Home > Finance > Hurdles for small firms may have hit state ranking, but many surprised over big fall

Hurdles for small firms may have hit state ranking, but many surprised over big fall


Bengaluru: The problems that medium and small scale industries go through in Karnataka may have dragged down the state’s position from the eighth rank last year to 17th in the latest ranking of states in the business reform action plan (BRAP), sections of stakeholders say.

Karnataka Small Scale Industries Association (Kassia) is not at all surprised, and says the drop was expected. “Industries are facing too many bottlenecks. Issues with getting approvals, land allotment have made the situation worse,” Kassia president KB Arasappa said. The single-window system for investment approvals remains their biggest bugbear, he said.

His predecessor R Raju said hurdles in the registration process, frequent disruption in power supply and heavy fines for delay in setting up industrial units have made the state investor-unfriendly.

“The government pays attention to the IT/BT sector, but ignores the problems the small and medium units are battling,” he added.

Those in the IT/BT and manufacturing are surprised at the sharp slide in what they call ease-of-doing-business (EoDB) rankings, and say the government has been supportive. According to Biocon founder Kiran Mazumdar-Shaw, Karnataka has been pro-business at least towards IT&BT industries. “I am surprised to see the slip in ranking. My experience shows nothing has changed for the worse in Karnataka. In fact, the government has introduced a slew of initiatives like a regulatory sandbox and virtual single window system to help industries,” she said.

Industry executives say the state has introduced several pro investor changes in the law and regulations which had, probably, not been considered in the survey.

Some of the recent initiatives amendment to the land reforms law, single-window system making it easy for industries to start early, developing nine industrial clusters to attract investments to smaller towns, securing 15,000 acre land bank are all in favour of businesses, said Bangalore Chamber of Industry and Commerce (BCIC) president TR Parasuraman.

A disappointed TV Mohandas Pai, founder of Aarin Capital, surmised ‘lethargic marketing’ by Karnataka may have led to its steep fall in ranking. “Karnataka has taken up a series of industrial reforms, but the ranking does not seem to reflect the situation on ground,” he said.

The reason for the fall, according to the former board member at Infosys, could be because the state was not doing enough to publicise its initiatives. “It shows the Karnataka government has not taken the ranking seriously. They have not done the necessary homework in terms of documentation required for the ranking,” he said.

Andhra Pradesh, Uttar Pradesh and Telangana have bagged the top three slots in the all India ranking, while Karnataka is neither among states that consistently ranked best in the last four rankings; nor among the most improved in 2019; nor is it the among top improvers since 2015.

The Centre announces the rankings based on 180 reform points covering 12 business regulatory areas such as access to information, single-window system, labour environment, etc. Through the ranking exercise the Centre seeks to build a competition among the states, pushing them to undertake aggressive business reforms to get industrial investments.

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