Karnataka Aims To Have A $300 Bn Digital Economy In 3-5 Years: IT Minister Dr. Ashwathnarayan

Ahead of Singapore and Shenzhen, while Bengaluru topped Collier Research’s Tech Jewels 2019 ranking in Asia, Karnataka is the top performer under the National State Startup Ranking Framework. The state also secured the top spot in the rankings for the most innovative business ecosystem in the country, as per think tank NITI Aayog.

Be it information technology or IT-enabled services (IT/ITeS), biotechnology, engineering or, lately, startups, Bengaluru has been a centre of tech activities and a hotbed of tech startups in the country.

Recently, speaking at the BRICS Summit 2022, Prime Minister Narendra Modi reiterated that the country’s digital economy will reach a size of $1 Tn by 2025. The Karnataka government has set a target of contributing $300 Bn to the country’s digital economy, the highest among all the states.

In order to achieve the milestone, the state government is now aiming to take tech activities beyond Bengaluru to other parts of Karnataka. Marking Mysuru, Mangalore and Hubli-Dharwad as the next key emerging clusters in electronics design and manufacturing, cybersecurity, fintech, foundry and automobile, Karnataka is looking to build multiple Bengaluru-like tech hubs with each cluster bringing its own merit into play.

Dr. Ashwathnarayan C.N., Minister for IT, biotechnology, science & technology; skill development, higher education, entrepreneurship & livelihood in the Karnataka government, is playing a key role in the efforts for the state to achieve the $300 Bn digital economy target, and is bringing the government and industry together. He has been actively involved in the efforts to build startup hubs across the state and was also instrumental in the launch of the Karnataka Digital Economy Mission (KDEM) last year.

Helmed by industry leaders, the KDEM has been playing a key role in filling in the demand and supply gaps in the startup ecosystem by listening to and addressing the challenges of tech startups in the state.

Under Ashwathnarayan’s leadership, the state has taken a slew of initiatives to promote technology and innovation. In a first in the country, the Karnataka Innovation Authority has come up with the regulatory sandbox framework, a test bed to promote innovative technologies in the state.

He has also been instrumental in creating various Vision Groups, led by industry stalwarts, with members from the industry and the state government. This includes Vision Group on IT, biotechnology, and startups. The Vision Groups aim to chart a futuristic roadmap for these segments.

In an interaction with Inc42, Dr Ashwathnarayan spoke about Karnataka’s tech vision, the efforts made in this regard in the last few years, and more.

Edited excerpts from the interview.

Inc42: The state has continuously topped rankings on multiple fronts such as startups, IT/ITeS, biotech and PSUs. How do you plan to scale this further? 

Dr. Ashwathnarayan C.N: The state of Karnataka, for many years, has been known as the destination for the IT/ITeS. And then for the startups, biotechnology, R&D and engineering. So, these are some of the important areas. In all these areas, we are very well known and are already established. With tech startups and centres of excellence (CoEs), now the innovation is catching up in a very big way.

So, we have been scaling up in this direction. Additionally, the state has been known for electronic design. We have now got into their manufacturing too. We want to have a bigger presence in manufacturing. And, in the startup space, we want to grow much bigger. We have been taking every suitable step in terms of requirements, opportunities and encouragement by bringing out the right programmes, providing seed money, venture funds, and so on.

Most of the country’s major venture capitals are all present here. So, that is a very good encouraging system. And, the ecosystem has been built very well. We have further established many more CoEs. In fact, during our government, we have established more than 50% of the CoEs. We have launched multiple startup-focused policies.

We are the first in India to launch a Vision Group for startups, Karnataka Innovation Authority and KDEM like organisation. This is how we are looking at developing the tech strategy and promote faster and inclusive growth beyond Bengaluru.

We have further established many more incubators and accelerators in partnership with private bodies and have worked immensely at getting the right leaders at the helm.

Inc42: While the state already had functional bodies like Startup Karnataka, which were active on the digital front and startups, what made you think of launching KDEM? 

Dr. Ashwathnarayan C.N: To bring knowledge convergence across different clusters of the ecosystem. After Singapore, we are the first one to launch this. To keep it industry-oriented and fast-paced in sync with the changing dynamics of digital transformation, we have given 51% shares of KDEM to industry representatives such as Nasscom, Assocham, India Electronics and Semiconductor Association (IESA), among others. Among the 49% are the principal secretaries of various departments including finance, IT/biotechnology, and skill development.

KDEM thus presents a good convergence and is a good place to hear each other and address all the challenges that the tech industries are facing.

Inc42: How did you come to the 51:49 ratio for private and government representation in the KDEM?

Dr. Ashwathnarayan C.N: These are emerging areas. We want people to take the initiatives as well as the ownership. Otherwise, it may not trigger the right enablement. These are very challenging areas and we can’t afford to go slow. We have a clear understanding that the government is here to enable and facilitate. So in this direction, that was a much-needed action.

Also, we have simply followed the Singapore model here, and thereby are filling the gaps. For instance, in a particular industry, the targeted investment, the industry can give the right input on the challenges being faced. The connections can be done, and the procedures are very fast.

Inc42: Chief Minister Basavraj Bommai stated earlier that Karnataka will contribute $1.5 Tn to PM Narendra Modi’s dream of making India a $5 Tn economy by 2025. What’s the roadmap for that? 

Dr. Ashwathnarayan C.N: The roadmap is in the numbers. For instance, we want to achieve $150 Bn in exports. Within three to five years, we want to have a $300 Bn digital economy. Here, I am not talking in terms of valuation but market revenue.

We have planned to further scale it up. In addition to this, we will be among the first state to establish semiconductor manufacturing facilities. It will be a huge market.

Inc42: The KDEM is taking numerous initiatives like the creation of local funds, facilitating plug-and-play infrastructure, and more. What support is being extended by the state and the central government in this regard?

Dr. Ashwathnarayan C.N: Government is only to facilitate, whether it is the government of India or the government of Karnataka. Ultimately, the target group, the industry, have to do so. We can keep adding integration and bring convergence. We keep fine-tuning our efforts towards facilitation and enablement. For instance, we keep adding things that are required or demanded by startups and industries in the areas beyond Bengaluru.

We ensure that there is an availability of funds in these emerging clusters. We have been following the hub and spoke model in this regard. We are helping companies expand their base in these clusters. So whatever support, incentives, encouragement… whatever can be done, we have been doing.

Inc42: Karnataka is also battling brain drain and startup migration issues. While local startups from other areas tend to move to Bengaluru, Bengaluru startups, blockchain startups, in particular, are moving abroad. How do you see this issue and how do you plan to take on this?

Dr. Ashwathnarayan C.N: Blockchain startups are keenly looking at the Indian market. Everybody wants to come here and they keep talking about the market potential that India offers. Also, considering the resource, talent and opportunities we offer, all these startups want this market to be tapped. So, that way, the blockchain people are looking here in a big way.

This might not be just limited to crypto. Crypto is one of the aspects of blockchain, there are many other areas. We are talking about Web 3.0, NFTs, Metaverse and more. In fact, we are taking it in a big way at the upcoming Bengaluru Tech Summit.

Now, as far as migration is concerned, it is more of market dynamics. See, they can’t just limit themselves to only one country. They need to grow as a global company.

What we aim to do is to present ourselves as the most competitive market and do hand-holding, if required.

Inc42: Karnataka is the first state to adopt the National Education Policy (NEP) 2020. Tell us about the key initiatives taken by the state in adopting NEP 2020. What are the key changes to be done in the conventional educational system in this regard? 

Dr. Ashwathnarayan C.N: It’s a great opportunity and is going to completely transform the education sector. It is very promising and the industry and academia are collaborating. The entire governance structure itself is changing.

In each and every institution, the Board of Governors concept will be brought in. The industry will thus be a part of the Board as well as the curriculum. The latest updates in the industry will be integrated into the curriculum. We have already started that. Besides academics, we are now looking at other aspects also. This includes team culture, experiential learning, problem-solving learning, industry-connected internships, and so on. Earlier, this was only for six weeks, we have now extended it to 36 weeks. This will help students become industry-ready.

Inc42: Bengaluru has the highest number of startups in crypto, Web3 and Metaverse. What is the state’s policy on this? There were times when local police arrested some startup founders due to lack of clarity on the policy level.

Dr. Ashwathnarayan C.N: This is a cyber issue. So, it has international ramifications…In crypto, a state has limited room. This is entirely the central government’s play and we abide by that. So far, there was not much clarity. Now that the government of India has come up with a clear tax policy, lines are very clear.

Inc42: How much funds have been released to the state startup ecosystem so far?

Dr. Ashwathnarayan C.N: So far, we have released INR 150 Cr for the 750 startups under the Elevate programme. Another INR 50 Cr is being released for the next 250 startups which have almost been shortlisted. So, a total of INR 200 Cr for 1,000 startups under Elevate.

Besides, we have been releasing funds for building CoEs, and enabling sector-specific tech facilities in the state. We have just released a futuristic data policy along with a slew of incentives and concessions, and aim to attract INR 10,000 Cr investments in the emerging markets. The list goes on.