NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News  » Business » Karnataka crisis: Rattled investors back out

Karnataka crisis: Rattled investors back out

October 12, 2007 16:21 IST

The biggest loser in the ongoing political tug-of-war between the Janata Dal-Secular and the Bharatiya Janata Party will be the state of Karnataka, which has incurred a loss of $5 billion in terms of business investments.

Market pundits say that the perennial political instability in the state and indecision by the government in the past one year has lead to the loss of investment opportunities. According to them, the government was too busy trying to sort out its own problems and did not have the time to consider the major companies which were trying to invest in the state.

Once the most popular destination for them, Karnataka is now losing some of its biggest investors. Infosys recently decided to expand its branch in Pune instead of the one in Bangalore. The state government had reportedly failed to give it the huge chunk of land needed to expand its Bangalore office, in spite of repeated requests by the IT major.

Infosys is now planning to acquire 300 and 350 acres of land in Bangalore and Mangalore respectively, said T V Mohandas Pai, director of Human Resources.

However, Karnataka's loss has translated into additional investments for its neighbouring states.  Nokia's cell phone development and manufacturing unit, BMW's auto-making facility, electronic component manufacturers such as Foxconn, Sanmina, Alcatel, Flextronics, Signet Solar's photovoltaic production unit and Sem India's Fab facility have all decided to set up their units in Andhra Pradesh and Tamil Nadu.

While the IT majors blame the government's lack of vision and political instability for this fiasco, others feel that too much is being made out of this issue. The Chamber of Industry and Commerce claims that political instability is not the only reason for investors backing out. The CIC says that Bangalore is losing out to other states due to high power costs, tough land acquisition procedures and a sudden rise in the cost of living in and around the city.

Political leaders claim that IT majors are making these allegations as they are unable to make their inroads into the state. They add that the IT companies had threatened to shift base two years ago, but nothing much happened after that.

Vicky Nanjappa in Bangalore