Having a cluster for construction-related goods will help the state compete with cheaper Chinese goods in the market.  (Mint)
Having a cluster for construction-related goods will help the state compete with cheaper Chinese goods in the market. (Mint)

Karnataka moots cluster for construction sector, MSMEs

  • Karnataka is also planning a new industrial policy to boost sluggish growth in the state that has heavily banked on IT exports in the past
  • With an economic slowdown across the country, the govt is hoping that such measures will help the state insulate itself from cyclical uncertainties

BENGALURU : he Karnataka government proposes to set up a cluster for the construction sector to help localize manufacturing of fittings, hinges and other material to limit imports, help boost investment, and further channel its focus into labour-intensive micro, small and medium enterprises (MSMEs) to insulate itself from the economic uncertainties.

The construction cluster follows the cluster-based approach of the state government aimed to increase the contribution of manufacturing to the state’s growth and is part of Karnataka’s ambitious “compete with China policy".

“From fittings to hinges to other requirements of construction, everything will be made available on one platform," said a senior government official, requesting not to be named.

Agriculture, the sector employing the largest number of people in the state, is being unable to sustain the growing pressure on land. The problem has been compounded by droughts, floods, and other natural and market-induced vagaries. As such, the government proposes to build infrastructure to set up clusters in regions outside Bengaluru to take in more labour and curb migration from rural areas to urban centres.

The government is yet to finalize the details of the construction cluster, but has drawn up plans to set up similar clusters for sectors such as textile, handicraft, and electronic toys, which have the potential to create large employment opportunities with capital ranging from 10 lakh to 10 crore. However, complaints such as seeking multiple clearances despite the “single window" system, the slow pace of work, and delayed approvals have led to lost opportunities in the past.

Karnataka also plans to bring out a new industrial policy as part of its measures to boost growth. The state has heavily banked on information technology (IT) exports in the past.

The state government hopes such measures will help create employment and insulate itself from cyclical uncertainties, especially in light of the economic slowdown across India.

“Chinese home fittings are almost 40% cheaper and many unregistered contractors use them to bring down costs. However, these are not durable," said S. Shivaprakash, chairman, Karnataka chapter, Builders Association of India (BAI). There are local options for hinges, fittings and other material, but Chinese alternatives have seamlessly entered the market. Other finished goods such as wardrobes, wood flooring, and sanitary products are also in high demand.

Clusters will help lower prices, create an ecosystem, and regulate the flow of Chinese goods into the market in a sector that is expected to grow on the back of government and private projects such as housing for all and smart cities, said the official quoted above.

The construction industry employs almost 50 million people across India and the sector will require investment of almost $1 trillion by 2040, according to government estimates.

“At present different things need to be sourced from different locations. Having a cluster for construction-related goods will make things easy because everything will be available on a single platform," said Bijay Agarwal, managing director of Bengaluru-based real estate firm, Salarpuria Sattva Group.

The aim of the construction cluster and other labour intensive MSME focus would help boost manufacturing in a state that has seen small industries, like auto components manufacturers, take the biggest hit in the current economic slowdown leading to loss of jobs and working hours.

Political instability has added to the economic uncertainty that has led to loss of jobs in Karnataka, which last hosted the Global Investors Summit, a biennial event, in 2016. There are more than 7 million organized labour in the MSMEs operating in Karnataka, according to 2017-18 government data. However, the slowdown has led to job losses in the state. Data from the Periodic Labour Force Survey (PLFS) shows that unemployment in Karnataka stands at 4.8% for people above 15 years of age, which is lower than the national average of 6%.

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