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EntrepreneurialIndia

SculptingtheLandscape
21-23December,2009-Mumbai

KPMG IN INDIA

Foreword

EntrepreneurshipisthekeytoIndiaachievingherpromise

UnlikepasteditionsofthisstudyonIndianentrepreneurship

asaneconomyandasacountry.Unleashedafterdecades

whichsurveyedentrepreneursacrossthecountry,this

ofslowgrowthandgovernmentcontrol,Indias

whitepaperstudiesselectIndianstatesindetailandbring

entrepreneurshavebeguntotakeadvantageofmanyofthe

forththestatesperspective.Thestudyhasrevealedthat

opportunitiespresentedbythepostliberalizationbusiness

Indiansareclearlybullishandforwardthinkingabout

environment.However,foritssize,Indiahasstillhasmuch

entrepreneurshipandthattheyrecognizetheimportanceof

todoinordertoharnessentrepreneurshiponabroader

entrepreneurship.Butthereisstillalotofroomfor

level.Theentrepreneurialecosystemcandofarmorethan

improvement.Wehavealongwaytogotodevelopabroad

todaytospurtheentrepreneurtogreaterheights.Akey

basedandorganizedentrepreneurialcommunity.Thispaper

pillarofthisecosysteminIndiaaregovernmentscentral,

shouldallowustoreassessandrenewoureffortsin

stateandlocal.Governmentpolicies,incentivesand

addressingthesituation.Thestudyalsobringstogetherthe

programsplayasubstantialroleininfluencing

datathatcanbefurtherstudiedforpursuingaspecialpolicy

entrepreneurs.Thisplacesagreatresponsibilityon

focus.

governmentbodiestoenactpoliciesandlawsthat
encourageentrepreneurshipwhichinturncanleadtothe

AsacountryIndiashouldsustainapositivemomentumin

countryseconomicascent.

harnessingthebusinesseswehave,identifyingthegrowth
areasoftomorrowandsupportingmorepeopletobecome

KPMG,oneoftheleadingprovidersofadvisoryservicesin

entrepreneurs.Throughthisstudy,TiEandKPMGhopeto

IndiaandTiE,theworldslargestorganizationof

contributetocraftingmoremeaningfulpoliciesand

entrepreneursaspartoftheircommitmenttofoster

programsthatwillcontinuetoinspiremoreandmore

entrepreneurshipinIndiaarebringingoutthethirdeditionof

Indianstohaveanentrepreneurialmindsetanddevelopa

EntrepreneurialIndia2009.Thewhitepaperendeavorsto

strongercapacitytograbtheopportunitieswehavenow.

assesstheinitiativesofselectIndianstatestoencourage
entrepreneurialgrowthandputforthbestpractices,raise
theprofileofdiscussionsonentrepreneurshipdevelopment
andcontributetoshapingpolicy.
KPMGandTiEembarkedonthisuniquestudy,which
profilestheentrepreneuriallandscapeofIndiaandaimsto

VikramUtamsingh

SridharIyengar

Head-Markets

President

KPMGinIndia

TiEMumbai

uncoverfactorsleadingtoappropriatelevelsof
entrepreneurship.Thestudyevaluatestheperspectiveof
Indianstatesandtheirinitiativestowardsentrepreneurial
developmentononehandwhileevaluatingtheperception

JehilThakkar
ExecutiveDirector,Markets
KPMGinIndia

ofentrepreneursontheseinitiativesthroughtheirviewson
nationalstrengthsandweaknessesasacontextfor
entrepreneurshipontheother.Theentrepreneursindicate
whatpolicyorprogramchangestheybelievewouldenhance
thecountrysenvironmentforentrepreneurship.Italso
attemptstoestablishthebestpracticesacrossIndiato
fosterentrepreneurshipwhilealsobenchmarkingwithsome
oftheglobalbestpracticesinentrepreneurialeconomies
suchasSingapore,PhilippinesandIsrael.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

ExecutiveSummary

HowsupportiveistheecosysteminIndiadoinvestors,

TheEntrepreneursViewpoint

thegovernment,andsocietyprovideafoundationonwhich
entrepreneurscangrowandflourish?Itisaquestionworth

Availability of Finance

exploringindept.
Financialsupportwascitedasthemostlimitingfactorfor
Theemergenceofopportunitiesinmanysectorsandthe

entrepreneurship.Mostentrepreneurscitedthelackof

lackofopportunityinothershasdrivenmanyyoungpeople

appropriatefinancialhelp,resourcesandtheinaccessibility

tostrikeoutontheirown.Manyareleavingtheirwell

ofavailablefinancing.Thereisadeficiencyofsufficientdebt,

payingjobstoestablishtheirownsmallventures.

equityandventurecapitalfunding,governmentsubsidies

Entrepreneurshipishotandrisktakingabounds.The

andfundingavailablethroughgovernementagaencies.

promiseofwealthinthelongrunandthefreedomto

Mostentrepreneursexpressedtheneedforsufficient

choosetheirownpathare,majorfactorsbutdoingthings

funding,bothdebtandequityaimedathelpingnewand

forapassionandfindingfulfillmentarekeydriversaswell.

strugglingbusinesses.Theyalsostressedthattheevaluation

Today,thescopeandvarietyofself-generatedworkis

forloansshouldbefocusedontheviabilityofthebusiness

unlimited.

proposalandnotjustthequantumofcollateralorassetsize.

However,despitethegreatinitiativesundertakenbymany

The Policy Framework

Indianentrepreneurs,Indiaremainsatoughplacetobean
entrepreneur.Governmentregulations,cumbersome

Entrepreneursacrossthesixstatesprofiledmentionedthe

proceduresandrestrictedaccesstocapitalmakestarting

lackofstronggovernmentpolicysupportfor

andrunninganewbusinessachallengingproposition.

entrepreneurship.Theycitedbureaucracyandcorruption,
poorimplementationofexistingpoliciesandinadequate

Inmanycases,governmentsaremovingtowardsfriendlier

supportmechanismsaspartofthelimitingfactorsto

policiesbutmorerapidchangeisnecessary.

entrepreneurship.

TiEandKPMGasapartoftheiraspartoftheircommitment

Ontheotherhand,theygenerallyagreedthatthesupport

tofosterentrepreneurshipinIndiabringoutthisthirdedition

fornewandgrowingbusinessesisahighpriorityforstate

ofEntrepreneurialIndia2009.Thewhitepaperendeavorsto

governmentsandacknowledgeditasathrustareafor

assesstheinitiativesofselectIndianstatestoencourage

policy.Buttheycompletelydisagreedthatresultingpolicies

entrepreneurialgrowthandputforthbestpractices,raise

werebeingimplementedinamannerthatbenefitednew

theprofileofdiscussionsonentrepreneurshipdevelopment

andentrepreneurialbusinesses.

andcontributetoshapingpolicy.
Theratherambivalentviewofprofessionalsand
ThestudyevaluatestheperspectiveofIndianstatesand

entrepreneursonwhethergovernmentpolicyis

theirinitiativestowardsentrepreneurialdevelopmentaswell

categoricallylimitingorcontributingtoentrepreneurship

asevaluatingtheperceptionofentrepreneurs.The

suggeststhattheyviewthegovernmentpolicyhavinga

entrepreneursindicatewhatpolicyorprogramchangesthey

limitedeffect.Whilethegovernmentisperceivedtobe

believewouldenhancethecountrysenvironmentfor

focusingonentrepreneurship,muchneedstobedoneat

entrepreneurship.

thegroundlevelinorderforgovernmentpolicytobecomea
truecatalystforentrepreneurship.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Entrepreneursstressedthatimplementinggovernment

Partnership Approach

policiesshouldbemoreefficient.Theyrecommendedlocal
policiesshouldalsobecraftedtohelpthebusinessesin

Entrepreneurshipaccordingtogovernmentsisnotpurelya

ruralareasandthatbothnationalandstategovernment

functionofindividualorstatespolicyregime.Itisrathera

agenciesshouldproactivelyengageinseamless

collaborationofentrepreneurs,educationalinstitutes,

partnershipsandassistanceineffectingpoliciesfor

independentagencies,themediaandthegovernment,

entrepreneurship.

wheregovernmentisafacilitatorandanenabler.The
governmentwouldliketoseemoreproactivepartnership

Access to Markets

fromentrepreneursandbusinessinaddressingtheoverall
developmentalchallengesthatfaceIndia.

Formidablebarrierstohighgrowthentrepreneurship
continuetoexistinIndia.Ourresearchintothebarriersand

Cost Benefit Matrix

facilitatorsofentrepreneurshipinthepreviouseditionsof
EntrepreneurialIndiahasrevealedmanyfacetsofthis

Whilegovernmentisoftencriticizedfornotproviding

problem.

enoughsupport.Withlimitedresources,eachstatealso
needstobeconvincedofthecostbenefitbeforeinvesting

StatesViewpoint

inapolicyoraspecificdevelopmentprogram.The
governmentsneedtoevaluatecarefullyeveryrequestfor

Thesixstatesprofiledforthepurposeofthisstudyhave

assistanceorpolicyenactmenttotakeintoaccountthe

beenmovingintherightdirectiontopromotebusiness

overallresourcepictureandgoalsfortheregion.

growth.Thegovernmentisincreasinglybecomingreceptive
toentrepreneurialdemandsandexpectationsandrollingout

Prioritization

programstoprovidesupporttonewaswellasexisting
enterprises.However,implementationofsomeofthe

Eachstateinthecountryhasasetofdevelopmental

programsiseitherlimitedorfocusedatlargerenterprises.

challengesandprioritiestoraisetheoverallprofileofits

Insomecases,thegovernmentsacrossthesestatesare

citizens.Withmorethan30percentofcountryspopulation

increasinglyadoptingnewerapproaches.Whilethestates

belowpovertyline,thestatesprioritiesareoftenclearand

aremovingintherightdirection,albeitatacautiouspace,

maynotfitwiththeprioritiesofsomeentrepreneursand

theytoohavetheirsetofchallenges.

thatsometimeslimitsopportunities.Althoughthe
governmentsacknowledgethatopportunitycreationwill
haveadominoeffectandcouldleadtolongtermeconomic
upliftment,manyshorttermprioritiesandneedsoftentake
precedenceoverlongtermgoals.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Contents

Introduction

01

The Assessment

04

Punjab

05

Gujarat

12

Delhi

19

TamilNadu

25

Karnataka

32

Maharashtra

38

Creating an Entrepreneurship Culture

44

Conclusion and Policy Recommendations

48

About the study

50

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

01

Introduction

Thecentralroleofentrepreneurshipintheeconomicgrowth

infrastructurehasledentrepreneurstocreatetheirownand

ofnationsisincreasinglycomingintofocus,especiallyinthe

intheprocess,lockuppreciouscapitalwhichshouldhave

recenttroubledtimes.Aspointedoutinarecentarticlein

beendeployedtogrowthebusiness.Inadequateavailability

The Economist,evenasgovernmentsarebusytryingto

oflandwithcleartitles,andowner-occupantfriendlypolicies

savetheireconomies,policymakersaredemonstratinga

hasledtothediversionofscarcecapitaltowards

renewedinterestinentrepreneurshipandinnovation.

unproductiveinvestmentsinlandandbuildings.Lengthy
courtproceedingsandslowjudicialenforcementofproperty

Inmodernopeneconomies,entrepreneurshipisarguedto

rightsandprivatecontractshaveledtosub-optimal

befarmoreimportantthanitverwas.Itisevidentthat

businesspractices.

entrepreneurialventuresaredrivingthegrowthof
economiesdevelopedandemerging.However,amongst

Despiteallodds,theaccentonliberalizationand

thetypesofentrepreneurshipthereisnecessitybased

globalizationinthelasttwodecadeshasbroughtabout

entrepreneurshipatoneendofthespectrumtoopportunity

mitigatingeffectsinmanyoftheareascitedabove.A

basedentrepreneurshipattheother,thatseeksto

discussionwithsomeoftheestablishedentrepreneurs

revolutionizetheworldbyleveragingnewtechnologyand

pointstoapositiveroleplayedbytheneweconomic

creatingnewmarkets.

policiesinopeningupareas.

WhileIndiahasalonghistoryofentrepreneurship,as

GiventheambitiouseconomicgrowthtargetsthatIndiahas

evidencedbycenturiesofbusinessandcommercialactivity

setforitself,highgrowthbusinesseshaveacrucialroleto

andtheexistenceofgenerationsoldbusinessgroupsand

play.Whilehighgrowthbusinesseshavetousetheir

families,recentGlobalEntrepreneurshipMonitorstudies

entrepreneurialingenuitytoovercometheenvironmental

foundthatentrepreneurshipinIndiahaspredominantlybeen

constraintsorrenderthemirrelevant,publicpolicyhasa

necessitybasedratherthanopportunitybased.

significantanddecisiveroletoplayinminimizing,and
preferably,completelyremovingtheconstraintsthathobble

Formidablebarriersexisttoentrepreneurshipcontinueto

highgrowthentrepreneurship.

existinIndiaforhighgrowthentrepreneurship.Ourresearch
intothebarriersandfacilitatorsofentrepreneurshipinthe
previouseditionsofEntrepreneurial India hasrevealedmany
facetsofthisproblem.
Severalexamplescitedininterviewsinclude,several
constraintstoquicktechnologyadoptionbyIndian
companies,.InconsistentIndirecttaxrulesand
enforcementissuesthatlimittheabilitytoscalequickly,
Laborlawsthatlimitthemobilityoflaborforced
entrepreneurstofeargrowthinemployeestrength.Poor

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

02

ThechallengeforpolicymakersinIndiacanthusbe
articulatedasoneofcreatingtherightframeworkof
conditionstoenabletheestablishmentoffastgrowing,
innovativenewbusinesses.Therearemanyavenuesopen
topolicymakerstoaddresstheissue,butthechallenge
wouldbeinprioritization-pickingtherightsetofissuesand
sequencingthemtoachievesignificantandquickpay-off.
Againstthisbackdrop,theEntrepreneurial India 2009
focusesonhowtoredesignIndia'sentrepreneurial
ecosystemsoIndiacanfinallyunleashwhatPrimeMinister
Singhcalled"theanimalspirit"ofIndianentrepreneurs.TiE
andKPMGhavestudiedselectIndianstatestounderstand
theirregulatoryandpolicyframeworkandsuggestbest
practicesthatcouldhelpthecountrytocreateatruly
conduciveentrepreneurialecosystemfocusedatfostering
highgrowthentrepreneurialactivitynotlimitedtonecessity
butoneemergingfromaplethoraofopportunities.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

04

TheAssessment

TodayinIndia,opportunityabounds.Thescopefor

ThefollowingpageswillprofiletheinitiativesbysixIndian

entrepreneurialdevelopmentinthecountryistremendous.

statestofosterentrepreneurialandbusinessgrowth.

WhileGDPgrowthseemstobebackontrack,thecountry
isfacedwithtremendouschallengesincludingcreationof

Ourresearchfocusesonunderstandingthekeypolicy

widespreademploymentandreducingpoverty.Creatingan

initiativesofthesestatestopromotebusinessandindustry.

environmentandanecosystemthatencouragesand

Itfurtheranalysestheentrepreneursperceptionofthese

facilitatestheentrepreneurshiptakesadvantageof

initiativesandtheStateschallengesinpromoting

opportunitycanbecriticalinthenationmeetingitsoverall

entrepreneurialgrowth.Astheseperceptionsand

developmentgoals.

challengesevolve,KPMGandTiEplantoactasacatalyst
forgovernmentsandentrepreneurstocometogetherto

InIndia,wehavedeeptechnicalandknowledgebased

refineideas,enablebetterpolicyimplementationandfoster

resourcestotakeuptheentrepreneurialchallenge.The

growth.

successofIndianentrepreneursaroundtheworld,and
increasinglyinIndia,istestimonytothedriveourpotential
asanentrepreneurialnation.Atpresent,therearevarious
organizationsatthecountrylevelandstateleveloffering
supporttoentrepreneursinvariousways.TheGovernment
ofIndiaandvariousStateGovernmentshavebeen
implementingvariousschemesandprogrammesaimedat
nurturingentrepreneurshipoverthelastfewdecades.
VariousChambersofCommerce&apexinstitutionshave
startedorganizingseminars&workshopstopromote
entrepreneurship.Incidentally,variousmanagementcolleges
haveincorporatedentrepreneurshipaspartoftheir
curriculum.Thisisindeedagooddevelopment.Thisshows
thecommitmentoftheGovernmentandthevarious
organizationstowardsdevelopingentrepreneurialqualitiesin
theindividuals.
However,inacountry,whereover300millionpeopleare
livingbelowthepovertyline,itissimplyimpossibleforany
governmentalonetodriveentrepreneurialandbusiness
growthaproductivepartnershipwithallstakeholdersis
criticalandnecessary.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Punjab
Population

Per Capita Net State Domestic Product

24 million (as per 2001 census)


The state had about 0.520 million (67.26 percent)
employees in public sector and rest of the 0.253
million employees was in private sector in 2005
(Source: Government of Punjab)

Source:Directorateofeconomicsandstatisticsandstategovernment,2008-09

ThePolicyFramework
New industrial policy to push the states economy
PunjabisoneofthelargestproducersoffoodgrainsinIndiawithfoodgrainscontributing68percenttotheannualfood
productionofIndia.In2006-07itcontributed75.3percentWheatand31.2percentRice.ItwasthefirstIndianstatetouse
agriculturaltechnologytoengineeraGreenRevolution.1
Theeasyavailabilityofrawmaterialhasattractedagro-basedindustrieslikefood&foodproducts,textilesandapparel.
Otherindustrialsectorsinthestateincludechemicalsandchemicalproductsandtransportequipment.
Punjabseconomyisprimarilyanagro-basedeconomyanditsindustrialbaseisdominatedbysmallandmedium
enterprises.However,withthefastchangingglobaleconomicscenario,thestategovernmenthasframedanewIndustrial
Policydirectedatattractingindustrialinvestmentinthestate.

1 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

06

The Assessment | Punjab


Highlights of the Industrial Policy2
Theprimaryobjectiveofthenewindustrialpolicyistobringsynergybetweentheagricultureandindustrialsectorto
growthestateseconomy
NoCLUchargesandLicensefeeforchangeoflandusefromagriculturetoindustryanywhereinthestate
DedicatedannualizedfundofINR1500millionwillbecreatedforthepurposesofcreationofclusters&upgradationof
IndustrialInfrastructure
StateGovernmentwillcreatelandbankstodevelopIndustrialAreasfortherelocationofexistingindustriesfrom
residentialareasandforlocationofnewindustries
Extendedseveralpolicyincentivesandconcessionstoareaslikehotelandresortprojects,healthtourism,farmtourism,
multiplexesandtextileindustry

Industry specific Policies


IT Policy
ITPolicyintendstocreateanenablingenvironmentinthestateforIT/KnowledgeIndustrytoattractinvestmentfromthe
privatesector.ItalsotargetstheexportsofIT/KnowledgeindustryworthINR214.6billion(USD4.6billion)and0.6million
directandindirectjobsby2018.3
TheincentivesgiventoIT/TIESIndustryinclude:4
Exemptionsfromstampdutyandregistrationfeeforlandtransfer/allottedbyPICTCL(PunjabInformation&
CommunicationTechnologyCorporationLtd.)
StampdutyreimbursementonlandacquiredbydeveloperforbuildingITparkorITunitsdevelopingtheirowncampuses
VATonallITproductsrationalizedtobeatparwiththeminimumfloorrateof4percent
ITunitscanbesetupinresidential,commercial,institutional,industrialoragricultureusezonenotifiedunderthemaster
plan
Capitalsubsidyat20percentoffixedcapitalinvestmentintheproject,subjecttoceilingofINR2milliontobegivento
first10SMEunitsinITParknotifiedbyPICTCL
PunjabVentureCapitalFundhasbeencreatedbyGovernmentofPunjab,SIDBIandvariousstatecorporationsforIT/
KnowledgeIndustry
ITParksnotifiedbyPICTCLwillbeexemptedfromstatutorypowercuts,restrictionsonpeakloadhoursandweekly
loadshedding.ITunitsandparkswillbechargedfortheactualunitsconsumed.

2 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
3 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
4 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

07

The Assessment | Punjab


Agro- Policy5
Inordertodeveloptheagrosector,thepolicyhasmadeprovisionof:
Interestsubsidywouldbegrantedtounitsavailingtermloanfromscheduled/nationalizedBanks/FIs,whichfallunderthe
purviewoftheReserveBankofIndia
5percentbackendedsubsidyfor5yearsontheinterestontermloansubjecttoaceilingofINR2millionperyearper
unitwillbeprovidedsubjecttotheconditionsspecified
InterestsubsidywillbeavailabletoagroindustrialunitsmakingfixedcapitalinvestmentrangingfromINR100millionto
lessthanINR250millionandavailingtermloanuptoINR150million.Thecostoflandforthecomputationoffixed
capitalinvestmentwillnotbemorethan20percentoffixedcapitalinvestment
Assistanceforpreparationofdetailedprojectreportandforpatentregistrationinagro-industriesupto50percent
CLUchargeswouldbewaivedoffwhileEDCchargesaretobereviewed
VATandothertaxes/levieswouldberationalized

Notification Textile Policy 20066


TextilesareafocusareaofIndustrypolicyinPunjab.KeyHighlightsoftheTextilePolicyare:
ApparelTrainingandDesignCentreinLudhianaandparticipationoftheprivatesectorisbeingencouragedtostrengthen
apparel-relatedcoursesofIndustrialTrainingInstitutesandPolytechnicsinthestate
Assistanceinlandacquisitionbythestategovernmentforsettingupofmegatextileunits
Creationofinfrastructureintheformoftextileclusters,apparelparksandintegratedtextileparks,havingallnecessary
facilitiesatoneplace,developedmainlythroughprivatesectorparticipation
Reductioninelectricitydutytohalftheexistingrateformegatextileprojectsforaperiodoffiveyearsandfullwaiverof
electricitydutyforaperiodofsevenyearsformegatextileprojectsinthedistrictsofPatiala,Sangrur,Mansa,Bathinda,
Faridkot,Moga,MuktsarandFerozepur
Settingupofneweducationalandtraininginstitutesformakingskilledtechnicalworkforceavailabletotheindustry,with
assistancefromtheGovernmentofIndiaaswellasprivatesectorparticipation.
Creationofinfrastructurethroughclusters,educationalandtraininginstitutions
Reductionofelectricitydutyforprojects
Assistanceinlandacquisition
Biotech Policy 20066
Thepolicyintendstofacilitatethegrowthofbiotechindustriesanddevelopmentofcleanbiotechtechnologiesinthestate.
Keyinitiativesunderthispolicyinclude:
Conductingworkshopsandtrainingsessionsonapplicationofcleanbiotechtechnologiestocreatepublicawareness
aboutbiotechnology
SetupthePunjabBiotechPromotionBoardtoattractinvestmentinthesector

5 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
6 PublicPrivatePartnershipinIndia,Punjab,StatePolicy

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

08

The Assessment | Punjab


Promotionofpublic-privatepartnershipsinagricultureextension,cropdiversificationandorganicfarminginthestate
Establishinganewbiotechnologyinstitute,whichwillactasabiotechnologydevelopmentcentretomeetR&D,pilot
scaletestingandvalidationrequirementsofthebiotechnologyindustry
Creatingagri-clinicsandagri-businesscentresthroughoutthestatetoserveasnodalcentresforinformation
disseminationandkisancallcentrestoprovideimmediateandfirst-handinformationtofarmers

Micro, Small and Medium Enterprise Policy highlights7


Interestsubsidywillbeavailabletoexistingsmall/mediumagroindustrialunitsundertakingmodernizationand/or
technologyup-gradationforinstallingnewequipmentsandavailingtermloanuptoINR50millionforthepurpose
Interestsubsidyat5percentfor5yearsontheinterestontermloansubjecttoceilingofINR2millionperyearperunit
toagro-industrialunits,agri-infrastructureprojectsandalsotoexistingsmall/mediumagro-industrialunitsfor
modernization
Capitalsubsidyat20percentoffixedcapitalinvestmentinaproject,subjecttoceilingofINR2million,tobeavailableto
first10approvedSMEunitsintheITParksnotifiedbyPICTCL
TheStateGovernmentwouldencourageexistingsmall/mediumagroindustrialunitstoundertakemodernizationand/or
technologyupgradationtomeetthechallengesofmarketing

ThePolicyImpact
Strong agricultural and well developed small/medium scale industrial base
Thesmallscaleindustriesleadtheindustrialperformanceofthestatewith47percentofproduction,60percentofexports
and21percentoftheinvestmentfortheindustrialsectorin2008.8

Small Scale Industries in Punjab


Units(inmillion)

FixedInvestment
(INRMillion)

Employment
(InMillion)

ProductionValue
(INRMillion)

2004-05

0.204

48350

0.934

250950

2005-06

0.205

48550

0.938

252000

2006-07

0.205

55000

NA

NA

Source:GovernmentofPunjabandCII,2007-08

7 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
8 IBEF

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

09

The Assessment | Punjab


Investment intentions in terms of IEMs filed,
LOIs/DILs issued in Punjab
Numbers

Focus on increasing the existing industrial base

ProposedInvestment

Thenewindustrialpolicyhasunveiledreformssuchascluster

(INRBillion)

approachwhichincludesdevelopmentandupgradationof
infrastructure.

2005

203

58.46

2006

214

114.09

2007

105

51.72

2008

102

94.82

2009
(tillAug)

42

86.08

Thenewpolicyislikelytostrengthentheexistingsmallscale
sectorsuchashandtools,steel,forging,castingandtextile
locatedinseveralpartsoftheState.Smallscaleindustrialhubs
includingLudhiana,Batala,Jalandhar,Amritsar,Mohali,
Kapurthala,MandiGobindgarharelikelytobebenefitfromthe
policy.
Source:DepartmentofIndustrialPolicyandPromotion,Monthly
Magazine,September2009

NotonlythesmallscalesectorbutalsotheITIndustryandagro-sectorareexpectedtoattractinvestmenttothestate.The
policyreformstocreatelandbankstoprovidelandataffordablepricestonewindustriesarealsolikelytoincreasethefresh
investmentinthestate.

GrowthImpetus
Proposed Industrial infrastructure
ConsideringthattheIndustrialparksfortheIT,BiotechandTextileindustriesaretheprimarycatalystforthegrowthofthe
industry,thestategovernmentisencouragingthedevelopmentofParks.About273MegaIndustrialManufacturing,
IndustrialPark,MultiplexandHotelProjectswithproposedinvestmentofINR614.66billionhavebeenapprovedbyState
Governmentforimplementationduring2007-08.9
Someoftheindustrialparkscomingupinnearfutureinthestateareasfollows:

Industries

Infrastructure
ApparelExportersAssociationofLudhianaandthePunjabSmallIndustriesCorporationjointlydevelopingan
apparelparkin85acreswith102plots

Textiles
LudhianaIntegratedTextilePark(forknittingandgarmenting)inLudhiana,andLotusIntegratedTexpark,in
Dhaula,DistrictBarnalahavebeenapprovedforPunjabundertheSITPSchemein2007
FoodParks

SirhindinFatehgarhSahibdistrict

IndustrialClusters

Textile(Ludhiana),Leatherindustry(Jalandhar),SewingMachine&parts(Ludhiana),Agriculturalimplements
(Moga),MachineToolsatBatala,BicyclesandBicyclePartsatLudhiana,RerollingSteelMillsatMandi
Gobindgarh,GemsandJewelleryatAmritsar,DieselEnginesatPhagwara,HandicraftsatHoshiarpur
AutomobilesandAutoPartsinLudhianaandWoodenFurnitureatKartarpur

InformationTechnology
Parks

ElectronicsTownship(ELTOP),spanning365acresinMohaliformsthehuboftheITindustryinPunjab
ITparksarealsoplannedforPatiala,Amritsar,JalandharandLudhiana
QuarkcityIndiaPvt.Ltd.-ITspecificSEZinMohali.ThisSEZcoversanareaof20hectares

SEZ
RanbaxyLaboratoriesLtd.,MohaliThepharmaSEZcoversanareaof32hectares
Source:UnitedNationsIndustrialDevelopmentOrganization,PunjabIndustrialreview,2008

9 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

10

The Assessment | Punjab


Venture Capital fund for IT industry
ThestatehaslaunchedaVentureCapitalFunddedicatedtoITIndustrywithacorpusofINR200million.Thishasbeen
fundedjointlybyPSIDC,PunjabInfotech,PFCandSIDBI.10
States emphasis on the development of skilled work
Faculty

Institutions

Students

Engineering

38

9455

Management

57

2,000

HotelManagement&
CateringTechnology

120

MCA

25

1,180

force
Thestatehasastrongeducationalinfrastructure,with
literacyrateof69.7percent,whichisabovethenational
averageof64.8percent(2001census).11

Source:GovernmentofPunjab,Education

The Entrepreneurs Viewpoint


TheentrepreneursinPunjabareawareofthenewindustrialpolicyandadmitthatthestatehastakensomeinitiativesand
ismovingintherightdirection.TheyacknowledgetheinitiativestowardspromotingITindustryinthestate,however,the
entrepreneursarekeenlyawaitinganeffectivesinglewindowclearance.Theyalsoexpresstheneedtomigratemost
processesonlinetoensurefasterturnaroundsandpromotestandardization.Whiletheentrepreneursacknowledgethe
initiativesofthegovernment,thereisageneralperceptionthatthestatelacksthepoliticalwilltofocusonentrepreneurial
development.
Withregardstoeducationaldevelopment,entrepreneursfindagapbetweenacademiaandindustryandaneedforindustry
readyprofessionals.Thereseemstobeaneedforincreasedfocusonvocationaltrainingandskillsbasededucation.
WhiletheentrepreneursappreciatetheagroinitiativesandtheITindustrydevelopment,theyexpressaneedtoconsciously
boostthemanufacturingsector.Itisfeltthataconsiderablenumberofmanufacturingunitshavemovedtonearbystates
likeHimachalthatmayofferamorewelcomingenvironment.
Theentrepreneursalsoacknowledgethatthereisaneedforproactiveandusefulinteractionbetweengovernmentand
industryassociationstoarriveatamutuallyagreeablepolicyframeworkwhichislong-termandpractical.Theentrepreneurs
canbepartoftheoveralldevelopmentstrategyiftheyareconsideredatthetimeofformulatingthestrategy.Ageneral
perceptionisthatstrategiesareusuallymadekeepingthelargerentrepreneursinmindthusnotbenefitingsmaller
enterprises.However,notunderminingtheneedtoattractlargeenterprises,entrepreneursadmitlargerenterprisesare
criticaltotheecosystemtoactasacustomerbaseforMSMEs
Further,whenprobedonawishlist,theentrepreneursexpressedaneedforaregionwisepolicyandaclusterbased
approachratherthanonesinglepolicyfortheentireState.
ASeedandVenturefundcocreatedbythegovernmentandestablishedentrepreneursisalsoexpectedtoprovide
opportunitiestothestatesaspiringentrepreneurialpopulation.

10 GovernmentofPunjab,IndustrialPolicy,2009
11 MaharashtraGovernment,EconomicSurvey,2008-09
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

11

The Assessment | Punjab


The Governments Viewpoint
ThestategovernmentpraisesthepeopleofPunjabfortheirentrepreneurialqualities.However,itisfeltthatinmanycases,
theentrepreneurslimitthemselvesanddonotpushforscaleafterreachingacertainlevel.Thestatebelievesthatthereis
anenormouslevelofinnovationatthegrassrootlevelbutthisinnovationisnotcommerciallyexploitedinanefficient
manner.Rapidtechnologyadoptionisalsoachallengeasvoicedbythegovernment.
Thegovernmenthoweveradmitsthatthesupportsystemmaynotbesufficientlyrobusttogiveentrepreneurstheleverage
theyneedtogetthemtothenextlevel.Thegovernmentalsofeelsthementoringinthestateisminimalorabsentwhich
furtherleadstoopportunitylossorstagnation.
Onfinancialincentivestopromoteindustry,thestategovernmentstatedthatlimitedfundsconstrainitfromgivingmany
exemptionsandsubsidies.Thereisnoplannedexpenditureonindustries.However,shouldsurplusfundsbemadeavailable,
thestatewillfocusoninfrastructuredevelopment,VCfund,developmentoflaborskillsandlanddevelopment.
JustifyingthestatesfocusonAgricultureandAgrobasedindustries,thestatefeelsthatitsfocusiscommensuratewith
thesectorscontributiontoGSDP.TakingtheexampleofpowerApprox32percentofpowerisconsumedbyAgriculture,
35percentbyindustry,19-20percentislostandbalanceusedfordomesticpurpose.However,industrycontributesonly15
percentoftheGSDP.
Acknowledgingthedemandsofentrepreneurs,thestategovernmentrealizesandrecognizestheneedfordevelopmenton
otherfactorslikelanddevelopment;industryspecificinfrastructurelikecoldstorage,goodroads,properwatermanagement
andindustryclusterscomprisingsimilarconcernsandexpertisetobesetup.Fromthestatesperspective,ifgivenachoice
theywouldenhancetheirfocusonSMEsectorasthelargerenterprisescanavailofexternalhelp.
Withregardstospecificentrepreneurialeducationanddevelopment,thestatehascoursesonentrepreneurshipwherethe
objectiveistoprovidetheknowledgeforjobcreationaswellasselfemployment.Thereisalsocontinuousefforttoenable
andincreaseinteractionwiththeindustryandbridgethegapbetweenwhatistaughtintheseinstitutesandwhatthe
industryrequires.PeoplefromIndustryarecalledforinteractions,workshopsandtalks.Theyarealsoinvolvedwhile
developingthecurricula.Initiativeshavealsobeenstartedforcollaborationbetweenthegovernmentandindustryplayers
withbiggerorganizationslikeTATAandL&Ttakingthelead.
TheStateismovingintherightdirectionbutpolicyimplementationneedstoincreasethemomentumofentrepreneurial
growth.TheStatedoescitetheneedforadditionalfinancialresourcestoimplementthesepoliciesthough.TheGovernment
alsolooksforwardtoacommunicationandfeedbackmechanismwithitsentrepreneursandisopentoinitiativesthatwill
increasecommunicationandpartnershippotentialwithprivateindustry.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Gujarat
Population
50.6 million (as per 2001 census)
Per Capita Net State Domestic Product

Job creation Trend

Source:SocioEconomicReview,GujaratState,20082009

Source:SocioEconomicReview,GujaratState,20082009

ThePolicyFramework
Highlights of the Industrial Policy 2009
GujaratisconsideredoneoftheleadingindustrialstatesinIndiaandisoftenprojectedasanexampleofabusiness-friendly
state.Itaccountsfor22percentofthecountrystotalinvestmentandcontributesabout16percenttothetotalvalueof
outputaddedbythemanufacturingsectorinthecountry1.Thestatehasachievedgrowthintheindustrialsectorand
contributesnearly16.1percenttothecountrysindustrialoutput1.
ToprovideimpetustothegrowthoftheindustrialunitsinGujarat,thestategovernmenthasreviewedandupdatedthe
IndustrialPolicyandannouncedtheGujaratIndustrialPolicy2009.Themainobjectiveofthepolicyistofacilitateinvestment
inthestate,createlargescaleemploymentopportunitiesandachieveglobalcompetitivenessbyimprovingproductivity
amongindustrialunits.Asperthenormsofthepolicy,thestatehopestodothefollowing2:

1 SocioEconomicReview,GujaratState,20082009
2 IndustriesandMinesDepartmentofGujarat,IndustrialPolicy,2009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

13

The Assessment | Gujarat


FocusonSpecialInvestmentRegions(SIR)andInvestmentRegions(IR)withconvergenceofindustrial,socialandurban
infrastructure.ThestatehaslegislatedtheSpecialInvestmentRegionAct,2009(SIRAct)forfacilitatingdevelopmentof
SIRinDedicatedFreightCorridor(DFC)andDelhiMumbaiIndustrialCorridor(DMIC)
Encouragesettingupofmegaprojectstofacilitatelargescaleeconomicactivityinthestate.Projectswithinvestment
ofmorethanINR10billionandcapacitytoprovideemploymentto2,000peopleareencouraged
Promotionofclusterdevelopmentapproachbyprovidingfinancialassistancetotheclusters
Specialthrusttosectorssuchastextilesandapparels;gemsandjewellery,agri-business,fisheries,IT/Knowledgebasedindustries,nanotechnology,biotechnology,non-conventionalenergyresourcesportandrelatedindustriesand
powersector
Providingfinancialassistancefortheupgradationandimprovementuponthestatusofinfrastructureinthestate
Developmentofnewindustrialestatesinfocussectorstopromotesectorspecificeconomicactivityandgenerate
employment.Thestategovernmentplanstoprovidefinancialassistanceandincentivessuchasreimbursementof
stampdutyonthecostofland
DevelopmentofnewindustrialestatesthroughthePublicPrivatePartnershipmodel(PPP)framework
Emphasisonencouragingexpansionoftheskilledandeducatedmanpowerbase
TheGovernmentofGujarat(GoG)hasincorporatedGujaratKnowledgeSocietyandplanstosetupknowledge
corridorsforhighereducation
Ithasproposedtosetuptrainingextensioncentersinindustrialparks/clusters/SEZsonaPPPbasis,anchor
institutes,incubationcenters

Industry specific Policies


Thestateisprovidingsupporttothekeythrustsectorsthroughspecificpolicyinitiatives:
IT/ITES Policy3
TheGovernmentofGujarathasundertakeninitiativestopromotethe
IT/ITESindustryinthestate.ThestategovernmenthasnotifiedIT
Policy20062011inNovember2006.Asperthepolicy,thefollowing
incentiveswillbeprovidedtoaugmentthegrowthofthesector:
Exemptionfrompaymentofelectricitydutyforaperiodoffive
yearsandpowercutsforallnewITunits
ExemptionofstampdutyforunitsintheITParksandITSEZ
FinancialassistancetoITparkdeveloperandallowingadditional
floorspaceindex(FSI)forIT/ITESparksinurbancenters
ProposedinvestmentofaboutINR114millionin2009-20104
GrantingofSEZstatustotheITindustrysubjecttotheprovisionof
SEZAct/rules

3 IndustriesandMinesDepartmentofGujarat,IndustrialPolicy,2009
4 IndustriesandMinesDepartmentofGujarat,InvestmentOpportunities(Vision2010forProposedInvestmentProgram)

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

14

The Assessment | Gujarat


Biotechnology Policy5
ThestateofGujaratconsistofmorethan50biotechnologycompaniesand66supportorganizations6.Toencouragenew
entrepreneursandattractinvestmentsinbiotechnologysector,theGoGhasformulatedtheStateBiotechnologyPolicy
20072012.Thekeyhighlightsofthepolicyare:
Focusonthrustareassuchasanimalhusbandry;agriculture;pharmaandhealthcare;andmarineforthedevelopmentin
biotechnology
Facilitateprivatepartnershipsfordevelopingbiotechnologyparks,zonesandothersupportinginfrastructureforresearch,
training,testing,andaccreditation
Financialassistanceforthebiotechnologyparksat50percentoffixedcapitalinvestmentsinland,buildingsand
infrastructurefacilitiesuptoamaximumofINR25million
Promotingsinglewindowclearancebyfacilitatingeasyapprovalsbyinstitutingacoordinatingorliaisonofficer
Gems and Jewellery Policy7
TheGoGhasidentifiedthegemsandjewellerysectorasoneofthethrust
areasfordevelopment.Thestateaccountsfor80percentofthediamonds
processedinIndiaandhasemergedasthemajorsourceofemployment
generation.Tofurtherenhanceitsdominanceinthesector,thestate
governmenthasformulatedvariousschemestomakethestateasthe
favorabledestinationofinvestment.
FinancialassistancebywayofinterestsubsidytoModernJewellery
unitsattherateof3percentperannumuptoamaximumofINR1.5
million
EstablishmentofjewelleryparksbyencouragingPPPinthesector
FinancialassistancefortheestablishmentofHallmarkCertification
CentresandGemsTestingCentres
Textile and Apparel8
Thestatecontributesabout33percentofmill-madefabricand25percentofpower-loomfabricofthecountry.Tofurther
augmentthegrowthofthesector,thestategovernmenthasintroducedvariousschemes:
Financialassistancebywayofinterestsubsidyintechnicaltextiles,spinning,weaving,knitting,apparelandmachine
carpeting
Financialassistancefortechnologyacquisitionandupgradation.
ProposedinvestmentofaboutINR4billiontothesector9
AssistanceforestablishingApparelTrainingInstitutions
Supportforsettingupapparel/sewingparks,weavingparkforcotton/synthetictextiles,exclusivetechnicaltextileparks,
etc,onPPPbasis

5 GovernmentofGujaratScienceandTechnologyDepartment,BTPolicy20072012
6 GujaratTheGrowthEngineofIndia,SectorProfile,Biotechnology,January2009
7 GovernmentofGujarat,IndustriesandMinesDepartment,GemsandJewellerySector,2009
8 GovernmentofGujarat,IndustriesandMinesDepartment,TextileandApparelSector,2009
9 IndustriesandMinesDepartmentofGujarat,InvestmentOpportunities(Vision2010forProposedInvestmentProgram)
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

15

The Assessment | Gujarat


Micro, Small and Medium Enterprise Policy highlights10
ThestategovernmenthasidentifiedvariousincentivesfortheMSMEs.
Interestsubsidyattherateof7percentand5percentformicroenterprisesandsmallandmediumenterprises,
respectively
InterestsubsidyislikelytobegrantedforamaximumamountofINR2.5millionperannum,foraperiodoffiveyears
VenturecapitalfundingfortheMSMEsuptoINR100millionduringtheoperativeperiodofthescheme
Allotmentof50percentgrantsubjecttomaximumofINR10milliontotheMSMEsfortheacquisitionoftechnologyin
anyform
AssistancetoR&Dinstitutionsupto60percentoftheprojectcostexcludinglandcostandbuildingcost
Patentassistanceupto50percentsubjecttomaximumofINR1millionforexpenditureforobtainingdomesticpatent
anduptoINR2.5millionforobtaininginternationalpatents

ThePolicyImpact
TheintroductionoftheIndustrialpolicy2009isseentohavehelpedindustrialdevelopmentinthestate.
TheimplementationofpolicieshasleadtoanemergenceofnumberofIndustrialEntrepreneursMemorandum(IEMs)in
thestate.Inthefirsteightmonthsof2009,about61IEMswereimplementedwithaninvestmentofINR13.4billion.
Further,sinceAugust1991tillAugust2009,1,485IEMswhereimplementedbytheentrepreneurswithatotalinvestment
ofINR807.4billionandgeneratingemploymentfor209,100people.11

2007

IEMs
Implemented

2008

2009(UptoAugust)

Number

Investment(INRbillion)

Number

Investment(INRbillion)

Number

Investment(INRbillion)

223

74.7

76

13.3

61

13.4

Source:IndiaStatandMinistryofCommerceandIndustry,GovernmentofIndia

Further,theMicro,SmallandMedium

UnitsRegisteredundertheMSMEDActfromOctober2006toJune2009

Enterprise(MSMED)Act-2006,hasalso
triggeredthedevelopmentofthemicro,small

Micro

Small

Medium

NumberofUnitsRegistered

29085

7911

316

Investment(INRBillion)

58.4

114.2

28.5

Employment(milion)

0.27

0.24

0.04

andmediumenterprisesandabout37,312units
havebeenregisteredwithaninvestmentofINR
201billionandemploymentgenerationof
approx600billionduringOctober2006June
2009.Also,about4,359unitswereregistered
duringJanuary2009June2009.

Source:OfficeofTheIndustriesCommissionerate,Gujarat

10 GovernmentofGujarat,IndustriesandMinesDepartment,Micro,SmallandMediumEnterprises,2009
11 MinistryofCommerceandIndustry,SIAStatistics,September2009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

16

The Assessment | Gujarat


GrowthImpetus
Infrastructural development initiatives Thestatehastakenanumberofinfrastructuraldevelopmentinitiativessuchas
developmentofbiotechnologyparks,industrialparksandestates.
ThestateissettingupBiotechSEZatSavil,Vadodarawithatotalareaof1,700acres,thelargestinthecountry.Thestate
governmenthasalsoproposedtosetupbiotechzonesandparksatfivelocationsinGujarat12.
Further,theGujaratIndustrialDevelopmentCorporation(GIDC)hasapproved6newproposalsforindustrialestatesatthe
endofyear2008-09.12
Investment Promotion Measures TheGovernmentofGujarathastakenanumberofinvestmentpromotionmeasuresfor
theoveralldevelopmentofthestate.InJanuary2009,ithasorganizedVibrantGujaratGlobalInvestorsSummit-2009to
attractinvestorstoestablishprojectsinthestate.About8690MoUsweresigned/announcedin28differentmajorsectors
withtotalinvestmentofINR12215billionand2.7millionemploymentopportunitiesinthestate.13
Sectors

MoUs(Number)

ProposedInvestment
(INRBillion)

ProposedEmployment
(Million)

Manufacturing

576

2,405

0.98

Infrastructure

194

4,859

0.17

InvestmentRegions

101

1,967

0.85

UrbanDevelopment

261

1,012

0.17

SocialServices

145

301

0.02

Tourism

99

440

0.13

SpecialSectors

1423

721

0.05

MSME

7252

68

0.30

Announcements

15

444

0.00

Source:SocioEconomicReview,GujaratState,20082009

States emphasis on the development of skilled work force Thestategovernmenthascreatedincubationcentersin


partnershipwithprivateandcorporatesectortosupportthepotentialoftheyouthinthestate.Thestateisalso
encouragingspecializedskilldevelopmentinstitutionsthatcanimpartvocationalskillsinareassuchasmarineengineering,
mining,specializedpipelaying,logistic,etc.14

12 VibrantGujarat,BiotechnologySector,2009;GujaratTheGrowthEngineofIndia,SectorProfile,Biotechnology,January2009
13 SocioEconomicReview,GujaratState,20082009
14 SocioEconomicReview,GujaratState,20082009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

17

The Assessment | Gujarat


Major hub for SEZs units Gujaratwasthe
firststatetoimplementtheSpecialEconomic
Zone(SEZ)Act,2004.Thestateisranked

ProposedInvestmentandEmploymentinthe60SEZs (May30,2009)

numberoneintermsofareacoveredunder

ProposedInvestmentbytheDeveloper
aswellasUnitsinSEZs

INR2,674billion

SEZsinIndiawith60approvedSEZs(ason

ProposedEmployment

1.9millionpersons

ProposedareaofSEZs

29423.83hectares

May2009).
Source:OfficeofTheIndustriesCommissionerate,Gujarat(SEZs)

Single window clearance facility ThestategovernmenthassetupasinglewindowclearancefacilitythroughINDEXTb


(IndustrialExtensionBureau),anorganizationofGujaratGovernment.ItactsasaninvestmentpromotionagencyofGujarat
stateandprovidessinglepointofcontactforallinvestmentrelatedactivitiesinGujarat.15
The Entrepreneurs Viewpoint
Laudingtheeffortsofthestategovernment,theentrepreneursinGujarattrulybelieveintheirstatesgoverningmachinery.
Accordingtoentrepreneurs,thestatehassetoneofthebestplatformsforanentrepreneur.Ithastakennumeroussteps
toensureentrepreneurialdevelopment.Thereiseaseinsettingupanindustrialunitthroughquickdecisionsand
streamlinedprocedures.Thestategivesopportunitytotransformideasintoactivities.
Togetherwiththeresources,Gujaratisseenashavingaveryprogressiveoutlooktowardstheindustryandentrepreneurial
development.Thestatehasarobustpolicyframework,whichiscreatedwithparticipationfromallstakeholders.However,
theentrepreneursfeelthatwhilethestateisproactiveinannouncingpolicies,theimplementationofsomeofthesepolicies
hasbeenfallingbehindschedule.
Further,thestatesfocusonSMEsectortogetherwithlargerenterprisesandforeigninvestmentismuchappreciatedbyits
entrepreneurs.Fromanentrepreneursperspective,landbankforsmallplayersandeasylandtransformationsfrom
AgriculturetoIndustry,availabilityoffinancialinstitutionsanddevelopmentbanks,easycommunicationwiththe
governmentarecitedassomeofthemotivatingfactors.Thestatesstrategicvisioncombinedwithefficientutilisationofits
resourceshasledtovariousnewgrowthopportunitiesinthestatewhichthestatesentrepreneurshavetriedtoharness.
AsoneoftheentrepreneurinGujaratcommentedGujarathasentrepreneurshipinitsDNA,thegovernmentonlyneedsto
provideopportunities
Asentrepreneursinthestaterecognisethestateseffortsandwillingnesstopromoteentrepreneurialdevelopment,they
alsoexpressedsomeoftheirconcernsandexpectations.Thereisaneedtocreatemodernworld-classsocialinfrastructure
intermsofeducation,healthcareandtourismtopromoteinboundtourismaswellasmanpowermigrationfromother
states.Further,whiletheavailabilityofmanpowerisnotanissue,athoroughskillgapanalysisisrequiredfromgroundto
topleveltoaddresstheneedsofspecialisedindustries.Thestatesentrepreneurstakeprideinthestatesproactive
investmentpromotionprogrammes,theyalsofeeltheneedtocreatesustainabletradeandbusinesscoordinationagency
acrossvariousIndianstatesandcountriestofosterbusinesstie-ups.Further,whilethestatehasanefficientsinglewindow
mechanismsitsentrepreneursfeelthatthattoalargeextentthisisonlyforselectmarqueeprojectsandnotallprojects
receivethesametreatmentandsomestillfacedelays.Inaddition,whilethestatesauthoritiesareperceivedtobe
supportiveinmanyareas,entrepreneurshavefacedhindranceswhiledealingwiththecentralauthorities(Customs&excise
andIncomeTax)operatinginthestate.

15 INDEXTb

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

18

The Assessment | Gujarat


The Governments Viewpoint
ThestateofGujarathasbeenattheforefrontofindustrialandentrepreneurialdevelopment.Thestatehassetmany
policiesandinitiativeswhicharenowbeingreplicatedbyotherstatestocreatesimilareffect.However,thegovernment
alsocreditsthestatesentrepreneurialcultureforitssuccess
Thegovernmentacknowledgesitsroleasanenablerandfacilitatorforgrowthandendeavourstodeliverbycreatingthe
rightframework.Thegovernmentalsoencouragesadialoguebetweenallstakeholderstocreategrowthinitiativeswhile
focussingontheoveralldevelopmentofthestate.Thegovernmenthasbeenreceptiveofthefeedbackprovidedbythe
industryatvariousforumsandhasbeencontinuouslydevisingwaystoaddresstheconcernsofitsentrepreneurs.
Theclarityofvisionandobjectivesatthestatelevelhasenabledthestatetobecomeoneofthemostindustrialised
economiesinthecountrytoday.TheGovernmenthasacknowledgedaneedforongoingdialogueandinteractionbetween
thestateandentrepreneurstocontinuallytakeintoaccounttheentrepreneursneedswhileframingandimplementing
policies.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Delhi
Population
13.85 million (as per 2001 census)
Per Capita Net State Domestic Product

Source:EconomicSurveyofDelhi,20082009

Job creation Trend

Source:EconomicSurveyofDelhi,20082009

ThePolicyFramework
Highlights of the Industrial Policy
Delhihasalargepresenceofmanufacturingunitsemployingabout0.6millionpeople,withmajorityofunitsoperatinginthe
unorganizedsector.Asperthe5thEconomicCensusheldinDelhiduring2005,thestatewasranked16thintheAllIndia
ranking,withnumberofestablishmentscontributingabout1.80percentofthetotalestablishmentsinIndia.1 Thestatehas
about28plannedindustrialestatesspreadoveranareaof4,647acres,ofwhich21areunderDelhiDevelopmentAuthority
(DDA)andtheremainingaremaintainedbyDelhiStateIndustrial&InfrastructureDevelopmentCorporation(DSIIDC).2
Thestategovernmentintendstoachieveconsistentgrowthandhasformulatedindustrialpolicytoattractinvestmentinthe
state.ThefirstindustrialpolicyfortheNationalCapitalTerritory(NCT)wasframedin1982withanobjectiveofcreatinga
manufacturingsectorandemploymentopportunitiesinthestate.However,withglobalizationofeconomiesandtechnology
andadvancementbecomingthekeystoneofaneconomydevelopment,thestategovernmenthasformulatedanew
industrialpolicy2009-2021after27yearsofthelastpolicy.

1 EconomicSurveyofDelhi,20082009
2 GovernmentOfNationalCapitalTerritoryofDelhi,DepartmentofIndustries,DraftIndustrialPolicy,2009-2021

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

20

The Assessment | Delhi


ThenewindustrialpolicyisstillunderconsiderationbyGovernmentofNationalCapitalTerritoryofDelhi(GNCTD)giving
thrustonthefollowing:2
Focusonrelocatingandphasingoutpollutingunits
Promotinghightechnologyandskilledindustries.Thefocusistoattractknowledge-basedindustries
Redevelopmentofindustrialareas
Encouragementofclusterapproachinnewindustrialareas
PromotingPublicPrivatePartnership(PPP)fordevelopingspecializedindustrialparks(suchasHi-TechParkforIT/ITES)or
SpecialEconomicZones(SEZ)withgovernmentasco-partner
CreationofR&Dandeducationhubsinconjunctionwitheducationaluniversities,researchinstitutesandR&Dunitsin
engineering,pharmaceuticalsandelectronics
PromotingsinglewindowclearancethroughtheBusinessFacilitationMission(BFM)program.Theobjectiveistoattract
investmentsinthestatethroughproceduralsimplificationsandremovingtheneedforapproachingvariousdepartments
forclearancesandpayments.
Industry Specific Policies
Thestateisprovidingsupporttothekeythrustsectorsthroughspecificpolicyinitiatives:
IT/ITES Policy3
TheGovernmentofNCTofDelhihasundertakeninitiativestopromotetheinformationtechnologysectorinthestate.The
stategovernmenthasputforththeITpolicyin2000,whichaimstoexplorenewopportunitiesforemployment,efficiency
andenhancefactorsforeconomicgrowth.Thekeyhighlightsofthepolicyare:
Generateadditionalemploymentinthedigitaleconomy
Promotetheusageofe-governancetosupportthegovernmenttodeliverefficientservicestoitscitizens
EncouragetheuseofITinschools,collegesandeducationalinstitutionsinthestateofDelhi
PromoteentrepreneurshipandincreaseIT'scontributiontotheeconomicgrowthofthestate
Usethemediumofinformationtechnologytopromoteequalitybyremovingpoverty,improvinghealthcare,empowering
women,etc.
EncourageinvestmentandaccelerategrowthintheIThardware,software,Internet,training,ITenabledservices,
telecomande-commercesectors

3 GovernmentOfNationalCapitalTerritoryofDelhi,DepartmentofIndustries,ITPolicy,2000

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

21

The Assessment | Delhi


SEZ Policy4
TheGovernmentofNCTofDelhihasformulatedapolicytoprovidevariousincentivesandconcessionsforthepromotionof
SEZunitsinthestate.TofosterthegrowthoftheSEZunitsinthestate,thegovernmentisprovidingthefollowing
incentives:
SpecificsectorssuchaselectronichardwareandsoftwareincludingITES,nano-technology,bio-technology,gemsand
jewelleryandnon-conventionalenergyareallowedtocarryoutactivitiesintheSEZunits
IT/ITESSEZunitsarelikelytobeexemptedfromenvironmentclearance
ExemptionfromstateandlocaltaxesfortransactionswithintheSEZunits
100percentexemptionfrompaymentofstampdutyonthelease/licensedeedregardingthelandorbuiltupspace,
howevernoexemptionfrompaymentofregistrationcharges
Exemptionfromelectricitydutyortax
AllunitsestablishedundertheSEZwillbedeclaredpublicutilityservices''underthejurisdictionoftheIndustrial
DisputeAct1947
Transport Policy5
Thestategovernmentformulatedthetransportpolicytoprovidecost-effectiveand
efficientmodesoftransportationtothecitizens.Thekeyhighlightsofthepolicyare:
Provisionofaffordablemodesoftransportsuchasbuses,mini-buses,electric
trolleybuses,metros,etc.
ControllingpollutionbyprovidingCNGbuses,strengtheningthepollutionnorms,
introductionofstrictinspectionandcertificationsystems
Strengtheningthetransportinfrastructurebyconstructingflyovers,subwaysand
expressways
Small Scale Industries6
ThestategovernmenthasidentifiedvariousincentivesfortheSmallScaleIndustries(SSI)inDelhi:
ProvisionofcapitalsubsidyschemefortechnologyupgradationtothenewandexistingSSIs.Thecapitalsubsidyis
limitedto12percentofmaximumloanofUSD86,703underthescheme.
Promotingsinglewindowclearanceservices
Simplifyingproceduresandintroducingredressalofgrievancesandassistancemechanism
Establishingexportpromotionandqualitycontrolcell
Provisionoffinancialassistanceatlowerinterestrates
Focusoninfrastructurefacilitiesbyprovidingdevelopedplotsandfactories

4 GovernmentOfNationalCapitalTerritoryofDelhi,IndustriesDepartment,SEZPolicy
5 GovernmentOfNationalCapitalTerritoryofDelhi,IndustriesDepartment,TransportPolicy
6 MinistryofExternalAffairs,GovernmentofIndia,ITPDivision,ProfileofDelhi

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

22

The Assessment | Delhi


ThePolicyImpact
TheintroductionoftheIndustrialpolicyhelpedindustrialdevelopmentinthestatewithincreaseinnumberofpublicprivate
partnershipprojectsandforeigndirectinvestment(FDI)inflowsinthestate.
Theimplementationofpolicieshasfosteredthegrowthofforeigndirectinvestmentinthestate.Inthefirstfivemonthsof
2009,theDelhiregion(includingpartsofUPandHaryana)wasthesecondmostfavoredforeigndirectinvestment
destinationafterMumbai.Duringtheperiodthelargestinvestmentattractingsectorshavebeenelectricalequipment,the
servicessector,telecommunications,andtransportationindustryfollowedbychemicals,foodprocessingindustries,drugs
&pharmaceuticals.
Theinvestmentinflowislikelytobringinnewtechnology,enhancethequalityofhumancapitalandcreateastrong
competitivebaseforitsoveralldevelopment.
Further,duringAugust1991toAugust2009,thestatehas

ForeignDirectInvestmentInflowinDelhi(INRbillion)
20002005

implementedonly50IndustrialEntrepreneurMemorandums

220.8

(IEMs)withaninvestmenttoINR6.5billionandgenerating
employmentfor4,880people.7

2006

97.8

2007

138.6

2008

93.5

emergenceofpublicprivatepartnershipsprojectsinthestate.The

2009(JanuarytoMay)

101.1

2010CommonWealthGamesinNewDelhihasprovidedan

Theimplementationofindustrialpolicyhasalsotriggeredthe

opportunitytotheprivatesectortobeinvolvedonalargescale
Note:ThedataforDelhiincludesUttarPradesh(UP)andHaryana

fortheoveralldevelopmentofthestate.

Source:IndiaStatandMinistryofCommerceandIndustry,
GovernmentofIndia

GrowthImpetus
Thestateprovidesanenvironmentconducivetobusinesswithqualityinfrastructure,favourablegovernmentpoliciesand
highly-skilledandtrainedworkforce.
Infrastructural development initiatives Thestategovernmentistakinganumberofinfrastructuraldevelopment
initiativessuchasdevelopmentofindustrialparksandestates.Ithasacquired1,300acresoflandofwhichpossessionof
1,065acreshasbeentakenfordevelopingnewindustrialestates.Ithasalsoacquired800acresoflandforthe
developmentofindustrialareas.DevelopmentofurbantransportinfrastructuresuchastheDelhiMetro,freewaysand
betterroadshavealsohelpedmakeDelhiamoreattractivecityforbusinessingeneral.
ThestategovernmenthasmadeDelhiFinancialCorporationresponsibleforfacilitatingvariousclearancesandloans
requiredforsettingupanindustry.
TotalNumberofIndustrialEstateinDelhi(asonMarch31oftherespectiveyears)
2002

2003

2004

2005

2006

2007

2008

2009

29

29

29

31

31

31

28

28

Source:EconomicSurveyofDelhi,20082009

7 MinistryofCommerceandIndustry,SIAStatistics,September2009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

23

The Assessment | Delhi


Thestateishostingthe2010CommonwealthGames,whichislikelytoprovideitanopportunitytoaugmentits
infrastructureandfacilities.ThestategovernmenthasproposedanoutlayofINR21.05billionfortheCommonwealth
Gamesprojects.ThegovernmenthasalsotargetedutilizingmorethanINR450billion(during2007-2012)forimprovingcivic
infrastructureandservicesinthestate.8
Strong focus on the development of skilled work force9 Thestatehasastrongeducationalinfrastructure,withliteracy
rateof81.67percent,whichisabovethenationalaverageof64.8percent.Thestateisthehubforleadingtechnical(IIT),
medical,management,andlegalinstitutions.TheGovernmentofDelhiisfocusingontheeducationsectorandhas
increasedtheexpenditureonthesectorfrom8.5percentin2007-08to10.3percentin2008-09ofthetotalplan
expenditure.Further,in2008-09,Delhiper-capitaexpenditure(INR1,753)oneducationsectorwashigherthanallstates
(INR1,098).
Strong financial infrastructure for collection of

StatusofEducationalInstitutes

savings and disbursal of credit Thestatehas


asoundfinancialinfrastructurewith2,076

Schools

5022

Colleges

175-degreecolleges

TechnicalInstitutes

46AICTEapprovedtechnicaleducationinstitutions

branches(September2008)ofScheduled
CommercialBanks,anincreaseof14.32percent
ascomparedtothepreviousyear.Thecreditto
depositratioofallscheduledcommercialbanks
Source:EconomicSurveyofDelhi,20082009

was70.49percent,veryclosetotheallIndia

FinancialInstitutionsinDelhi(asonSeptember2008)
StateBankofIndiaanditsAssociates

360

NationalizedBanks

1247

ForeignBanks

40

OtherScheduledCommercialBanks

429

ratioof74.93percent.

Source:EconomicSurveyofDelhi,20082009

8 StateBudget20092010
9 EconomicSurveyofDelhi,20082009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

24

The Assessment | Delhi


The Entrepreneurs Viewpoint
WithCommonwealthGames2010aroundthecorner,thestateofDelhiisworkingtomakemanyimprovementsand
creatingaplethoraofopportunitiesinmultiplesectorsacrossthespectrum.However,whilenewopportunitiesarebeing
createdinlightoftheCWG2010,thebasicpolicyframeworkofthestatehasnotbeenrevisedforthelast27years.Hence,
manyentrepreneursinthestatearenotawareofthepoliciesandperhapswerenotabletoharnessthebenefitswhile
startingtheirentrepreneurialjourney.
However,thestateofDelhiisperceivedasnotproactiveinpromotingbusinessorindustrialgrowth.NeighbouringHaryana
andUPareactivelycreatinginfrastructuretopromoteindustrywhichhascompelledthebusinesstomigratefromDelhito
thesestates.Partly,thereluctancemaystemfromthedesiretomoveheavyindustryoutofDelhiandpartlyfromthefact
thatDelhi,beingthecapitalandtheeconomiccentreoftheNorth,seesvibranteconomicactivitywithoutactivepromotion.
However,entrepreneursdidcitetheneedforactivegovernmentsupportandthereseemedtobeanoveralllackof
awarenessoftheStatessectorspecificpoliciesandincentivestructures.
Whilediscussingtheirwishlistandconcerns,therewasconsensusamongstentrepreneursforcreatinganenablingpolicy
frameworkfocusedatinclusivegrowthandservicesectordevelopment.Accordingtoentrepreneursinthestate,
entrepreneurshipisnotarticulatedinthecurrentpolicy.TheentrepreneursalsofeeltheneedforastatesupportedVenture
/SeedFund.Thereisalsoadireneedtocreateinfrastructureintermsofofficespaceanddevelopexistingpowerand
telecominfrastructuretofosterbusinessgrowthinthestate.Further,theexistingindustrialinfrastructureneedsafaceliftto
enableinvestmentsinthestatewhilecreatingamorefocusedregulatoryframeworktominimiseprocesstimeand
enhanceclarity.
The Governments Viewpoint
WiththeCWG2010preperationsinfullswing,thestategovernmentemphasisestheopportunitiesithascreatedacross
theNCRregioninsectorssuchasinfrastructure,hospitality,construction,transportetc.Whilethestaterecognisesthatthe
focusonindustryintermsofpolicyinitiativeshaslaggedbehindschedule,thenewdraftindustrialpolicy2009-21islikelyto
befinalisedbytheendof2009.Thepolicyisfocusedatcreatingopportunitiesinnewcleanersectorswhilesimplifying
proceduresthroughamorerobustandefficiente-governanceframework.
Further,thestategovernmentintendstoachieveconsistentandrapidgrowthandhasformulatedindustrialpolicytoattract
investmentinthestatebypromotinghightechnologyandskilledindustries.Thefocusistoattractknowledge-based
industriesandredevelopmentofindustrialareas.
ThegovernmentislookingforwardtoshowcasingDelhitotheworldduringtheCWG2010andthegameshavebecomea
catalystforinvestmentandgrowthorientedactivityinthestate.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Ta m i l  N a d u
Population
62.4 million (as per 2001 census)
Per Capita Net State Domestic Product

Source:EconomicSurveyofDelhi,20082009

Job creation Trend

Source:EconomicSurveyofDelhi,20082009

ThePolicyFramework
Highlights of the Industrial Policy 20071
TamilNaduisconsideredaleadingindustrialstateinIndia,andamajormanufacturingcentre.Itisoneofthemostfavored
destinationsbyboththedomesticandforeigninvestors,especiallyinareasofInformationTechnologyandrelated
industries,automobiles,electronics,consumerdurables,garmentsandrealestate.
Tofurtherstimulatethegrowthofindustrialdevelopmentinthestate,thegovernmentintroducedtheIndustrialPolicy2007.
Thekeyobjectivesofthepolicyaretoattractinvestment,facilitatenewmanufacturingcapacityandraisethe
competitivenessandefficiencyoflocalindustry.Otherstatedhighlightsofthepolicyare:
IncreasemanufacturingsectorcontributioninGSDPfrom21percentto27percentby2011
Developanefficientanddependableindustrialinfrastructure
Upgradeinfrastructurefacilitiesbyencouragingpublicprivatepartnershipsinallindustrialclusters,includingwater
supply,power,communicationfacilities,roads,railways,etctoincreasecompetitivenessintheindustry

1 TamilNaduindustrialDevelopmentCorporationLimited,IndustrialPolicy,2007

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

26

The Assessment | Tamil Nadu


UpgradationofeducationalinstitutionsbyinitiatinganIndustrialTrainingQualityImprovementProjecttoinvest
substantiallyintheITI/ITCinfrastructuredevelopmentandcapabilities
FinancialassistancetoindustrialparksuptothemaximumofINR20millionor25percentoftheinvestmentineligible
fixedassets,whicheverisless
FinancialassistancetotechnologyinnovatorsorstandaloneR&Dunitsorindividualsforinnovationscapableofindustrial
application,upto50percentofthecostoffilingapatentorINR0.2million,whicheverisless
Encouragementofinvestmentsinresearchanddevelopmentbymanufacturingcompanies
EnactmentofaBusinessFacilitationActforgivingSingleWindowCommittees,atStateandDistrictlevel,formal
authorityandcleartimelinesforeachapproval
ImplementingaBusinessFacilitatione-GovernanceSystemforenablinginvestorstoapplyforSingleWindow
Clearanceon-lineandtomonitorclearances
Promotingclusterdevelopmentactionplanforupgradingthequalityofinfrastructureinindustrialclusters
Industry specific Policies
Thestateendeavorstosupportkeythrustsectorsthroughspecificpolicyinitiatives:
ITES Policy2
Topromotethesector,in2005,theGovernmentofTamilNadureleasedanITESpolicy.Thepolicyoutlinescertain
concessionsandincentivestoencouragethegrowthofthesector.
Granted50percentexemptionofstampdutyforITcompaniestowardslandregistrationandofficeconstruction
Promotingunrestrictedmovementofcapitalequipmentincludinghardware,peripherals,captivepowergenerationsets,
etc.
RelaxationofFSI(FloorSpaceIndex)upto100percentwillbegivenindesignatedITParks
AllotmentofIndustryStatustoallsoftwareindustriesincludingservicesandtraininginstitutionsinITES
CreationofITESParksinChennaiandotherTierII/TierIIIcities
Handloom and Textile Policy3
Tostimulatethegrowthofthetextileindustry,thestategovernmenthasformulatedthehandloomandTextilePolicy2006
2007.Thepolicyaimsatachievingglobalstandardsinproductquality,contributemoretoexportsandtoencouragetextile
clusters.Thekeyhighlightsofthepolicyare:
Focusonhandloomexportsbyencouragingtheweaverstobringoutexport-orientedproducts
RegisteringhandloomproductssuchasKancheepuramSilkSareesand"BhavaniJamakkalamunderunderthe
GeographicalIndicationsAct
SettingupofApparelandHi-techWeavingParks

2 GovernmentofTamilNadu,ITPolicy
3 GovernmentofTamilNaduHandloomandTextilePolicy

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

27

The Assessment | Tamil Nadu


Biotech Policy4
TamilNaduisrichinbioresourceswithoneofthelargestcoastlines
inthecountry,representingopportunitiesformarinebiotechnology.
TofurtheraugmentthegrowthoftheBiotechnologyindustry,the
stategovernmenthasformulatedabiotechnologypolicy.Thekey
highlightsofthepolicyare:
FocusonMedical/Human&AnimalHealthcare,Agriculturefood,Environment,andIndustrialProducts
CreationofBiotechnologicalEnterprisesZones(Bio-Valleys)in
thestate
RegulatoryfacilitationforestablishingaBiotechentityresearch
centres
FacilitatingsinglewindowfacilityforBiotechenterprisesand
entitiestoobtainclearancesfromthevariousCentralagencies
Enhancementofhumanresourcepoolforthedevelopmentof
thesector
Facilitatingestablishmentofanemergingtechnologyfundfor
thesector
Allotmentofindustrystatustothebiotechnologyunits
undertakingcommercialproduction
Micro, Small and Medium Enterprise (MSMEs) Policy highlights5
ToenhancethecompetitivenessoftheMicro,SmallandMediumenterprises,thestategovernmentannouncedan
exclusiveMicro,SmallandMediumEnterprisePolicy2008.Thepolicyfocusesonallinitiativestobetakenbythestate
governmentforthedevelopmentofMSMEs
Encourageagro-basedindustriestoprovidebetterincometothefarmers
Promoteentrepreneurdevelopmentandsectorspecificskilldevelopmenttrainingprogrammes
Establishmentofnewindustrialestatesbyallotting20percentlandinallnew/expansionschemesundertakenbyState
IndustriesPromotionCorporationofTamilNaduLtd(SIPCOT)toMSMEs
Rebateof50percentonstampdutyandregistrationatthetimeoforiginalallotment
Encouragementofprivatelydevelopedestatesbyproviding25percentofthetotalprojectcost,subjecttoamaximum
ofINR10millionasassistance
Financialassistancebywayofcapitalsubsidyattherateof15percentoneligibleplantandmachinery,subjecttoa
maximumofINR0.375million
FinancialassistancebywayofcapitalsubsidyforThrustSectormanufacturingenterprisessetupanywhereintheState

4 BiotechnologyPolicyOfGovernmentOfTamilNadu
5 GovernmentofTamilNadu,Micro,SmallandMediumIndustriesPolicy2008

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

28

The Assessment | Tamil Nadu


ThePolicyImpact
TheintroductionoftheIndustrialpolicy2007hasplayedacriticalroleinenhancingthegrowthofindustrialdevelopmentin
thestate.
Theimplementationofthesepolicieswereanimportantcontributortothestateincreasingtotalinvestment3timesfrom
INR1,737billiontoINR5,792billionduringJune2006toMarch2009.6 ItalsoleadanumberofIndustrialEntrepreneurs
Memorandum(IEMs)inthestate.FromAugust1991toAugust2009,about521IEMshavebeenimplementedbythe
entrepreneurswithaninvestmentofINR137.7billionandgeneratingemploymentopportunitiesfor79,084people.7

19912006

IEMs
Implemented

2007

2008

2009(UptoAugust)

Number

Investment
(INRbillion)

Number

Investment
(INRbillion)

Number

Investment
(INRbillion)

Number

Investment
(INRbillion)

438

96.4

29

15.6

24

13.7

30

12.1

Source:IndiaStatandMinistryofCommerceandIndustry,GovernmentofIndia

Further,theimplementationofpolicieshastriggeredthegrowthofForeignDirectInvestment(FDI)inthestate.TheFDI
inflowintheChennairegion(includingTamilNaduandPondicherry)increasedfromINR28.9billionin2007toINR29.8
billiontillMay2009.

20002005

2006

2007

2008

2009(TillMay)

52.0

51.9

28.9

58.2

29.8

ForeignDirect
Investment

Source:MinistryofCommerce&Industry,GovernmentofIndia

ThestatehasimplementedtheMicro,SmallandMediumEnterprise(MSMED)Act-2008,whichhasstimulatedthegrowthof
micro,smallandmediumenterprisesinthestate.ThenumberofMSMEhasincreasedby3.5percentfrom0.539millionin
20062007to0.558millionin20072008,whichhasleadtoanincreaseinthenumberofpersonsemployedinthestate.8
Parameter

20052006

20062007

20072008

NumberofRegisteredMSMEs(Million)

0.511

0.539

0.558

InvestmentinFixedCapital(INRbillion)

161.0

168.2

193.6

1,039.1

1,059.8

1,147.2

3.593

3.703

3.946

ValueofOutput(INRbillion)
Employment(Millionnumber)

Source:DepartmentofEconomicsandStatistics,TamilNaduStatisticsataGlance-2008

Further,thepolicyalsoresultedintheestablishmentofanumberofindustrialestates.During20082009about11new
industrialestateshavebeenestablished.Thegovernmentplanstosetupaboutthreenewindustrialestatesfortheyear
20092010.9

6 GovernmentofTamilNadu,IndustriesDepartment,PolicyNote20092010
7 MinistryofCommerceandIndustry,SIAStatistics,September2009
8 DepartmentofEconomicsandStatistics,TamilNaduStatisticsataGlance-2008
9 GovernmentofTamilNadu,PolicyNotes,Micro,SmallandMediumEnterprisesDepartment,20092010

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

29

The Assessment | Tamil Nadu


GrowthImpetus
Infrastructural development initiatives Thestatehastakenanumberofinfrastructuraldevelopmentinitiativessuchas
developmentofindustrialparksandSEZunitstodispersetheindustries.Thestateranksthirdinthenumberofapproved
SEZunits11.Thestatehasnotified47SEZunitswithatotalareaof3972hectares.

State-wiseDistributionofApprovedSEZs(asonMarch31,2009)
Formalapprovals

In-principleapprovals

NotifiedSEZs

69

17

47

Source:DepartmentofCommerce,India,SpecialEconomicZones(SEZs)andExportOrientedUnits(EOUs)

Investment Promotion Measures10 TheGovernmentofTamilNaduhasputinplacespecificindustrialpromotional


agenciessuchasTIDCO,SIPCOTandTANSIDCOwithanobjectiveofoverallindustrialdevelopmentinthestate.
TheGovernmenthasmadesignificanteffortstoattractnewinvestmentsinthestate.Withinthenewindustrialpolicy,the
governmenthassanctionedstructuredpackagesofassistanceforattractingnewinvestmentsinthestate.During2006
2009,thestatesigned23MemorandumofUnderstanding(MOU)inadditiontosanctioningstructuredpackagesof
assistancefor9projects.Outofthe23MOU,12weresignedinthecalendaryear2008withatotalinvestmentofINR251
billion.Thegovernmentalsoissuedstructuredpackagesofassistancefor7projectsforaninvestmentofINR54.6billion.
Availability of skilled manpower Thestatehasaliteracyrateof73.5percent,whichishigherthanthenationalaverage
of64.8percent.Thestategovernmentistakinganumberofinitiativestoenhancethequalityofmanpower.Ithasinitiated
anIndustrialTrainingQualityImprovementProjectfortheupgradationofeducationalinstitutions.Ithasalsoopeneda
numberofindustrialtrainingcentersandissupportingdevelopmentofCentersofExcellenceandincubationcentersforthe
overalldevelopmentoftheentrepreneurs.
StatusofEducationalInstitutes
Arts,ScienceandOtherColleges

1,145

Engineeringeducationalinstitutions

355

Polytechnics

317

Governmentitis

60

AffiliatedPrivateIndustrialTrainingCenters

605

IndustrialTrainingCenters

753

Source:GovernmentofTamilNadu,IndustriesDepartment,PolicyNote20092010

Single window clearance facility Thestategovernmenthasaneffectivesinglewindowclearancemechanismto


facilitatesmoothimplementationofindustrialprojects.Toavoidproceduraldelays,thegovernmenthasintroduceda
CommonApplicationForm(CAF)toreplacemultipleforms.IthasdesignatedanodalagencyTamilNaduIndustrialGuidance
&ExportPromotionBureau(GuidanceBureau)fortheefficientfunctioningofthemechanism.11

10 GovernmentofTamilNadu,IndustriesDepartment,PolicyNote20092010
11 GovernmentofTamilNadu,IndustriesDepartment,PolicyNote20092010

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

30

The Assessment | Tamil Nadu


The entrepreneurs Viewpoint
ThestateofTamilNaduisundoubtedlyoneofthemostindustrializedstatesinthecountrywithspecificfocuson
InformationTechnology,automobilesandtextilesectors.Thestategovernmenthasbeenproactiveinidentifyingthekey
focusareasandaccordinglyimplementingthepolicyframeworktoaugmentgrowthinspecificsectors.Thestatehasalso
beenoneofthefirstinthecountrytospecificallyfocusonpromotingindustryandbusinessgrowthinTierIIandTierIII
citiesthusaimingfortheholisticdevelopmentofthestate.
Theentrepreneursinthestateacknowledgethatthestatehasbeenmovingintherightdirectionwiththeindustrialpolicy
beingbusinessfriendlyandmeasuresbeingtakenspecificallyforthemicro,smallandmediumenterprises.Therehavealso
beenspecificmeasurestopromoteITandITESindustriesandthestatesgovernmentmachineryhasbeenextremely
supportiveandhasplayedavitalroleinestablishingtheIT/ITESsectorinthestate.
Accordingtoentrepreneurs,thegovernmentthroughTamilNaduSmallIndustriesDevelopmentCorporationLimited
(TANSIDCO),hasalsoplayedacatalyticroleinthepromotionanddevelopmentofSmallScaleIndustriesandhasteningthe
industrialdispersalthroughoutTamilNadu.Thegovernmenthasbeenproactiveinprovidingsupportthroughdevelopmentof
industrialestates,provisionofworksheds,developedplots,rawmaterialssupply,marketingassistance,exportassistance
andguidancetoentrepreneurs.
Further,thestatehascreatedvariousapexbodiesandsupportedchamberstopromotetheinterestofsmallandtiny
enterprise.Thegovernmentalsobeenorganizingguidanceseminarsforentrepreneursandcreatingtrainingprogrammesto
addresstheirconcerns.However,despitetheseefforts,mostentrepreneursfeelthatthisisanareawherethescopeof
developmentisimmense.Theentrepreneursexpectthegovernmenttoprovidesoftersupportthroughmakingcritical
information(schemes,incentivesetc)availablewhilecreatingmentoringandguidanceplatforms.
Thewishlistalsoincludescreationofstateinitiatedfundingmechanismforentrepreneurialdevelopmentwhileensuring
creationofrightinfrastructureontheotherhand.AspecificexamplecitedwaswithspecificreferencetoSEZswherethe
infrastructureattheSEZisreadybutperhapstheconnectingroadsarestillnotreadythusdelayingthepossibleusageof
thereadyinfrastructure.
The Governments Viewpoint
ThegovernmentofTNisfocusedoncreatingandattractingindustrialprojectsandpromoteinvestmentsinTamilNadu.The
stateacknowledgestheneedforinformationdisseminationandiscommittedtoprovidingcomprehensiveinformationon
supporttoinvestorsaboutfederalandStateGovernmentpolicies,infrastructuresupport,taxation,investmentopportunities
etcthroughtheirportals.
ThegovernmentisalsoproactivelyplanningtheSingleWindowDocumentationCentreformajorinvestmentproposalsand
assistinvestorsingettingallpre-projectclearances,infrastructuresupportlikelandinindustrialparks,power,water,etc.
Howeverfromasmallerinvestorperspective,thegovernmentacknowledgestheneedtoprovidebetterinformation
disseminationonschemesandincentivesandamoreproactiveapproachtotheSMEsegment
Thegovernmentalsoclaimssignificantprogressinenablinginformationandleadsharingonexportenquiriesandother
measurestopromoteexports.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

31

The Assessment | Tamil Nadu


Thestategovernmenthastakenanumberofpolicyinitiativestopropelgrowthinthemanufacturingandservicessectors.
TamilNaduhasbeenconstantlyupgradingitsinfrastructuretomeettheindustrialneed.Policymeasuressuchassingle
windowclearancesystemhavepavedwayfortheforeignerstoinvestinthestate.TamilNaduwasoneofthefirstto
formulatepoliciesfortheITESandbiotechindustries.Ithasoneofthelowestpowertariffsinthecountryandisoneofthe
fewstatestosellelectricitytoneighbours.
Althoughthegovernmenttakesprideinthevariousinitiativestheyhavebeenrollingouttosupportindustryand
entrepreneurs,theyalsoacknowledgetheneedforimprovedcommunicationbetweenentrepreneursandthegovernment.
Thestatehasidentified5criticalactionareasi.e.,industrialpolicy,infrastructuredevelopment,proceduralsimplification,
industrialpromotionandinvestmentpackagestowardssignificantdevelopmentsintheindustrialsceneandhopesto
engagewiththeentrepreneurialcommunitymoreontheseareas.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Karnataka
Population
52.9 million ( as per 2001 census)
Per Capita Net State Domestic Product

Source:EconomicSurveyofKarnataka,20082009

Job creation Trend

Source:EconomicSurveyofKarnataka,20082009

ThePolicyFramework
Highlights of the Industrial Policy 2009 2014
KnownastheSiliconValleyofIndia,KarnatakaisamongstthetopfiveindustriallydevelopedstatesinIndiawiththe
servicesectorlargelyfuellingtheoveralleconomicgrowth.1
Aimedatpropellingtheoverallsocio-economicdevelopmentofKarnataka,thestategovernmentintroducedtheIndustrial
Policy2006-2009.ThispolicywasfurtherrevisitedtoformthelatestIndustrialPolicy2009-2014.Thekeyobjectivesofthe
policyaretoincreasethegrowthofGDPandexports,strengthenmanufacturingindustries,andgenerateadditional
employmentforatleast1millionpersonsinthemanufacturingandservicesectors.Otherstatedobjectivesandhighlights
ofthepolicyinclude2:
IncreasingtheshareofindustrytothestateGDPto20percentbytheyear2014
Developmentofsector-wiseindustrialzonesforoptimalutilizationoflocalnaturalandhumanresources

1IndiaBrandEquityFoundation(IBEF)
2 KarnatakaIndustrialPolicy,2009-2014
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

33

The Assessment | Karnataka


Thrustonprovisionofworld-classinfrastructuralfacilitiesforindustrieswithactiveparticipationofprivatesector/industry.
Toupgradeandmaintaininfrastructuralfacilitiesonasustainablebasis,itisproposedtohaveadedicatedInfrastructure
DevelopmentFundofINR5billion
Lucrativeemploymentandperformancelinkedpackageofincentivesandconcessionstoattractinvestmentsto
backwardregionsandtheMicroSmallMediumEnterprises(MSME)sector.ThestatewillallocateINR10billionfor
acquiring1000to2000acresoflandforestablishingsmallandmediumenterprisecolonies
Emphasisonthedevelopmentofskilledmanpowerwithaspecialfocusonupgradingemergingskillsetsand
developingskillsetsinwomen
Promotionofselfemploymentbylocalyouthislikelytobefocusedonthroughproperbackupsupportandfacilitation
Aclusterdevelopmentapproachwillbeencouragedforthestatetoproductivelytargetresourcesanddevelopastateof-artindustrialinfrastructure
Enhancetheeffectivenessofthesinglewindowclearancemechanismandreducethetransactioncostsofdoing
business
PromotionofPublicPrivatePartnership(PPP)frameworkforthedevelopmentofnewindustrialestates
Industry Specific Policies
Thestateendeavorstopromoteinvestmentsincertainkeyfocussectorsthroughspecificpolicies:
IT/BPO Policy - No longer the de facto choice for the IT/ITES industry
Thestategovernmentispursuingnumerouseffortstoregaingrowthandexpansioninthesector
throughfavorablepolicies3:
ExemptiontoITcompaniesfrompaymentofentrytaxoncertaincapitalgoods,concessiononstampdutyand
registrationcharges,andrebatesoncostofland
ContinuousanduninterruptedsupplyofpoweratindustrialratestoITunits
Pollutioncontrolclearances,relaxationinlaborlaws,andeasyfacilitationthroughthesinglewindowagency
Venturecapitalandassistancefromgovernmentforstart-ups
Biotechnology Policy
Themainobjectivesofthebiotechnologypolicyaretospreadawarenessabouttheinvestmentopportunitiesin
biotechnologyandrelatedsectors.Furthermore,thepolicyoutlinesasetofincentivesandconcessionsforattracting
investments4:
Exemptionfromthepaymentofentrytaxonallinputsaswellascapitalgoods,includingcaptivegenerationsets,during
theimplementationstage(upto5years)
Megaprojectswillbeofferedauniquepackageofconcessionsforamaximumperiodof8years.Theywillalsobe
offeredupto50percentconcessiononstampdutyandregistrationchargesforfirstsaleandfirstlease
Totalexemptionfromelectricitytaxforaperiodoffiveyears
Upto50percentexemptionfromthepaymentofstampdutyandregistrationchargesforbiotechparks

3IndustryOverview,EconomicSurveyofKarnataka2008-2009
4 TheMillenniumBiotechPolicy
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

34

The Assessment | Karnataka


Special Economic Zone Policy Highlights5
TheKarnatakagovernmentannouncedastatepolicyforexpeditingthegrowthofSpecialEconomicZones(SEZ)andasa
partofthis,keybenefitstoSEZsinclude:
SinglepointclearancewhichwillbegivenforSEZproposalsbeforerecommendingtotheGovernmentofIndiafor
approval
SEZswillbedeclaredasindustrialtownshipsundertheKarnatakaMunicipalities(Third)AmendmentAct,2002enabling
themtofunctionasselfgoverningandautonomousmunicipalbodies
Anexemptionof50percentonstampdutyandregistrationfeesforregistrationofleasedeeds/sub-leasedeedsin
respectofindustrialland/built-upspaceandloan/creditdocumentsintheprocessingarea
Exemptionof1percentoflaborwelfarecessonconstructioncostincurredbytheSEZunit
Exemptionofelectricitydutyortaxesonsaleofselfgeneratedorpurchasedelectricpowerforuseintheprocessing
areaofaSEZ
AllpurchasesexcludingpurchaseofpetroleumproductsbySEZunitslocatedintheprocessingareasfromdomestic
tariffareaorSEZareaforitssetupshallbeexemptedfromstateandlocalbodytaxesorleviesorcess.

Micro, Small and Medium Enterprise (MSME) Policy Highlights6


Thestategovernmenthasproposedvariousmeasuresandpoliciesin
theMicro,Small&MediumEnterprisesDevelopmentAct,2006to
facilitatethegrowthofMSMEs:
Whiledevelopingindustrialareasatleast20percentofthelandwill
beearmarkedfortheMSMEsector
Apricepreferenceof15percentwillbeallowedforthegoods
manufacturedbyindustrialMSMEslocatedinthestateincaseof
purchasesmadebythegovernmentdepartmentsandstateowned
PSUs
MarketdevelopmentandpromotionofMSMEmanufactured
productswillbesupportedthroughsettingupvirtualandphysical
exhibitioncentersatstate&districtlevels
RelevantsupportschemessuchasCreditGuaranteeFundTrust
Scheme,andClusterDevelopmentProgrammeforMSMEswillbe
mergedforthebenefitoftheseenterprises
Attractiveincentivepackageswillbeofferedespeciallyinbackward
areastoprovidecompetitiveedgetothesectorwithemphasison
theindustrializationofbordertaluks.

5StatePolicyforSpecialEconomicZones2009
6 KarnatakaIndustrialPolicy,2009-2014
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

35

The Assessment | Karnataka


ThePolicyImpact
TheintroductionoftheIndustrialPolicy2006-2009hasplayedanimportantroleinacceleratingthepaceofindustrialization
andtradeinKarnataka.
DuringtheAprilSeptember2008,118IEMshavebeenissuedasagainst113IEMsforthesameperiodduringthepreviousyear.
Particulars

2006-2007

2007-2008

2007(Apr.toSept.)

2008(Apr.toSept.)

277

208

113

118

718.44

1676.49

377.13

223.29

10

10

4.06

1.68

0.7

.027

1.a.IEMsFiled
b.ProposedInvestment(inbillions)
2.a.LettersofIntentandDirectIndustrialLicenses
b.ProposedInvestment(inbillions)

Source:TechnicalConsultancyServicesOrganizationofKarnataka(TECSOK)

Further,duringApriltoNovember2008,about9,289smallscaleindustrieswereregisteredgeneratingemploymentfor
63,961persons.
2006-07

2007-08

ApriltoNovember
2007

2008

SSIsRegistered

12,580

14,984

8,398

9,289

Employment

57,517

123,399

76,862

63,961

4.7

11.3

7.0

6.2

Investment(INRbillion)
Source:EconomicSurveyofKarnataka2008-09

GrowthImpetus
Karnatakaprovidesatransparentpolicyframeworkandasupportivebusinessenvironmentwhichisdesignedtoencourage
entrepreneurshipandindustrialization.Thestategovernmentheavilyfocusesondevelopinganequippedworkforce
supportedbyawell-definedindustrialandfinancialpolicies,however,entrepreneurscontinuetociteinfrastructureas
constrainingfactorinKarnataka.
Single Window Clearance Facility -IntheKarnatakaIndustries(Facilitation)Act,2002thestateconstitutedtheStateHigh
LevelClearanceCommitteewhich,actsasthesinglepointofclearanceforSEZdevelopersandco-developers.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

36

The Assessment | Karnataka


TheStateHighLevelClearanceCommitteeapproved1,818projectswithanaggregatedinvestmentofINR255.78billion
whichisexpectedtoprovideemploymentopportunitiesforabout1.2millionpersonsuponimplementation.

ProjectsApprovedbytheStateLevelSingleWindowClearanceCommitteefrom2006-2008(Oct.)
Year

ApprovedProjects

Investment(inbillion)

Employment(InNo.s)

2006-2007

881

119.23

731750

2007-2008

728

103.09

349665

2008-2009

209

33.46

86546

Source:IndustryOverview,EconomicSurveyofKarnataka2008-2009

A Strong Financial System Karnatakahasadevelopedbankingnetworksystemwhichextendstoboththeurbanand


ruralareas.AsofMarch2008,thereare5,280ofbankbracheslocatedacrossstateasagainst755branchesatthetimeof
nationalization(1969).Ofthese,3,304bankbranchesarelocatedinruralandsemiurbanareas,indicatingawelldistributed
creditdeliverysystem7.
The Karnataka State Financial Corporation (KSFC) and the Karnataka State -IndustrialInvestment&Development
Corporation(KSIIDC),whichprimarilyengageindevelopingMSMEsandlargescaleindustries,areintenselyfocusedon
financingschemesforinfrastructuraldevelopmentprojectsincludingtourism,healthcare,foodprocessing,textiles,
insurance,andagro-basedinsurance.ItisanticipatedthattheloansmadebyKSFCwillreachINR6.5billionasagainstINR
3.7billionasofMarch20088.
Initiatives Focused on Infrastructure Development -Asapartoftheinfrastructurepolicy2007,thestategovernmenthas
setoutseveralsectoralpoliciesfordevelopingroads,power,informationtechnology,andports.Thedevelopmental
expenditurebudgetedfor2008-2009isoftheorderofINR401.0billionagainstINR336.2billionin2007-08,anincreaseof
19.27percent9.
Active Focus on Skill Development and Training -Thestategovernmentisinvestingincreatingtherequiredfacilitiesfor
trainingpeopleoncertainkeyskills.Asapartofthis,thestatehassetupsixtraininginstitutes10.Theseinstitutesimpart
periodicaltrainingtosericulturists,reelers,entrepreneursandlicensedseedpreparers.

7InstitutionalFinanceOverview,EconomicSurveyofKarnataka,2008-2009
8 InstitutionalFinanceOverview,EconomicSurveyofKarnataka,2008-2009
9TheStateBudget,EconomicSurveyofKarnataka,2008-2009
10IndustryOverview,EconomicSurveyofKarnataka,2008-2009
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

37

The Assessment | Karnataka


The Entrepreneurs Viewpoint
OneofIndiasfastestgrowingstates,KarnatakahasbeentheforerunnerinthefieldofIT/ITES.Theentrepreneursrecognize
theproactiveattitudeofthestategovernmentandappreciatethesectorfriendlypoliciesspecificallyintheIT/ITESsector.
Theentrepreneursalsoacknowledgevariousprogrammestohelpentrepreneurssetupnewbusinessesinruralareasby
providingfunds.
Thestatesincubationfacilitiesspecificallyintheknowledgebasedindustriesarealsorecognizedwhilethestatesfunding
ofstartupsisalsoappreciated.However,earlystageandseedfundingarestillseentobelackingandentrepreneurshave
expressedaneedforastatesupported(throughincentives&taxbenefits)seedfundorganizedbyanetworkofangel
investorsandestablishedentrepreneurs.
Thewishlistofentrepreneursincludesclarityandfasterresolutionoflandtitles;availabilityofbasicinfrastructureWater,
Roadsandpoweratcompetitivepricesandcreationofinfrastructureaheadofdevelopment.Withregardstoavailabilityof
financeandinformationtheentrepreneursarewillingtocreatetheirownnetworksbutexpectthegovernmenttostimulate
fundingbyprivateplayers.
Whiletheentrepreneursunderstandthatthestatehasmanymorecriticalissuestotackleontheoveralldevelopment,they
expectthegovernmenttocreateanenablingenvironmentforpeopletoharnessopportunities.Thestateisbelievedtobe
wellintentionedwithinitiatives,theimplementationofthesehasbeenquestionedbytheentrepreneurs.
The Governments Viewpoint
Karnatakaisfocusedonimprovingitsinvestmentclimate.Ithasbeenproactiveininvitingtheprivatesectorandwas
amongthefirsttoinviteprivateinvestmentintheeducationsector.Withitsencouragingpoliciesandfavourable
environment,thestatehasattractedinvestorsandhasseenasteadyincreaseinForeignDirectInvestment(FDI)inflowin
recentyears.
Karnatakaiskeentopromoteitselfasthedestinationfordomesticandforeigninvestmenttocatalyseindustrialgrowth.The
stateproposestocreateemploymentopportunitiesthroughindustrialgrowthinthestateandseveralsectorshavebeen
identifiedasthrustareas.Thestateoffersincentivessuchastaxexemptionsforinvestmentinthesesectors.Thesesectors
areelectronics,telecommunication,informatics,precisiontoolingandtoolroomindustries,readymadegarmentsincluding
leathergarments,unitsmanufacturingpollutioncontrolandeffluenttreatmentplants,equipmentandappliancesand
biotechnology.
Thegovernmentisalsofocusedonstreamliningproceduresforinvestorsandentreprneursinthestatethroughsingle
windownodalagencycalled'KarnatakaUdyogMitra'atstatelevelanddistrictlevelfornecessaryclearances.
Thestateisfocusedatachievinggrowththroughindustrialdevelopmentandhastherightvision.Thegovernmentis
initiatingschemesandsimplificationofprocessestoenabledomesticandforeigninvestmentandprovideanenabling
environment.Infrastructureamajorpainpointforentrepreneursisbeingrecognizedasanurgentissueandthat
somethingthatwillbedealtwithonaprioritybasisintheshorttomediumterm.

10IndustryOverview,EconomicSurveyofKarnataka,2008-2009

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Maharashtra
Population
96.9 million (as per 2001 census)
Per Capita Net State Domestic Product

Job creation Trend

Source:MaharashtraEconomicSurvey,2008-09

Source:MaharashtraEconomicSurvey,2008-09

ThePolicyFramework
Policy reforms to create the conducive industrial climate in the State
MaharashtraisoneoftheleadingindustrializedandurbanizedstatesinIndia.Itsstrongfinancialinfrastructurehasalso
madeitoneofthemostattractivestatesforFDIinIndia.IthasreceivedaninvestmentofINR750.96billionduring19912008.1 SectorswhichhavelargelygainedbytheFDIintheStateincludeautomobilesandautocomponents,information
technology,consumerdurables,engineering,financialservices,electronicshardware,chemicals,petrochemicals,
pharmaceuticalsandbiotechnology.
Toachievethisconsistentandimpressivegrowthbycreatingafavorableenvironmentforinvestment,theMaharashtra
StateGovernmenthasissuedtheindustrialpolicy.

1DirectorateofEconomics&StatisticMaharashtra,EconomicSurvey,2008-09

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

39

The Assessment | Maharashtra


Highlights of the Industrial Policy2
Thepolicyseekstobuildqualityinfrastructureandnurtureindustrialclusterstoensuresustainableindustrialgrowth
IthasdefinedsectorssuchasTextiles,IT/ITES,BiotechnologyandInfrastructureasthrustareasfortheindustrialpolicy
Itwillprovidequalitycompetitiveness,researchanddevelopmentandtechnologyupgradationforstrengtheningthe
SMEsector
NewindustriesestablishinginC,D,D+areasandnonindustrydistrictsareexemptedfrompaymentofelectricityduty
foraperiodof15years
WaiverofstampdutyforindustriesinC,D,D+areasandnonindustrydistricts
Specialcapitalincentivesforsmallscaleindustriesareprovided

IT Policy to make Maharashtra the most favoured destination for investments in the IT and ITES
Key Features3
GuidetheimplementationofthepolicybyestablishinganEmpoweredCommitteeandaDirectorateofInformation
Technology
Exemptioninstampdutyandelectricityduty,eliminationofoctroiontelecomequipmentforunitsbuiltinITParks
LowerPropertyTaxes-sameasresidentialrates
MinimalSalesTaxratesonlocallyprocuredcapitalgoods
Powersupplyat'industrialrates'
Non-fiscalincentivesincludingadditionalFSI,permittingsoftwareindustryinresidentialareas,suitablepermissionsto
developcommunication
PermissionofflexibilityinworkinghoursandrelaxationofLaborlaws

2GovernmentOfMaharashtra,IndustrialPolicyOfMaharashtra,2006
3GovernmentOfMaharashtra,ITandITeSPolicy,2003

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

40

The Assessment | Maharashtra


Biotech Policy to promote the growth of the biotech industry in the state and make it globally competitive
Key Features4
CreationofinstitutionssuchastheMaharashtraBiotechnologyBoard,andtheMaharashtraBiotechnologyCommission
Fiscalbenefitsincludingelectricityduty,stampdutyandregistrationfeesexemption,octroirefund
DevelopmentofBiotechParksandBiotechResourceCentre
Specialincentivestopromotesettingupofbiotechnologyparks,researchanddevelopmentcentresandpilotplant
facilitiesforundertakingcontractresearch
AllBTunitswillgetincentivesapplicabletoITunits
Tourism Policy
TheStatesTourismPolicy2006emphasisesonthedevelopmentofininfrastructuralfacilitiesattouristdestinations,
encouragingprivateparticipationincapacitybuildingrelatedtotouristaccommodation,recreationfacilities,etc.Theaction
pointsofthepolicyalsoincludestrengtheningofBedandBreakfastschemesandconservationofWorldheritagesites.5
SEZ Policy
TheSEZPolicyaimsatcreatingasimpleandtransparentsystemandprocedurestoattractlargeforeignanddomestic
investmentininfrastructureforSEZsinMaharashtra.
SEZpolicyofMaharashtraprovidesattractiveincentivesasfollows:
HundredpercentexemptionfromStampDutyandRegistrationFees
PermissionforCaptivePowerGeneration
Micro, Small and Medium Enterprise Policy highlights6
Governmentisplanningtoinitiatemeasuresforavailabilityofcheapandtimelyfinance,technologyup-gradation,upgradationofskillsetsofthoseemployedinMSMEenterprisesandmarketing.
SettingupofaspecialinstitutionfortheSMEs
Newsmallscaleindustriesareeligibleforcapitalsubsidy
Specialcapitalincentives(grants)areofferedforsettingupSmall-scaleindustriesinbackwardunits
Interestsubsidyisalsoofferedtonewtextile,hosieryandknitwearSSIunits
Incentivestopromotequalitycompetitiveness,researchanddevelopmentandtechnologyup-gradation
Incentives

Subsidy(%)

Limitedto(INRMillion)

Capitalequipment

2.5

Expensesincurredforqualitycertification

50

0.10

Cleanerproductionmeasures

25

0.50

Expensesincurredforpatentregistration

50

0.50

Source:MaharashtraEconomicSurvey,2008-09

4GovernmentOfMaharashtra,BioTechpolicy,2001
5MaharashtraTourismDevelopmentCorporation,TourismPolicy,2006
6GovernmentOfMaharashtra,IndustrialPolicyOfMaharashtra,2006

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

41

The Assessment | Maharashtra


ThePolicyImpact
MaharashtraisoneoftheleadingstatesintermsoftheinvestmentreceivedduringJan-Aug2009.Maharashtrareceived
384proposalsforIEMswithaninvestmentofINR509.48billionduringsameperiod.7
TheimplementationofaspecificpolicyforIThasleadtoanemergenceofITparksinthestate.About36publicITparks
havebeendevelopedbyMIDCandCIDCOand353privateITparkshavebeenapproved.8

PrivateITParks

Number

Investment(INRbillion)

Jobcreation(inmillion)

Functional

53

22.49

0.122

Developmentstage(LOI)

300

158.4

0.65

Source:MaharashtraEconomicSurvey,2008-09

Additionally,theseparatepolicyforbio-techhasenabledthedevelopmentofbio-TechparksintheStateatJalnaand
Hinjewadi(Pune).Apartfromthis,about16biotechSEZsareproposedintheStatewithlikelyinvestmentofINR64billion
andestimatedemploymentgenerationof0.13million.9

GrowthImpetus
Maharashtraprovidesabusiness-friendlyenvironment,qualityinfrastructurewithproactivegovernmentpoliciesandhighlyskilledandtrainedworkforceintheindustrialunits.
Maharashtra -One of the most industrialized state
TheStatesindustrialpolicyhasminimizedtheindustriallicensingrequirements,removedrestrictionsoninvestmentsand
facilitatedeasyaccesstoforeigntechnologyanddirectinvestments.TheCAGRforinvestmentinprojectsregisteredand
commissionedduring2004-05to2008-09is16.1percent.10 Theindustrialinvestmentsinthestateareasfollows:

ApprovedProjects
Category

MOU

Number

Investments(INRBillion)

Employment

113

1234.43

423,811

Source:MaharashtraEconomicSurvey,2008-09

Strong financial infrastructure serves as an entry point for global financial institutions
AccordingtothestudypublishedbyReserveBankofIndia(RBI)in2008-09,thestatecapturedalmost21percentoftotal
investmentproposalsmadeinthecountry.Thestatealsoaccountsfor14percentofthenationalbankdepositsandmore
than90percentofmerchantbankingtransactionsarecarriedoutinMumbai.Mumbaiisemergingasaglobalfinancialhub
andbackofficeformajorcompanieslikeMorganStanley,JPMorgan,CreditSuisse,etc.

7DepartmentofIndustrialPolicyandPromotion,MonthlyMagazine,September2009
8DirectorateofEconomics&StatisticMaharashtra,EconomicSurvey,2008-09
9DirectorateofEconomics&StatisticMaharashtra,EconomicSurvey,2008-09
10DirectorateofEconomics&StatisticMaharashtra,2008-09
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

42

The Assessment | Maharashtra


States emphasis on the development of skilled work force
Skilledhumanresourcescontributetotheoveralleconomicdevelopmentofastatemoreeffectively.Thestategovernment
hascreatedabudgetprovisionofINR24.63billionforhigher&technicaleducationin2008-09.11

Faculty

Institutions

Capacity

Admittedstudents

Engineering

37

14,130

11,595

ManagementSciences

120

121

HotelManagement&CateringTechnology

120

121

PharmaceuticalScience

10

416

337

IndustrialTrainingInstitutes

407

71,497

61,690

Source:MaharashtraEconomicSurvey,2008-09

Infrastructure Development initiatives


TheCentralgovernmenthasapproved133SpecialEconomicZoneproposalsundertheStateSEZPolicy2006forcreation
ofadditionalemploymentinthestate.TheseSEZsarelikelytorequireaninvestmentofINR1487.22billionwithan
employmentcreationof6.104millionjobs.12

Industries

SEZs

ITsector

52

multi-product

17

singleproduct

64

Source:MaharashtraEconomicSurvey,2008-09

The Entrepreneurs Viewpoint


Thestategovernmentisseenastakingincreasedinterestinpromotingthegrowthofentrepreneurship.Individualsare
beingencouragedtoformnewbusinessesandarebeingprovidedsuchgovernmentsupportastaxincentives,buildings,
roads,andacommunicationsystemtofacilitatethiscreationprocess.However,whilethestategovernmentisdeveloping
itsowninnovativeindustrialstrategiesforfosteringentrepreneurialactivity,thereislimitedawarenessamong
entrepreneursoftheseincentives.
Fundingandmentoringareseenaskeytoentrepreneurialgrowth,theentrepreneursexpectthestatetocreatean
innovationfundwherethegovernmentsetsasideanon-refundableinnovationcorpusorseedfund.Theentrepreneurs
believethattheenvironmentisstillnotconduciveforentrepreneurs.Therearetoomanyregulatoryhurdleswhichan
entrepreneurgoesthrough.Governmentisseenaslaggingbehindinitsroleasafacilitator.Eventhoughtheprivatesector
isdoingitsbitintheareaoffunding,thegovernmentisnotseenasdoingmuchtohelpthem.
Entrepreneurialgrowthinthestateisalsonotuniformwithlimitedreachinruralareasandwidedisparitybetweentherural
andurbanareas.Further,mentoringopportunitiesinitiatedbothbyestablishedentrepreneurs;independentbodiesand
governmentareseenasadireneedthatiskeytocreatingalastingentrepreneurialimpactinthestate.

11DirectorateofEconomics&StatisticMaharashtra,EconomicSurvey,2008-09
12DirectorateofEconomics&StatisticMaharashtra,EconomicSurvey,2008-09

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

43

The Assessment | Maharashtra


The Governments Viewpoint
ThegovernmentofMaharashtraismakingsystematicefforttosustaineconomicgrowthbyresortingtoinnovativemethods
toimprovetheentrepreneurialenvironmentanddeveloppotentialsectors.
Thegovernmentisfocussingonspecificsectorsandformulatingitsgrowthstrategies.Inrespectofitsexistingindustries
whichincludeschemicals,textiles,engineering,petroleum,automobilesandautocomponents,thegovernment'sstrategy
involvessystematiceffortstokeepupthecurrentindustrialmomentum.Asfarasthefinancialservices,ITandITESsectors
areconcerned,itaimstocreatesufficientemploymentopportunitiesbyencouragingwidergeographicspreadofthese
industries.RegardingthetourismandbiotechnologysectorofMaharashtra,thestategovernmentplanstostrengthenthese
sectorsanddevelopastrongcustomerbase.
Addressingtheconcernsofitsentrepreneurs,MaharashtraIndustrialDevelopmentCorporation(MIDC)hasbeentryingto
fosterrapid,orderlygrowthinindustrialareasinthestate.Ithasdevelopedsectorspecificindustrialareas.Itprovides
developedplotswithnecessary
infrastructurefacilitieslikeinternal
roads,water,electricityandother
internalservicestoentrepreneursin
theindustrialareas.Ithasbeen
proactiveindevelopingawebsite,
whichprovidesusefulinformation
requiredbyentrepreneursinterestedin
settingunitsindifferentpartsof
Maharashtra.
Maharashtrawithitsstrongpositionas
thefinancialhubofthecountryandthe
reputationofbeingoneofthemost
industrializedstates,iscreatingapolicy
frameworktofosterbusinessgrowth.
However,thelackofinformation
disseminationandtheexpectationfrom
entrepreneursarestillnotmet.While
thestatehastheappropriateimpetus,
itneedstoinvolveitsentrepreneurs
andbusinesscommunityatlargeto
trulytransformitself.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

44

CreatinganEntrepreneurshipCulture
Asnapshotofentrepreneurialleadingpractices

Indiaexertedgreaterefforttopromoteandnurture

Basedonoursecondaryresearchandourinteractionswith

entrepreneurship.Attemptsatvariouslevelshavetaken

thestategovernmentsandentrepreneurswehave

placetodirectlyorindirectlypromoteentrepreneurship.The

attemptedtoidentifysomeleadingpracticesacrossthesix

attemptsfallunderthreemaincategories:removalofstate-

IndianstatesprofiledinthiseditionofEntrepreneurial

imposedbarriersforstartingbusinesses:availabilityof

India.Whilethisisnotanexhaustivelist,theseinitiatives

finances,educationandnurturing.

undertakenbyvariousstatesexemplifytheirrespectivewill
tocreateopportunitiesforgrowthbyenablingcrosssector

Indiasjourneyfromaslowgrowth,highly-regulated

development,inclusivegrowth,improvedefficiencyor

economytoahigh-growthcountryisnowwellknown.

marketalignment.Theleadingpracticeslistedbeloware

Manypoliciesandregulationshavefallenbythewayside

specifictoaparticularstate;however,thesecanbe

overthelasttwodecades,butmanyimpedimentsto

replicatedbyotherstatesinthecountrytofoster

startingandgrowingabusinessremainwellentrenchedif

entrepreneurialgrowth.

notinpolicy,theninpractice.
Apositivedevelopmentofeconomicgrowthandchangein
mindsetwithinthegovernmentisthatthereisnow
recognitionatthenationalandstatelevelthatabusiness
friendlyenvironmentisamusttoencouragegrowth.
Businesses,entrepreneursandcapitalaremobileandcan
andarelikelytomoveawaytofriendlierstatesand
countriesifdoingbusinessinanyjurisdictionisdifficult
beyondapoint.Indianowcompeteswiththeworld,within
itsregionandwithitself.

Leading Practice

Owner State

Focus

Leveragesynergybetweenagroandindustrialsector+Apply
technology

Punjab

Cross-Sectordevelopment

Conductingworkshopsandtrainingsessionsonapplicationofclean
Punjab
biotechtechnologiestocreatepublicawarenessaboutbiotechnology

Futuristicdevelopment

Creatingagri-clinicsandagri-businesscentresthroughoutthestate
toserveasnodalcentresforinformationdisseminationfor
maximizingRoIforfarmers

Punjab

Marketalignmentandvalueaddition

Maharashtra

BalancedGrowth

Maharashtra

Internaldemandcreation

NewindustriesestablishinginC,D,D+areasandnonindustry
districtsareexemptedfrompaymentofelectricitydutyfora
periodof15years
WaiverofstampdutyforindustriesinC,D,D+areasandnon
industrydistricts
MinimalSalesTaxratesonlocallyprocuredCapitalgoods

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

45

Leading Practice

Owner State

Focus

Promotetheusageofe-governancetosupportthegovernmentto
deliverefficientservicestoitscitizens

Delhi

Efficiencyandtransparency

ControllingpollutionbyprovidingCNGbuses,strengtheningthe
pollutionnorms,introductionofstrictinspectionandcertification
systems

Delhi

Environmentalimprovement

Thestateishostingthe2010CommonwealthGames,whichislikely
toprovideitanopportunitytoaugmentitsinfrastructureandfacilities
inturningitselfintoa"WorldClassCity

Delhi

Megadevelopment

Strongfocusonthedevelopmentofskilledworkforce

Delhi

Economicenabler

FocusonSpecialInvestmentRegions(SIR)andInvestmentRegions
(IR)withconvergenceofindustrial,socialandurbaninfrastructure

Gujarat

TheGovernmentofGujarat(GoG)hasincorporatedGujarat
KnowledgeSocietyandplanstosetupknowledgecorridorsfor
highereducation

Gujarat

Megadevelopment

Economicenabler

Micro,SMEpolicy:
Allotmentof50percentgrantsubjecttomaximumofINR10
milliontotheMSMEsfortheacquisitionoftechnologyinanyform

Gujarat

FuturisticDevelopment

AssistancetoR&Dinstitutionsupto60percentoftheprojectcost
excludinglandcostandbuildingcost
Lucrativeemploymentandperformancelinkedpackageofincentives
andconcessionstoattractinvestmentstobackwardregionsandthe
MicroSmallMediumEnterprises(MSME)sector.

Karnataka

BalancedGrowth

Biotech:Megaprojectswillbeofferedauniquepackageof
concessionsforamaximumperiodof8years.Theywillalsobe
offeredupto50percentconcessiononstampdutyandregistration
chargesforfirstsaleandfirstlease

Karnataka

Futuristicdevelopment

SEZswillbedeclaredasindustrialtownshipsundertheKarnataka
Municipalities(Third)AmendmentAct,2002enablingthemto
functionasselfgoverningandautonomousmunicipalbodies

Karnataka

Efficiency

Karnatakahasadevelopedbankingnetworksystemwhichextends
toboththeurbanandruralareas.

Karnataka

Economicenabler

FinancialassistancetotechnologyinnovatorsorstandaloneR&D
unitsorindividualsforinnovationscapableofindustrialapplication,
upto50percentofthecostoffilingapatentorINR0.2million,
whicheverisless

TamilNadu

Futuristicdevelopment

CreationofITESParksinChennaiandotherTierII/TierIIIcities

TamilNadu

BalancedGrowth

Apparel:Focusonhandloomexportsbyencouragingtheweaversto
bringoutexport-orientedproducts

TamilNadu

MarketAlignment

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

46

GlobalExperience:Asnapshotof
entrepreneurialleadingpracticesinIsrael,
SingaporeandthePhilippines
Asweunderstandthegoodpracticesbeingfollowedin
Indianstates,itisimperativetobenchmarkourstateswith
someofthemoreentrepreneurialeconomiesaroundthe
worldandunderstandtheirrespectivepracticestofoster
entrepreneurialgrowth.
InAmerica,astudyshowsthateveryyear,therewere
600,000newfirmsformedand1,000ofthemwould
ultimatelybecomehigh-growthcompanies,contributingto
1/3oftheGDPgrowth.InSingapore,SMEsaccountfor2/3
ofjobscreatedandmorethanhalfoftheirGDP.
Theseeconomieshavecreatedaveryconducive
environmentforentrepreneurship.Thesmallercompanies
andstart-upsinSingaporeenjoytheworldslowesteffective
taxrates.Ittakeslessthan15minutesandUSD300to
registeracompanyinSingapore.Singaporehasbeen
rankedbytheWorldBankastheworldseasiestplacetodo
businessforthreeyearsrunning.
SimilarlyinthePhillipines,4outof10adultFilipinos,aged
18to64areengagedinbusiness,whichapproximates
around19million(39.2percent)ofthewholecountry
population.ThisranksthePhilippinessecondamong
countrieswithmostindividualsowningabusiness
accordingtotheGlobalEntrepreneurshipMonitor
Further,Israelisattheforefrontoftechnology.Israelis
knownasSiliconValleyII.Thereareover100Israeli
businessesthattradeontheNYSE,NASDAQ,andAMEX
equitymarkets.OutsideofCanada,thereisnoother
countrythathasmorecompaniesrepresentedThisisa
tremendousachievementforasmallcountrylikeIsrael.
Thekeypracticesmentionedinthefollowingtablehave
beenusedintheseeconomiestoestablisharobust
entrepreneurialecosystem.Thesecountrieshavebenefited
greatlyfrompromotingentrepreneurialgrowth.These
practicesaresetoutasexamplesofpracticesthatcanbe
incorporatedbyIndia.It'sforIndianowtoadopttherelevant
practicesinaphasedmannerandstartanentrepreneurial
revolutionacrossthelengthandbreadthofthecountry.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

47

Leading Practice

Owner Country

Focus

Technologicalincubators-Incubatorsthatprovideasupportive
frameworkfortechnologicalideasbyentrepreneur.Providingupto
85percentoftheapprovedR&Dexpenditure.

Israel

FinancialEnabler

Governmentseedfund-governmentmatchinginvestmentinastartupcompany,proportionaltotheinvestmentofaninvestingentity

Israel

FinancialEnabler

Entrepreneurfriendlyprocedures.Ittakeslessthan15minutesand
USD300toregisteracompanyinSingapore.Singaporehasbeen
rankedbytheWorldBankastheworldseasiestplacetodo
businessforthreeyearsrunning.

Singapore

Efficiency

TheTechnologyEnterpriseCommercializationScheme(TECS)USD
50milliontohelpstart-upscreatetheirfirstprototypesformarket
trialsandacceptance

Singapore

Marketalignment

YoungEntrepreneurScheme(YES)fundstohelpschoolsdevelop
entrepreneurshiplearningcontents

Singapore

FuturisticDevelopment

Start-upEnterpriseDevelopmentScheme(SEEDS),whichprovides
equityfinancingwiththird-partyinvestorstosmallstart-ups.

Singapore

FinancialEnabler

Philippines

Overalleconomicdevelopment

Promotionofmutuallybeneficiallinkagesamongsmallandlarge
firms:Promotionofindustrial-subcontractingexchangeschemes,
strengtheningofSMEassociations,establishmentoflinkagesand
cooperationbetweensmall,mediumandlargefirms

Philippines

Innovativegrowth

Improvingaccesstofinance:Innovativefinancingschemesusing
non-traditionalsourcesandschemessuchascooperativesand
associations,and,equityfinancingandventurecapital,respectively.

Philippines

Innovativegrowth

Informationsharing:Strengtheningofprimaryfocalpointsfor
deliveringinformationservicesrelatedtoexportsuchasthe
PhilippineTradeInformationandNetworkSystems(PHILTINS)and,
OneStopExportInformationAssistanceCenter(EXPONET)

Philippines

Marketalignment

MagnaCartaforSmallEnterprisesisalandmarklegislation.ThisLaw
isguidedbythreeprinciplesinsettingthepaceforsmalland
mediumenterprisedevelopment:
-Minimalsetofrulesandsimplificationofproceduresand
requirements.
-ParticipationofprivatesectorintheimplementationofSME
policiesandprograms
-Coordinationofgovernmentefforts

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

48

ConclusionandPolicyImplications

Insummary,policyand
implementationshouldhelpsupport
thefollowingobjectives:
Improve the quality, availability and
accessibility of financing
Inparticular,deliberateeffortsare
neededtomakebanksandangel
networksmoreresponsivetothe
particularneedsofstartup
enterprises.Whilefinancing
consistentlyemergesasthetop
challengeoffirms,especiallynascent
businesses,thereisaneed,to
developviableapproachesthatwill
Despitepositivebusinesssentimentinthecountryanda
bullishattitudetowardsenterprise,entrepreneursinthe
countrystillfacetremendouschallenges.Whilethecountry
hasseenasurgeinentrepreneurialactivityintherecent
pastmuchscoperemainsforimprovingentrepreneurship
qualityandmomentum.
Equalimportanceneedstobegiventoeffortsfocusingon
futureentrepreneurs.Entrepreneurshipisrootedin
education,culture,valuesandattitudesthatmustbe

makeprovisionofstart-upfinancing
moreattractivetobankswhileatthesametimemakingit
moreattractiveforbusinessestomakeuseofthebanking
system.Establishmentofangelnetworksperhapsas
partnershipsbetweengovernmentandentrepreneurscan
playacriticalroleinfinancingaswellasunderstandingthe
uniqueneedsofyoungenterprises.
Enhance business growth potential of existing
companies

nurturedfromanearlyage.Accordingly,itneedstobe

Thereisaneedtoassistexistinghighpotentialbusinesses

imbibedandunderstoodonthebasisofitsdeeper

inrealizingthatpotential.Animprovedbalanceandplanned

significancebeyondincomegeneration,includingitsrolein

approachtoindustryincentivesandpromotionacross

fosteringgreaterindependence,prideandgoodcitizenship.

industriesandashifttovalueadditionshouldbe
encouragedtoappropriatelyrespondtotheneedsofthe

Thus,atwo-prongedpolicyeffortshouldbeconsideredin

marketandeventuallyexpandwithitsopportunities.Policies

addressingenterprisedevelopment.Thatis,policies,

andinterventionsshouldtakeaccountoftheresourcesand

programsandinterventionsshouldfocusonbothimproving

marketcharacteristicsofspecificregionsandutilizetheseto

existingbusinessesanddevelopingthecapacityoffuture

maximumadvantageinordertofocusgovernmentsefforts

entrepreneurs,therebycreatingmoreopportunities.Inboth
cases,ageneralimprovementofentrepreneurial
frameworksisnecessarytoprovideamoreconducive
environment.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

49

Promote wider geographic penetration


Effortsareneededtoencourageandequipenterprisesto
movebeyondthedomesticorregionalmarketsandtapthe
opportunitiesintheexportmarkets.Severalcompanieshave
marketsbeyondtheirregionsthatarecurrently
underexploited.Alongwithimprovedaccesstotechnology,
thisrequiresadeliberatemixoftheappropriate
macroeconomicpolicyenvironment(i.e.tradeandexchange

Ontheotherhand,addressingfutureentrepreneursentails
interventionsfocusedoneducationandtrainingtoimprove
bothattitudesforsuccessfulandeffectiveentrepreneurship
andskillsforenterprisemanagementandoperations.
Increasedcontactbetweenentrepreneursandschoolsand
collegeswillpartlyenhancetheentrepreneurialmindset
studentsandallowthemtoconsiderthepossibilitiesof
entrepreneurshipatanearlyage.

ratepolicies)andassistanceinexportmarketpromotion.
Strengthen entrepreneurial values and attitudes
Emphasize the critical role of state governments
Stategovernmentsneedtoplayastrongerroleinenterprise
promotion,supportanddevelopment.Whilecertainlarger
businesssupportprogramscanbeeffectivelyrunbythe
nationalgovernmentagencies,stategovernementsare
better-placedtoprovideaconduciveenvironmentfor
enterprisedevelopment.Aspartoftheireffortstoexpand
theirlocaleconomiesandreducepovertyamongtheir
populace,governmentsneedtotakeaproactivebusiness-

Thereshouldbeadeliberateefforttotransformthe
educationalsystematalllevelstofosteran
entrepreneurshipculture,throughcurriculumdesignand
appropriatepedagogicalapproaches.Schoolsmustlead
studentstoaspirenotonlytoseekjobsupongraduation,
buttocreatejobs;notjustearnincomes,buttocreate
wealth.Educationmustalsoinstillasenseofinnovationand
risk-taking,inordertoovercomesomeofthetraditional
barrierstoenterprisedevelopment.

promotionorientation,facilitatebusinessopportunities,
eliminateunnecessaryobstaclestosettingupabusiness
andprovideanencouragingenvironmentforhealthy
businessgrowth.Consequently,stategovernments
themselveswouldneedtrainingonhowtoeffectsuchan
entrepreneurialorientation,alongwithconcreteapproaches
andmechanismsforcreatingabusiness-friendly
environment.

Conclusion

ThereareampleopportunitiesforenterprenursinIndiaand

Practicalandcosteffectiveprogramsneedtobedeveloped

suchopportunitiesifleveragedhavethepotentialto

toaddresstheirneedsbecauseself-employedpeoplewill

transformIndia.Forsuchtransformationtohappenthere

representanimportantsegmentineconomicrevitalization.

needstobesupportbothatthegovernmentalandsocietal

Aresponsive,decisiveandopengovernmentiscriticalto

level.Forthegovernmentitisimportanttorealizethatthe

rapidentrepreneurialgrowth.Itisincumbentonboth,the

goalofsmallbusinessownersistoremainself-employed.

entrepreneurandthegovernment,torecognizethata

Suchpeoplemaynotneedfinancialassistancebuttheyare

symbioticpartnershipisnecessarytohelpthegrowthof

definitelylikelytoneedregulatory,marketingandlegal

businessandofthenation.

assistanceinordertosustainthemselvesandgrow.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

50

Aboutthestudy

ThethirdeditionofEntrepreneurialIndia2009isaresearch

UnlikepaststudiesonIndianentrepreneurshipwhich

paperwhichassessestheinitiativesofselectIndianstates

surveyedentrepreneursacrossthecountry,thiswhitepaper

toencourageentrepreneurialgrowthandputforththebest

studiesselectIndianstatesindetailandbringforththe

practices.Thewhitepaperaimstoprovideaplatformto

statesperspective.Thispapershouldallowustoreassess

discussonentrepreneurshipdevelopmentandcontributeto

andrenewoureffortsinaddressingthesituation.Thestudy

shapingpolicybybringingtogethertheviewsof

alsobringstogetherthedatathatcanbefurtherstudiedfor

entrepreneursandstategovernments.

pursuingspecialpolicyfocus.

Thestudyendeavorstouncoverfactorsleadingto

Throughthisstudy,TiEandKPMGhopetocontributeto

appropriatelevelsofEntrepreneurship.Thestudyevaluates

craftingmoremeaningfulpoliciesandprogramsthatwill

theperspectiveofIndianstatesandtheirinitiativestowards

continuetoinspiremoreandmoreIndianstohavean

entrepreneurialdevelopmentononehandwhileevaluating

entrepreneurialmindsetanddevelopastrongercapacityto

theperceptionofentrepreneursoftheseinitiativesthrough

grabtheopportunitieswehavenow.

theirviewsonnationalstrengthsandweaknessesasa
contextforentrepreneurshipontheother.The
entrepreneursindicatewhatpolicyorprogramchangesthey
believewouldenhancethecountrysenvironmentfor
entrepreneurship.Italsoattemptstoestablishthebest
practicesacrossIndiatofosterentrepreneurshipwhilealso
benchmarkingwithsomeoftheglobalbestpracticesin
entrepreneurialeconomiessuchasSingapore,Philippines
andIsrael.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

51

AboutKPMGinIndia

KPMGisaglobalnetworkofprofessionalfirmsproviding

KPMGhasofficesinIndiainMumbai,Delhi,Bangalore,

Audit,TaxandAdvisoryservices.Weoperatein140

Chennai,Hyderabad,Kolkata,PuneandKochi.Thefirmsin

countriesandhave135,000peopleworkinginmember

Indiahaveaccesstomorethan2000Indianandexpatriate

firmsaroundtheworld.Theindependentmemberfirmsof

professionals,manyofwhomareinternationallytrained.We

theKPMGnetworkareaffiliatedwithKPMGInternational,a

strivetoproviderapid,performance-based,industry-focused

Swisscooperative.EachKPMGfirmisalegallydistinctand

andtechnology-enabledservices,whichreflectashared

separateentityanddescribesitselfassuch.

knowledgeofglobalandlocalindustriesandourexperience
oftheIndianbusinessenvironment.

TheIndianmemberfirmsaffiliatedwithKPMGInternational
wereestablishedinSeptember1993.Asmembersofa
cohesivebusinessunittheyrespondtoaclientservice
environmentbyleveragingtheresourcesofaglobal
networkoffirms,providingdetailedknowledgeoflocal
laws,regulations,marketsandcompetition.Weprovide
servicestoover2,000internationalandnationalclients,in
India.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

52

AboutTiE(TheIndusEntrepreneurs)

TiEinits17yearsofexistence,hastodayemergedasthe
worldslargestnon-profitglobalnetworkofEntrepreneurs

Educating-Inspiresandeducatesbudding
entrepreneurs

andprofessionals,dedicatedtotheadvancementof
entrepreneurship.

Mentoring-Providesrolemodelsandone-on-one
mentorshipthroughexperiencedentrepreneursand

With53chapter(15inIndia)across13countriesand
15,000+membersworldwide,TiEoffersarichresourcepool
toanentrepreneur.

supportsystemlikeVCs,serviceproviders
NetworkingHoldsregularconferences,workshops,and
networkingmeetingsprovidingaplatformtoforge
relationships.e.g.15TiEchaptersinIndiacollectively

TiEsmissionistofosterconsciousentrepreneurship

roll-out300+programsforentrepreneurseveryyear.

globallybyEducating,MentoringandNetworking:

AboutTiEMumbai

TiEMumbaiisamongthemostvibrantandfastestgrowing

Activepartnershipswithorganisationswithashared

entrepreneurialeco-systemsintheGlobalTiENetworkwith

focusontheSMEsegmente.g.ICICIBank,SIDBI,

afastexpandinganddiversememberbaseof150+Charter

KPMG,CII,FICCI,Academia(IIT,Welingakr,SPJainand

Membersand700+members.

manyothers),andvariousotherprivateandPublicsector
agencies/bodies

Purposeaboveactivitytoconstantlychallengestatus
quoandbuildinnovative,sustainableplatforms
/programstofosterentrepreneurshipthroughadvocacy,
awarenessandassistance

MENTORINGarobustandfocusedprogramcalled
EntrepreneurNurturingProgram(ENP)withadedicated
andactivevoluntarybaseofMentorsguidingagrowing
baseofMentees(Entrepreneurs)

50+programsannuallythroughvoluntarycollaboration
andparticipationfromavibrantandinclusive
membership

SpecialInterestgroupssuchWomenEntrepreneurship,
Cleantech,SocialEnterprise,Tech&Media,Human
Capital.

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

53

Acknowledgment

ThisreporthasbeenpreparedbyTiEandKPMGinIndiato

SecondaryResearch

belaunchedattheTiEEntrepreneurialSummit(TES)on
21-23December2009inMumbai

KunalJain,RuchikaAnand,PallaviPhatak,NishthaSatyam
(KPMGinIndia)

OverallLeadership
DesignandBrand&RegulatoryCompliance
Valuableguidancewasprovidedinpreparingthisreportby
VikramUtamsingh(KPMGinIndia),PradipKanakia(KPMGin

JitenGanatraandNishaFernandes(KPMGinIndia)

India),JehilThakkar(KPMGinIndia),SridarIyengar
(President-TiEMumbai),VimalShah(AkrutiCity),Pradeep

SpecialThanks

Udhas(GreaterPacificCapital),ChiragMehta,AnuSutaria,
PuneetVatsayan,ShivneetSingh,PradeepGupta,Geetika

Toallgovernmentofficialsfromthesixstatesprofiledinthe

Dayal,PradeepKar,R.Ramaraj,ManakSingh(allfromTiE)

study,PradipKanakia,VivekAtray,ManishAgarwal,Manish
Sharma,SameerBhatnagar,PradeepSaluja(allfromKPMG

EditingandReportCreation

inIndia)andallTiEchaptersinIndia.

JehilThakkar,ManikaJauhari,NehaSangal(KPMGinIndia)

2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

in.kpmg.com

KPMGContacts

TiEChaptersinIndia

Vikram Utamsingh
Head - Markets
+91 22 3090 2320
vutamsingh@kpmg.com

Ahmedabad
badri.mahapatra@ahmedabad.tie.org
+91 79 3294 3095

Kerala
tiekerala@yahoo.com
+91 484 324 8735

Bangalore
info@tiebangalore.org
+91 80 4147 4567/69

Kolkata
tie.kolkata@gmail.com
+91 33 6454 3361

Chandigarh
info@tiechandigarh.org
+91 172 500 7000

Mumbai
info@tiemumbai.org
+91 22 4220 0100

Chennai
sharon.henry@chennai.tie.org
+91 98842 84578

Nagpur
info.nagpur@nagpur.tie.org
+91 712 646 4066

Delhi
info@tienewdelhi.org
+91 120 406 6500

Patna
tie_bihar@yahoo.com
+91 612 222 1374

Hubli
santosh@nsinfotech.com
+9198807 65246

Rajasthan
zulfi@tiejaipur.org
+91 141 510 4464

Hyderabad
info@tiehyderabad.org
+91 40 6451 3397

UP
rajesh.wahie@up.tie.org

Jehil Thakkar
Executive Director
Markets
+91 22 3090 1670
jthakkar@kpmg.com

Theinformationcontainedhereinisofageneralnatureandisnotintendedtoaddressthecircumstancesofany
particularindividualorentity.Althoughweendeavortoprovideaccurateandtimelyinformation,therecanbeno
guaranteethatsuchinformationisaccurateasofthedateitisreceivedorthatitwillcontinuetobeaccurateinthe

2009KPMG,anIndianPartnershipandamember
firmoftheKPMGnetworkofindependentmember
firmsaffiliatedwithKPMGInternational,aSwiss
cooperative.Allrightsreserved.

future.Nooneshouldactonsuchinformationwithoutappropriateprofessionaladviceafterathoroughexaminationof
theparticularsituation.

KPMGandtheKPMGlogoareregisteredtrademarksof
KPMGInternational,aSwisscooperative.

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