BENGALURU: The Karnataka government's aggressive investment promotion drive, featuring roadshows across India and overseas, has yielded significant memorandum of understanding (MoU) signings but faces challenges in converting these agreements into actual projects. Data tabled in the recent legislature session in Belagavi reveals a 15% strike rate for converting MoUs into approved projects during the period from June 2023 to October 2025.
Investment Commitments Versus Ground Reality
According to the state industries department, an impressive 117 MoUs were signed during this timeframe, representing potential investments worth Rs 6.7 lakh crore with the capacity to generate approximately 2.5 lakh employment opportunities. However, only 17 projects have received formal approval thus far. These approved ventures are expected to bring in Rs 25,055 crore in actual investments and create 13,882 jobs.
Government Explanation for Conversion Gap
The industries department attributes the seemingly sluggish conversion rate to the extended project implementation timeline, which can span up to seven years. Officials point out that when examining calendar year-wise realization data, the conversion rate improves to approximately 50%. The period under review covers the first two-and-a-half years of the Congress government, which assumed office in May 2023.
Principal Secretary for Commerce and Industries S Selvakumar elaborated on the process, noting that these are substantial projects averaging about Rs 5,000 crore per company. "After signing MoUs, companies typically conduct thorough due diligence before seeking approvals for essential resources like land, water, and electricity," Selvakumar explained. "Usually, formal demands are placed within three to four years of MoU signing, followed by another three years for project implementation."
Industry Concerns and Comparative Analysis
While the government maintains that an enabling industrial environment is fostering growth, industry veterans have identified several obstacles. Despite welcoming Industries Minister MB Patil's commitment, they point to systemic lethargy and infrastructure bottlenecks as significant impediments.
Industry observer TV Mohandas Pai offered a critical comparison with neighboring states, telling TOI: "When we examine the policies of Tamil Nadu and Andhra Pradesh, Karnataka's high-level committees appear to have minimal impact on the ground. The reality involves navigating bribery at multiple levels. If high-level committees are genuinely headed by the Chief Minister, no further approvals should be necessary. Our CM, being a strong leader, should conduct monthly implementation reviews and dismiss non-performing officials."
Uma Reddy, President of the Federation of Karnataka Chambers of Commerce and Industry (FKCCI), highlighted land scarcity and inadequate infrastructure as primary concerns affecting project implementation.
Geographical Concentration of Approved Projects
An interesting pattern emerges from the approved projects data—13 of the 17 sanctioned ventures are located in and around Bengaluru. This concentration raises questions about regional industrial development balance and whether infrastructure challenges are more pronounced in other parts of the state.
The investment promotion strategy represents a crucial component of Karnataka's economic development agenda, but the conversion gap between signed agreements and implemented projects suggests that procedural efficiencies and infrastructure development require continued attention to maximize the state's industrial potential.
