Political instability takes a heavy toll on Karnataka economy

As Karnataka chief minister BS Yeddyurappa was trying to save his throne, all economic matters were put on the backburner. This, say experts, could inflict a huge economic blow on Karnataka as businessmen look for more stable states to invest.

Aroon Raman, chairman of Confederation of Indian Industry (CII) Karnataka, is a wee bit worried that the momentum generated at the Global Investment Meet (GIM) early this year could slacken, if the current political crisis had stretched.

“The bureaucracy is taking some decisions but not the government (cabinet). There is no need to press the panic button but we need a proactive government to take advantage of the momentum generated from GIM and get it into top gear. Over the last few weeks, there had been a lot of (political) uncertainty and if it had further protracted, I don’t see that (investment into the state getting into top gear) happening,” said the state industry body chief.

He said prospective investors were already in a “wait and watch” mode and were pushing back decision.

Jai Prakash Hedge, former MLA from Chikmaglur, believed businessmen were stalling their decisions on investing in the state as any project cleared now would not have an element of permanency.

“Since we were not sure of this government’s fate, people did not want to start projects now as it would come up for review even before it takes off if a new government is established in the state,” he said.

Hedge said most of the Rs4 lakh crore worth memoranda of understanding (MoUs) signed during GIM were in a limbo.

“Even the ArcelorMittal steel project has yet to get the mining licence. The government cannot take decisions on these MoUs because of the current instability,” he said.

HD Kumaraswamy, state president of JD(S), said that political crisis in the state had brought the entire government machinery to a standstill. “Not only the chief minister but none of the ministers in his cabinet is attending work. The tall claims of attracting over Rs4 lakh crore of investments at the recently held GIM is a sham. Leave alone getting fresh investments, even the investors who were contemplating to set up their units in the state are now having a rethink,” said the former chief minister .

Murugesh Nirani, large and medium industries minister, dismissed such statements about negative sentiments among investors. He said the political situation had no impact on functioning of his department.

“We have set up an exclusive committee headed by the chief secretary to review the implementation of MoUs signed during GIM. The Nestle group has already started setting up its mega food processing unit at Nanjangud, the steel industry hub planned in Bellary is progressing at a rapid pace and implementation of ITIR near Devanahalli too is progressing as expected,” he elaborated.

NS Srinivasa Murthy, president of FKCCI, disagreed with Nirani, saying the mood in the state’s apex body for industry and trade “was somber”.

“Those investors in the process of deciding may have to wait and the projects under way may get stalled. The situation is bad and we are all worried,” he said.

MC Dinesh, chairman, industry committee, FKCCI and past president of Kassia, said the political mess could drive prospective investors to other states. “It is indeed sad that when the whole world is here with their purse to invest, such unnecessary political fracas is happening,” he said.

TV Mohandas Pai, director and human resource head at Infosys Technologies, said the state was already losing investments due to its diminishing brand value. “The political instability is damaging the brand of the state. It has also led to reduction in job creation. I know of many technology projects that moved to Pune and Hyderabad because the state did not act swiftly on them,” Pai said.