“Mysuru, for example, can become an electronics and semiconductor manufacturing hub. We’re planning maritime manufacturing clusters in Mangaluru, which is a coastal city,” said Kharge. The state, he added, would also set up regional centres of excellence in these regions, which would become smaller hubs on their own.
The government is planning to open two new tech clusters in Shivamogga and AICC president Mallikarjun Kharge’s hometown Kalaburagi by the end of this year, the state’s industry ecosystem accelerator Karnataka Digital Economy Mission (KDEM) chairman Naidu BV told ET. This will add to the tech clusters planned in Mysuru, Mangaluru and Hubblli-Dharwad-Belagavi.
On Friday, KDEM announced that the Mysuru cluster will get operationalised in the coming days. The KDEM said it received LoIs from the industry for the Mysuru cluster seed fund at the industry roundtable.
“Beyond Bengaluru is becoming a reality. In the last 18 months, we have facilitated over 45 companies setting up their operations in these clusters. Our most recent success is supporting Kaynes Technologies for their expansion plans and we hope and are ready for greater investments to follow,” said KDEM CEO Sanjeev Gupta.
The Beyond Bengaluru mission began in 2020 to develop smaller cities into emerging tech clusters. The idea, said Naidu, is to expand businesses from Bengaluru in an “off-shore to spoke shore” pattern to these clusters. In 2022, the then IT minister CN Ashwathnarayan had said that by 2030, the three flagship clusters in Mysuru, Hubballi-Dharwad-Belagavi and Mangaluru were expected to contribute about $10 billion towards the tech industry employing more than 10 lakh people and becoming home to 10,000 startups.
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To incentivise companies to move to these cities, the state has several initiatives, like setting up Cluster seed funds for startups, with a corpus of at least Rs 25 crore. The government, banks and local industries all contribute to it, with the state’s share being 30%, said Naidu. The state is also establishing ‘Karnataka accelerator networks’ in these clusters as a way for startups to establish contacts with venture capitalists, mentors and market leaders. While the government has signed MoUs with various industries, developing allied infrastructure takes time, said Kharge. “Creating tech clusters requires constant push, we are taking it step-by-step,” he said.
Possible roadblocks
Bengaluru still remains a preferred location for companies, with 5,062 startups being set up in the city out of 6,429 in Karnataka since the beginning of the initiative in 2020. The main reason for this is too much red tape and low confidence in government benefits, said TV Mohandas Pai, chairman of venture capital fund Aarin Capital Partners.
“The KDEM is doing a good job, but the companies setting up shop in these sectors need to be incentivised along the lines of the Elevate program in Karnataka. Top 20-30 companies should get Rs 50 lakh in funding,” he said. The elevate program is an initiative by the Karnataka government, where top innovators would get a one-time grant of Rs 50 lakh as a means of encouraging startups.
“It is very complex right now, because the government tells you to set up an industry in a place, come and apply, and then receive up to 20% subsidy. It would be easier if the government funds the KDEM and empowers it to make grants to the companies,” said Pai.
The other major factor, added Pai, is creating high-quality infrastructure so that companies will want to move to these cities. “The government needs to work with companies that design workspaces to design these tech clusters,” he said.
Startups and tech companies also need an incentive to move away from the talent pool Bengaluru offers. “In a smaller city, the pool of people for jobs is not as large. The government can work with startups via the KDEM to create specific programs for training people. It can also provide grants for every job the company creates,” he said.
While it is not possible to duplicate Bengaluru or Hyderabad, cities need funding to become vibrant centres of tech commerce, he said. Mainly, he added, the government needs to pump money into these clusters to ensure there is a viable ecosystem of venture capitalists, lawyers and a market for companies to flourish. “We must invest in the local community, in the local techies and local companies, who are there and need funding.They will form the base, and over a period of time, others from outside will come in,” he said.
