Building a Robust Ecosystem - Infrastructure and Ease of Doing Business for MSMEs:

The Government of Karnataka recognizes that a thriving MSME sector requires not only financial support but also a robust ecosystem characterized by well-developed infrastructure and a conducive business environment. Accordingly, the state has implemented various policies aimed at fostering infrastructure development and enhancing the ease of doing business for MSMEs. A key focus of the New Industrial Policy 2020-25 is to streamline the availability of industrial land, a critical factor for the establishment and expansion of MSME operations. Furthermore, the policy places a significant emphasis on the development of MSME clusters, aiming to provide these enterprises with improved access to financial resources, essential infrastructure, and opportunities in global markets. To enhance the operational efficiency of these clusters, the government is actively involved in the establishment of Common Facility Centers (CFCs) that offer vital services such as testing, training, and storage. The allocation of industrial land is facilitated through key state agencies, namely the Karnataka Industrial Areas Development Board (KIADB) and the Karnataka State Small Industries Development Corporation (KSSIDC). The New Industrial Policy also sets an ambitious target of developing at least five new industrial areas annually, signaling a strong commitment to expanding the infrastructure available to businesses. This strategic focus on cluster development aims to cultivate collaboration, facilitate knowledge exchange, and enable MSMEs within specific sectors or geographical regions to benefit from economies of scale. The involvement of both KIADB, which typically handles larger industrial areas, and KSSIDC, which caters to the specific needs of smaller enterprises by offering smaller plots or ready-built sheds, demonstrates a comprehensive approach to addressing the diverse land requirements of MSMEs of varying sizes and operational scales.

Recognizing the importance of efficient governance and streamlined processes, the Karnataka government has established the Karnataka Udyog Mitra (KUM) as a central nodal agency operating under a Single Window Mechanism. This initiative is designed to expedite clearances for projects seeking to establish or expand in the state. KUM acts as a crucial intermediary, liaising between businesses and various government departments to facilitate approvals related to land acquisition, power supply, water access, and environmental clearances. The implementation of a new Single Window System (SWS) is anticipated to further enhance the ease of doing business for MSMEs while also reducing the associated costs. To provide comprehensive support, the government has proposed the development of a comprehensive digital portal that will integrate various MSME-related initiatives and function as a platform for vendor development and matchmaking within the state. The Karnataka State Small Industries Development Corporation is also actively developing an online system utilizing the Electronic Delivery of Citizen's Services (EDCS) platform to further streamline processes. Moreover, MSMEs can conveniently access and apply for various incentives and concessions online, simplifying the application process. These initiatives underscore the government's strategic use of technology to enhance efficiency and transparency in its interactions with the MSME sector. The development and deployment of a Single Window System and digital portals aim to minimize bureaucratic delays, simplify complex application procedures, and provide MSMEs with more accessible and readily available information and services.

Karnataka has consistently been recognized for its favorable business environment, securing high rankings in the Ease of Doing Business Index. The state has proactively undertaken measures to simplify various business processes. Deregulation efforts, encompassing digitization and the simplification of regulatory procedures, have played a significant role in fostering the growth of MSMEs. However, despite these positive strides, several challenges continue to impede the progress of MSMEs. These include persistent difficulties in acquiring suitable land for industrial purposes, coupled with the high cost of land in areas developed by KIADB, which can be prohibitive for small and medium-sized entrepreneurs. The Federation of Karnataka Chambers of Commerce and Industry (FKCCI) has specifically called for reforms within both KIADB and KSSIDC to address these land-related challenges. Furthermore, despite government initiatives aimed at simplification, the regulatory framework remains complex and often difficult for MSMEs to navigate. Access to adequate capital, particularly for microenterprises, continues to be a significant hurdle. The availability of skilled professionals also remains a persistent concern for the sector. A significant portion of MSMEs operate from private industrial estates that often lack the necessary infrastructure to support their operations effectively. Delayed payments from larger industries further exacerbate the financial strain on smaller enterprises, and issues related to red tape and corruption continue to be cited as concerns. Despite the government's commendable efforts to improve the ease of doing business, tangible challenges persist for MSMEs on the ground, particularly concerning the affordability and accessibility of industrial land, the complexities of navigating regulations, and the securing of timely payments for their goods and services. The differing perspectives between the government's positive portrayal of the ease of doing business environment, reflected in high rankings, and the persistent challenges highlighted by industry associations suggest a potential disconnect between policy perception and the lived realities of MSMEs, indicating a need for more direct feedback and a deeper understanding of the specific operational pain points experienced by these enterprises to ensure the effectiveness of policy interventions.

Building a robust ecosystem for MSMEs in Karnataka:

• Focus on Infrastructure and Ease of Doing Business: The Karnataka government prioritizes a strong ecosystem for MSMEs through infrastructure development and a conducive business environment.
• New Industrial Policy 2020-25: Key focus areas include streamlining industrial land availability and developing MSME clusters.
• MSME Cluster Development: Aims to improve access to finance, infrastructure, and global markets, supported by the establishment of Common Facility Centers (CFCs) for testing, training, and storage.
• Land Allocation Agencies: KIADB handles larger industrial areas, while KSSIDC caters to smaller enterprises with smaller plots and ready-built sheds.
• Ambitious Industrial Area Expansion: The New Industrial Policy targets developing at least five new industrial areas annually.
• Single Window Mechanism: Karnataka Udyog Mitra (KUM) acts as a central nodal agency to expedite project clearances.
• New Single Window System (SWS): Anticipated to further enhance the ease of doing business and reduce costs for MSMEs.
• Digital Portal Development: Proposed to integrate MSME initiatives and facilitate vendor development and matchmaking.
• Online Systems by KSSIDC: Utilizing the EDCS platform to streamline processes and online application for incentives.
• High Rankings in Ease of Doing Business: Karnataka has consistently been recognized for its favorable business environment.
• Deregulation Efforts: Digitization and simplification of regulations have contributed to MSME growth.
• Persistent Challenges: Despite progress, MSMEs face difficulties in land acquisition (availability and cost), complex regulations, access to capital (especially for microenterprises), availability of skilled professionals, inadequate infrastructure in private industrial estates, delayed payments, and issues with red tape and corruption.
• Discrepancy in Perception: A potential disconnect exists between the government's positive view of the business environment and the ongoing challenges reported by industry associations like FKCCI, particularly regarding land and regulations.

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