Invest Karnatka 2016’ event has been excellent. We have been holding roadshows in different cities, meetings with investors within the country and overseas, and they have shown keen interest in exploring business opportunities in the state. I believe in bringing investments on the ground and making them a reality. And we are confident to get more encouraging response in the upcoming global investors meet to be held in February next year.

TDB: But iconic German multinational Bosch has threatened to shift future investments elsewhere, companies like Hero Motocorp and Amazon have put on hold their expansion plans in Karnataka. Aren’t these signaling a disturbing trend in the state?

RVD: Bosch is happy with the state government. We recently inaugurated their plant in Bidadi. Sometimes, even your wife complains (laughs). They are like members of the family. And the reports on Hero Motocorp are nothing but wrong. When we asked the company heads (Munjals) if they had any problem in the state, they said absolutely not. They clearly said that they will consider investments in Karnataka in aviation and other sectors. Karnataka’s friendly manufacturing and services-driven policies aren’t going anywhere, and as long as that remains, investments aren’t going anywhere.

TDB: In the ‘Ease of doing business’ report, Karnataka was ranked a lowly 9th. How do you explain that?

RVD: Karnataka has been ranked 9th in the ease of doing business report but it has nothing to do with investments. Infact, ease of doing business started from Karnataka in 2002. When I was the industries minister previously, our government brought the Karnataka Industries (facilitation) Act 2002, and it was about ease of doing business. There are states like Jharkhand which are at top but have not attracted much investment. I believe success is what comes on the ground, can be seen and felt. On paper heroics matter little to our state government.

TDB: Still, what steps are being taken to get better as an investment destination and if we may say, improve the ease of doing business in the state?

RVD: We have held meetings on how we can take further steps to ease doing business. We have come out with steps like strengthening our ‘udyog mitra’ – a state government undertaking that assists investors, and we are delegating more powers to commissioner-rank officers to clear projects. Besides, we are also introducing some labour reforms. MoUs are welcome but our priority is clearing projects and bringing investments on the ground. This apart, we would try to bring more transparency in operations of various divisions of the state, upgrade online systems, etc.

TDB: Are you happy with PM Modi’s ‘Make in India’ programme? What has the initiative offered the state so far?

RVD: It is a good initiative and we are happy about it, but the Government of India should have clarity about the programme. There is no clarity on the policies. As a result, we are confused and the investors are confused as well. I am still not aware what is different in this programme. We have nothing against the programme and the PM should know that we are with the government. We just want to know what unique has happened after the initiative was launched. Make in India is happening since long, but there is nothing new to it. The ‘Make in India‘ campaign should have started from Karnataka because we were already making in India. Even before liberalisation came, MNCs arrived in Karnataka. Bosch was there, IBM landed in 1991. All the major MNCs have a presence in the state.

TDB: What role is the state government playing in providing a conducive environment to MSMEs?

RVD: We are encouraging small-scale industries and enterprises. If you glance through the industry policies of the state, you will find that the Karnataka government has got a prime place for MSMEs. In various Tier-I and Tier-II cities, along with backward regions, we are supporting them through various fiscal incentives like subsidies. For instance, in investments below Rs.100 crore, workers are entitled for PFs and other benefits. Again, improvement in this regard is always a work-in-progress.